UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______ to _______ Commission file number:001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | |----------------------- ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) ClearOne provides conferencing and streaming solutions, prioritizing product innovation and intellectual property defense against infringement across global markets [Business Strategy and Products](index=6&type=section&id=Business%20Strategy%20and%20Products) The company's strategy focuses on product innovation and IP defense against patent infringement, launching new products like Aura™ and enhancing existing technologies - The company's primary challenge is revenue loss from patent infringement by competitors. Its strategy is to counter this through product innovation, cost-cutting, and aggressive defense of its intellectual property via litigation[23](index=23&type=chunk) - In November 2020, the company launched Aura™, a new product line of professional audio and video solutions targeting the growing home office market, driven by the COVID-19 pandemic[84](index=84&type=chunk)[85](index=85&type=chunk) - The company introduced several new products and updates in 2020, including the BMA 360 Beamforming Microphone Array, a new Touch-Panel Controller, and enhancements to its COLLABORATE Space software with webinar and Web RTC features[36](index=36&type=chunk)[51](index=51&type=chunk)[70](index=70&type=chunk) Revenue by Product Category (2020 vs. 2019) | Product Category | 2020 Revenue % | 2019 Revenue % | | :--- | :--- | :--- | | Audio Conferencing | 37.6% | 46.3% | | Professional Microphones | 31.5% | 35.2% | | Video Products | 30.9% | 18.4% | [Marketing, Sales, and Customers](index=15&type=section&id=Marketing%2C%20Sales%2C%20and%20Customers) The company utilizes a two-tier distribution channel model, selling to approximately 312 distributors and direct resellers worldwide, with no single distributor exceeding **10%** of revenue in 2020 Revenue by Geography (in millions) | Region | 2020 Revenue | 2020 % | 2019 Revenue | 2019 % | | :--- | :--- | :--- | :--- | :--- | | United States | $18.0 | 62% | $13.5 | 54% | | Outside United States | $11.1 | 38% | $11.6 | 46% | | **Total** | **$29.1** | **100%** | **$25.1** | **100%** | - The company utilizes a two-tier channel model, selling to distributors who then sell to resellers and system integrators. In 2020, it sold products to approximately **312** distributors and direct resellers worldwide[86](index=86&type=chunk)[88](index=88&type=chunk) - In 2020, no single distributor accounted for more than **10%** of total consolidated revenue. This is a change from 2019, when one distributor accounted for approximately **11%** of revenue[92](index=92&type=chunk) - Backlog of unfulfilled orders increased to **$1.0 million** as of December 31, 2020, from **$0.2 million** at the end of 2019[93](index=93&type=chunk) [Competition, Manufacturing, and R&D](index=16&type=section&id=Competition%2C%20Manufacturing%2C%20and%20R%26D) The company faces intense competition from larger, well-resourced companies, relies entirely on third-party manufacturing, and actively defends its crucial patent portfolio - The company faces intense competition across all product categories from larger, well-resourced companies including Poly, Shure, Crestron, Cisco, and Zoom[94](index=94&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk) - All products are manufactured by third-party electronics manufacturing services (EMS) providers, with Flextronics being the primary partner[104](index=104&type=chunk) - As of December 31, 2020, the company held approximately **85** patents and had **10** pending patent applications, which it considers crucial for its success and actively defends through litigation[110](index=110&type=chunk)[111](index=111&type=chunk) Research and Product Development Expenses | Year | Expense (in millions) | | :--- | :--- | | 2020 | $5.5 | | 2019 | $5.8 | [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, IP protection challenges, litigation, outsourced manufacturing dependency, and financial vulnerabilities including potential write-offs of capitalized legal expenses - The company is subject to intense competition from businesses with substantially greater financial and R&D resources, which could lead to pricing pressures and reduced market share[116](index=116&type=chunk)[117](index=117&type=chunk) - Management identified two significant deficiencies in internal controls: a lack of end-user segregation of duties in the accounting system and a failure to follow procedures for updating inventory standard costs[134](index=134&type=chunk) - The company depends on an outsourced manufacturing strategy, primarily with EMS providers outside the U.S. Any disruption could negatively impact product availability and revenues[143](index=143&type=chunk)[144](index=144&type=chunk) - A significant risk is the potential write-off of **$16.6 million** in capitalized legal expenses related to patent defense if the litigation is not successful or if the expected monetary benefits are not realized[190](index=190&type=chunk) - The COVID-19 pandemic has caused significant disruptions to the global economy and could adversely affect demand for products, the supply chain, and overall financial results[177](index=177&type=chunk) [Properties](index=28&type=section&id=Item%202.%20Properties) The company leases all its facilities, including its principal administrative and R&D offices in Salt Lake City, Utah, and other locations globally for various functions - The company's principal executive offices are in a leased **21,443 sq-ft** facility in Salt Lake City, Utah, with the lease expiring in March 2024[197](index=197&type=chunk) - The company has international leased offices in Zaragoza, Spain (R&D and customer support) and Chennai, India (administrative, marketing, R&D)[198](index=198&type=chunk)[199](index=199&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203.%20Legal%20Proceedings) The company is engaged in extensive intellectual property litigation with Shure Incorporated, involving patent infringement claims and a preliminary injunction granted against Shure in 2019, followed by a contempt ruling in 2020 - The company is involved in significant, ongoing litigation against Shure Incorporated concerning patent infringement of its beamforming microphone array technology[440](index=440&type=chunk)[441](index=441&type=chunk) - In August 2019, a U.S. District Court granted ClearOne a preliminary injunction preventing Shure from selling its MXA910 microphone in a specific infringing configuration[443](index=443&type=chunk) - In September 2020, the court held Shure in contempt for violating the preliminary injunction with its redesigned MXA910-A product and ordered Shure to stop manufacturing, marketing, or selling it[446](index=446&type=chunk) - The company capitalized **$6.7 million** and **$5.1 million** in legal expenses related to this litigation in 2020 and 2019, respectively[256](index=256&type=chunk)[456](index=456&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ClearOne's common stock trades on NASDAQ under 'CLRO', with the company suspending its dividend program in 2018 to preserve cash for ongoing patent litigation - The company's common stock trades on the NASDAQ Capital Market under the ticker symbol CLRO[205](index=205&type=chunk) - The company suspended its dividend program on June 13, 2018, to preserve cash for litigation costs related to defending its patents[206](index=206&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, revenue increased **16%** to **$29.1 million** driven by video product sales, resulting in a net income of **$0.5 million** primarily due to a **$7.1 million** tax benefit, despite continued operating losses and significant litigation expenses [Results of Operations](index=34&type=section&id=Results%20of%20Operations) In 2020, revenue increased **16%** to **$29.1 million** driven by video products, leading to a net income of **$0.5 million** primarily due to a **$7.1 million** income tax benefit, despite a decline in gross profit margin Consolidated Statement of Operations Summary (in thousands) | Line Item | 2020 | 2019 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $29,069 | $25,042 | 16% | | Gross Profit | $12,559 | $11,193 | 12% | | Operating Loss | $(5,567) | $(8,562) | 35% | | Net Income (Loss) | $505 | $(8,408) | 106% | - Revenue increased by **16%** in 2020, primarily driven by a **95%** increase in video product revenue. This was partially offset by a **6%** decline in audio conferencing products[239](index=239&type=chunk) - Gross profit margin decreased from **44.7%** in 2019 to **43.2%** in 2020. The decline was attributed to a shift in product mix towards lower-margin products, increased freight and tariff costs, and higher inventory obsolescence costs[227](index=227&type=chunk)[245](index=245&type=chunk) - Total operating expenses decreased by **8%** to **$18.1 million** in 2020, driven by a **15%** reduction in Sales & Marketing expenses due to lower trade show and travel costs[247](index=247&type=chunk)[248](index=248&type=chunk) - The significant shift from a net loss to net income was primarily due to recognizing an income tax benefit of **$6.4 million** in 2020, which included a **$7.1 million** refund from carrying back net operating losses under the CARES Act[253](index=253&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash used in operating activities improved to **$1.0 million** in 2020, while investing activities consumed **$5.5 million** primarily for patent defense, and financing activities provided **$6.3 million** from stock issuance and a PPP loan Cash and Working Capital (in millions) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $3.8 | $4.1 | | Working capital | $22.2 | $18.9 | - Net cash used in operating activities was **$1.0 million** in 2020, a significant improvement from **$4.7 million** used in 2019[255](index=255&type=chunk) - Net cash used in investing activities was **$5.5 million** in 2020, which included **$6.7 million** for capitalized patent defense costs[256](index=256&type=chunk)[257](index=257&type=chunk) - Net cash provided by financing activities was **$6.3 million** in 2020, primarily from the issuance of common stock (**$4.8 million** net) and a **$1.5 million** Paycheck Protection Program (PPP) loan[259](index=259&type=chunk)[261](index=261&type=chunk) Contractual Obligations as of Dec 31, 2020 (in millions) | Obligation | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | | :--- | :--- | :--- | :--- | :--- | | Senior Convertible Notes | $3.0 | $0.4 | $2.6 | $— | | PPP Borrowing | $1.5 | $0.3 | $1.2 | $— | | Operating Lease Obligations | $2.3 | $0.7 | $1.2 | $0.4 | | Purchase Obligations | $3.4 | $3.4 | $— | $— | | **Total** | **$10.2** | **$4.8** | **$5.0** | **$0.4** | [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2020 and 2019, including the auditor's report highlighting capitalized patent defense costs and inventory valuation as critical audit matters [Report of Independent Registered Public Accounting Firm](index=52&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor, Tanner LLC, identified capitalized patent defense costs and inventory valuation as critical audit matters due to significant management judgment involved - The auditor, Tanner LLC, identified two Critical Audit Matters for the 2020 audit: 1. Capitalization of patent defense costs, due to the significant management judgment involved in assessing litigation outcomes and expected monetary benefits 2. Assessment of the lower of cost or net realizable value of inventories, due to the significant judgment in forecasting future product demand[345](index=345&type=chunk)[347](index=347&type=chunk)[349](index=349&type=chunk) [Consolidated Financial Statements](index=54&type=section&id=Consolidated%20Financial%20Statements) This section provides the company's consolidated balance sheets, statements of operations, and cash flows for 2020 and 2019, detailing financial position and performance Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,803 | $4,064 | | Total Inventories, net | $15,053 | $17,725 | | Intangibles, net | $19,248 | $14,009 | | Total Assets | $62,323 | $55,110 | | Total Liabilities | $12,509 | $10,632 | | Total Shareholders' Equity | $49,814 | $44,478 | Consolidated Statement of Operations Highlights (in thousands) | Account | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Revenue | $29,069 | $25,042 | | Gross Profit | $12,559 | $11,193 | | Operating Loss | $(5,567) | $(8,562) | | Net Income (Loss) | $505 | $(8,408) | | Diluted EPS | $0.03 | $(0.51) | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(982) | $(4,656) | | Net cash used in investing activities | $(5,544) | $(5,127) | | Net cash provided by financing activities | $6,277 | $2,677 | | Net (decrease) in cash | $(261) | $(7,147) | [Controls and Procedures](index=40&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[282](index=282&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[286](index=286&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=41&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's leadership, including key executives Zeynep Hakimoglu and Narsi Narayanan, and the Audit and Compliance Committee chaired by Eric L. Robinson, the designated audit committee financial expert - The key executive officers are Zeynep Hakimoglu (Chairman, CEO, President) and Narsi Narayanan (SVP of Finance)[290](index=290&type=chunk)[297](index=297&type=chunk) - The Audit and Compliance Committee members are Eric L. Robinson (Chairman), Larry R. Hendricks, and Bruce Whaley. Mr. Robinson is considered the 'audit committee financial expert'[301](index=301&type=chunk) [Executive Compensation](index=43&type=section&id=Item%2011.%20Executive%20Compensation) This section details 2020 compensation for named executive officers, including CEO Zeynep Hakimoglu and SVP of Finance Narsi Narayanan, and non-employee directors, noting the termination of director stock option grants in 2018 2020 Named Executive Officer Compensation | Name and Position | Salary | Option Awards | Total Compensation | | :--- | :--- | :--- | :--- | | Zeynep Hakimoglu (CEO) | $355,000 | $68,500 | $423,500 | | Narsi Narayanan (SVP Finance) | $196,500 | $41,100 | $237,600 | 2020 Non-Employee Director Compensation | Name | Fees Earned or Paid in Cash | | :--- | :--- | | Larry R. Hendricks | $33,600 | | Lisa B. Higley | $11,250 | | Eric L. Robinson | $40,800 | | Bruce Whaley | $33,600 | - The annual grant of stock options to non-employee directors was terminated in 2018, and no such grants were made in 2020[311](index=311&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=44&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses beneficial ownership of common stock, with Edward D. Bagley holding **44.5%** and directors/executive officers collectively owning **6.1%**, alongside equity compensation plan information - Edward D. Bagley is the largest shareholder, beneficially owning **44.46%** of the company's common stock as of March 28, 2021[312](index=312&type=chunk) - All directors and executive officers as a group beneficially own **1,293,803** shares, representing **6.06%** of the total outstanding shares (including shares acquirable within 60 days)[312](index=312&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Securities to be issued upon exercise | Weighted-Average Exercise Price | Securities available for future issuance | | :--- | :--- | :--- | :--- | | Approved by Stockholders | 843,446 | $6.60 | 1,035,276 | | Not Approved by Stockholders | — | — | — | | **Total** | **843,446** | **$6.60** | **1,035,276** | [Certain Relationships and Related Transactions, and Director Independence](index=46&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses a related party consulting agreement with major shareholder Edward D. Bagley and confirms the independence of three board members per NASDAQ standards - The company has a consulting agreement with Edward D. Bagley, a greater than **10%** shareholder, paying him a fee of **$5,000** per month. He was paid **$60,000** in consulting fees during 2020[319](index=319&type=chunk) - The Board has determined that directors Larry Hendricks, Eric Robinson, and Bruce Whaley are independent[320](index=320&type=chunk) [Principal Accounting Fees and Services](index=47&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details fees paid to independent auditor Tanner LLC, totaling approximately **$290,000** in 2020, with all services pre-approved by the Audit and Compliance Committee Principal Accountant Fees (in thousands) | Fee Type | 2020 | 2019 | | :--- | :--- | :--- | | Audit fees | $210.5 | $242.5 | | Audit-related fees | $26.5 | $3.4 | | Tax fees | $52.9 | $45.7 | | All other fees | $— | $— | | **Total** | **$290.0** | **$291.6** | - All audit and non-audit services provided by the independent registered public accounting firm were pre-approved by the Audit and Compliance Committee[325](index=325&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents and required certifications - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K, including the CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[327](index=327&type=chunk)[328](index=328&type=chunk)[332](index=332&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______ to _______ Commission file number:001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | --- | --- | |------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______ to _______ Commission file number:001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | --- | --- | |------------ ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q1 2020 are presented, covering balance sheets, operations, cash flows, and related notes [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,855 | $4,064 | | Total current assets | $22,204 | $25,183 | | Total assets | $52,346 | $55,110 | | **Liabilities & Equity** | | | | Total current liabilities | $5,405 | $6,249 | | Total liabilities | $9,732 | $10,632 | | Total shareholders' equity | $42,614 | $44,478 | | Total liabilities and shareholders' equity | $52,346 | $55,110 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Account | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Revenue | $5,734 | $6,305 | | Gross profit | $2,838 | $2,704 | | Total operating expenses | $4,589 | $5,095 | | Operating loss | $(1,751) | $(2,391) | | Net loss | $(1,847) | $(2,349) | | Basic and Diluted loss per share | $(0.11) | $(0.14) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Account | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $531 | $(1,294) | | Net cash used in investing activities | $(1,716) | $(5,591) | | Net cash provided by financing activities | $3 | $9 | | Net decrease in cash and cash equivalents | $(1,209) | $(6,885) | | Cash and cash equivalents at end of period | $2,855 | $4,326 | [Unaudited Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Unaudited%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company is a global market leader in conferencing, collaboration, and AV streaming solutions for voice and visual communications[14](index=14&type=chunk) - As of March 31, 2020, cash and cash equivalents were **$2.9 million**. The company spent approximately **$15.3 million** on patent litigation from 2016 through March 31, 2020. Management believes existing liquidity, combined with cost-saving measures and potential capital raises, will be sufficient to meet operating needs through at least **May 20, 2021**[21](index=21&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk) Revenue by Product Group (in thousands) | Product Group | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Audio conferencing | $2,787 | $2,711 | | Microphones | $2,143 | $2,106 | | Video products | $804 | $1,488 | | **Total** | **$5,734** | **$6,305** | Revenue by Region (in thousands) | Region | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | North and South America | $3,352 | $3,760 | | Asia (including Middle East) and Australia | $1,416 | $1,864 | | Europe and Africa | $966 | $681 | | **Total** | **$5,734** | **$6,305** | - In December 2019, the company issued **$3.0 million** in secured convertible notes and warrants to an affiliate. The notes mature in **2023** and have a conversion price of **$2.11 per share**[55](index=55&type=chunk)[56](index=56&type=chunk) - Subsequent to the quarter end, the company is monitoring the impact of the COVID-19 pandemic. On **April 24, 2020**, the company received a PPP loan of approximately **$1.5 million** under the CARES Act[69](index=69&type=chunk)[70](index=70&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 performance, noting revenue decline, improved gross margin, reduced net loss, and key operational updates - Overall revenue declined by **9%** in Q1 2020 compared to Q1 2019, primarily due to a decline in revenue from video products. Gross profit margin increased to **49%** from **43%**, and net loss decreased from **$2.3 million** to **$1.8 million**[81](index=81&type=chunk) - The company is actively pursuing patent infringement litigation against a competitor (Shure) and believes a preliminary injunction granted in **August 2019** is a valuable ruling for the business, despite believing the competitor continues to infringe[82](index=82&type=chunk)[112](index=112&type=chunk) - New products were announced in Q1 2020, including COLLABORATE® Versa Room CT, COLLABORATE Versa Lite CT, and a new Touch-Panel Controller. COLLABORATE Space added webinar and Web RTC features[74](index=74&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - Operating expenses decreased by **10%** to **$4.6 million** in Q1 2020, driven by reductions in Sales & Marketing and R&D costs[92](index=92&type=chunk)[100](index=100&type=chunk) - Cash and cash equivalents were **$2.9 million** at March 31, 2020. Net cash from operating activities was **$0.5 million**, a significant improvement from a **$1.3 million** use of cash in Q1 2019. The company capitalized **$1.7 million** in patent defense costs during the quarter[108](index=108&type=chunk)[109](index=109&type=chunk)[111](index=111&type=chunk) Contractual Obligations as of March 31, 2020 (in millions) | Obligation | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior Convertible Notes | $3.0 | $0.1 | $1.2 | $1.7 | $— | | Operating lease obligations | $2.8 | $0.6 | $1.4 | $0.8 | $— | | Purchase obligations | $1.4 | $1.4 | $— | $— | $— | | **Total** | **$7.2** | **$2.1** | **$2.6** | **$2.5** | **$—** | [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company indicates that this section is not applicable for this reporting period - Not applicable[120](index=120&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - Based on an evaluation, the CEO and Senior Vice President of Finance concluded that disclosure controls and procedures were effective as of **March 31, 2020**[121](index=121&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[122](index=122&type=chunk) [PART II - OTHER INFORMATION](index=25&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no new legal proceedings in this section for the quarter, with ongoing litigation discussed in MD&A - None[126](index=126&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year 2019 - There have been no material changes to the risk factors included in the Annual Report on Form 10-K for the fiscal year ended **December 31, 2019**[127](index=127&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the reporting period - None[128](index=128&type=chunk) [Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company indicates that this item is not applicable - Not applicable[129](index=129&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company indicates that this item is not applicable - Not applicable[130](index=130&type=chunk) [Other Information](index=25&type=section&id=Item%205.%20Other%20Information) The company indicates that this item is not applicable - Not applicable[131](index=131&type=chunk) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and PFO certifications and XBRL documents - The report includes certifications from the CEO and Principal Financial Officer (**Sections 302 and 906**) and XBRL data files as exhibits[133](index=133&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) Delaware 87-0398877 | --- | --- | --- | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______ to _______ Commission file number:001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | |- ...

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for H1 2019 reflect decreased assets and equity, ongoing net losses, negative operating cash flow, and the adoption of new lease accounting standards [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,352 | $11,211 | | Total current assets | $25,395 | $34,365 | | Total assets | $55,907 | $58,915 | | Total current liabilities | $5,031 | $6,008 | | Total liabilities | $7,871 | $6,714 | | Total shareholders' equity | $48,036 | $52,201 | - The company adopted a new lease accounting standard in 2019, resulting in the recognition of **$2.7 million** in 'Operating lease - right of use assets' and **$2.3 million** in 'Operating lease liability' which were not present on the 2018 balance sheet[7](index=7&type=chunk)[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Statement of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,420 | $6,971 | $12,725 | $14,260 | | Gross Profit | $2,939 | $3,250 | $5,643 | $7,349 | | Operating Loss | $(2,104) | $(2,972) | $(4,495) | $(5,414) | | Net Loss | $(2,098) | $(2,163) | $(4,447) | $(4,009) | | Diluted Loss Per Share | $(0.13) | $(0.26) | $(0.27) | $(0.48) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,398) | $(1,865) | | Net cash provided by (used in) investing activities | $(7,471) | $1,114 | | Net cash provided by (used in) financing activities | $16 | $(710) | | Net decrease in cash and cash equivalents | $(8,859) | $(1,492) | - Investing activities in H1 2019 included **$2.3 million** in capitalized patent defense costs and a net purchase of marketable securities of **$5.1 million** (**$7.1M** purchases vs **$2.0M** proceeds)[9](index=9&type=chunk) - The company did not pay dividends or repurchase stock in H1 2019, compared to paying **$583 thousand** in dividends and repurchasing **$147 thousand** of stock in H1 2018[9](index=9&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Revenue by Product Group for Six Months Ended June 30 (in thousands) | Product Group | 2019 | 2018 | | :--- | :--- | :--- | | Audio Conferencing | $5,600 | $7,252 | | Microphones | $4,336 | $4,565 | | Video products | $2,789 | $2,443 | - Intangible assets related to 'Patents and technological know-how' increased from **$13.4 million** to **$15.7 million** between Dec 31, 2018, and June 30, 2019, reflecting capitalized patent defense costs[30](index=30&type=chunk) - Subsequent to the quarter's end, on August 5, 2019, a U.S. District Court granted ClearOne a preliminary injunction against Shure Incorporated, prohibiting Shure from manufacturing, marketing, and selling its competing MXA910 microphone in a drop-ceiling configuration[51](index=51&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **11% revenue decline** to patent infringement and product mix, while reducing operating expenses by **21%** and implementing cash preservation strategies despite significant cash reserve decreases [Business Overview and Results of Operations](index=17&type=section&id=Business%20Overview%20and%20Results%20of%20Operations) - Management states that the major cause of revenue decline in its core audio conferencing and microphone categories is the ongoing infringement of ClearOne's patents by competitors[60](index=60&type=chunk)[61](index=61&type=chunk)[71](index=71&type=chunk) - The company began shipping its new patented Beamforming Microphone Array Ceiling Tile (BMA CT) in Q1 2019 and introduced COLLABORATE Space, a unified communication and collaboration software suite[55](index=55&type=chunk)[56](index=56&type=chunk) Financial Performance Comparison (in thousands) | Metric | H1 2019 | H1 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $12,725 | $14,260 | -11% | | Gross Profit | $5,643 | $7,349 | -23% | | Operating Expenses | $10,138 | $12,763 | -21% | | Net Loss | $(4,447) | $(4,009) | 11% | - Gross profit margin for the first six months of 2019 decreased to **44%** from **52%** in the same period of 2018, primarily due to increased material costs and a lower mix of high-margin professional audio products[61](index=61&type=chunk)[77](index=77&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents decreased significantly from **$11.2 million** at year-end 2018 to **$2.4 million** as of June 30, 2019[88](index=88&type=chunk) - The company is capitalizing external legal costs for patent defense, spending **$1.1 million** in Q2 2019 and a total of **$10.8 million** from 2016 through June 30, 2019[91](index=91&type=chunk)[92](index=92&type=chunk) - To preserve cash, the company has suspended its dividend program, allowed its share repurchase program to expire, and implemented company-wide cost reductions[93](index=93&type=chunk) - Total inventory was **$20.0 million**, with **$7.7 million** classified as long-term inventory, a reduction from **$22.2 million** and **$9.0 million** respectively at year-end 2018[94](index=94&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has determined that this section is not applicable for the reporting period - This item is marked as 'Not applicable'[99](index=99&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2019, due to a material weakness in financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2019[100](index=100&type=chunk) - A material weakness was identified in the operating effectiveness of internal control over financial reporting, specifically concerning the accurate and timely reporting of financial results[101](index=101&type=chunk) - A remediation plan is being implemented with a third-party consultant to address the material weakness, focusing on personnel levels, training, and processes for public company reporting[102](index=102&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in active patent litigation with Shure, Inc., securing a preliminary injunction against Shure's MXA910 while facing a new infringement claim from Shure - On August 5, 2019, a court granted ClearOne a preliminary injunction against Shure Inc., prohibiting the sale of Shure's MXA910 microphone in a drop-ceiling configuration due to likely infringement of ClearOne's U.S. Patent No. 9,813,806[107](index=107&type=chunk) - On July 18, 2019, Shure, Inc. filed a lawsuit against ClearOne, alleging patent infringement and unfair competition related to ClearOne's BMA CT product. ClearOne intends to vigorously defend against this suit[106](index=106&type=chunk) - In February 2019, ClearOne filed a petition for inter partes review of Shure's U.S. Patent No. 9,565,493, arguing its claims should be cancelled[105](index=105&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2018[108](index=108&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[109](index=109&type=chunk) [Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes CEO and PFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL filings[114](index=114&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______ to _______ Commission file number:001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) Delaware 87-0398877 | --- ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-33660 CLEARONE, INC. (Exact name of registrant as specified in its charter) 5225 Wiley Post Way, S ...