CLEARONE INC

GENERAL

ClearOne, Inc. (the Company) was incorporated in Utah in 1983 and reincorporated in Delaware on October 25, 2018. The Company is headquartered in Salt Lake City, Utah. The Company has other locations in Gainesville, Florida; Zaragoza, Spain; Chennai, India; and Dubai, United Arab Emirates.

We compete in a global market with our conferencing, collaboration, and network streaming solutions. We design, develop and sell conferencing, collaboration and network streaming solutions for voice and visual communications. The performance and simplicity of our advanced comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

Our comprehensive line of high-quality conferencing and collaboration products are targeted for large, medium and small businesses, as well as for personal use. We have been a global market leader in the installed professional audio conferencing market, where our products are used in numerous industries such as enterprise, healthcare, education, government, legal and finance.

We have an established history of product innovation and plan to continue to apply our expertise in audio, video and networked AV todesign, develop and introduce innovative new products and enhance our existing products. Our end-users range from some of the world’s largest and most prestigious companies and institutions to small and medium-sized businesses, higher education and government organizations, as well as individual consumers. We sell our commercial products to these end-users through a global network of independent distributors who, in turn, sell our products to dealers, systems integrators and other value-added resellers. We also sell directly to dealers, systems integrators and other value-added resellers. Our solutions save end-users time and money by creating a natural environment for collaboration and communication. Our partners, who are involved in system integration benefit from simpler project designs and lower support costs becauseour products are designed and built to work with each other seamlessly.

Company Information

Our website address is http://www.clearone.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports are available, free of charge, on our website in the “Investor Relations” section under “Company.” These reports are made available as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. These reports are also available on the SEC’s website, which is located at http://www.sec.gov.

For a discussion of certain risks applicable to our business, results of operations, financial position, and liquidity, see the risk factors described in “Item 1 A, Risk Factors” below.

Our Business Strategy

The Company’s primary challenge is the loss in revenue and consequent reduction in cash flows due to operating losses. Our current strategy consists of the following elements to overcome this adverse situation:

We currently participate in the following markets:

Our business goals are to:

ITEM 1- BUSINESS

We will continue to focus on our core strengths, which include the following:

PRODUCTS

Our products can be broadly categorized into the following:

AUDIO CONFERENCING

Our full range of audio conferencing products include (i) professional installed DSP based audio conferencing and sound-reinforcement products used in enterprise, healthcare, education and distance learning, government, legal and finance organizations, (ii) mid-tier premium conferencing products for smaller rooms and small and medium businesses which interface with video and web conferencing systems, (iii) affordable USB-based speakerphones that can be used with PCs, laptops, tablets, smartphones, and other portable devices, and (iv) traditional tabletop conferencing phones used in conference rooms and offices.

Ouraudio conferencing products feature our proprietary HDConference®, Distributed Echo Cancellation® and noise cancellation technologies to enhance communication during a conference call by eliminating echo and background noise. Most of our products also feature some of our other HDConference proprietary audio processing technologies such as adaptive modeling and first-microphone priority, which combine to deliver clear, crisp and full-duplex audio. These technologies enable natural and fatigue-free communication between distant conferencing participants.

Ouraudio conferencing products contributed 45% and 47% of our conso lidated revenue in 2023 and 2022, respectively.

Professional installed audio conferencing and sound reinforcement

We compete in the global professional installed audio conferencing market. We are a pioneer in the development of high-end, professional conferencing products and we have established strong brand recognition for these products worldwide. Our installed professional conferencing products include the CONVERGE® Pro 2 and CONVERGE Pro 2 SR product lines.

Our flagship CONVERGE Pro 2 product line lead our professionally installed audio products line. The CONVERGE Pro 2 product line currently includes CONVERGE Pro 2 128, CONVERGE Pro 2 128 VT, CONVERGE Pro 2 128 VTD, CONVERGE Pro 2 120, CONVERGE Pro 2 012, CONVERGE Pro 2 48 VT and CONVERGE Pro 2 48 VTD. CONVERGE Pro 2 SR product line currently includes CONVERGE Pro 2 128 SR, and CONVERGE Pro 2 128 SRD. CONVERGE Pro 2 and CONVERGE Pro 2 SR together offer various levels of integration and features to allow a commercial system integrator to optimize a system to fit diverse conferencing applications and environments. CONVERGE Pro 2 product line succeeded the original CONVERGE Pro product line, which is currently being phased out as our customers transition fully to CONVERGE Pro 2 product line.

CONVERGE Pro 2’s broad DSP platform satisfies clients’ diverse audio needs with these features:

The CONVERGE Pro 2 line of products is ably supported by a touch panel controller, a GPIO expansion box, a USB expansion box and a wall-mount Bluetooth Expander. CONVERGE Pro 2 VoIP SKUs are certified to interoperate with Cisco, Avaya and ShoreTel SIP based VoIP systemsand also interoperate with Microsoft Teams, Zoom, Google Meet, and other popular collaboration applications.

Our CONVERGENCE Cloud software is a unified AV network management platform to monitor, control, and audit ClearOne Pro Audio and Video products and services. Remote real-time system access provides at-a-glance and all-inclusive dashboard views with auto-discovery of Pro Audio devices and unlimited scalability designed to support organizations of any size. With the new Cloud option, AV Practitioners can profit on value-added MaaS opportunities to easily support multiple clients and multiple networks with fully secure, real-time remote system access on a single multi-tenant platform. The powerful and elegant user interface, intwelve languages, works on any browser and will allow full support of the AV Network with built-in video, audio, and chat tools for real-time communications as well as email and immediate SMS text alerts. Relevant information is quickly found with search, sort, and filter options. CONVERGENCE AV Cloud can be virtually partitioned for AV management by location such as building, floor, room, or any desired global topology. Practitioners can easily manage accounts, assigning three levels of access with Owner, Administrator, and Monitor roles; all housed on encrypted secure cloud servers. Client tenant usage can be conveniently tracked for invoicing and optional auto-payment reminders.

Our CONVERGENCE® InSite server network hardware enables remote device management by facilitating bi-directional communications between its Cloud or Enterprise AV Manager and on-site ClearOne Pro Audio products.

Mid-Tier Premium Conferencing

Our premium conferencing offerings consist of the CONVERGE Huddle and INTERACT® product lines. Premium conferencing solutions are mid-tier, lower cost, conferencing product solutions designed to meet the needs of our larger customers with smaller conferencing rooms as well as small and medium businesses. CONVERGE Huddle is a versatile solution for multiple use huddle room environments at a price point that meets budget requirements for audio and video collaboration applications. CONVERGE Huddle connects to ClearOne or third-party peripheral devices, such as microphones, speakers, cameras, and display screens and applications such as Microsoft Teams, Zoom, Google Meet, GoToMeeting ™, and WebEx® through a single clutter-free connection via USB 3.0 to a laptop. It comes with professional quality Acoustic Echo Cancellation and Noise Cancellation algorithms and user-friendly CONSOLE® software. It can be mounted easily under a table, behind a display, on a wall or in a rack. The INTERACT product series is comprised of INTERACT AT and INTERACT Pro. Both systems can be easily connected to enterprise telephones, analog POTS lines, existing HD video codecs and soft video clients. These INTERACT systems also include a USB audio interface to connect to PCs, laptops and tablets, as well as to rich multimedia devices, such as video or web conferencing systems and unified communication systems for enhanced collaboration.

Speakerphones

Our CHAT® product line of speakerphones includes affordable and stylish USB based personal and group speakerphones. CHAT speakerphones provide full-duplex and rich full bandwidth frequency response for superior audio clarity. CHAT products are designed for a wide variety of applications and devices (fixed or portable) for greatly enhanced collaboration wherever and whenever needed. CHAT speakerphones are offered either as personal speakerphones under CHAT 50 SKU or as group speakerphones under CHAT 150 CHAT 150 BT SKUs.

CHAT 50 personal speakerphones are approximately the size of a deck of cards, and connect to PCs and Macs for rich, clear, hands-free audio and playback. CHAT 150 group speakerphones are designed for small group use. These can connect to the same devices and applications as the CHAT personal speakerphones but feature three microphones in larger design for use by a larger number of participants. CHAT group speakerphones make it possible to introduce rich, crystal clear conferencing capability without the need for introducing a separate traditional conference phone. CHATAttach® is comprised oftwo CHAT 150 group speakerphones which can be daisy-chained together to function as a single conferencing system for much larger coverage than a single CHAT 150. CHAT group speakerphones are integral to our media collaboration product line.

On January 30, 2023, we introduced the new CHAT®150 BT group speakerphone with USB and Bluetooth connectivity that enhances the conferencing experience for the ultimate in business class performance. With simple, instant connection to personal computers, mobile devices or Bluetooth-enabled desk phones, the CHAT®150 BT group speakerphone provides users with an affordable way to upgrade home offices, executive offices, and mid-size meeting rooms with BYOD convenience and superior audio clarity for audio conferences and video meetings. The CHAT®150 BT speakerphone also has an audio bridging feature that allows far end conference participants connected via a software conferencing application through USB, local users of the speakerphone, and far end callers on a mobile call connected through Bluetooth to all join the same call and hear each other clearly. Featuring a steerable microphone array with first-mic priority, the CHAT®150 BT speakerphone intelligently activates the microphone closest to the person speaking, reducing interference from ambient noise. Like all ClearOne microphone products, the CHAT®150 BT speakerphone is compatible with popular collaboration platforms including Microsoft® Teams, Zoom™, WebEx™, Google® Meet™, and many more. The new BT model retains all the class-leading features of the original CHAT®150 speakerphone, including Advanced Noise Cancellation, Full Duplex Distributed Echo Cancellation™ and Automatic Level Control algorithms, to ensure highly intelligible, natural audio capture and playback. It also supports NFC tap-to-pair and includes a wired USB connection for compatibility with the full variety of modern devices.

PROFESSIONAL MICROPHONES

Our microphones contributed 41% and 39% of our conso lidated revenue in 2023 and 2022, respectively.

Beamforming Microphone Array

ClearOne began shipping the first generation Beamforming Microphone Array in March 2013. This product works with CONVERGE Pro products. Beamforming Microphone Array 2, the next generation Beamforming Microphone Array started shipping in the last quarter of 2017. It works with CONVERGE Pro 2. It affirmed ClearOne’s clear industry leadership with the following outstanding features:

During the first quarter of 2019, the Company began shipping our patented Beamforming Microphone Array Ceiling Tile (BMA CT) to our partners. All of the innovations developed for the BMA CT make the integrator’s job easier and more profitable. The BMA CT dramatically transforms how integrators can approach system design for ceiling tile installations, allowing for multi-array setups that can utilize a single, low-channel count DSP mixer while maintaining ClearOne’s high level of performance and reliability. Further simplification comes from the array’s built-in power amplifier, which allows each array to drive two 10-Watt, 8-Ohm loudspeakers. The BMA CT also features ClearOne’s proprietary adaptive steering technology (think of it as smart switching). This provides impeccable room coverage while eliminating the need to adjust individual beams. Integrators can daisy chain ceiling tiles via P-Link (ClearOne’s proprietary peripheral link) for larger conference setups – for simpler wiring and longer distances compared to networked home-run connections. P-Link also allows integrators to daisy chain additional peripherals such as wireless mics, USB Expanders, and GPIO Expanders. The system supports all of this functionality with zero consumption of analog I/O and signal processing in the DSP mixer leaving those resources available for other needs.

During the first quarter of 2020, we announcedtwo new additions to our COLLABORATE Versa family of products. COLLABORATE® Versa Room CT, provides all the equipment and accessories needed for exceptional room cloud-based conferencing. At the heart of the system, is the USB audio-enabled Beamforming Mic Array Ceiling Tile (BMA CTH). Thanks to its onboard processing, the BMA CTH performs acoustic echo cancellation, noise cancellation, and beam selection, so no external DSP mixer is required. The array’s adaptive steering (think of it as smart switching) provides impeccable room coverage. The Versa Room CT brings cost-effective professional conferencing audio to small and mid-sized meeting rooms. COLLABORATE Versa Lite CT is a USB audio enabled BMA CTH room solution. This solution dramatically enhances the audio experience for any cloud-collaboration application such as Zoom, Microsoft Teams, and Webex, without the need for a DSP mixer. The system can be easily and quickly configured using ClearOne’s CONSOLE® AI Lite software with Audio Intelligence™ and Auto Connect™. A laptop or a desktop PC can be connected to the BMA CTH directly through the USB port on the Versa USB to share room audio. The included 50-foot CAT 6 cable connects the Versa USB Expander to the BMA CTH.

During October 2020, we announced BMA 360, the world’s most technologically advanced Beamforming Microphone Array Ceiling Tile, delivering unequaled audio performance and deployment ease. The ClearOne BMA 360 is the world’s first truly wideband, frequency invariant beamforming mic array with uniform gain response across all frequency bands. With FiBeam™ technology, conference participants will experience the ultimate in natural and full fidelity audio across all beams and within a single beam. Deep sidelobe beamforming, DsBeam™, provides unparalleled maximum sidelobe depth, below -40 dB, resulting in superior rejection of reverberation and noise in difficult spaces for superb clarity and intelligibility.

The BMA 360 is based on a dramatically new approach to beamforming that provides a new beam topology to easily achieve distortion-free, full 360-degree coverage of any room shape and any seating arrangement using ClearOne Audio Intelligence™. Further advancements in adaptive steering (think of it as smart switching) provide impeccable coverage of each conference participant as well as support for camera tracking. In addition to the advancements in beamforming technology, the 6 G Acoustic Echo Cancellation (AEC) delivers unmatched per-beam full-duplex audio performance. On-board audio algorithms, like noise reduction, filtering, and Automatic Level Control, eliminate the need for per-beam processing in a DSP mixer - requiring fewer DSP mixer resources. Finally, robust built-in amplifiers, configurable as 4 x 15 Watt or 2 x 30 Watt, provide flexibility for driving loudspeakers. ClearOne’s breakthrough technologies, FiBeam, DsBeam, and 6 G AEC combine to create VividVoice™, a significant advancement for professional conferencing. The integrated features in the BMA 360 significantly reduce system design complexity, simplify installation, consume less rack space, and lower system cost. The BMA 360 also supports daisy-chaining of up to three ceiling tiles via P-Link for divisible rooms, or larger conference setups – for simpler wiring, longer distances, and lower-cost deployments compared to networked “home-run” connections via Ethernet. ClearOne’s BMA technology is protected by at least a dozen patents and pending patent applications.

During February 2021, we expanded the applications for our BMA 360, Beamforming Microphone Array Ceiling Tile with the addition of a new Voice Lift feature that allows its impeccable audio to be locally amplified and heard throughout classrooms, lecture halls, and large meeting rooms. ClearOne’s powerful breakthrough technologies, FiBeam™ and DsBeam™, already found on the BMA 360, enable exceptional new levels of Voice Lift performance. FiBeam technology makes the BMA 360 the world’s first truly wideband, frequency-invariant beamforming mic array that provides the ultimate in natural and full-fidelity sound. DsBeam provides unparalleled sidelobe depth below -40 dB, resulting in superior rejection of reverb and noise and providing superb clarity and intelligibility. With the addition of the new Voice Lift feature, the BMA 360 offers everything desired in a beamforming microphone array ceiling tile—superior beamformed audio, echo cancellation, noise cancellation, auto-mixing, power amplifiers, and camera-tracking functions. The ClearOne architecture offers easy setup and configuration for foolproof installation which benefits AV practitioners. End-users also benefit from the BMA 360’s reduced overall system cost for maximum return on investment. Each BMA 360 can have up tofour Voice Lift zones to provide a simple and intuitive way to drive multiple speaker groups, allowing everyone to easily hear and be heard. Built-in 4 channel power amplifiers make wiring simple, convenient, and provide a large cost savings. ClearOne’s innovative combination of built-in power amplifiers and mix-minus zones makes the Voice Lift feature extremely simple to create and deploy. The BMA 360, now with Voice Lift, sets another industry standard for exceptional mic pickup distance and system gain.

At Infocomm 2023, we unveiled the BMA 360D, the newest member of the world’s most advanced beamforming microphone array ceiling tile family. The BMA 360D offers unrivaled audio performance and native compatibility with any Dante-enabled DSP mixer. The new Dante-compatible beamforming microphone array allows integrators and users to leverage ClearOne’s industry-leading microphone innovations in more projects and spaces than ever before. The BMA 360D takes our groundbreaking product to the next level by leveraging standard IP networking infrastructure in an enterprise, empowering AV and IT practitioners to upgrade existing room solutions to use more powerful microphones and expanding flexibility that enables third-party DSP integrations in new system designs. The added power and advanced beamforming also enhance the performance of critical modern functions such as voice lift and camera tracking. Dante integration in the BMA 360D enhances the array’s functionality by delivering unprocessed beam audio on individual Dante transmit channels. Additionally, a smart-switched output is delivered on a separate Dante channel to provide the optimal mix of active inputs while enabling ClearOne’s full suite of audio enhancements, which include echo cancellation, noise cancellation, and level control. The BMA 360D incorporates the industry’s only ultra-wideband, frequency-invariant beamforming mic array technology with uniform gain response across all frequency bands. With proprietary FiBeam™ and DsBeam™ technology, participants experience natural and full-fidelity audio across all beams and within a single beam. DsBeam delivers superb clarity and intelligibility through unparalleled sidelobe depth below -40 dB, resulting in superior rejection of reverb and noise even in challenging environments. Integrator setup is simplified by convenient preset beam patterns for common room layouts, while custom beam patterns can be created for unique floor plans. Combined with adaptive steering that focuses audio pickup on active speakers, the adjustable beam patterns provide impeccable coverage of every meeting or conference participant. The exceptional accuracy of ClearOne’s beamforming and adaptive steering technologies also enhance the performance of voice lift and camera tracking functions for any attached DSP mixer.

Ceiling Microphone Array

The ClearOne Ceiling Microphone Array enhances almost any professional conferencing application which demands high-quality audio. The Ceiling Microphone Array is easily installed and combines affordability with exceptional audio quality. With three wide-range microphones mounted together into a single unit array, the Ceiling Microphone Array provides the rich sound ofthree individual unidirectional microphones while maintaining full 360-degree coverage.

This product line was further strengthened in 2018 by the introduction of the Ceiling Microphone Array Analog-X series of ceiling microphones. These products feature superior sound quality, adjustability for desired height from 0 to 7 feet and numbered microphone elements for easy identification. This product line was further expanded with the introduction of Ceiling Microphone Array Dante, a tri-element ceiling microphone array with built-in Dante audio networking for conferencing and sound reinforcement applications. Each Ceiling Microphone Array Dante utilizes three premium quality microphone elements to deliver 360-degree room coverage for boardrooms, conference rooms, telemedicine facilities and more. Dante networking technology offers simple installation with CAT 5 or CAT 6 cabling, and delivers uncompressed, multi-channel audio with near-zero latency and sample accurate time synchronization throughout the network.

Wireless Microphones

In 2013, ClearOne introduced WS 800 Wireless Microphone Systems, including four new models of wireless microphones/transmitters (Tabletop/boundary, Gooseneck, Handheld, Bodypack) and a base-station receiver with either 4 or 8 channels, which connect to professional audio mixers. Since the Sabine acquisition in 2014, our portfolio of wireless microphone systems was enhanced by the introduction of digital compressed versions, Dante compatible versions and more frequency ranges catering to various international markets.

During 2017, we started shipping DIALOG® 20, the two-channel wireless microphone system. Leveraging the full power of ClearOne's robust, adaptive frequency-hopping "spread" spectrum technology within the 2.4 GHz unlicensed spectrum, DIALOG 20 has several advantages over fixed-frequency transmission. DIALOG 20 incorporates flexible features and multiple options usually available only in much larger systems. While DIALOG 20 works seamlessly with all commercially available mixers, it boasts additional features when natively interfacing with our CONVERGE Pro 2 or Beamforming Microphone Arrays.

In January 2022 we introduced DIALOG®10 USB, the industry’s only single-channel wireless microphone system offering professional-quality audio with USB connectivity. Offering plug-and-play simplicity and wireless convenience, DIALOG 10 USB is an ideal solution for webcasting and cloud-based collaboration. Setup is a breeze with the included USB Type C cable that connects to any PC for audio, power, and control. With no external power source or additional audio cables required, DIALOG 10 USB isone of the easiest and fastest ways to enjoy high-quality audio in any application.

In June 2023 we introduced the DIALOG UVHF wireless microphone system that combines class-leading flexibility, Power over Ethernet (PoE) simplicity, Dante technology and up to 350 usable frequencies. The DIALOG UVHF is a highly flexible wireless microphone system that delivers incredibly robust reception and more available spectrum on-demand than any other product in its class. The system has the only wireless access point to offer antenna redundancy and antenna diversity. Dual integral antennas with spatial and polarization diversity help to maintain high audio quality in harsh environments.

VIDEO

Our video products include video collaboration and AV networking products. Our video products contributed 14% of our consolidated revenue in 2023 and 2022.

Video Collaboration:

Our Media Collaboration suite of products is led by our comprehensive portfolio of COLLABORATE® branded videoconferencing and collaboration solutions.

Our Media Collaboration series includes COLLABORATE Space, a suiteof solutions that unifies messaging, calls, meetings and, perhaps most importantly, minds in a way that will energize workflows and increase productivity for everyone involved in the enterprise. Designed as a persistent, user-friendly collaboration suite, COLLABORATE Space contains many powerful UCC capabilities, as well as the seamless ability to make calls outside the network. By adding phone credits on the account, customers can reach anyone in the world on a standard landline or mobile phone with the system’s integrated phone dialer.

With COLLABORATE Space, users can work together one-on-one, or in groups of hundreds, with integrated file sharing, searchable archives, and user presence information. They can connect with colleagues and contacts, via audio and video, with the most intuitive collaboration tools. Users can meet immediately or schedule a meeting and access a full suite of collaboration features, including file sharing, whiteboarding, annotation, chat, and meeting minutes. Team members wishing to move from email can also create searchable private and public channels, organized by topic, which can be accessed from anywhere. They can also search, access and store agendas, notes, messages, documents, whiteboards, session recordings, and more. Finally, COLLABORATE Space runs on any device, from desktop to mobile, and on any standards-based video endpoint.

COLLABORATE Space Enterprise has all the functionality people have come to expect from a full-featured cloud collaboration app, with the increased security and full, enterprise control associated with on-premises platforms. In addition to the “Enterprise” platform, COLLABORATE Space is available in cloud-based “Basic” and “Pro” versions.

COLLABORATE Space, our powerful cloud-based collaboration solution, addedtwo valuable features in 2020 - webinar hosting and Web RTC. COLLABORATE Space Pro and Enterprise meeting plans can be upgraded to include the Webinar feature allowing session hosts to conduct video and audio presentations for up to 1,000 participants. The Web RTC feature works with all popular browsers including Microsoft Edge, Google Chrome, Safari and Mozilla Firefox. The Web RTC feature enables users to easily join full-featured COLLABORATE Space audio and video meetings using a browser with no downloads or plug-ins required. Users can accept meeting, webinar, and classroom invitations and join with a single click; easily sharing and viewing content within a browser window. COLLABORATE Space also added a feature where Microsoft Teams users can now enjoy a richer collaboration than that available within the Teams environment today. This richer collaboration experience includes better video quality, support for multiple cameras, support for multiple displays, and a persistent meeting space where chats, audio and video recordings, documents, meeting minutes, whiteboard sessions, and more can be shared in private or public channels for later access. Users can easily initiate a Space video meeting or join an existing Space video meeting within the MS Teams environment.

Bring your own device and web conferencing

The COLLABORATE Versa series offer a USB PTZ camera, a speakerphone and USB hub that connects a laptop to the meeting room peripherals via a single USB 3.0 cable. COLLABORATE Versa, is compatible with Microsoft Teams, Zoom, WebEx, Google Meet, and more. This solution is targeted at huddle spaces and medium conference rooms.

COLLABORATE Versa 50 features a ClearOne UNITE® 50 EPTZ 3 x zoom 1080 p 30 camera to capture all participants in the room; a USB hub for connecting to dual displays, cameras, audio endpoints, networks and other peripherals, and a CHAT® 150 speakerphone with advanced audio processing for a rich conferencing experience.

The COLLABORATE Versa Pro 50 addresses today’s AV collaboration needs for COLLABORATE Space, MS Teams, Zoom, WebEx, GoToMeeting and other applications with a complete huddle space solution. It features a CONVERGE® Huddle audio DSP mixer for a professional audio experience, a ClearOne UNITE® 50 EPTZ 3 x zoom 1080 p 30 camera, and a ceiling microphone array with 360-degree coverage reducing reverberation and noise. Customers purchasing the COLLABORATE Versa Pro 150 get upgraded to a 1080 p 30 UNITE® 150 PTZ camera with 12 x optical zoom.

COLLABORATE Versa Pro CT, includes a Huddle DSP mixer and the Huddle-compatible and patented BMA CTH that is a perfect fit for small-to medium-sized rooms. The COLLABORATE Versa Pro CT is a great room solution for Bring Your Own Device (BYOD) collaboration using any cloud-based service. such as Microsoft Teams, WebEx, Zoom, and more. The system includes the Company’s new BMA CTH Beamforming Microphone Array Ceiling Tile with built-in AEC, providing the same impeccable room coverage as the BMA CT using adaptive steering (think of it as smart switching). The COLLABORATE Versa Pro CT system also includes mic/line inputs with AEC, line outputs,4 x 10 Watt power amps, USB audio, and HDMI. The system comes preloaded with a project file ready for the most common room configuration. Or it can be further configured using CONSOLE® AI software, now with enhanced visualization and Audio Intelligence.

Additionally, both COLLABORATE Versa Pro 50 and Versa Pro 150 solutions feature a CONVERGE® Huddle audio DSP mixer for a professional audio experience, and a Ceiling Microphone Array with 360-degree coverage that reduces reverberation and noise.

In May 2023, we launched eight new COLLABORATE® Versa® packaged hardware systems to provide optimized audio and video performance for conference rooms and personal office spaces. The updated lineup of bundled solutions empowers businesses of all sizes and means to leverage powerful conferencing capabilities that include automatic voice tracking, face tracking and echo cancellation. The new lineup of COLLABORATE Versa solutions offers an ideal package for every small-to-medium sized conferencing space or personal office, giving business owners and IT staff mission-specific options that ensure maximum value, utility and performance in any room. The solutions launched were COLLABORATE Versa Room CT 160, COLLABORATE Versa Room CT, COLLABORATE Versa 20, COLLABORATE Versa 20 Plus, COLLABORATE Versa 160, COLLABORATE Versa 60, COLLABORATE Versa Pro 160, and COLLABORATE Versa Pro 60.

In April 2023 we announced the immediate market availability of the Versa UCS2100 Collaboration Switcher Kit. Designed for use in small to mid-sized meeting rooms, board rooms, and executive offices, the Versa UCS2100 automatically detects HDMI and USB-C sources, such as a dedicated in-room PC or a Bring-Your-Own-Meeting (BYOM) laptop and offers the flexibility for users to access the same set of in-room AV peripherals, such as cameras and audio devices. Its USB-C input provides up to 60 watts charging and provides simultaneous 1 x HDMI output and 1 x HDBaseT output. When combined with ClearOne UNITE series PTZ cameras, INTERACT, CONVERGE® Pro 2, CONVERGE® HUDDLE, and CHAT series audio conferencing devices, the Versa UCS2100 delivers guaranteed performance and a streamlined user experience that supports automatic source detection and switching and is controllable via RS-232, TCP/IP, or front panel buttons.

In October 2023 at Infocomm India we provided our integration partners and end user customers with added flexibility in system connectivity with the introduction of our new Versa USB22 Dante adapter. This new product enables users to directly connect any computer to a Dante network without first requiring software installation and can be used with any audio application for playback or capture and is thus ideal for a wide range of small to mid-sized meeting spaces. The Versa USB 22D delivers bit-perfect audio reproduction, super-low latency, and sample-accurate synchronization across the entire Dante network. It connects any computer to the ClearOne BMA 360D through a Dante network.

Cameras

UNITE 200/150 is a professional-grade PTZ camera series supporting USB, HDMI and IP connectivity. It delivers 1080 p HD resolution, 12 X optical zoom and is compatible with PC-based and Pro-AV applications, supporting wide range of meeting spaces.

The UNITE 50 4 K camera is plug-and-play ready with a 120-degree field-of-view, and digital zoom. It pairs easily with any microphone/speaker combination. The UNITE 50 4 K camera’s ultra-wide-angle field-of-view is ideally suited for PC-based video conferencing, web conferencing and unified communications, and other collaboration experiences in huddle spaces and small conference rooms. The camera also supports the USB Video Class (UVC) 1.1 standard for maximum compatibility with a wide variety of cloud and room-based solutions. Along with 4 K 30 resolution, the autofocus camera features 3 x digital zoom and a full-function USB 3.0 interface for video and power. Its wide dynamic range provides support for optimal image capture — critical for all video conferencing.

In April 2020, we introduced the UNITE 20 Pro Webcam, which easily mounts on a PC or laptop to provide full 1080 p 30 image with an ultra wide-angle field-of-view up to 120°. A super-high signal-to-noise ratio and advanced 2 D and 3 D noise reduction provides superior desktop camera video quality.

During the first quarter of 2021, we announcedtwo powerful cameras that enhance the ease and visual quality of online collaboration beyond the capabilities of integrated laptop and PC cameras. With the ClearOne UNITE®10, the Company’s most affordable camera ever, and the feature-rich ClearOne UNITE 50 4 K AF that includes Auto-Framing technology for automatic single- or multi-person capture, everyone can communicate with the confidence provided by stunning video that puts them in the best possible light. The small, powerful webcam supports up to 1080 p video quality and offers autofocus. The UNITE 10 can capture five-megapixel images with a field of view up to 87 degrees. The UNITE 10 attaches to any PC or laptop with a simple mounting bracket, and a 1.5 m USB-A cable ensures simple connection to most modern computers.

The new UNITE 50 4 K AF camera is a major upgrade over traditional webcams and introduces ClearOne’s new Auto-Framing technology that automatically frames meeting participants to maximize screen use through intelligent image algorithms and ePTZ automation (electronic pan, tilt and zoom). With 4 K video quality at 30 Hz, auto-focus capability,4 x digital zoom, more than 8 megapixels of total resolution and an ultra-wide 110-degree field of view, the UNITE 50 4 K AF ePTZ is equally capable of delivering incredible image quality from a home office as it is at capturing all participants in an office boardroom. The camera can be controlled through an IR remote, further simplifying use and enabling real-time control of pan, tilt and zoom to provide greater control when capturing multi-person meeting environments. A standard damping mount ensures fast, easy installation, while an included USB 3.0 cable provides both power and video. Both new ClearOne cameras enable life-like video quality to web-based conferencing applications including Microsoft Teams, WebEx, Google Meet, Zoom, and GoToMeeting.

During July 2021 we introduced the UNITE 180 ePTZ professional camera that provides a full 180-degree panoramic field-of-view with “real-time stitching” to achieve a variety of useful viewing modes for any application and environment. Designed for professional-quality visual collaboration, conferencing, UC applications, distance learning, and more, the new UNITE 180 camera providessix viewing mode options as well as panoramic view for the ultimate in camera flexibility. Real-time stitching creates a seamless 180-degree panoramic view of wide spaces by bringing the views of multiple lenses together asone complete image. Large classroom settings, training centers, or any wide conferencing area are all captured and presented with perfect clarity in any of the viewing mode options. A 4 x zoom further enhances the UNITE 180 feature set. The UNITE 180 is compatible with all popular cloud-based video collaboration applications including Microsoft Teams, Zoom, WebEx, Google Meet, and others.

During July 2021 we also announced the market introduction of the Versa Mediabar™ video soundbar, the Company’s first professional quality all-in-one audio and video capture device that combines the elegance and simplicity of a soundbar with the power of ClearOne’s intelligent audio capture and 4 K camera technologies. Versa Mediabar provides high-quality visual collaboration, audio conferencing, and UC applications from a single integrated device, offering the simplest solution available for offices, conference rooms and home offices with virtually no setup required. With a compact design that can be mounted on a wall or attached to a video display, the Versa Mediabar connects via a single USB cable to elevate the soundbar concept into a powerful tool for virtual collaboration that includes AI-enabled auto-framing and people tracking. The Versa Mediabar features a built-in 4 K Ultra HD camera with a 110-degree ultra wide-angle field of view and afour-element microphone array with 360-degree voice pickup and intelligent DSP that provides acoustic echo cancellation (AEC) and automatic noise reduction to ensure crystal clear audio capture. The camera combines electronic pan, tilt and zoom functions (ePTZ) with artificial intelligence to enable auto-framing and people tracking that keeps the speaker in view even if they move around the room. From huddle spaces and small meeting rooms to executive offices and home offices, the compact Versa Mediabar delivers all the power and clarity needed for daily virtual communications. In addition to its professional-quality audio and video capture, the Versa Mediabar also features a powerful built-in speaker with Bluetooth connectivity that allows it to serve double duty as a fully-featured conferencing solution or a Bluetooth speaker for impromptu calls using any Bluetooth device. These attributes make the Versa Mediabar perfect for popular cloud-based collaboration applications such as Microsoft Teams, Zoom, WebEx, and Google Meet. The Versa Mediabar supports standard UVC commands for control, making it a great addition to existing systems, while dual wall and display mounting options deliver freedom of placement and movement.

At the end of October 2022, we announced the introduction of the UNITE® 60 camera, a new wide angle 4 K USB camera featuring AI-powered smart face and voice tracking, along with electronic PTZ (pan/tilt/zoom) capabilities. With a 120-degree field of view, and a plug-and-play USB 3.0 connection for video, control, and power, the new UNITE 60 camera is ideally suited for rooms such as executive offices, huddle rooms, or smaller conference rooms. The UNITE 60 camera leverages a wide dynamic range and super-high SNR with advanced 2 D and 3 D noise reduction to deliver excellent visuals across varied lighting conditions. In addition to the AI auto-tracking feature, the camera can also be controlled via IR remote or UVC protocol. The camera can be paired with a wide variety of microphones and speakers.

In November 2022, we announced the introduction of UNITE 160, a new camera that offers cutting-edge 4 K UHD performance with 12 x optical zoom capabilities, remote-controlled mechanical pan and tilt as well as AI-powered smart face tracking and auto framing. This camera is designed to capture all participants in large rooms while enabling automated focus on a moving presenter, making it ideal for larger spaces including board rooms, training centers, conference rooms and classrooms. This new camera offers an integrated AI-based camera tracking solution for rooms that are a fit for ClearOne's Versa Lite CT and a single camera. This new lower-cost camera tracking configuration eliminates the need for a DSP mixer and a control system.

On January 16, 2023, we introduced UNITE 260 Pro camera, a professional grade 4 K Ultra HD camera featuring both a 20 X optical zoom and 16 X digital zoom that allows users to capture every participant in all meeting, training, and learning environments it is deployed in. Compatible with all popular meeting applications like Microsoft® Teams, Zoom™, WebEx™, and Google® Meet™, the new camera features an AI-based smart face tracking mode that keeps a selected presenter in the frame as they move about the room. Alternatively, the camera’s AI-based auto framing mode always keeps an entire group in perfect view. With dual video outputs HDMI and IP, the UNITE 260 Pro Camera is an excellent choice for a hybrid environment: streaming content while simultaneously showing it live where the presentation is occurring.

AV Networking

Our AV networking products are primarily sold under VIEW® Pro and VIEW Lite brands and deliver the ultimate IP A/V experience by streaming time sensitive high definition audio and video and control over TCP/IP networks. By combining audio and/or video content, meta-data and control signals intoone digital stream in harmony with industry standards, its distributed, edge of the network architecture allows the hardware and the processing power to be distributed across any existing TCP/IP network. This leverages many of the advantages of using TCP/IP over traditional analog systems and other centrally controlled IP-based systems.

PROFESSIONAL AUDIO AND VIDEO HOME OFFICE SOLUTIONS

During November 2020, we introduced Aura™, a comprehensive range of Good, Better and Best packages of enterprise quality audio, video, audio-video options to meet the home office market demand for professional audio and video collaboration solutions that match the quality found in a traditional corporate office.

With the post-pandemic demand for work from home and learn from home markets plateauing, we have decided to deemphasize the Aura product line and continue our focus on our core product lines and our key channels including the professional audiovisual channel.

MARKETING AND SALES

We use atwo-tier channel model through which we sell our commercial products to a worldwide network of independent professional audiovisual, information technology and telecommunications distributors, who then sell our products to independent systems integrators, dealers, and value-added resellers, who in turn work directly with the end-users of our products for product fulfillment and installation, if needed. Our products are also specified and recommended by professional audio-visual consultants. We also sell our commercial products directly to certain dealers, systems integrators, value-added resellers, and end-users.

Our product sales generated in the United States and outside the United States for the years ended December 31 are as follows:

We sell directly to our distributors and resellers in approximately 38 countries worldwide. We anticipate that the portion of our total product revenue from international sales will continue to be a significant portion of our total revenue as we further enhance our focus on developing new products, establishing new channel partners, strengthening our presence in key growth areas, complying with regional environmental regulatory standards, and improving product localization with country-specific product documentation and marketing materials.

Distributors, Resellers and Independent Integrators

We sold our products directly to approximately 263 distributors and direct resellers throughout the world during 2023. Distributors and resellers purchase our products at a discount from list price and resell them worldwide to hundreds of independent systems integrators, telephony value-added resellers, IT value-added resellers, and PC dealers on a non-exclusive basis. Our distributors maintain their own inventory and accounts receivable and are required to provide technical and non-technical support for our products to the next level of distribution participants. We work with our distributors and resellers to establish appropriate inventory stocking levels. We also work with our distributors and resellers to maintain relationships with our existing systems integrators, dealers, and other value-added resellers.

While dealers, resellers, and system integrators all sell our products directly to end-users, system integrators typically add significant value to each sale by combining our products with products from other manufacturers as part of an integrated system solution. Commercial dealers and value-added resellers usually purchase our products from distributors and may bundle our products with products from other manufacturers for resale to the end-user. We maintain close working relationships with all our reseller partners and offer them education and training on all of our products.

Marketing

Much of our marketing effort is conducted in conjunction with our channel partners who provide leverage for us in reaching existing and prospective customers worldwide. We also regularly attend industry forums and exhibit our products at multiple regional and international trade shows, often with our channel partners. These trade shows provide exposure for our brand and products to a wide audience. We market our ClearOne-branded commercial products on our website www.clearone.com. We also conduct public relations initiatives to get press coverage and product reviews in industry and non-industry publications alike.

Customers

Since we sell through distributors and value-added resellers, we do not have comprehensive information on end-users who ultimately use our products. As a result, we do not know whether any end-user accounted for more than 10% of our total revenue during any of the periods reported in this Annual Report. Our customers are distributors and value-added resellers. During the years ended December 31, 2023 and 2022 no distributor accounted for more than 10% of our total consolidated revenue.

As discussed above, distributors facilitate product sales toa large number of independent systems integrators, dealers, and value-added resellers, and subsequently to their end-users. The loss ofone or more distributors could reduce revenue and have a material adverse effect on our business and results of operations. Our orders fulfilled on which we had not recognized revenue were$30 thousand and $63 thousand as of December 31, 2023 and 2022, respectively. We had a backlog of unfulfilled orders of approximately $0.4 million and $2.9 million as of December 31, 2023 and 2022, respectively.

Competition

The audio-visual product markets are characterized by intense competition, rapidly evolving technology, and increased business consolidation. We compete with businesses having substantially greater financial, research and product development, manufacturing, marketing, and other resources. If we are not able to continually design, manufacture, and successfully market new or enhanced products or services that are comparable or superior to those provided by our competitors and at comparable or better prices, we could experience pricing pressures and reduced sales, gross profit margins, profits, and market share, each of which could have a materially adverse effect on our business. Our competitors vary within each product category. We believe we are able to differentiate ourselves and therefore successfully compete as a result of the high audio quality of our products resulting from a combination of proprietary and highly advanced audio signal processing technologies and networking technology in the form of trade secrets and patented intellectual property, technical and channel support services, and the strength of our channels and brands. It is critical for our success to be able to defend our intellectual property including trademarks, trade secrets and patents from our competitors who have far more resources.

We believe the following principal factors drive our sales:

In the professional audio conferencing system and sound reinforcement markets our main competitors include AcousticMagic, Biamp, BOSE, Crestron, Extron, Harman (Samsung), Peavey, Poly, QSC, Shure, Symetrix, Vaddio, Xilica, and Yamaha and any original equipment manufacturing (OEM) partners, along with several other companies potentially poised to enter the market.

Our primary competitors in the USB-based speakerphones market are Jabra, Logitech, Poly, Sennheiser, Yamaha and Yealink and any OEM partners.

In the microphones market, our primary competitors include AKG, Audio Technica, Audix, Avlex/Mipro, Beyerdynamic, Biamp, Clock Audio, Lectrosonics, Nureva, Mediavision/Taiden, Poly, Sennheiser, Shure, TeachLogic, TOA, Yamaha and Vaddio and any OEM partners.

Our video conferencing products face tremendous competition from well established players as well as emerging players, including Acano/CISCO, Adobe Connect, Amazon Chime, Avaya (Radvision), Aver, Barco, Blackboard Collaborate, Cisco, Citrix, Fuze, Huawei, InFocus, Kramer, LifeSize, Magor, Pexip, Poly, Microsoft, Starleaf, UNIFY, Vidyo, Yealink, Zoom and ZTE.

Sources and Availability of Raw Materials

We manufacture our products through electronics manufacturing services (“EMS”) providers, who are generally responsible for sourcing and procuring required raw materials and components. Most of the components that our EMS providers require for manufacturing our products are readily available froma number of sources. During 2020 and 2021, we witnessed a significant tightening of the electronics market with demand for electronic products especially for semiconductors which include memories and processors, far exceeding the supply along with surging inflation that caused price increases and longer fulfillment cycles. COVID-19 completely disrupted the entire supply chain and extended the already lengthy fulfillment cycles. Continuing tariff wars between USA and China has created more uncertainty with respect to pricing and has consequently affected the supply chain. During 2023, we experienced arevenue decline partially due to our inability to source adequate inventory to meet the demand for professional audio products and BMA due to the transition of manufacturing of our products from China to Singapore by our electronics manufacturing services provider. The challenges with the manufacturing transition from China to Singapore was successfully resolved in the fourth quarter of 2023.

Extended lead times for component purchases and component cost increases persisted throughout 2021 and 2022. Lead times shortened for many components in 2023, and although component costs moderated somewhat in 2022 and 2023 compared to 2021, several component suppliers have made cost increases permanent.

We continually work with our EMS providers to seek alternative sources for all our components and raw material requirements to ensure higher quality and better pricing. Most of our EMS providers and their vendors are duly qualified by our corporate quality assurance process. We work with our EMS providers to ensure that raw materials and components conform to our specifications.

Manufacturing

Currently, all of our products are manufactured by EMS providers. Our primary EMS provider is Flextronics.

Seasonality

We do not recognize a consistent pattern between the quarters to identify seasonality.

Research and Product Development

We are committed to research and product development and view our continued investment in research and product development as a key ingredient to our long-term business success. Our research and product development expenditures were approximately $3.7 million and $4.4 million during the years ended December 31, 2023 and 2022, respectively.

Our core competencies in research and product development include (a) many audio technologies, including acoustic echo cancellation, noise cancellation and other advanced adaptive digital signal processing technologies, (b) networking and multimedia streaming technologies, (c) video technologies, and (d) cloud technologies. We also have expertise in wireless technologies, VoIP, software and network system development. We believe that continued investment in our core technological competencies is vital to developing new products and to enhancing existing products.

Intellectual Property and Other Proprietary Rights

We believe that our success depends in part on our ability to protect our proprietary rights. We rely on a combination of patent, copyright, trademark, and trade secret laws and confidentiality agreements and processes to protect our proprietary rights.

As of December 31, 2023, we had approximately 79 patents and 4 pending patent applications, including foreign counterpart patents and foreign applications. Our patents and pending patent applications cover a wide range of our products and services including, but not limited to acoustic echo cancellation, beamforming microphone arrays, systems that enable streaming media over IP networks, algorithms for video processing, wireless conferencing systems, spatial audio, and technologies for the Internet of Things. The durations of our patents are determined by the laws of the country of issuance. For the U.S., patents may be 17 years from the date of issuance of the patent or 20 years from the date of its filing, depending upon when the patent application was filed. In addition, we hold numerous U.S. trademarks. The laws of foreign countries may not protect our intellectual property to the same degree as the laws of the United States.

We will obtain patents and other intellectual property rights used in connection with our business when practicable and appropriate. Our intellectual property policy is to protect our products, technology and processes by asserting our intellectual property rights where appropriate and prudent. From time to time, assertions of infringement of certain patents or other intellectual property rights of others have been made against us. In addition, the Company was involved in patent infringement lawsuits against Shure Inc. ("Shure"). See Note 8– Commit ments and Contingencies – Legal Proceedings – Intellectual Property Litigation for a discussion of these legal proceedings.

We are dependent on our intellectual property. If we are not able to protect our proprietary rights or if those rights are invalidated or circumvented, our business may be adversely affected. We may be subject to litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products or services. For more information concerning the risks related to patents, trademarks, and other intellectual property, please see “Risk Factors-Risks Related to our Business.”

We generally require our employees, certain customers and partners to enter into confidentiality and non-disclosure agreements before we disclose any confidential aspect of our technology, services, or business. In addition, our employees are required to assign to us any proprietary information, inventions, or other technology created during the term of their employment with us. However, these precautions may not besufficient to protect us from misappropriation or infringement of our intellectual property.

Employees

Asof December 31, 2023, we had 82 full-time employees. Of these employees, 44 were located in the U.S. and 38 in locations outside the U.S. None of our employees are subject to a collective bargaining agreement and we believe our relationship with our employees is good. We also hire contractors with specific skill sets to meet our operational needs.