CLEARONE INC
For the period ended Dec 31, 2025. Filed Mar 31, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 31, 2026
CLRO$5.01+10.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001753926-25-000516
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-31.
0001753926-26-000600
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 87 previous paragraphs and 52 current paragraphs.
9 unchanged; 3 reworded; 39 added; 75 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 3 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
The year ended December 31, 2025 was a transformational period for ClearOne, Inc. (“ClearOne,” the “Company,” “we,” “us” or “our”). On October 24, 2025, the Company completed the sale of certain intellectual property, product inventory, and non-exclusive rights to customer data (the “Asset Sale”). As a result of the Asset Sale, the Company no longer manufactures or sells products and maintains a limited inventory and provides customer support services to satisfy warranty claims. The financial results of the disposed operations are reflected as discontinued operations in the Company’s consolidated financial statements for all periods presented.
Current report
Following the Asset Sale, the Company’s continuing activities consist solely of fulfilling warranty and technical support obligations on legacy products, evaluating potential Strategic Transactions, managing and liquidating remaining assets of the Company’s legacy operating business, collecting accounts receivable and recovering prepaid assets, satisfying outstanding liabilities, and maintaining public-company compliance. These activities are transitional in nature and are not expected to generate material revenue.
Current report
The Company is actively evaluating strategic alternatives intended to enhance stockholder value. These alternatives may include without limitation one or more special transactions, an investment in, or an acquisition of a private operating company, additional asset sales, or other actions that maximize value for stockholders. The closing of the Asset Sale on October 24, 2025 triggered the mandatory redemption of all outstanding shares of the Company’s Class A Redeemable Preferred Stock. The Company currently estimates the final redemption amount will be approximately $50 after permitted expenses and net asset recoveries.
Current report
Discontinued Operations
Current report
Description of Disposed Assets
Current report
The disposed assets consisted of the Company’s historical operations related to conferencing, collaboration, and network streaming products, including product development, manufacturing, sales, and support activities. These operations historically generated the majority of the Company’s revenue.
Current report
Timing and Classification
Current report
The Company classified the disposed assets as held for sale and discontinued operations during the third quarter of 2025. The sale closed on October 24, 2025. Accordingly, the results of the disposed assets are presented as discontinued operations for all periods presented, with a hard cutoff on the legal closing date of October 24, 2025. No allocation or smoothing of results has been applied.
Current report
Financial Impact
Current report
The discontinued operations incurred operating losses during 2025 and prior periods. In connection with the Asset Sale, the Company recognized a loss on sale in the fourth quarter of 2025 (primarily driven by inventory carrying values exceeding the $3.0 million gross proceeds, after the $10.7 million impairment charge recorded in the third quarter of 2025). The results of discontinued operations include operating losses incurred prior to closing, inventory write-downs, severance and restructuring costs, and the loss on sale. See Note 2 to the consolidated financial statements for additional information regarding discontinued operations, including the components of the loss on disposal.
Current report
The following table summarizes the results of discontinued operations (in thousands):
Current report
Continuing Involvement
Current report
Following the Asset Sale, the Company continues to service warranty claims and provide technical support related to products sold prior to October 24, 2025. The Company retained a limited amount of inventory solely to fulfill these obligations. These activities are reported in continuing operations and do not constitute ongoing operations of the disposed assets.
Current report
Discontinued Operations
Current report
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Current report
Revenue from discontinued operations decreased significantly in 2025 compared to 2024 due to the disposition of operating assets and the cessation of revenue-generating activities associated with the disposed assets on October 24, 2025. Gross margin and operating results were negatively impacted by reduced sales volume prior to disposition, inventory write-downs, severance and restructuring costs, and the loss on sale recognized in the fourth quarter of 2025. As a result, discontinued operations reported a substantial net loss for the year ended December 31, 2025.
Current report
Continuing Operations
Current report
Following the Asset Sale, continuing operations generated no revenue during the fourth quarter of 2025. Operating expenses consisted primarily of public-company compliance costs, legal and professional fees, warranty servicing and technical support costs, and general and administrative expenses related to the significantly reduced workforce. Because continuing operations are limited in scope and do not generate revenue, period-to-period comparisons are not meaningful.
Current report
Liquidity Position
Current report
As of December 31, 2025, the Company had cash and cash equivalents, and restricted cash of $0.74 million. The Company’s primary liquidity requirements relate to ongoing public-company compliance and reporting costs, warranty servicing obligations, professional fees (including legal and investment banking), lease payments on the remaining facilities, the $57,500 severance obligation to the former CEO, and the required redemption of the Class A Redeemable Preferred Stock with any net proceeds from the Asset Sale.
Current report
Net proceeds from the Asset Sale are contractually required to be used to redeem all outstanding shares of the Company’s Class A Redeemable Preferred Stock. The Asset Sale closed on October 24, 2025, triggering the mandatory redemption of the Class A Redeemable Preferred Stock. As of December 31, 2025, the redemption had not yet been completed. The Company currently estimates the final redemption amount at approximately $50,000 after permitted expenses and net asset recoveries. The redemption payment will occur subsequent to December 31, 2025 and is treated as a non-recognized subsequent event.
Current report
Subsequent to year-end, on March 11, 2026, the Company closed a private placement with First Finance Ltd. (its largest stockholder) for aggregate gross proceeds of $1.75 million through the issuance of 437,500 shares of common stock at $4.00 per share and a warrant to purchase up to 437,500 additional shares at $5.00 per share. Of the proceeds, $500,000 became immediately available, with the remaining $1.25 million available upon completion of the Company’s reincorporation from Delaware to Nevada. This financing provides an additional source of short-term liquidity.
Current report
Cash Flows
Current report
Net cash used in operating activities during 2025 primarily resulted from operating losses, restructuring activities, and costs associated with discontinued operations. Net cash provided by investing activities primarily reflects the $3.0 million gross proceeds from the October 2025 Asset Sale (net of transaction costs). The Company did not have committed sources of financing during 2025.
Current report
Subsequent to year-end, on March 11, 2026, the Company closed a private placement with its largest stockholder for aggregate gross proceeds of $1.75 million (see Liquidity, Capital Resources and Financial Position and Note 17 – Subsequent Events for additional information).
Current report
Capital Resources and Going Concern
Current report
The Company has incurred significant losses and negative cash flows from operations. These conditions, the limited nature of continuing operations, the mandatory redemption obligation for the Class A Redeemable Preferred Stock (triggered by the October 24, 2025 Asset Sale closing), and the absence of committed sources of financing raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of the consolidated financial statements.
Current report
Subsequent to year-end, on March 11, 2026, the Company closed a private placement with its largest stockholder for aggregate gross proceeds of $1.75 million (see Liquidity, Capital Resources and Financial Position and Note 17 – Subsequent Events for additional information). This financing provides a partial source of short-term liquidity.
Current report
Management is actively evaluating strategic alternatives intended to enhance stockholder value and improve the Company’s liquidity position. These alternatives may include one or more special transactions or other actions that maximize value for stockholders. There can be no assurance that the Company will successfully complete any transaction or that any such transaction will provide sufficient liquidity to continue operations.
Current report
If the Company is unable to complete a special transaction, satisfy the conditions for the remaining financing proceeds, or otherwise obtain additional capital on acceptable terms, management may be required to significantly curtail operations or pursue an orderly wind-down of operations. The consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Current report
The Company’s contractual obligations as of December 31, 2025 primarily consist of operating lease obligations for the three remaining facilities, warranty obligations, and legal settlement obligations.
Current report
A summary of the Company’s contractual obligations is included in the table below (in thousands):
Current report
Classification of and accounting for discontinued operations and the Asset Sale (ASC 205-20 and ASC 360)
Current report
Impairment of long-lived assets and inventory valuation related to retained warranty inventory
Current report
Warranty reserves
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Legal contingencies and settlements
Current report
Going-concern assessment (ASC 205-40)
Current report
Actual results could differ materially from these estimates.
Current report
Recent Accounting Pronouncements
Removed paragraphs (75)
Previous report
ClearOne is a global Company that designs, develops and sells conferencing, collaboration, and AV networking solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer a high level of functionality, reliability and scalability. We derive a major portion of our revenue from audio conferencing products and microphones by promoting our products in the professional audio-visual channel. We have extended our total addressable market from the installed audio conferencing market to adjacent complementary markets – microphones, video collaboration and AV networking. We have achieved this historically through strategic technological acquisitions as well as by internal product development.
Previous report
In early January 2022, we introduced DIALOG® 10 USB, the industry's only pro-quality, single-channel wireless USB microphone system offering professional-quality audio with USB connectivity for webcasting and cloud-based collaboration. In March 2022, this new USB wireless mic system won the 2022 NSCA Excellence in Product Innovation Award. One of only seven winners in this prestigious award program, the DIALOG 10 USB is the industry’s only pro-quality single-channel wireless microphone system with USB connectivity for webcasting and cloud-based collaboration such as Microsoft Teams, Zoom, WebEx, and GotoMeeting. DIALOG 10 USB won its second award in May 2022 by winning the 2022 Top New Technology (TNT) Award in the Microphone category. In June 2022, at Infocomm 2022 in Las Vegas, Nevada, DIALOG 10 USB wontwo additional awards - Commercial Integrator 2022 BEST Award in the Microphones category and 2022 Sound & Video Contractor Magazine Infocomm Best in Market Award.
Previous report
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.
Previous report
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.
Previous report
In April 2023 we announced the immediate market availability of the Versa UCS 2100 Collaboration Switcher Kit. Designed for use in small to mid-sized meeting rooms, board rooms, and executive offices, the Versa UCS 2100 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 100 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 UCS 2100 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.
Previous report
At Infocomm 2023, we unveiled the BMA 360 D, the newest member of the world’s most advanced beamforming microphone array ceiling tile family. The BMA 360 D 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 360 D 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 360 D 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 360 D 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.
Previous report
We also introduced at Infocomm, our powerful new DIALOG® UVHF wireless microphone system that combines class-leading flexibility, Power over Ethernet (PoE) simplicity, Dante technology, and up to 350 usable frequencies to offer professional-quality audio conferencing, video collaboration, and sound reinforcement for any size room. The new DIALOG UVHF system offers businesses and institutions a flexible wireless microphone system that can address varying types of audio pickup needs for rooms of virtually any size. With up to 350 available frequencies across 160 MHz of RF range, the system also delivers incredibly robust reception. Now corporate boardrooms, training rooms, college lecture halls, courtrooms and other multi-use venues can ensure excellent audio pickup quality and meet varying pickup needs with the simplicity of PoE that enables installation virtually anywhere through a single CAT 6 ethernet cable. ClearOne’s free support for system design and remote commissioning makes it easier than ever to outfit any presentation space with a professional-quality multi-function audio pickup solution. The DIALOG UVHF system allows integrators, room designers and meeting hosts to address a wide range of audio pickup needs through five lavalier, lanyard and headset-type body microphones, two handheld microphones, a boundary microphone andthree gooseneck microphones for podium use. Powering the microphones is simple and efficient, as all models use the same 12-hour off-the-shelf Li-ion battery that can be charged via USB-C or an optional eight-bay network-connected charging dock. Firmware updates can be done over the network, while the transmitters charge. The Dante-enabled system includes aneight-channel Dante Access Point to ensure optimal signal transmission and system reliability, while an optional DIALOG UVHF Dante interface provides eight Euroblock balanced analog outputs, including mixed output, USB audio output andeight GPIOs. The lightweight plenum-rated access point provides versatile mounting options for wall, ceiling, tabletop or pole mounting, including VESA mount holes. The DIALOG UVHF is the only system with a wireless access point that delivers antenna redundancy and diversity, with dual antennas providing spatial and polarization diversity that helps maintain high audio quality in harsh environments. A wired ethernet connection adds the ability to connect management software to the access point via a web browser. Secure RF connections are created using full-time standards-based FIPS 197 AES-256 encryption. ClearOne’s solutions are designed to support all leading collaboration platforms, including Microsoft Teams, Google Meet, GoToMeeting, Zoom and WebEx.
Previous report
In August 2023, we showcased our full range of conferencing, collaboration, and communications solutions at CEDIA 2023 held in Denver, Colorado. During the event, we highlighted the CHAT®150 BT Speakerphone (USB and Bluetooth speakerphone), Versa® Mediabar™ (video soundbar), UNITE®60 (4 K ePTZ wide-angle tracking camera), COLLABORATE® Versa® Pro CT (product bundle consisting of Huddle DSP and BMA CTH beamforming mic array ceiling tile), COLLABORATE® Versa® Lite CT (USB Plug-N-Play beamforming mic array ceiling tile), and COLLABORATE® Versa®60 (product bundle consisting of CHAT®150 USB speakerphone, a UNITE®60 wide angle 4 K ePTZ camera, and a VERSA USB Hub).
Previous report
In August 2023, we announced that our entire line of commercial and residential solutions is available for specification within the popular D-Tools software program for integrators. D-Tools’ System Integrator software and D-Tools Cloud platform make it easier than ever for integrators to specify ClearOne solutions for any type of installation.
Previous report
In September 2023, our new DIALOG® UVHF Wireless Microphone System was named a winner in the Higher Education category of the 2023 Tech & Learning Magazine Awards of Excellence. The annual Tech & Learning Awards of Excellence program, conducted by leading educational technology publication Tech & Learning, recognizes innovation in the edtech industry and celebrates the most impressive products and solutions that support learning environments.
Previous report
In October 2023, we debuted thenew Versa USB 22 D Dante Adapter at InfoComm India 2023. Versa USB 22 D enables users to seamlessly connect computers to a Dante network and use any audio application for playback or capture without installing software.
Previous report
In January 2024, we introduced the DIALOG 20 USB. This solution is ideal for hybrid meetings that require a dedicated presenter microphone and a shared audience microphone with simultaneous sound reinforcement, such as any type of hybrid training or presentation session. The DIALOG 20 USB works in spaces up to 2500 square feet.
Previous report
We also continued our programs to cut costs and to speed up product development that we believe will enable us to get back to a growth path.
Previous report
During 2024, our overall revenue of $11.4 million decreased by 39% when compared to revenue of $18.7 million during 2023. The decrease in revenue was seen across all product categories and major regions. We believe the revenue decline was primarily due to the decline in demand for video products anddue to our inability in the first half of 2023 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 EMS provider. We believe that many of our channel partners who could not buy our products due to product shortages caused by our manufacturing transition issues are yet to resume their typical buying pattern with us. We also believe that the lack of Microsoft Teams certification for our products is increasingly impacting our ability to sell our conferencing and collaboration solutions.
Previous report
Our gross profit margin decreased to 23% during 2024 from 34% in 2023. Net loss of $0.6 million in 2023 changed to net loss of $9.0 million in 2024. The increase in the loss is attributed to decreasing revenue and an inability to capture cost reductions as rapidly as the decrease in revenue combined with compressed margins, falling 11% year over year.
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Industry conditions
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We operate in a very dynamic and highly competitive industry which is dominated on theone hand by a few players with respect to certain products like video conferencing appliances while on the other hand influenced heavily by a fragmented reseller market consisting of numerous regional and local players. The industry is also characterized by venture capitalist funded start-ups and private companies willing to fund cumulative cash losses in order to gain market share and achieve certain non-financial goals. It has become increasingly important to have higher interoperability with other products in the audio-visual market as well as product certifications with leading video conferencing service providers like Microsoft and Zoom.
Previous report
Economic conditions, challenges and risks
Previous report
The audio-visual products market is characterized by intense competition and rapidly evolving technology. Our competitors vary within each product category. Our installed professional audio-conferencing products, which is our flagship product category, continue to be ahead of the competition despite the reduction in revenues. Our strength in this space is largely due to our fully integrated suite of products consisting of DSPs, a wide range of professional microphone products and video collaboration products. Despite our strong leadership position in the installed professional audio-conferencing market, we face challenges to revenue growth due to the limited size of the market, pricing pressures from new competitors attracted to the commercial market due to higher margins, and the lack of certifications from Microsoft.
Previous report
Our video products and beamforming microphone arrays, especially highly advanced BMA 360 and BMA-CTare critical to our long-term growth. We face intense competition in this market from well-established market leaders as well as emerging players rich with marketing funds. We expect our strategy of making our products more interoperable with other audio-visual products, continuing to improve the quality ofour high-end audio-conferencing products and microphones, and offering a wide range of innovative professional cameras will generate high growth in the near future.
Previous report
We derive a significant portion of our revenue (approximately 67% in 2024) from international operations and expect this trend to continue in the future. Most of our revenue from outside the U.S. is billed in U.S. dollars and is not exposed to any significant currency risk. However, we are exposed to foreign exchange risk if the U.S. dollar is strong against other currencies as it will make U.S. Dollar denominated prices of our products less competitive.
Previous report
Deferred Revenue
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Deferred revenue decreased from $30 thousand in 2023 to $17 thousand in 2024 due to decrease in new subscriptions to the video conferencing software.
Previous report
The following table sets forth certain items from our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024 and 2023, together with the percentage change each item represents. Throughout this discussion, we compare results of operations forthe year ended December 31, 2024 (“2024”) tothe year ended December 31, 2023 (“2023” or “the comparable period”).
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Revenue
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Our revenue decreased by 39% to$11.4 million in 2024 compared to $18.7 million of revenue in 2023. Revenue from all product categories declined during the year with audio conferencing, microphones and video products declining by 49%, 33% and 26% respectively. Video products suffered a decline in revenues in 2024 compared to 2023 due to alack of demand for video products as demand for the work from home and learn from home markets contracted as well as experiencing extreme pricing pressures. Revenue decreases were also due to our inability in the first half of 2023 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 EMS provider. We believe that many of our channel partners who could not buy our products due to product shortages caused by our manufacturing transition issues are yet to resume their typical buying pattern with us. We also believe that the lack of Microsoft Teams certification for our products is increasingly impacting our ability to sell our conferencing and collaboration solutions.
Previous report
The share ofaudio-conferencing products in our product mixdecreased from 45% in 2023 to 38% in 2024. The share of microphonesin the revenue mixincreased slightly from 41% in 2023 to 46% in 2024. Share of video products in the revenue mix increased from 14% in 2023 and 16% in 2024.
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During 2024, revenue decreased in the Asia Pacific area, including the Middle East, by 19%. Europe and Africa decreased by 46% and the Americas decreased by approximately 54%.
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We believe, although there can be no assurance, that we can return to revenue growth and generating operating profits through our strategic initiatives namely product innovation, focus on core products and cost reduction.
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Cost of Goods Sold and Gross Profit
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Cost of goods sold (“COGS”) includes expenses associated with finished goods purchased from outsourced manufacturers, the manufacture of our products (including material and direct labor), our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, and the allocation of overhead expenses.
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Our gross profit during 2024 was approximately$2.6 million or 23% compared to approximately $6.4 million or 34% in 2023. The gross profit margin was negatively impacteddue to (a) an increase infreight and tariff costs as a percentage of revenue, (b)increased material costs across all product lines, and (c) an increase in inventory obsolescence costs.
Previous report
Our profitability in the near-term continues to depend significantly on our revenues from audio conferencing products. We hold long-term inventory and if we are unable to sell our long-term inventory, our profitability might be affected by inventory write-offs and price mark-downs. Our long-term inventory includes approximately $2.2 million of Converge Pro and Beamforming microphone array products, $0.5 million of cameras, and $1.1 million of raw materials that will be used primarily for manufacturing professional audio conferencing products and BMA microphones. Any business changes that are adverse to these product lines could potentially impact our ability to sell our long-term inventory in addition to our current inventory.
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Operating Expenses and Profits (Losses)
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Operating income (loss), or income(loss) from operations, is the surplus or deficit after operating expenses are deducted from gross profits. Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses. Total operating expenses were$11.8 million in 2024, compared to $13.1 million in 2023. The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.
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Sales and Marketing S&M expenses include sales, customer service, and marketing expenses such as employee-related costs, allocations of overhead expenses, trade shows, and other advertising and selling expenses.
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S&M expenses in 2024 decreased to $4.6 million, compared to $4.9 million in 2023. The decrease was primarily due to (a) decreasesin employment expenses and consultant expenses, (b) a decrease in commissions paid to employees, full-time consultants andindependent manufacturer representatives. This overall decrease was partially offset by (a) an increase in trade-show-related costs, and (b) an increase in travel expenses.
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Research and Product Development R&D expenses include research and development, product line management, engineering services, and test and application expenses, including employee-related costs, outside services, expensed materials, depreciation, and an allocation of overhead expenses.
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R&D expenses decreased from $3.7 million in 2023 to$3.3 million in 2024. The decrease was primarily due to (a) a decrease in project-related expenses, (b) a decrease in employment expenses including salaries and bonuses, and (c) a decrease in allocation of common expenses to R&D. This overall decrease was partially offset by an increase in legal expenses incurred on application for new patents.
Previous report
General and Administrative G&A expenses include employee-related costs, professional service fees, allocations of overhead expenses, litigation costs, and corporate administrative costs, including costs related to finance and human resources.
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Previous wording
The following discussion should be read in conjunction with our consolidated financial statements and related notes included in this report, as well as our other filings with the SEC. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions, as set forth under “Disclosure Regarding Forward-Looking Statements.” Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the following discussion and under the caption “Risk Factors” in Item 1 A and elsewhere in this report.
Current wording
The following discussion should be read in conjunction with our consolidated financial statements and related notes included in this report, as well as our other filings with the SEC. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions, as set forth under“SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.” Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the following discussion and under the caption “Risk Factors” in Item 1 A and elsewhere in this report.
Previous wording
Our discussion and analysis of our results of operations and financial position are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. We believe that the estimates we use are reasonable; however, actual results could differ from those estimates. Our significant accounting policies are described in Note 1 - Business Description, Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements included in Part IV of this report. We believe the following critical accounting policies identify our most critical accounting policies, which are the policies that are both important to the representation of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Current wording
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. The Company’s most significant accounting estimates include:
Previous wording
We have no off-balance-sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, results of operations or liquidity.
Current wording
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on its financial condition, results of operations, liquidity, or capital resources.
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Current report — wording carried from elsewhere
For descriptions of recently issued accounting standards, see Note 1. Business Description, Basis of Presentation and Significant Accounting Policies of our Notes to Consolidated Financial Statements.