CLEARONE INC

Note 1 -Business Description, Basis of Presentation and Significant Accounting Policies

Business Description:

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), was previously engaged in the design, development, and marketing of professional audio conferencing, microphone, and video collaboration solutions. On October 24, 2025, the Company completed the sale of a significant portion of its operating assets (the "Asset Sale"). Following 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. Its continuing activities consist solely of fulfilling warranty and technical support obligations on legacy products, managing and liquidating remaining assets, collecting accounts receivable, satisfying outstanding liabilities, and maintaining public-company compliance. These activities are transitional in nature and are not expected to generate material revenue.

Going Concern:

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred significant losses, has negative cash flows from operations, and its continuing operations are limited and not expected to generate revenue at levels sufficient to fund ongoing costs. These conditions, together with the mandatory redemption obligation for the Class A Redeemable Preferred Stock (triggered by the closing of the Asset Sale on October 24, 2025), raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements. Management is actively evaluating strategic alternatives intended to enhance stockholder value and improve liquidity. These alternatives may include one or more special transactions or other actions that maximize value for stockholders. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation:

The consolidated financial statements include the accounts of ClearOne, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. The financial statements are prepared in accordance with U.S. GAAP. The year ended December 31, 2025 includes the results of the disposed assets as discontinued operations that were sold on October 24, 2025. No allocation or smoothing of results between continuing and discontinued operations has been applied.

Reverse Stock Split:

The Company completed a 1-for-15 reverse stock split of the Company's issued and outstanding common stock, par value $0.001 per share, effective at 5:00 p.m. Eastern Time on June 9, 2025. The common stock began trading on a split-adjusted basis on the Nasdaq Capital Market on June 10, 2025, under the symbol "CLRO" and a new CUSIP number of 18506U203. The reverse stock split was primarily intended to increase the per share market price of the common stock in order to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. As a result of the reverse stock split, every 15 shares of issued and outstanding common stock were automatically combined into one share, withno fractional shares issued (any fractional interests were rounded up to the next whole share). The reverse stock split did not change the par value of the common stock or the authorized number of shares but reduced the number of issued and outstanding shares from approximately 26.0 million to approximately 1.7 million, with proportional adjustments to outstanding stock options, warrants, and shares reserved under equity incentive plans. For additional details, refer to the Company's Current Report on Form 8-K filed with the SEC on June 2, 2025, including the press release attached as Exhibit 99.1 thereto.

All share and per-share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented.

Restricted Cash consists of $519 in remaining proceeds from a $3,000 convertible note issued to First Finance Ltd. on June 20, 2025 (withno restricted cash balance as of March 31, 2025). These funds are subject to enforceable contractual restrictions per the disbursement schedule in Schedule 8.5 of the Note Purchase Agreement, which allocates proceeds to specific uses such as advisory fees, warrant holder payments, legal and audit expenses, staff costs (e.g., board fees, accounting staff, operations/sales staff bonuses), shutdown costs for foreign subsidiaries, and severance/PTO for employee layoffs. The funds are held in a segregated account and released only upon meeting specified milestones, with penalties for non-compliance.

| F-8 |

The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, in accordance with ASU 2016-18. Restricted cash as of September 30, 2025, disbursed for severances, deal fees, legal fees, and compliance fees, resulting in the ending restricted cash balance. Full disbursement of the remaining restricted cash is expected by December 2025 as additional milestones are achieved. Restricted cash is classified as a current asset on the balance sheet and included in the total cash, cash equivalents, and restricted cash balances in the statement of cash flows. Changes in restricted cash are not presented as separate cash flows but are reconciled in this note. This classification and presentation provide transparency regarding the Company's liquidity, as the restricted funds are not available for general corporate purposes.

Significant Accounting Policies:

Cash Equivalents – The Company considers all highly-liquid investments with a maturity ofthree months or less, when purchased, to be cash equivalents. The Company places its temporary cash investments with high-quality financial institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limits. As of December 31, 2025, there were no cash accounts in the United States that exceeded federally insured limits. In addition, there were foreign cash accounts in the amount of $46 that were not covered by Federal Deposit Insurance Corporation insurance.

Marketable Securities - The Company has classified its marketable securities as available-for-sale securities. These debt securities are carried at estimated fair value with unrealized holding gains and losses included in other comprehensive income (loss) in shareholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned.

A decline in the market value of any available-for-sale security below cost that is deemed other than temporary results in a charge to earnings and establishes a new cost basis for the security. Losses are charged against “Other income” when a decline in fair value is determined to be other than temporary. We review several factors to determine whether a loss is other than temporary. These factors include, but are not limited to: (i) the extent to which the fair value is less than cost and the cause for the fair value decline, (ii) the financial condition and near term prospects of the issuer, (iii) the length of time a security is in an unrealized loss position and (iv) our ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. There were no other-than-temporary impairments recognized during the years ended December 31, 2025 and 2024.

Accounts Receivable – Accounts receivable are recorded at the invoiced amount, net of expected returns and allowance for doubtful accounts. Generally, credit is granted to customers on a short-term basis without requiring collateral, and as such, these accounts receivable, do not bear interest, although a finance charge may be applied to such receivables that are past due. The Company extends credit to customers who it believes have the financial strength to pay. The Company has in place credit policies and procedures, an approval process for sales returns and credit memos, and processes for managing and monitoring channel inventory levels.

The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Management regularly analyzes accounts receivable including current aging, historical write-off experience, customer concentrations, customer creditworthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. We review customer accounts quarterly by first assessing accounts with aging over a specific duration and balance over a specific amount. We review all other balances on a pooled basis based on past collection experience. Accounts identified in our customer-level review as exceeding certain thresholds are assessed for potential allowance adjustment if we conclude the financial condition of that customer has deteriorated, adversely affecting their ability to make payments. Delinquent account balances are written off if the Company determines that the likelihood of collection is not probable. If the assumptions that are used to determine the allowance for credit losses change, the Company may have to provide for a greater level of expense in future periods or reverse amounts provided in prior periods.

| F-9 |

The Company’s allowance for doubtful accounts activity for the years ended December 31, 2025 and 2024 is as follows(see Note 2, as accounts receivable and the allowance for doubtful accounts are included in current assets related to discontinued operations):

Inventories – Inventories are valued at the lower of cost or market, with cost computed on a first-in, first-out (“FIFO”) basis. In addition to the price of the product purchased, the cost of inventory includes the Company’s internal manufacturing costs, including warehousing, engineering, material purchasing, quality and product planning expenses and applicable overhead, not in excess of estimated realizable value. Consideration is given to obsolescence, excessive levels, deterioration, direct selling expenses, and other factors in evaluating net realizable value.

The inventory includes advance replacement units (valued at cost) provided by the Company to end-users to service defective products under warranty. The value of advance replacement units included in the inventory was$353 and $392, as of December 31, 2025 and 2024, respectively.

Property and Equipment – Property and equipment are stated at cost less accumulated depreciation and amortization. Expenditures that materially increase values or capacities or extend useful lives of property and equipment are capitalized. Routine maintenance, repairs, and renewal costs are expensed as incurred. Gains or losses from the sale, trade-in, or retirement of property and equipment are recorded in current operations and the related book value of the property is removed from property and equipment accounts and the related accumulated depreciation and amortization accounts. Estimated useful lives are generallytwo toten years. Depreciation and amortization are calculated over the estimated useful lives of the respective assets using the straight-line method. Leasehold improvement amortization is computed using the straight-line method over the shorter of the lease term or the estimated useful life of the related assets.

Intangible Assets – Intangible assets are amortized over their useful lives unless these lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, which are generally three toten years. Intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized.

Impairment of Long-Lived Assets - Long-lived assets, such as property, equipment, and definite-lived intangible assets subject to depreciation and amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated future undiscounted net cash flows of the related asset or group of assets over their remaining lives. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change. Assets held for sale are reported at the lower of the carrying amount or fair value, less the estimated costs to sell.

| F-10 |

*Leases:*We determine if an arrangement is a lease at inception. Operating leases are included in operating lease - right of use (“ROU”) assets, accrued liabilities, and operating lease liability in our consolidated balance sheets. As of adoption of ASC 842 and as of December 31, 2025 and December 31, 2024, the Company was not party to finance lease arrangements. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Under the available practical expedient, we account for the lease and non-lease components as a single lease component.

Revenue Recognition Policy: The Company generates revenue from sales of its audio and video conferencing equipment to distributors, system integrators and value-added resellers. The Company also generates revenue, to a much lesser extent, from sale of software and licenses to distributors, system integrators, value-added resellers and end-users. The Company recognizes revenue when it satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled. For sales agreements, the Company has identified the promise to transfer products, each of which are distinct, to be the performance obligation. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty and supply, but typically do not require mandatory purchase commitments. In the absence of a sales agreement, the Company’s standard terms and conditions at the time of acceptance of purchase orders apply. The Company considers the customer purchase orders, governed by sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. The Company evaluates certain factors including the customer’s ability to pay (or credit risk)

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. Sales to distributors, are typically made pursuant to agreements that provide return rights with respect to discontinued or slow-moving products, referred to as stock rotation. Sales to distributors can also be subject to price adjustment on certain products, primarily for distributors with drop-shipping rights. Although payment terms vary, most distributor agreements require payment within 45 days of invoicing.

The Company recognizes revenue when it satisfies a performance obligation. The Company recognizes revenue from sales agreements upon transferring control of a product to the customer. This typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are sold to dealers or end users. Sales returns and allowances are estimated based on historical experience. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenues are recognized, and are netted against revenues. For returns, the Company recognizes a related asset for the right to recover returned products with a corresponding reduction to cost of goods sold. The Company reviews warranty and related claims activity and records provisions, as necessary.

Frequently, the Company receives orders with multiple delivery dates that may extend across reporting periods. Since each delivery constitutes a performance obligation, the Company allocates the transaction price of the contract to each performance obligation based on the stand-alone selling price of the products. The Company invoices the customer for each delivery upon shipment and recognizes revenues in accordance with delivery terms. Although payment terms vary, distributors typically pay within 45 days of invoicing and dealers pay within 30 days of invoicing. As scheduled delivery dates are within one year, revenue allocated to future shipments of partially completed contracts are not disclosed.

The Company has elected to record freight and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost and include it in cost of revenues. Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenues) in the consolidated statements of operations and comprehensive income (loss).

| F-11 |

The details of deferred revenue and associated cost of goods sold and gross profit are as follows:

The Company offers rebates and market development funds to certain of its distributors, dealers/resellers, and end-users based upon the volume of product purchased by them. The Company records rebates as a reduction of revenue in accordance with GAAP.

The Company provides, at its discretion, advance replacement units to end-users on defective units of certain products under warranty. Since the purpose of these units is not revenue generating, the Company tracks the units due from the end-user, until the defective unit has been returned. Any amount due from the customer upon failure to return the products is accounted as receivable only after establishing customer's failure to return the products. The inventory due from the customer is accounted at cost or market value whichever is lower.

The following table disaggregates the Company’s revenue into primary product groups (see Note 2, as all revenue is classified in discontinued operations):

The following table disaggregates the Company’s revenue into major regions:

Warranty Costs – The Company accrues for warranty costs based on estimated warranty return rates and estimated costs to repair. These reserve costs are classified as accrued liabilities on the consolidated balance sheets. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty returns, and repair cost. The Company reviews the adequacy of its recorded warranty accrual on a quarterly basis.

The details of changes in the Company’s warranty accrual are as follows:

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Advertising – The Company expenses advertising costs as incurred. Advertising costs consist of trade shows, magazine advertisements, and other forms of media. Advertising expenses for the years ended December 31, 2025 and 2024 totaled $227 and $526, respectively, and are included in discontinued operationson the consolidated statements of operations and comprehensive income (loss).

Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry-forwards. These temporary differences will result in deductible or taxable amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets may not be realized. On a quarterly basis, the Company tests the value of deferred tax assets for impairment at the taxpaying-component level within each tax jurisdiction. Significant judgment and estimates are required in determining whether valuation allowances should be established as well as the amount of such allowances.

The valuation allowance is based on our estimates of future taxable income and the period over which we expect the deferred tax assets to be recovered. Our assessment of future taxable income is based on historical experience and current and anticipated market and economic conditions and trends. In 2018, as a result of negative evidence, principally three years of cumulative pre-tax operating losses, we concluded that it was more likely than not that net operating losses, tax credits and other deferred tax assets were not realizable and therefore, we recorded a full valuation allowance against those net deferred tax assets. We continue to record full valuation against our net deferred tax assets. Adjustments to the valuation allowance increase or decrease the Company’s income tax provision or benefit.

As of December 31, 2025 the Company had no net deferred tax assets due to valuation allowances recorded to account for the consecutive quarters with losses before taxes.

Recent changes: There were no changes that hada material impact on the Company's consolidated financial position, results of operations or cash flows.

Earnings Per Share – The following table sets forth the computation of basic and diluted loss per common share:

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Share-Based Payment – We estimate the fair value of stock options using the Black-Scholes option-pricing model, which requires certain estimates, including an expected forfeiture rate and expected term of options granted. We also make decisions regarding the method of calculating expected volatilities and the risk-free interest rate used in the option-pricing model. The resulting calculated fair value of stock options is recognized as compensation expense over the requisite service period, which is generally the vesting period. When there are changes to the assumptions used in the option-pricing model, including fluctuations in the market price of our common stock, there will be variations in the calculated fair value of our future stock option awards, which results in variation in the compensation cost recognized.

Operating Segment – The Company operates asone operating segment. Operating segments are defined as components of an entity for which separate financial information is regularly evaluated by the chief operating decision maker ("CODM"), which is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company's CODM evaluates financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information that is supplemental to information disclosed within the consolidated financial statements, that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss and functional expenses as reported on our consolidated statements of operations and comprehensive loss. Because the Company operates asone operating segment, financial segment information, including expense and asset information, can be found in the consolidated financial statements.

Recently issued accounting pronouncements:

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued Accounting Standards Update (“ASU”)2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for full year 2024 reporting, and for interim reporting beginning in 2025. The adoption of this ASU did not change the way the Company evaluates its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures.

ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This update enhances income tax disclosure requirements, primarily by requiring greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disclosures. For public business entities, such as the Company, ASU 2023-09 mandates a tabular reconciliation of the effective tax rate using both percentages and reporting currency amounts, with specific categories of reconciling items and additional detail for items meeting a quantitative threshold of 5% of the expected tax amount. Additionally, the standard requires annual disclosure of income taxes paid, disaggregated by federal, state, and foreign jurisdictions, with further breakout by individual jurisdiction if the amount is significant. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively, though retrospective application is optional. The Company adopted the new standard on January 1, 2025, using the retrospective transition method. The adoption modified the presentation of our income tax disclosures (see Note 14) but did not have a material impact on our consolidated financial position or results of operations.

ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No.2024-03, "Income Statement—Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses," which requires public business entities, such as the Company, to provide disaggregated disclosure of specific natural expense categories underlying certain income statement expense line items in the notes to the financial statements. The standard identifies five required natural expense categories for disaggregation—employee compensation, depreciation, amortization, inventory expense, and other manufacturing expenses—along with a residual "other" category for remaining amounts within relevant expense captions (e.g., cost of sales, selling, general and administrative expenses). ASU 2024-03 does not alter the expense captions presented on the face of the income statement but enhances footnote disclosures to improve transparency. The standard is effective for annual periods beginning after December 15, 2026, with early adoption permitted, and must be applied prospectively, though retrospective application is optional. An update in ASU 2025-01 clarified that interim period disclosures are not required until annual periods beginning after December 15, 2027. The Company is currently developing its implementation plan and evaluating the impact of this standard on its consolidated financial statement disclosures. While we expect adoption to necessitate modifications to our financial reporting processes and systems to capture the required disaggregated information, management does not expect a material effect on our reported financial position or results of operations.

| F-14 |

Discontinued Operations:

See Note 2 for a full description of the Asset Sale and presentation of discontinued operations.

Use of Estimates***:***

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts. Key estimates include valuation of retained warranty inventory, warranty reserves, legal contingencies, and the going-concern assessment. Actual results could differ materially from these estimates.

Note 2 – Discontinued Operations and Asset Sale

On October 24, 2025, the Company completed the sale of substantially all of its operating intellectual property, product inventory, and related production assets to Biamp Systems, LLC (“Biamp”) for gross cash consideration of $3,000 (the “Asset Sale”). Biamp did not assume any warranty or technical support obligations. The Company retained its books and records, all equity interests in subsidiaries, approximately $390 of inventory solely to service warranty obligations, and all public-company assets and obligations. See the Company’s Current Report on Form 8-K filed October 30, 2025 for additional information.

The sale represents the disposal of a component that qualifies as discontinued operations under ASC 205-20. 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.

At September 30, 2025, the disposal group was classified as held for sale and measured at fair value less costs to sell. The carrying amount of the disposal group was $13,641 (primarily inventory of $12,856 and intangible assets of $785). Based on the executed asset purchase agreement for $3,000 cash consideration and estimated transaction costs of $100, management recorded an impairment of $10,741 to reduce the disposal group to fair value less costs to sell. The impairment is included in “Loss from discontinued operations” in the consolidated statements of operations.

Carrying amounts classified as held for sale

• Assets held for sale at September 30, 2025 totaled $2,900 (comprised primarily of inventory $12,956 and intangibles $785, less impairment to fair value less costs to sell of $10,741 and transaction costs of $100).

• Liabilities held for sale at September 30, 2025 were $0 (no obligations transferred).

The carrying value of net assets sold at the October 24, 2025 closing date, after the Q 3 impairment and additional changes in October, was $14,055. The loss on sale recognized in the fourth quarter of 2025 was calculated as follows (in thousands):

| F-15 |

The major classes of assets and liabilities of the disposed assets as of the October 24, 2025 closing date (gross carrying value before impairment allocation) were as follows (in thousands):

The difference between the gross carrying value of $17,638 and the post-impairment carrying value of $14,055 used in the loss on sale calculation is attributable to the Q 3 impairment of $10,741 and additional net asset activity in October 2025.

The results of discontinued operations for the years ended December 31, 2025 and 2024 are summarized as follows (in thousands):

Following the Asset Sale, the Company continues to fulfill warranty and technical support obligations on products sold October 24, 2025 in accordance with published policies. The Company retained a limited amount of inventory solely to service these obligations. These activities are reported within continuing operations and do not constitute ongoing operations of the disposed assets.

Cash flows from discontinued operations are included in the consolidated statements of cash flows. For the year ended December 31, 2025, net cash provided by discontinued operations was $9,944.

Net proceeds from the Asset Sale are contractually earmarked to redeem the Class A Redeemable Preferred Stock. Redemption occurred after December 31, 2025 and is treated as a subsequent event.

| F-16 |

Note 3 - Marketable Securities

All marketable securities were liquidated during 2025 to support working capital needs. There wereno marketable securities as of December 31, 2025 or 2024.

Note 4 -Intangible Assets

All intangible assets were sold as part of the Asset Sale on October 24, 2025. There wereno intangible assets remaining as of December 31, 2025

Note 5 -Inventories

Inventories consist solely of the limited amount retained to service warranty obligations:

Note 6 - Property and Equipment

All property and equipment associated with the disposed operations were sold as part of the Asset Sale. All remaining property and equipment consist primarily of office supplies and aged computer equipment which was written off as de minumus:

Depreciation expense included in discontinued operations totaled $232 thousand and $226 thousand for the years ended December 31, 2025 and 2024 respectively. No depreciation expense was recorded in continuing operations for either period.

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Note 7 - Leases

Rent expense is recognized on a straight-line basis over the period of the lease considering future rent escalation and holiday periods.

Rent expense for the years ended December 31, 2025 and 2024 was as follows:

We occupy approximately 9,402 square feet of office space in Salt Lake City, Utah under an operating lease expiring in February 2028. This facility supports the Company’s remaining administrative functions, public company compliance activities, and limited operational support functions.

The Company previously occupied a 1,350 square-foot facility in Gainesville, Florida under an operating lease that had been extended to February 29, 2029. On March 2, 2026, the Company entered into a Settlement, Release and Agreement to Terminate Lease with the landlord. Pursuant to the settlement, the Company paid $30 and forfeited its security deposit in exchange for full termination of the lease and a mutual release of all obligations. The Company has no further liability under this lease.

The Company previously occupied a 2,590 square-foot warehouse facility in Salt Lake City, Utah (363 West 2720 South, Suite B) under an operating lease scheduled to expire in February 2028. On February 24, 2026, the Company entered into an Early Termination Agreement with the landlord that terminated the lease effective midnight February 28, 2026. In connection with the early termination, the Company paid a buyout of $43 and forfeited its security deposit. The Company has no further liability under this lease after February 28, 2026. This facility previously supported warranty servicing and repair activities related to products sold prior to the October 2025 asset disposition.

The Company previously occupied a 6,175 square-foot facility in Chennai, India under the terms of an operating lease which expired September 2025. This facility supported our administrative, marketing, customer support, and research and product development activities. We did not renew the lease and vacated these premises on November 15,2025 and the deposit was refunded in January 2026.

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

| F-18 |

The following represents maturities of operating lease liabilities as of December 31, 2025:

Subsequent Events

Subsequent to December 31, 2025, the Company terminatedtwo of its operating leases: (i) the Gainesville, Florida facility was terminated on March 2, 2026 via a settlement agreement with a $30 cash payment and forfeiture of the security deposit; and (ii) the Salt Lake City warehouse facility was terminated effective February 28, 2026 via an early termination agreement with a $43 buyout and forfeiture of the security deposit. The Company has no further liability under either lease. See Note 17 – Subsequent Events for additional information.

Note 8 - Accrued Liabilities

Accrued liabilities consist of the following:

Note 9 -Commitments and Contingencies

Legal Proceedings

See Item 3 – Legal Proceedings for incorporation by reference.

Spain Employee Settlement

ClearOne Spain, S.L. (“ClearOne Spain”), a wholly owned subsidiary, entered into a binding settlement agreement with eight former employees to resolve wrongful termination and severance claims arising from a collective dismissal implemented in August 2025.

• The settlement agreement was executed on December 29, 2025.

• The Board of Directors of ClearOne, Inc. approved the settlement on December 31, 2025.

• The agreement fixed the Company’s obligation to pay net settlement proceeds of €393 (€362 compensation + €31 severance).

Management concluded the obligation was both probable and reasonably estimable as of December 31, 2025 under ASC 450-20 and therefore accrued the full amount at year-end. The USD equivalent recorded at the December 31, 2025 spot rate was $461. Due to ClearOne Spain being part of the discontinued operations, this accrual is included in current liabilities related to discontinued operations on the balance sheet.

Payment of the settlement was made on January 14, 2026 (value date January 16, 2026) and the formal ratification occurred at the Zaragoza SMAC conciliation hearing on January 21, 2026. These events are treated as non-recognized subsequent events with respect to cash disbursement timing only. No adjustment to the year-end accrual was required.

| F-19 |

The settlement is disclosed in the Discontinued Operations footnote (Note 2) to the extent it relates to the disposed business, as well as in Subsequent Events (Note 17) and Legal Proceedings (Item 3).

Executive Retention Bonuses

In connection with post-transaction leadership restructuring, the Company granted retention bonuses to Derek Graham and Simon Brewer contingent upon the completion of certain projects and duration of employment and the closing of a future transaction of the Company, respectively. These bonuses are not probable or estimable as of December 31, 2025 and are therefore disclosed only.

Other Contingencies

The Company is involved from time to time in claims and legal proceedings arising in the ordinary course of business. Management does not believe any such matters will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Note 10 - Debt

On July 21, 2025, the Company’s $3.0 million convertible note issued on June 20, 2025 to First Finance Ltd. (together with $26 of accrued interest) automatically converted into 3,026 shares of Class B Convertible Preferred Stock pursuant to its original terms. The conversion ratio of 166.44474 common shares per Class B share was determined at issuance based on the Nasdaq closing price and 5-day average closing prices on June 19, 2025 (the trading day immediately preceding execution of the note and purchase agreement) and is fixed (subject only to customary anti-dilution). Because the conversion option is indexed to, and will be settled in, the Company’s own equity, it qualifies for the ASC 815-40 “own-equity” scope exception; accordingly, no derivative liability was recorded and the full conversion amount was recognized in equity, withno gain or loss recognized on conversion. The Company has 5,100 Class B shares authorized and 3,026 issued and outstanding as of September 30, 2025. This conversion represents a non-cash financing activity and is disclosed in the supplemental cash flow information. Class B Convertible Preferred Stock is convertible into common stock in accordance with its Certificate of Designation filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2025. There wasno debt outstanding as of December 31, 2025 or 2024. On November 24, 2025, First Finance Ltd. converted all 3,026 shares of Class B Convertible Preferred Stock into 503,662 shares of common stock at the fixed conversion price of $6.008 per share. This non-cash conversion is reflected in the consolidated financial statements as of December 31, 2025, with no Class B Convertible Preferred Stock remaining outstanding.

Note 11 - Share-Based Payments

Employee Stock Option Plans

The Company’s share-based incentive plan offering stock options is primarily through 2007 Equity Incentive Plan (the “2007 Plan”). Under this plan, one new share is issued for each stock option exercised. The plan is described below.

The 2007 Plan was restated and approved by the shareholders on December 12, 2016. Provisions of the restated 2007 Plan include thegranting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion.

Generally vesting schedules for options granted are based on 3 or 4-year vesting schedules, with eitherone-third orone-fourth vesting on the first anniversary and the remaining options vesting ratably over the remainder of the vesting term. Generally, directors and officers have 3-year vesting schedules and all other employees have 4-year vesting schedules. Additionally, in the event of a change in control or the occurrence of a corporate transaction, the Company’s Board of Directors has the authority to elect that all unvested options shall vest and become exercisable immediately prior to the event or closing of the transaction. As of December 31, 2025, the Company had 2,769 options with contractual lives often years and 16,947 options with contractual lives ofsix years.

As of December 31, 2025, there were 19,716 options outstanding under the 2007 Plan. As of December 31, 2025, the 2007 Plan had 1,980,284 authorized unissued options.

The Company uses judgment in determining the fair value of the share-based payments on the date of grant using an option-pricing model with assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the risk-free interest rate of the awards, the expected life of the awards, the expected volatility over the term of the awards, and the expected dividends of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of share-based payments granted under the guidelines of ASC Topic 718.

| F-20 |

In applying the Black-Scholes methodology to the 10,667 options granted during the year ended December 31, 2024, the Company used the following assumptions:

There wereno options granted during the year ended December 31, 2025.

The risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of the grant, based on the expected life of the stock option. The expected life of the stock option is determined using historical data.

The expected price volatility is determined using a weighted average of daily historical volatility of the Company’s stock price over the corresponding expected option life.

Under guidelines of ASC Topic 718, the Company recognizes the associated compensation cost for only those awards expected to vest on a straight-line basis over the underlying requisite service period. The Company estimated the forfeiture rates based on its historical experience and expectations about future forfeitures.

The following table shows the stock option activity:

| F-21 |

The total pre-tax compensation cost related to stock options recognized during the years ended December 31, 2025 and 2024 was $78 and $89, respectively. Tax benefit from compensation cost related to stock options during the years ended December 31, 2025 and 2024, respectively was $1 and $2. As of December 31, 2025, the total compensation cost related to stock options not yet recognized and before the effect of any forfeitures was $0, which is expected to be recognized over approximately the next 0.0 years on a straight-line basis.

Employee Stock Purchase Plan

During the years ended December 31, 2025 and 2024, the Company maintained a 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved by the Company’s shareholders on December 12, 2016. Offering periods under the ESPP commenced on each January 1 and July 1 and continued for a duration ofsix months. The ESPP was available to all employees who did not own, or were deemed to own, shares of stock making up an excess of 0% of the combined voting power of the Company, its parent or subsidiary.

In connection with the significant reduction in force completed in June 2025, the Company terminated the ESPP effective July 2025. All participant contributions were refunded to employees in May and June 2025, totaling approximately $1. No shares were issued under the ESPP during the year ended December 31, 2025.

Shares purchased and compensation expense associated with the ESPP were as follows:

As of December 31, 2025, the ESPP has been terminated andno shares remain available for future issuance.

Issuance of Common Stock and Warrants

On September 13,2020, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”), pursuant to which the Company issued and sold, in a registered direct offering 141,070 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at an offering price of $37.39 per share, (the “Registered Offering”). The Company received gross proceeds of approximately $5,275 (4,764 net of issuance costs)in connection with the Registered Offering, before deducting placement agent fees and related offering expenses. In a concurrent private placement, the Company issued to the Purchasers who participated in the Registered Offering warrants exercisable for an aggregate of 70,535 shares of common stock at an exercise price of $36.45 per share. Each warrant became immediately exercisable and had an expiry term offive years from the issuance date.

On September 12, 2021, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued 241,546 shares of the Company's common stock, par value $0.001 per share at an offering price of $41.40 per share. The Company received gross proceeds of approximately $10,000 and net proceeds of $9,288 after deducting placement agent fees and related offering expenses. In a concurring private placement the Company also issued to the same purchasers warrants exercisable for an aggregate of 241,546 shares of common stock at an exercise price of $39.60 per share. Each warrant became immediately exercisable and will expire on March 15, 2027.

Warrants Repurchased (and Related Party)

During September 2025, the Company repurchased and cancelled outstanding warrants from (i) Intracoastal Capital, LLC (6,039 underlying shares) on September 2, 2025 for an aggregate purchase price of $4, (ii) Lind Global Fund II, LP (24,155 underlying shares) on September 10, 2025 for $15, (iii) Edward Dallin Bagley (related party; 18,940 underlying shares) on September 17, 2025 for $12, and (iv) Edward Bryan Bagley (3,788 underlying shares) on September 16, 2025 for $2. The repurchased warrants were cancelled upon settlement and accounted for as equity transactions with no effect on the statement of operations. As of September 30, 2025, warrants to purchase an aggregate of 218,887 shares of common stock remained outstanding. The Company did not issue new warrants during the quarter.

The repurchase price and other terms of the warrants repurchase from Edward Dallin Bagley were approved by the Board of Directors in accordance with the Company’s policy regarding related person transactions. No amounts were outstanding with Mr. Bagley related to these warrants as of September 30, 2025.

Subsequent to December 31, 2025, the Company repurchased and cancelled 24,155 of the September 12, 2021 warrants (see Note 17 – Subsequent Events).

| F-22 |

Note 12 - Significant Customers

The following customer concentration information relates to the discontinued operations for the periods presented.

During the year ended December 31, 2025, three of our distributors accounted for 10% or more of total sales. Customer A accounted for 12%, Customer B accounted for 13%, and Customer C accounted for 10%. For the year ended December 31, 2024, one distributor, customer D, accounted for more than 17% of our total consolidated revenue. As of December 31, 2025, customer E accounted for 16%, customer A accounted for 13%, customer F accounted for 11%, customer G accounted for 11%, and customer H accounted for 11% of trade accounts receivable. As of December 31, 2024, customer D accounted for 30% and customer A accounted for 12% of trade accounts receivable.

Note 13 - Fair Value Measurements

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 - Quoted prices in active markets for identical assets and liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. This category generally includes U.S. Government and agency securities; municipal securities; mutual funds and securities sold and not yet settled.

Level 3 - Unobservable inputs.

As of December 31, 2025 the Company had no financial instruments requiring fair value measurement under the three-level hierarchy.

Note 14 - Income Taxes

Consolidated income (loss) before income taxes, continuing operations, for domestic and foreign operations consisted of the following:

| F-23 |

The Company’s provision for income taxes, continuing operations, consisted of the following:

In accordance with the retrospective adoption of ASU 2023-09, the following table provides a tabular reconciliation of the income tax provision for continuing operations compared to the federal statutory rate for the years ended December 31, 2025 and 2024:

| F-24 |

In connection with the retrospective adoption of ASU 2023-09, the following table presents the tax effects of significant temporary differences that give rise to the Company’s net deferred tax assets and liabilities as of December 31, 2025 and 2024::

Taxes Paid by Jurisdiction (ASU 2023-09) (in thousands):

The Company has not provided for foreign withholding taxes on undistributed earnings of its non-U.S. subsidiaries since these earnings are intended to be reinvested indefinitely, in accordance with guidelines contained in ASC Topic 740, Accounting for Income Taxes. It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings.

The Company routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a valuation allowance if, based on all available evidence, it determines that it is more likely than not some portion of the tax benefit will not be realized. As of December 31, 2025, the Company had an aggregate of approximately $24,947 in deferred tax assets primarily related to intangible assets, net operating losses, tax credit carryforwards, and inventory basis differences. On a quarterly basis, the Company tests the value of deferred tax assets for impairment at the taxpaying-component level within each tax jurisdiction. Significant judgment and estimates are required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following:

Based on the foregoing criteria, the Company determined that it does not meet the “more likely than not” threshold that net operating losses, tax credits and other deferred tax assets will be realized. Accordingly, the Company recorded a full valuation allowance at December 31, 2025.

As of December 31, 2025 the Company has federal net operating loss (“NOL”) carryforwards of approximately $74,344 (pre-tax), state NOL carryforwards of approximately$76,036 (pre-tax) and Spain NOL carryforwards of approximately $15,034 (pre-tax). The federal NOL carryforward expires in 2030. The Spain NOL carryforward does not expire. The state NOL carryforwards expire over various periods.

| F-25 |

Effective July 1, 2007, the Company adopted the accounting standards related to uncertain tax positions. This standard requires that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts.

The total amount of unrecognized tax benefits for continuing operations at December 31, 2025 and 2024, that would favorably impact our effective tax rate if recognized was $1,162 and $1,101, respectively. As of December 31, 2025 and 2024, we accrued $279 and $198, respectively, in interest and penalties related to unrecognized tax benefits. We account for interest expense and penalties for unrecognized tax benefits as part of our income tax provision.

Although we believe our estimates are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our historical income tax provisions and accruals. Such difference could have a material impact on our income tax provision and operating results in the period in which we make such determination.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:

The Company’s U.S. federal income tax returns for 2018 through 2025 are subject to examination. The Company's U.S.2018 federal income tax return is currently under examination. The Company also files in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state, or non-U.S. income tax examinations by tax authorities for years prior to 2017.

Note 15 - Capital Structure: Class A Redeemable Preferred Stock

On July 18, 2025, following Board authorization on June 20, 2025, filing of the Certificate of Designation on June 24, 2025, and Nasdaq Corporate Data Operations approval on July 11, 2025 (the record date), the Company issued 2,069,065 shares of its Class A Redeemable Preferred Stock as aone-time special stock dividend (one Class A share for each common share and common stock equivalent outstanding as of the record date).2,069,066 shares are authorized and 2,069,065 were issued and outstanding as of December 31, 2025.

Pursuant to the Certificate of Designation, the Class A shares are mandatorily redeemable upon an Asset Sale for 100% of the net proceeds as defined therein. The closing of the Asset Sale on October 24, 2025 (see Note 2) triggered this mandatory redemption obligation. As of December 31, 2025, the redemption had not yet been completed.

The Company currently estimates the final redemption amount will be approximately $50 after permitted expenses and net asset recoveries. Accordingly, the Class A Redeemable Preferred Stock has been reclassified from temporary equity to a current liability on the consolidated balance sheet as of December 31, 2025.

The Class A Redeemable Preferred Stock is a participating security only in the liquidation or sale proceeds and does not receive dividends other than the redemption amount. Therefore, it is excluded from the computation of diluted earnings per share as anti-dilutive for the periods presented.

The actual cash redemption payment is expected to occur after December 31, 2025 and is treated as a non-recognized subsequent event (see Note 17 – Subsequent Events).

| F-26 |

Note 16 -Geographic Sales Information

The following geographic sales information relates to the discontinued operations for the periods presented.

The United States was the only country to contribute more than 10 percent of total revenues in each fiscal year. The Company’s revenues are substantially denominated in U.S. dollars and are summarized geographically as follows:

Note 17 -Subsequent events

Class A Redeemable Preferred Stock Redemption

Net proceeds from the October 2025 Asset Sale, after permitted expenses, are contractually required to be used to redeem all outstanding shares of the Company’s Class A Redeemable Preferred Stock. As of the date these consolidated financial statements were issued, the redemption had not yet occurred. The exact net proceeds available for redemption could not be determined as of December 31, 2025 because permitted expenses were still being finalized. The Company currently estimates that the final net amount available for redemption will be approximately $50. The redemption is expected to occur after the issuance of these financial statements and will be recognized in the period in which it takes place. See Note 15 – Capital Structure for additional information regarding the Class A Redeemable Preferred Stock.

On January 1, 2026, Simon Brewer was rehired as Chief Financial Officer and Principal Financial Officer under a new employment agreement.

On January 2, 2026, Derek Graham was rehired as part-time Chief Executive Officer and Principal Executive Officer under a new employment agreement.

On January 9, 2026, the Company paid Simon Brewer a $75,000 sign-on bonus with no clawback or retention conditions.

The Company granted retention bonuses to Derek Graham and Simon Brewer contingent upon the completion of projects and the duration of employment, and the closing of a future transaction, respectively.

Lease Terminations

• On February 24, 2026, the Company entered into an Early Termination Agreement for the 2,590 square-foot warehouse facility in Salt Lake City, Utah (363 West 2720 South, Suite B). The lease terminated effective midnight February 28, 2026. The Company paid a buyout of $42,556.50 and forfeited its security deposit. The Company has no further liability under this lease.

• In March, 2026, the Company entered into a Settlement, Release and Agreement to Terminate Lease for the 1,350 square-foot facility in Gainesville, Florida (2610 NW 43rd Street, Suite 2-C). The Company paid $30,000 and forfeited its $2,236.50 security deposit in exchange for full termination of the lease and a mutual release of all obligations. The Company has no further liability under this lease.

On March 2, 2026, the Company entered into a Securities Purchase Agreement with First Finance Ltd. (its largest stockholder) and issued 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 for aggregate gross proceeds of $1,750. Of the proceeds, $500 became immediately available to the Company, and the remaining $1,250 will become available upon completion of the Company’s reincorporation from Delaware to Nevada.

Warrant Repurchase

On March 9, 2026, the Company entered into a Warrant Repurchase Agreement with CVI Investments, Inc. and repurchased certain outstanding common stock purchase warrants originally issued on September 12, 2021. The repurchased warrants were exercisable for an aggregate of 24,155 shares of the Company’s common stock. The Company paid an aggregate cash purchase price of $22,000 ($0.9108 per underlying share). Upon settlement, the warrants were cancelled and are of no further force or effect.

Nevada Reincorporation

On March 12, 2026, stockholders holding a majority of the voting power of the Company’s outstanding capital stock entitled to vote and a majority of the outstanding shares of Class A Redeemable Preferred Stock approved, by written consent in lieu of a meeting, the reincorporation of the Company from the State of Delaware to the State of Nevada by conversion (the “Nevada Reincorporation”). The reincorporation is expected to become effective no earlier than twenty (20) calendar days after the mailing of the Information Statement on Schedule 14 C to the Company’s stockholders. This action satisfies the condition precedent in the March 2, 2026 Securities Purchase Agreement with First Finance Ltd. for the release of the remaining $1.25 million of proceeds from the $1.75 million private placement. See the Company’s Current Report on Form 8-K filed March 17, 2026 for additional information.

| F-27 |