UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period _______ to _______

Commission file number:001-33660

CLEARONE, INC.

(Exact name of registrant as specified in its charter)

Delaware		87-0398877
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

5225 Wiley Post Way, Suite 500, Salt Lake City, Utah		84116
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (801) 975-7200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001		CLRO		The NASDAQ Capital Market

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☒Yes ~~Yes~~ ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☒Yes☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Larger Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Yes ☐ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of ClearOne common stock outstanding as of May ~~18, 2022~~12, 2023 was ~~23,948,587.~~ 23,955,767.

Table of Contents

CLEARONE, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2022~~2023

INDEX


	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	5

	Unaudited Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1917

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2623

Item 4.	Controls and Procedures	2623

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2724

Item 1A.	Risk Factors	2724

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2724

Item 3.	Defaults Upon Senior Securities	2724

Item 4.	Mine Safety Disclosures	2724

Item 5.	Other Information	2724

Item 6.	Exhibits	2825

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CLEARONE, INC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

March 31, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$
1,422

$
1,071

Marketable securities

398

1,790

Receivables, net of allowance for doubtful accounts of $326 and $326, respectively

5,077

4,991

Inventories, net

9,865

10,033

Income tax receivable

7,540

7,535
Prepaid expenses and other assets

3,370

4,021

Total current assets

27,672

29,441

Long-term marketable securities

542

1,220

Long-term inventories, net

3,210

3,567

Property and equipment, net

676

744

Operating lease - right of use assets, net

1,383

1,537

Intangibles, net

24,675

25,086

Other assets

4,596

4,597

Total assets

$
62,754

$
66,192

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$
4,125

$
5,388

Accrued liabilities

2,826

2,549

Deferred product revenue

46

54

Short-term debt

1,336

3,481
Total current liabilities

8,333

11,472

Long-term debt, net

1,359

1,535

Operating lease liability, net of current

871

1,026

Other long-term liabilities

655

655

Total liabilities

11,218

14,688

Shareholders' equity:

Common stock, par value $0.001, 50,000,000 shares authorized, 23,948,587 and 22,410,126 shares issued and outstanding, respectively

24

22

Additional paid-in capital

74,831

72,795

Accumulated other comprehensive loss

(280
)

(241
)
Accumulated deficit

(23,039
)

(21,072
)
Total shareholders' equity

51,536

51,504

Total liabilities and shareholders' equity

$
62,754

$
66,192

	March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	59,006		$	984
Legal settlement receivable		—			55,000
Receivables, net of allowance of $326		3,541			3,603
Inventories, net		8,395			8,961
Income tax receivable		—			1,071
Prepaid expenses and other assets		3,635			7,808
Total current assets		74,577			77,427
Long-term inventories, net		2,885			2,707
Property and equipment, net		356			383
Operating lease - right of use assets, net		1,259			1,047
Intangibles, net		1,995			2,071
Other assets		112			115
Total assets	$	81,184		$	83,750
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,820		$	1,284
Accrued liabilities		2,454			3,041
Deferred product revenue		71			63
Short-term debt		1,556			3,732
Total current liabilities		5,901			8,120
Operating lease liability, net of current		949			492
Other long-term liabilities		1,008			1,008
Total liabilities		7,858			9,620

Shareholders' equity:
Common stock, par value $0.001, 50,000,000 shares authorized, 23,955,767 shares issued and outstanding		24			24
Additional paid-in capital		74,933			74,910
Accumulated other comprehensive loss		(283	)		(288	)
Accumulated deficit		(1,348	)		(516	)
Total shareholders' equity		73,326			74,130
Total liabilities and shareholders' equity	$	81,184		$	83,750

See accompanying notes

Table of Contents

CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

(Dollars in thousands, except per share amounts)

	Three months ended March 31,						Three months ended March 31,
	2022			2021			2023			2022
Revenue	$	7,545		$	7,038		$	4,178		$	7,545
Cost of goods sold		4,729			4,035			2,863			4,729
Gross profit		2,816			3,003			1,315			2,816

Operating expenses:
Sales and marketing		1,560			1,573			1,192			1,560
Research and product development		1,353			1,274			1,043			1,353
General and administrative		1,756			1,680			1,269			1,756
Total operating expenses		4,669			4,527			3,504			4,669

Operating loss		(1,853	)		(1,524	)		(2,189	)		(1,853	)

Interest expense		(101	)		(112	)		(292	)		(101	)
Other income, net		3			(5	)		1,666			3

Loss before income taxes		(1,951	)		(1,641	)		(815	)		(1,951	)

Provision for income taxes		16			14			17			16

Net loss	$	(1,967	)	$	(1,655	)	$	(832	)	$	(1,967	)

Basic weighted average shares outstanding		23,897,305			18,775,773			23,955,767			23,897,305
Diluted weighted average shares outstanding		23,897,305			18,775,773			23,955,767			23,897,305

Basic loss per share	$	(0.08	)	$	(0.09	)	$	(0.03	)	$	(0.08	)
Diluted loss per share	$	(0.08	)	$	(0.09	)	$	(0.03	)	$	(0.08	)


Comprehensive loss:
Net loss	$	(1,967	)	$	(1,655	)	$	(832	)	$	(1,967	)
Unrealized gain (loss) on available-for-sale securities, net of tax		(28	)		(2	)
Unrealized loss on available-for-sale securities, net of tax								—			(28	)
Change in foreign currency translation adjustment		(11	)		(12	)		5			(11	)
Comprehensive loss	$	(2,006	)	$	(1,669	)	$	(827	)	$	(2,006	)

See accompanying notes

Table of Contents

CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share amounts)

	Three months ended March 31,						Three months ended March 31,
	2022			2021			2023			2022
Cash flows from operating activities:
Net loss	$	(1,967	)	$	(1,655	)	$	(832	)	$	(1,967	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		794			661			221			794
Amortization of right-of-use assets		154			149			129			154
Share-based compensation expense		36			31			23			36
Change of inventory to net realizable value		—			375			23			—
Gain from disposal of assets								(8	)		—
Changes in operating assets and liabilities:
Receivables		(86	)		264			62			(86	)
Legal settlement receivable								55,000			—
Inventories		525			736			365			525
Prepaid expenses and other assets		651			265			4,176			651
Accounts payable		(1,263	)		(1,043	)		536			(1,263	)
Accrued liabilities		286			446			(551	)		286
Income taxes receivable		(5	)		(43	)		1,293			(5	)
Deferred product revenue		(8	)		(45	)		8			(8	)
Operating lease liabilities		(160	)		(154	)		(124	)		(160	)
Net cash used in operating activities		(1,043	)		(13	)
Net cash provided by (used in) operating activities								60,321			(1,043	)

Cash flows from investing activities:
Purchase of property and equipment		(8	)		(7	)		(27	)		(8	)
Purchase of intangibles		(70	)		(71	)		(42	)		(70	)
Capitalized patent defense costs		(189	)		(1,678	)		—			(189	)
Proceeds from maturities and sales of marketable securities		2,042			413			—			2,042
Purchases of marketable securities		—			(310	)
Net cash provided by (used in) investing activities		1,775			(1,653	)		(69)			1,775

Cash flows from financing activities:
Net proceeds from equity-based compensation programs		2			4			—			2
Principal payments of long-term debt		(370	)		(90	)
Net cash provided by financing activities		(368	)		(86	)
Principal payments of debt								(2,225	)		(370	)
Net cash used in financing activities								(2,225	)		(368	)

Effect of exchange rate changes on cash and cash equivalents		(13	)		(17	)		4			(13	)

Net increase in cash and cash equivalents		351			(1,769	)		58,031			351
Cash and cash equivalents at the beginning of the period		1,071			3,803			986			1,071
Cash and cash equivalents at the end of the period	$	1,422		$	2,034		$	59,017		$	1,422

CLEARONE, INC.

UNAUIDTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

1.1. Business Description, Basis of Presentation and Significant Accounting Policies

Business Description:

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and AV streaming solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

Basis of Presentation:

The fiscal year for ClearOne is the twelve months ending on December 31.31. The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, and the cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. The results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC.

Significant Accounting Policies:

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no changes to these policies during the quarter ended March 31, ~~2022~~2023 that are of significance or potential significance to the Company.

Recent accounting pronouncements:

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. CECL estimates of expected credit losses on trade receivables over their life will be required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The Company adopted the standard in its first quarter of 2023. There was no material impact on the results of operations.

The Company has determined that recently issued accounting standards, other than the above discussed,will not have a material impact on its consolidated financial position, results of operations or cash flows.

~~Liquidity:~~

~~As of~~ ~~March 31, 2022, our cash and cash equivalents were approximately $1,422 compared to $1,071~~ ~~as of December 31, 2021. Our working capital was $19,339~~ ~~as of~~ ~~March 31, 2022. Net cash used in operating activities was $1,043~~ ~~for the three months ended March 31, 2022, an increase 1,030 from $13 of cash used in activities in the three months ended March 31, 2022.~~

The Company is currently pursuing all available legal remedies to defend its strategic patents from infringement. The Company has already spent approximately $28,345 from 2016 through March 31, 2022 towards this litigation and may be required to spend more to continue its legal defense.

Table of Contents

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(~~Unaudited -~~ Dollars in thousands, except per share amounts)

~~The Company has been actively engaged~~Liquidity:

As of March 31, 2023, our cash and cash equivalents were approximately $59,006compared to $984 as of December 31, 2022. Our working capital was $68,676 as of March 31, 2023. Net cash provided by operating activities was $60,321 for thethree months ended March 31, 2023, an increase of $61,364 compared to $1,043 of cash used in ~~preserving cash by suspending our dividend program and allowing our share repurchase program to expire in 2018 and implementing~~operating ~~company-wide cost reduction measures.~~activities for thethree months ended March 31, 2022. The company ~~has also raised additional capital in 2019~~announced a special ~~by issuing senior convertible notes, in 2020 by borrowing through the CARES Act Paycheck Protection Program~~one-time cash dividend of $1.00 per share or eligible warrant (please see Note 10 - Subsequent events) which will be paid on May 31, 2023 and issuing common stock and warrants and in 2021 by issuing short-term notes and issuing common stock and warrants. In January 2022, the Company issued $2,000 in common stock as consideration for the cancellation and terminationis expected to generate cash outflows of ~~the short-term notes. In addition, we have been generating additional cash as our inventory levels are brought down to historical levels.~~

approximately $28,978. The Company also paid approximately $6,600 towards income taxes in April 2023. The Company believes that the Company's core strategies of product innovation and prudent cost management will bring the company back to profitability in the future. The Company believes, although there can be no assurance, that the current cash position and all of these measures and effective management of working capital, will provide the liquidity needed to meet our operating needs through at least May ~~19, 2023. We~~15, 2024. The Company also ~~believe~~believes that its strong portfolio of intellectual property and its solid brand equity in the market will enable it to raise additional capital if and when needed to meet ~~our~~its short and long-term financing needs; however, there can be no assurance that, if needed, wethe Company will be successful in obtaining the necessary funds through equity or debt financing. If the Company needs additional capital and is unable to secure financing, it may be required to further reduce expenses, or delay product development and ~~enhancement, or revise its strategy regarding ongoing litigation.~~enhancement.

2.2. Revenue Information

The following table disaggregates the Company’s revenue into primary product groups:

	Three months ended March 31,				Three months ended March 31,
	2022		2021		2023		2022
Audio conferencing	$	3,176	$	2,835	$	2,329	$	3,176
Microphones		2,928		2,350		1,195		2,928
Video products		1,441		1,853		654		1,441
	$	7,545	$	7,038	$	4,178	$	7,545

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

	Three months ended March 31,				Three months ended March 31,
	2022		2021		2023		2022
North and South America	$	3,776	$	3,524	$	1,570	$	3,776
Asia Pacific (includes Middle East, India and Australia)		2,074		2,226		1,696		2,074
Europe and Africa		1,695		1,288		912		1,695
	$	7,545	$	7,038	$	4,178	$	7,545

4. ~~Marketable Securities~~

The Company has classified its marketable securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive loss in stockholders’ 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.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities as of March 31, 2022 and December 31, 2021 were as follows:

Amortized cost

Gross unrealized holding gains

Gross unrealized holding losses

Estimated fair value

March 31, 2022

Available-for-sale securities:

Corporate bonds and notes

$
511

$
1

$
(13)

$
499

Municipal bonds

454

—

(13)

441

Total available-for-sale securities

$
965

$
1

$
(26)

$
940

December 31, 2021

Available-for-sale securities:

Corporate bonds and notes

$
1,434

$
8

$
(2
)

$
1,440

Municipal bonds

1,573

—

(3
)

1,570

Total available-for-sale securities

$
3,007

$
8

$
(5
)

$
3,010

~~Maturities of marketable securities classified as available-for-sale securities were as follows as of March 31, 2022:~~

Amortized cost

Estimated fair value

Due within one year

$
402

$
398

Due after one year through five years

563

542

Due after five years

—

—

Total available-for-sale securities

$
965

$
940

~~Table of Contents~~

~~UNAUDITED~~ ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited - Dollars in thousands, except per share amounts)~~

Debt securities in an unrealized loss position as of March 31, 2022 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur. The available-for-sale marketable securities with continuous gross unrealized loss position for less than 12 months and 12 months or greater and their related fair values were as follows:

Less than 12 months

More than 12 months

Total

Estimated fair value

Gross unrealized holding losses

Estimated fair value

Gross unrealized holding losses

Estimated fair value

Gross unrealized holding losses

As of March 31, 2022

Corporate bonds and notes

$
254

$
8

$
144

$
5

$
398

$
13
Municipal bonds

292

11

150

2

442

13

Total

$
546

$
19

$
294

$
7

$
840

$
26

~~Debt securities in an unrealized loss position as of~~ ~~March 31, 2022~~ were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur.

5. Intangible Assets

Intangible assets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

	Estimated useful lives (years)			March 31, 2022			December 31, 2021			Estimated useful lives (years)			March 31, 2023			December 31, 2022
Tradename	5	to	7	$	555		$	555		5	to	7	$	555		$	555
Patents and technological know-how	10	to	20		33,812			33,553		10	to	20		7,094			7,053
Proprietary software	3	to	15		2,981			2,981		3	to	15		2,981			2,981
Other	3	to	5		323			323		3	to	5		323			323
Total intangible assets					37,671			37,412						10,953			10,912
Accumulated amortization					(12,996	)		(12,326	)					(8,958	)		(8,841	)
Total intangible assets, net				$	24,675		$	25,086					$	1,995		$	2,071

The amortization of intangible assets for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was as follows:

Three months ended March 31,

2022

2021

Amortization of intangible assets

$
670

$
511

	Three months ended March 31,
	2023		2022
Amortization of intangible assets	$	118	$	670

The estimated future amortization expense of intangible assets is as follows:

Years ending December 31,	Amount		Amount
2022 (Remainder)	$	2,030
2023		2,700
2023 (Remainder)			$	398
2024		2,436		253
2025		2,375		192
2026		2,375		191
2027				61
Thereafter		12,759		900
Total	$	24,675	$	1,995

1110

Table of Contents

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(~~Unaudited -~~ Dollars in thousands, except per share amounts)

The following represents maturities of operating lease liabilities as of March 31, ~~2022:~~2023:

87. Shareholders' Equity

	Three months ended March 31,						Three months ended March 31,
	2022			2021			2023			2022
Common stock and additional paid-in capital
Balance, beginning of period	$	72,818		$	63,378		$	74,934		$	72,818
Issuance of common stock and warrants, net		2,000			—			—			2,000
Share-based compensation expense		35			31			22			35
Proceeds from employee stock purchase plan		2			4			1			2
Balance, end of period	$	74,855		$	63,413		$	74,957		$	74,855

Accumulated other comprehensive loss
Balance, beginning of period	$	(241	)	$	(186	)	$	(288	)	$	(241	)
Unrealized loss on available-for-sale securities, net of tax		(28	)		(2	)		—			(28	)
Foreign currency translation adjustment		(11	)		(12	)		5			(11	)
Balance, end of period	$	(280	)	$	(200	)	$	(283	)	$	(280	)

Accumulated deficit
Balance, beginning of period	$	(21,072	)	$	(13,378	)	$	(516	)	$	(21,072	)
Net loss		(1,967	)		(1,655	)		(832	)		(1,967	)
Balance, end of period	$	(23,039	)	$	(15,033	)	$	(1,348	)	$	(23,039	)

Total shareholders' equity	$	51,536		$	48,180		$	73,326		$	51,536

Issue of Common Stock and Warrants

On September 13, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued and sold in a registered direct offering 2,116,050 shares of the Company's common stock, par value $0.001 per share at an offering price of $2.4925 per share. The Company received gross proceeds of approximately $5,275 and net proceeds $4,764 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 1,058,025 shares of common stock at an exercise price of $2.43 per share. Each warrant became immediately exercisable and will expire ~~five 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 3,623,189 shares of the Company's common stock, par value $0.001 per share at an offering price of $2.76 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 3,623,189 shares of common stock at an exercise price of $2.76 per share. Each warrant became immediately exercisable and will expire on March 15, 2027.

On January 4, 2022, the Company entered into a Securities Purchase Agreement with Edward D. Bagley, an affiliate of the Company, pursuant to which the Company agreed to issue and sell, in a private placement 1,538,461 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.30 per share of Common Stock. The consideration for the Shares is the cancellation and termination of Mr.Bagley’s outstanding bridge loan to the Company in the principal amount of $~~2,000,000~~2,000 originally issued on July 2, 2021 and amended and restated on September 11, 2021. Mr. Bagley is an affiliate of the Company and the Company’s single largest stockholder.

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UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(~~Unaudited -~~ Dollars in thousands, except per share amounts)

9.8. Debt

Senior Convertible Notes and Warrants

On December 17, 2019, the Company completed the issuance and sale of $3,000 aggregate principal amount of secured convertible notes of the Company (the “Notes”) and warrants (the “Warrants”) to purchase 340,909 shares of common stock, par value $0.001 per share of the Company (the “Common Stock”), in a private placement transaction. The Notes and Warrants were issued and sold to Edward D. Bagley, an affiliate of the Company, on the terms and conditions of a Note Purchase Agreement dated December 8, 2019 between the Company, certain subsidiary guarantors of the Company, and Mr. Bagley. Mr. Bagley was the beneficial owner of approximately 46.6% of the Company’s issued and outstanding shares of Common Stock at the time that the Notes and Warrants were issued to him.

The Notes will mature on December 17, 2023 (the “Maturity Date”) and will accrue interest at a variable rate adjusted on a quarterly basis and equal to two and one-half percent (2.5%) over the greater of (x) five and one-quarter percent (5.25%) and (y) the Prime Rate as published in the Wall Street Journal (New York edition) as of the beginning of such calendar quarter. The Notes may be converted into shares of the Company’s Common Stock at any time at the election of Mr. Bagley at an initial conversion price of $2.11 per share (the “Conversion Price”), or 120% of the closing price of the Common Stock on December 6, 2019 as reported on the Nasdaq Capital Market. Also, the Company can cause a mandatory conversion of the Notes if the volume weighted average closing price of the Common Stock over 90 consecutive trading days exceeds 200% of the Conversion Price. In addition, the Notes may be redeemed by the Company for cash at any time after December 17, 2020 upon payment of the outstanding principal balance of the Notes and any unpaid and accrued interest. The Company also is required to redeem the Notes upon the occurrence of a change in control of the Company.

The Warrants have an initial exercise price equal to $1.76, the closing price of the Common Stock on December 6, 2019 as reported on the Nasdaq Capital Market, and are exercisable until December 17, 2026. The Warrants must be exercised for cash, unless at the time of exercise there is not a then effective registration statement for the resale of the shares of Common Stock issuable upon exercise of the Warrants, in which case the Warrants may be exercised via a cashless exercise feature that provides for net settlement of the shares of Common Stock issuable upon exercise.

Concurrent with the issuance of the Notes and Warrants pursuant to the Note Purchase Agreement, the Company, the Guarantors and Mr. Bagley entered into a Guaranty and Collateral Agreement (the “Collateral Agreement”) pursuant to which the Company and the Guarantors granted Mr. Bagley a first priority lien interest in all of the Company’s assets as security for the Company’s performance of its obligations under the Notes and Warrants.

The net proceeds after original issue discount and issuance costs of $346 were approximately $2,654. The Company ~~expects~~expected to use the proceeds from the sale of the Notes and Warrants for general corporate purposes and working capital.

In accounting for the issuance of the Notes, the Company separated Notes and Warrants into liability and equity components. The carrying amount of Warrants, being an equity component, was first calculated using Black-Scholes method with the following assumptions:

Risk-free interest rate	1.82%
Expected life of warrants (years)	7
Expected price volatility	49.4%
Expected dividend yield	0%

The carrying amount of the Notes was then determined by deducting the fair value of the Warrants from the principal amount of the Notes. The carrying amount of the Notes was further separated into equity and liability components after separating the value of the conversion feature into an equity component and leaving the remaining value as liability. The equity component is not remeasured while the Notes and Warrants continue to meet the conditions for equity classification for equity components.

The original issue discount and issuance costs are netted against the liability. The following table represents the carrying value of Notes and Warrants:

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UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except ~~share and~~ per share amounts)

	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Liability component:
Principal	$	2,460		$	2,640		$	1,695		$	1,920
Less: debt discount and issuance costs, net of amortization		(450	)		(385	)		(139	)		(188	)
Net carrying amount	$	2,010		$	2,255		$	1,556		$	1,732
Equity component⁽¹⁾:
Equity component⁽¹⁾:
Warrants	$	318		$	318		$	318		$	318
Conversion feature		122			122			122			122
Net carrying amount	$	440		$	440		$	440		$	440

Current portion of liability component included under short-term debt	$	765		$	720		$	1,556		$	1,920
Long-term portion of liability component included under long-term debt		1,695			1,920
Liability component total	$	2,460		$	2,640		$	1,556		$	1,920

(1) Recorded on the condensed consolidated balance sheets as additional paid-in capital.

Debt discount and issuance costs are amortized over the life of the note to interest expense using the effective interest method. During the three months ended March 31, ~~2022~~2023 and March 31, ~~2021~~ 2022 amortization of debt discount and issuance costs was $49 and $49, respectively. The following table represents schedule of maturities of principal amount contained in the Notes as of March 31, ~~2022:~~2023:

Year ending December 31,

Principal Amount Maturing

2022 (Remainder)

$
540

2023

1,920

2024

—

2025

—

Total principal amount

$
2,460

Year ending December 31,	Principal Amount Maturing
2023 (Remainder)		1,695
Total principal amount	$	1,695

Short-term Bridge ~~Loan~~Loans

On July 2, 2021, the Company obtained a bridge loan in the principal amount of $2,000 from Edward D. Bagley (the ~~“Bridge~~“2021 Bridge Loan”), an affiliate of the Company. The Bridge Loan iswas evidenced by a promissory note dated July 2, 2021 (the “Note”) issued by the Company to Mr. Bagley. The Note ~~bears~~bore ~~interests~~interest at a rate of 8.0% per ~~annum, matures on the earlier to occur of (i) October 1~~annum. ~~, 2021 or (ii) within two business days of the Company’s receipt of its expectedU.S. federal income tax refund, and contains other customary covenants and events of default~~. On September 11, 2021, the Company amended and restated the terms of the Bridge Loan to extend the latest maturity date from October 1, 2021 to January 3, 2022. All other terms and conditions of the Bridge Loan remained the same. ~~This Bridge Loan of $2,000 is included under short-term debt.~~ On January 4, 2022, the Company entered into a Securities Purchase Agreement with Edward D. Bagley, pursuant to which the Company ~~agreed~~issued and sold to ~~issue and sell,~~Mr. Bagley, in a private placement 1,538,461 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.30 per share of Common Stock. The consideration for the Shares iswas the cancellation and termination of Mr. Bagley’s outstanding bridge loan to the Company in the principal amount of ~~$2,000,000~~$2,000 originally issued on July 2, 2021 and amended and restated on September 11, 2021. Mr. Bagley is an affiliate of the Company and the Company’s single largest stockholder.

~~Paycheck Protection Program Loan~~

On ~~April 18, 2020,~~October 28, 2022 the Company ~~entered into~~obtained a ~~loan agreement with U.S. Bank National Association Bank, which provided for a~~bridge loan in the principal amount of ~~$1,499 (“PPP~~$2,000 from Edward D. Bagley (the “2022 Bridge Loan”) ~~pursuant to the Paycheck Protection Program under Division A, Title I~~, an affiliate of the ~~CARES Act, which~~Company. The 2022 Bridge Loan was ~~enacted March 27, 2020.~~evidenced by a promissory note dated October 28, 2022 (the “2022 Note”) issued by the Company to Mr. Bagley. The ~~PPP Loan has a~~ ~~two-year~~ ~~term and bears~~2022 Note bore interest at a rate of ~~1.0%~~12.0% per ~~annum. Monthly principal~~annum and ~~interest payments are deferred for approximately sixteen months after the~~had a maturity date of ~~disbursement.~~

~~The PPP~~October 28, 2023. Mr. Bagley is an affiliate of the Company and the Company’s single largest stockholder. This Bridge Loan ~~may be prepaid at any time prior to maturity with no prepayment penalties. The PPP Loan contains events~~ of ~~default and other provisions customary for a~~$2,000 is included under short-term debt as of December 31, 2022. In January 2023, the 2022 Bridge loan of ~~this type. The Paycheck Protection Program provides that the Loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described~~$2,000 along with applicable interest was repaid in ~~the CARES Act. The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.~~full.

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(Unaudited - Dollars in thousands, except ~~share and~~ per share amounts)

As further discussed in Note 11 - Subsequent Events, the PPP Loan and the interest associated with the loan have been forgiven by United States Small Business Administration ("SBA") effective April 29, 2022.

March 31, 2022

December 31, 2021

Current portion of the PPP Loan included under short-term debt
$ 571

$ 761
Long-term portion of the PPP Loan included under long-term debt

—

—
Liability component total
$ 571

$ 761

10~~. 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.~~

The Company’s financial instruments are valued using observable inputs. The following table sets forth the fair value of the financial instruments re-measured by the Company as of March 31, 2022 and December 31, 2021:

Level 1

Level 2

Level 3

Total

March 31, 2022

Corporate bonds and notes

$
—

$
499

$
—

$
499

Municipal bonds

—

441

—

441

Total

$
—

$
940

$
—

$
940

December 31, 2021

Corporate bonds and notes

$
—

$
1,440

$
—

$
1,440

Municipal bonds

—

1,570

—

1,570

Total

$
—

$
3,010

$
—

$
3,010

119. Income Taxes

The current year loss did not result in income tax benefit due to recording a full valuation allowance against expected benefits. The valuation allowance was recorded as we concluded that it was more likely than not that our deferred tax assets were not realizable primarily due to the Company's recent pre-tax losses. Provision for income taxes for the three months ended March 31, ~~2022~~2023 mostly represents income tax expense recorded for jurisdictions outside the United States.

The Company had approximately ~~$895~~$962 of uncertain tax positions as of March 31, ~~2022.~~2023. Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability for any particular year.

~~Table of Contents~~

1210. Subsequent events

~~The Company's Paycheck Protection Program Loan ("PPP Loan") under the CARES Act was forgiven by Small Business Administration effective April 29, 2022. With this forgiveness,~~On May 8, 2023, the Company announced that the Company’s Board of Directors had declared a special one-time cash dividend of $1.00 per share of the Company’s common stock or eligible warrants, payable on May 31, 2023 to shareholders of record on May 22, 2023. This is ~~not required~~expected to ~~repay the principal amount~~result in cash outflow of $1,499 and the interest of $31. The Company expects to receive $953 back that it had already paid towards principal and interest payments toward the PPP Loan. The Company will treat the forgiveness as extinguishment of debt in the quarter ended June 30, 2022 and will report the entire principal amount forgiven of $1,499 along with interest already accounted for of $27 ~~as a gain on extinguishment of debt.~~approximately, $28,978.

13~~. Commitments~~

We have manufacturing agreements with electronics manufacturing service (“EMS”) providers related to the outsourced manufacturing of our products. Certain manufacturing agreements establish annual volume commitments. We are also obligated to repurchase the Company-forecasted but unused materials. The Company has non-cancellable, non-returnable, and long-lead time commitments with its EMS providers and certain suppliers for inventory components that will be used in production. The Company’s purchase commitments under such agreements are approximately $4,850 as of March 31, 2022.

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Item 2.2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report, other than statements of historical fact, are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are based upon reasonable assumptions at the time made, there can be no assurance that any such expectations or any forward-looking statement will prove to be correct. Our actual results will vary, and may vary materially, from those projected or assumed in the forward-looking statements. Future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not anticipate, including, without limitation, product recalls and product liability claims; infringement of our technology or assertion that our technology infringes the rights of other parties; termination of supplier relationships, or failure of suppliers to perform; inability to successfully manage growth; delays in obtaining regulatory approvals or the failure to maintain such approvals; concentration of our revenue among a few customers, products or procedures; development of new products and technology that could render our products obsolete; market acceptance of new products; introduction of products in a timely fashion; price and product competition, availability of labor and materials, cost increases, and fluctuations in and obsolescence of inventory; volatility of the market price of our common stock; foreign currency fluctuations; changes in key personnel; work stoppage or transportation risks; integration of business acquisitions; and other factors referred to in our reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are discussed in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and inPart I, Item 1A1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

BUSINESS OVERVIEW

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 through strategic technological acquisitions as well as by internal product development.

~~In early~~On January ~~2022,~~30, 2023, we introduced ~~DIALOG~~^® ~~10 USB,~~ the ~~industry's only pro-quality, single-channel wireless USB microphone system offering professional-quality audio~~new CHAT® 150 BT group speakerphone with USB and Bluetooth connectivity that enhances the conferencing experience for ~~webcasting~~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 ~~cloud-based collaboration. In March 2022, this new~~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, ~~wireless mic system won~~local users of 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 webcastingspeakerphone, and ~~cloud-based collaboration such as Microsoft Teams, Zoom, WebEx, and GotoMeeting.~~

During January, at the Las Vegas Customer Electronics Show, CES 2022, the world’s most influential annual tech event, our home office Aura™ Xceed™ BMA was singled out for exceptional innovation withfar end callers on a ~~CES Picks Award, presented by Residential Systems magazine.~~

~~In early February 2022, our Versa Lite CT, a USB audio-enabled Beamforming Ceiling Tile Microphone that brings cost-effective and superb professional conferencing audio~~mobile call connected through Bluetooth to ~~small- and mid-sized spaces received Google Meet certification. Google Meet ranks among the top 5 for growth in the cloud meetings and team collaboration market according to Frost & Sullivan.~~

In early February 2022, we were awarded a new patent for a beamforming microphone array system with distributed processing. This patent claims a ceiling tile microphone array that can be physically separated from the processors running the beamforming algorithm. It enables a single computing engine to run multiple beamforming algorithms for multiple microphone arrays, which can lower the overall system cost compared to an integrated design that is limited to a single computing engine with a single microphone array. Later inall join the same month another ClearOne patent was granted which is related to beamforming microphone arrays with acoustic echo cancellation. The patent, titled “Band-Limited Beamforming Microphone Array with Acoustic Echo Cancellation," describes, amongcall and hear each other ~~things,~~clearly. Featuring a steerable microphone array with ~~one set of microphones used for beamforming,~~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 ~~one or more additional microphones that are not used for beamforming, but instead are used to enhance~~many more. The new BT model retains all the ~~audio performance~~class-leading features of the ~~microphone array.~~

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~During the first three months of 2022, we continued our efforts, primarily through litigation,~~original CHAT® 150 speakerphone, including Advanced Noise Cancellation, Full Duplex Distributed Echo Cancellation™ and Automatic Level Control algorithms, to ~~stop the infringement of our strategic patents.~~ ~~We believe the decision by the U.S. District Court in August 2019 granting our request~~ensure highly intelligible, natural audio capture and playback. It also supports NFC tap-to-pair and includes a wired USB connection for a preliminary injunction to prevent Shure from manufacturing, marketing, and selling its competing ceiling microphone array in an infringing configuration is an incredibly valuable ruling for ClearOne and its business. The decision validates the strength and importance of ClearOne’s intellectual property rights, recognizes ClearOne’s innovations in this space, and stops Shure from further infringing the Graham patent (U.S. Patent No. 9,813,806) pending a full trial. Although there can be no assurance of any outcome of a full trial, we believe this ruling will help pave the way for ClearOne’s recovery from the immense harm inflicted by Shure's infringement of our valuable patents. However, we are not gettingcompatibility with the full ~~benefits~~variety of the Court’s extraordinary remedy in the form of the preliminary injunction granted against Shure with respect to infringement of our ’806 Patent as we believe that Shure is still infringing ClearOne’s patent.

On September 1, 2020, the U.S. District Court of Northern Illinois held that "Shure has violated the preliminary injunction order and is found in contempt because it designed the MXA910-A in such a way that allows it to be easily installed flush in most ceiling grids”. The Court also opined that, “[t]he record is clear and convincing that Shure - through its design choices - violated the injunction order by allowing integrators to install the MXA910-A in the enjoined flush configuration.” Ultimately, the Court ordered that “Shure shall no longer manufacture, market, or sell the MXA910...”. ClearOne’s motion to accuse Shure’s MXA910-US of infringing the ’806 Patent is still pending with the Court.

Shure expanded the original litigation in the U.S. District Court of North Illinois to the District of Delaware, where Shure filed claims for patent infringement, including of a design patent, and trade libel against ClearOne. In May 2020 and January 2021, we secured an important pair of wins, defeating Shure’s requests first for a temporary restraining order and then a preliminary injunction, allowing us to continue selling our ground-breaking audio-conferencing products. In addition to defeating Shure’s requests for preliminary injunctive relief, we also obtained a stay of the proceedings with respect to the only other asserted patent. During November 2021, after a three-day jury trial, ClearOne obtained a complete victory against claims asserted by Shure, when the jury returned a verdict of no infringement and invalidated the asserted patent.

In February 2022 we claimed another legal victory over Shure. The Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (PTO) issued a final written decision confirming the patentability of all claims of ClearOne’s important U.S. Patent No. 10,728,653 (the “’653 Patent”). The ’653 Patent covers aspects of ClearOne’s revolutionary innovations in BMAs and relates to “a ceiling tile combined with [a] beamforming microphone array” that includes acoustic echo cancellation and “adaptive acoustic processing that automatically adjusts to a room configuration.” Shortly after the ’653 patent was issued in mid-2020, Shure initiated the case in yet another attempt to disrupt ClearOne’s patent rights, but the PTAB rejected each and every one of Shure’s seven challenges and is the latest in a long string of defeats for Shure. In 2019, the U.S. District Court for the Northern District of Illinois preliminarily enjoined Shure from infringing a different ClearOne patent, U.S. Patent No. 9,813,806, and then in 2020 held Shure in contempt of that injunction in case no. 17-cv-3078. In November 2021, a jury in a different court, the U.S. District Court for the District of Delaware, found a Shure design patent asserted against ClearOne to be invalid and not infringed.modern devices.

2017

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On January 16, 2023, we introduced UNITE 260 Pro camera, a professional grade 4K Ultra HD camera featuring both a 20X optical zoom and 16X 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.

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.

Overall revenue ~~increased~~decreased by 7%45% in the first quarter of ~~2022~~2023 when compared to the first quarter of ~~2021,~~2022, primarily due to a significant ~~increase in revenues from microphones followed by an increase in revenues from audio conferencing products and partially offset by a~~ decrease in revenues from ~~video products.~~all product categories, especially microphones. ~~Despite~~The revenue decline was primarily due to our continued inability to source adequate inventory to meet the ~~negative impact~~demand for professional audio products and BMA due to the ongoing transition of ~~COVID-19 and the infringement~~manufacturing of our ~~patents~~products from China to Singapore by ~~Shure on all professional installed products,~~ our new solutions incorporating Beamforming Microphone Array Ceiling Tile ("BMA-CT") continued to result in overall Beamforming Microphone Array ("BMA") revenue to be significantly higher than last year. However, revenue from BMA products as well as from our pro audio products are still far below the levels prior to infringement of our patents. Our revenue is negatively impactedelectronics manufacturing services provider and due to ~~on-going harm~~the decline in demand for video products. We expect the challenges with the manufacturing transition from China to Singapore to ease in the second half of infringement of ClearOne’s patents despite the preliminary injunction granted against Shure as we believe Shure continues to infringe certain of our patents and violates the preliminary injunction. The patent infringement also has negatively impacted directly the revenue from ClearOne’s other products not related to the infringed patents.2023. Our revenue performance in ~~2022-Q1~~2023-Q1 was also partially impacted negatively due to increased costs associated with the electronic raw material supply shortages that have affected the global manufacturing of high tech products as well as due to logistics bottlenecks. Despite the negative impact of COVID-19 and the infringement of our patents by Shure on all professional installed products, our new solutions incorporating Beamforming Microphone Array Ceiling Tile ("BMA-CT") continued to result in overall Beamforming Microphone Array ("BMA") revenue to be significantly higher than last year. However, revenue from BMA products as well as from our pro audio products are still far below the levels prior to infringement of our patents. Our revenue is negatively impacted due to on-going harm of infringement of ClearOne’s patents ~~despite the preliminary injunction granted against Shure as we believe Shure continues to infringe certain of our patents and violates the preliminary injunction.~~ products.~~The patent infringement also has negatively impacted directly~~ We expect these supply shortages and associated increased costs to continue through at least the ~~revenue from ClearOne’s other products not related to the infringed patents.~~ end of 2023.

Our gross profit margindecreased to 31.5% during the first quarter of 2023 from 37.3% during the first quarter of ~~2022~~ ~~from 42.7% during the first quarter~~ 2022. Gross Profit margin decreased year over year mainly due to increase in administration and overhead costs as a percentage of ~~2021.~~ revenue and increase in inventory obsolescence costs.

Net loss ~~increased~~decreased from ~~$1.7~~$2.0 million in the first quarter of ~~2021~~2022 to ~~$2.0~~$0.8 million in the first quarter of ~~2022~~2023. The ~~increase~~decrease in net loss was mainly due to ~~(a) decrease~~a receipt of $1.35 million from a one-time legal settlement of a contract dispute. This receipt, included in ~~absolute gross profit dollars as a result~~other income was partially offset by an increase in operating losses of ~~reduced gross margin, and (b) increased amortization costs relating to our capitalized patent defense costs.~~ $0.3 million.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Industry conditions

We operate in a very dynamic and highly competitive industry which is dominated on theonehand by a few players with respect to certain products like traditional 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 with leading video conferencing service providers like Microsoft and Zoom.

Economic conditions, challenges and risks

The audio-visual products market is characterized by intense competition and rapidly evolving technology. Our competitors vary within each product category. Our installed professionalaudio conferencingproducts, 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 DSP mixers, wide range of professional microphone products and video collaboration products. Despite our strong leadership position in the installed professionalaudio conferencingmarket, we face challenges to revenue growth due to the limited size of the market, ~~and~~ pricing pressures from new competitors attracted to the commercial market due to higher ~~margins.~~margins, our limited ability to be interoperable with other audio visual products in the market, and the lack of certifications from Microsoft.

Our video productsandbeamformingmicrophone arrays, especially highly advanced BMA360 and BMA-CT ~~and the newly introduced BMA 360~~ are critical to our ~~long term~~ long-termgrowth. 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 ~~combining curated audio solutions~~making our products more interoperable with ~~our high~~other audio-visual products, continuing to improve the quality ~~professional cameras, and~~ of our high-end audio conferencing ~~technology~~products and microphones, and offering a wide range of innovative professional cameras will generate high growth in the near future.

We derive a ~~major~~significant portion of our revenue (approximately ~~51% for the year ended December 31, 2021)~~52% in 2022) from international operations and expect this trend to continue in the future. Most of our revenue from ~~outside~~ outsidethe 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.

In December 2019, a novel strain of coronavirus (“~~COVID-19”~~COVID-19”) started spreading from China and was declared a pandemic. The ~~COVID-19~~ COVID-19pandemic caused severe global disruptions and had varying impact on our business. The installed audio conferencing market was negatively impacted due tolockdowns, postponement of projects and restrictions on installers to visit commercial sites. On the other hand, ~~COVID-19~~ COVID-19generated higher than normal demand in 2020 for our video products and personal conferencing products due to the significant expansion of work-from-home market. The extent of ~~COVID-19’s~~COVID-19’s effect on our operational and financial performance keeps evolving and depends on multiple factors including the severity and infectiousness of current and future virus strains, effectiveness of vaccines especially on novel strains of ~~COVID-19,~~COVID-19, government regulations, ~~etc.~~etc., all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Supply chain disruptions resulting from COVID-19 have caused significant fluctuations in our costs of goods resulting in a reduction of our gross margins in 2021 and ~~in the first quarter of~~ 2022. We expect ~~for~~ these fluctuations to continue in ~~2022.~~2023. If the pandemic continues to be a severe worldwide health crisis, the disease could have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.

Deferred Product Revenue

Deferred product revenue ~~decreased~~increased to ~~$46~~$71 thousand on March 31, ~~2022~~2023 compared to ~~$54~~$63 thousand on December 31, ~~2021.~~2022.

A detailed discussion of our results of operations follows below.

2219

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations for the three months ended March 31, ~~2022~~2023

The following table sets forth certain items from our unaudited condensed consolidated statements of operations for the three months ended March 31, ~~2022~~2023 (“2023-Q1”) ("2023-YTD") and2022("2022-Q1”")~~and2021~~("~~2021~~-Q1" ("2022-YTD"), respectively, together with the percentage of total revenue which each such item represents:

	Three months ended March 31,									Three months ended March 31,
(dollars in thousands)	2022			2021			Change Favorable (Adverse) in %			2023			2022			Change Favorable (Adverse) in %
Revenue	$	7,545		$	7,038			7		$	4,178		$	7,545			(45	)
Cost of goods sold		4,729			4,035			(17	)		2,863			4,729			39
Gross profit		2,816			3,003			(6	)		1,315			2,816			(53	)
Sales and marketing		1,560			1,573			1			1,192			1,560			24
Research and product development		1,353			1,274			(6	)		1,043			1,353			23
General and administrative		1,756			1,680			(5	)		1,269			1,756			28
Total operating expenses		4,669			4,527			(3	)		3,504			4,669			25
Operating loss		(1,853	)		(1,524	)		(22	)		(2,189	)		(1,853	)		(18	)
Interest expense net of other income		(98	)		(117	)		16
Other income (expense), net											1,374			(98	)		1,502
Loss before income taxes		(1,951	)		(1,641	)		(19	)		(815	)		(1,951	)		58
Provision for income taxes		16			14			(14	)		17			16			(6	)
Net loss	$	(1,967	)	$	(1,655	)		(19	)	$	(832	)	$	(1,967	)		58

Revenue

Our revenue ~~increased~~decreased to $4.2 million in 2023-Q1 compared to $7.5 million in 2022-Q1 ~~compared to $7.0 million in 2021-Q1~~ ~~primarily~~ due to a ~~23% increase~~59% decline in microphones, a 55% decline in video products, and a ~~13% increase~~27% decline in audio conferencing. Except for wireless mics and premium audio conferencing, both of which constitute a small percentage of our revenue all other product categories suffered revenue declines year over year. Revenues from BMA and professional audio conferencing products ~~partially offset~~were negatively impacted by ~~a 22% decrease in video products.~~ ~~Microphones growth continued~~our inability to ~~be led~~source adequate inventory to meet the demand for professional audio products and BMA due to the ongoing transition of manufacturing of our products from China to Singapore by our ~~new solutions incorporating BMA-CT and BMA~~ ~~360~~ ~~while our~~electronics manufacturing services provider. Our traditional ceiling mics, ~~also enjoyed a significant revenue increase. Audio Conferencing category as a whole increased mainly due to a strong revenue performance of our professional mixers and~~ personal audio conferencing ~~products.~~ ~~Video~~ products, video cameras and video conferencing equipment suffered revenue declines ~~in 2022-Q1 compared to 2021-Q1~~ due to lack of ~~demand for video products.~~demand. During the first quarter of ~~2022,~~2023, revenues from Americas ~~increased~~declined by 6%58% primarily due to ~~increased~~decreased revenues from ~~USA despite significant revenue decreases~~all the regions. During 2023-Q1 revenues from ~~Latin America and Canada, while revenues from~~the Asia Pacific, including the Middle East, India and Australia ~~decreased~~decline by 6%18% primarily due to ~~overall decrease~~declines in revenues from all ~~regions~~sub-markets except India and ~~China, and~~Australia. Finally, revenues from Europe and Africa ~~increased~~decreased significantly by ~~33%~~46% in 2023-Q1 primarily due to ~~significant revenue increases from~~decreases across all ~~parts of Europe~~the sub-markets except ~~central~~Central Europe.

We believe, although there can be no assurance, that we can ~~sustain our revenue growth and~~ return to generating operating profits through our strategic initiatives namely product innovation and cost ~~reduction and defense of our intellectual property.~~reduction.

Costs of Goods Sold and Gross Profit

Cost of goods sold includes expenses associated with finished goods purchased from outsourced manufacturers, the repackaging of our products, our manufacturing and operations organization, property and equipment depreciation, warranty expense, freight expense, royalty payments, and the allocation of overhead expenses.

Our gross profit margin decreased from ~~42.7%~~37.3% during ~~2021-Q1~~2022-Q1 to ~~37.3~~31.5% during ~~2022~~2023-Q1. The gross profit margin was negatively impacted due to ~~increase~~increases in material costs due to ~~continuing supply chain constraints,~~mainly due to increase in administration and ~~increased freight~~overhead costs as a percentage of revenue and ~~tariff costs, which were partially offset by the absence of~~increase in inventory obsolescence costs ~~in 2022-Q1.~~.

2320

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our profitability in the near-term continues to depend significantly on our revenues from professional installed 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 ~~$0.6~~$0.5 million of wireless microphone-related finished goods and assemblies, $0.3 million of Converge Pro and Beamforming microphone array products, ~~$0.1 million of network media streaming products, $0.6~~$1.0 million of video products, and ~~about $1.7~~$0.9 million of raw materials that will be used primarily for manufacturing professional audio conferencing ~~products.~~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.

Operating Expenses

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~~in 2023-Q1 was $3.5 million compared to $4.7 million in ~~2022 Q1 compared to $4.5 million in 2021-Q1.~~2022-Q1. The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.

Sales and Marketing - S&M expenses include selling, customer service, and marketing expenses such as employee-related costs, allocations of overhead expenses, trade shows, and other advertising and selling expenses.

S&M expenses in ~~2022-Q1 remained almost unchanged at~~2023-Q1 decreased to $~~1.6~~1.2 million ~~when compared~~from $1.6 million for 2022-Q1. The decrease was primarily due to ~~2021-Q1. The decrease~~decreases in employment expenses and consultant expenses due to a reduction in the headcount ~~were offset by an increase~~and due to decrease in ~~employee travel~~commissions paid to employees and ~~benefits expenses and increase in advertising expenses.~~consultants.

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.

R&D expenses ~~increased marginally~~decreased to $1.0 million in 2023-Q1 compared to $1.4 million ~~in 2022-Q1 compared to $1.3 million~~ for ~~2021-Q1.~~2022-Q1. The ~~increase~~decrease was primarily due to ~~increases in R&D project expenses, legal expenses, and employee benefits, which were partially offset by~~ reduction in employment expenses due to reduction in the ~~headcount.~~headcount and a decrease in project-related expenses.

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 teams.

G&A expenses ~~increased marginally from $1.7~~decreased to $1.3 million in ~~2021-Q1~~2023-Q1 compared to $1.8 million in ~~2022-~~2022-Q1.Q1. The ~~increase~~reduction was primarily due to ~~increased~~(i) a decrease in amortization costs relating to our capitalized patent defense costs, which ~~were~~was fully amortized in 2022-Q4, (ii) a decline in audit fees, (iii) and a decline in employment-related expenses, partially offset by ~~a reduction~~(iv) increase in legal expenses, and ~~consulting expenses.~~(v) insurance expenses.

Other income (expense), net

Other income (expense), net includes interest income, ~~and~~ foreign currency ~~changes.~~changes and gain or loss on disposal of assets. Other income in 2023-Q1 included a receipt of $1.35 million from a one-time legal settlement of a contract dispute. Other items included in other income remained immaterial during ~~the first quarter of2022~~2023-Q1 and~~2021.~~ 2022-Q1.

Interest expense ~~almost remained unchanged at~~increased to $0.3 million in 2023-Q1 compared to $0.1 million in ~~2022-Q1 when compared~~2022-Q1. primarily due to ~~2021-Q1.~~ interest associated with the prepayment of the $2 million bridge loan in January 2023.

Provision for income taxes

During each of the ~~first quarters of~~three months ended March 31, 2023 and 2022, ~~and 2021,~~ we did not recognize any benefit from the losses incurred due to setting up of a full valuation allowance.~~Provision for income taxes recognized in the first quarter of 2022 relates to foreign jurisdictions~~.

2421

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, ~~2022,~~2023, our cash and cash equivalents were approximately ~~$1.4~~$59.0 million compared to ~~$1.1~~$1.0 million as of December 31, ~~2021.~~2022. Our working capital was $~~19.3~~68.7 million and ~~$18.0~~$69.3 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Net cash ~~used in~~provided by operating activities was approximately ~~$1.0~~$60.3 million in ~~2022~~2023-Q1, an increase of cash ~~used in~~provided by ope ~~operating~~rating activities of approximately $61.4 million from $1.0 million ~~compared to 2021-Q1.~~of cash used by operating activities in 2022-Q1. The increase in cash ~~outflow~~inflow was primarily due to ~~(a)~~$56.4 million in receipts from legal settlements, the receipt of $4.5 million from the return of a ~~negative change in~~bond deposited with a court, and a $1.3 million refund of income taxes with interest. These receipts were partially offset by operating ~~assets and liabilities of $0.5 million, (b) a decrease in non-cash charges by $0.2 million and (c) an increase in net loss by $0.3 million.~~losses.

Net cash used in investing activities in 2023-Q1 was $0.1 million compared to $1.8 million of net cash provided by investing activities ~~was $1.8 million~~ in 2022-Q1. In 2022-Q1 ~~compared to net~~ cash ~~used in~~provided by investing activities primarily consisted of ~~$1.7~~$2.0 million ~~in 2021-Q1,~~ ~~a change in cash flow of $3.4~~ ~~million. The change in cash flow was primarily due to (a) an increase~~ in proceeds from sale of marketable securities, ~~net of any purchases from $0.1 million in 2021-Q1 to $2.0 million in 2022-Q1, and (b)~~partially offset by ~~a decrease in~~ capitalized patent defense costs ~~by $1.5 million~~of $0.2 million. .

Net cash used in financing activities in ~~2022-Q1~~2023-Q1 was ~~$0.4~~$2.2 million, ~~consisting~~comprised primarily of repayment of the bridge loan of $2.0 million and $0.2 million payments of principal amounts due on senior convertible ~~notes~~ ~~and Paycheck Protection Program Loans compared~~debt. This compares to ~~cash~~$0.4 million used in ~~financing activities of $86 thousand in 2021-Q1, which consisted primarily of~~ ~~repayment of~~ principal amounts due on senior convertible ~~notes.~~debt in 2022-Q1 .

~~Capitalization~~As of ~~patent defense costs~~March 31, 2023, our cash and cash equivalents were approximately $59.0 million compared to $1.0 million as of December 31, 2022. ~~We capitalize external legal costs incurred~~Our working capital was $68,7 million as of March 31, 2023. Net cash provided by operating activities was $60.3 million for the three months ended March 31, 2023, an increase of $61.4 million compared to $1.0 million of cash used in operating activities for the defense of our patents when we believe that a significant, discernible increase in value will result from the defense and a successful outcome of the legal action is probable. When we capitalize patent defense costs we amortize the costs over the remaining estimated useful life of the patents, which is 15 to 17 years. During ~~2022-~~Q1~~we spent $0.2 million on legal costs related to the defense of our patents and capitalized the entire amount.~~

~~We are currently pursuing all available legal remedies to defend our strategic patents from infringement. We have already spent approximately $28.3 million from 2016 through~~three months ended March 31, 2022. The company announced a special one-time cash dividend of $1.00 per share or eligible warrant (please see Note 10 - Subsequent events) which will be paid on May 31, 2023 and is expected to generate cash outflows of approximately $29.0 million. The Company also paid approximately $6.6 million towards ~~this litigation and may be required to spend more to continue our legal defense. We believe the decision by the U.S. District Court~~income taxes in August 2019 granting our request for a preliminary injunction to prevent our competitor from manufacturing, marketing, and selling its competing ceiling microphone array in an infringing configuration is an incredibly valuable ruling for ClearOne and its business. We believeApril 2023. The Company believes that the decision validates the strength and importance of ClearOne’s intellectual property rights, recognizes ClearOne’s innovations in this space, and stops our competitor from further infringing our Graham patent (U.S. Patent No. 9,813,806) pending a full trial. Although there can be no assurance of any outcome of a full trial, we believe this ruling will help pave way for ClearOne’s recovery from the immense harm inflicted by our competitor's infringement of our valuable patents. However, we are not getting the full benefits of the Court’s extraordinary remedy in the form of the preliminary injunction granted against Shure with respect to infringement of our ’806 Patent as we believe that Shure is still infringing ClearOne’s patent. During September 2020, the U.S District Court of Northern Illinois held Shure in contempt for marketing and selling their new design in violation of the preliminary injunction.

~~We have been actively engaged in preserving cash by suspending our dividend program and allowing our~~ ~~share repurchase program to expire in 2018 and implementing~~company-wide cost reduction measures. We have also raised additional capital of $9.9 million (net of issuance costs) in 2018 by issuing common stock, $2.7 million (net of issuances costs) in 2019 by issuing senior convertible notes, $1.5 million in April 2020 by borrowing through Paycheck Protection Program, $4.8 million ~~(net of issuances costs)~~ ~~in September 2020 by issuing common stock and warrants, $2.0 million in July 2021 by issuing short-term debt which repaid through issue of common stock in January 2022, and $9.3 million~~ ~~(net of issuances costs)~~ ~~in September 2021 by issuing common stock and warrants.~~

We ~~also believe that our~~Company's core strategies of product innovation and prudent cost management will bring usthe company back to profitability in the future. ~~We believe,~~ The Company believes, although there can be no assurance, that the current cash position and all of these measures and effective management of working capital, will provide the liquidity needed to meet our operating needs through at least ~~through~~ May ~~19, 2023. We~~15, 2024. The Company also ~~believe~~believes that ~~our~~its strong portfolio of intellectual property and ~~our~~its solid brand equity in the market will enable usit to raise additional capital if and when needed to meet ~~our~~its short and long-term financing needs; however, there can be no assurance that, if needed, wethe Company will be successful in obtaining the necessary funds through equity or debt financing. If ~~we need~~the Company needs additional capital and ~~are~~is unable to secure financing, weit may be required to further reduce expenses, or delay product development and ~~enhancement, or revise our strategy regarding ongoing litigation.~~ enhancement.

As of March 31, ~~2022,~~2023, we had open purchase orders of approximately ~~$4.8~~$1.6 million mostly for the purchase of inventory.

As of March 31, ~~2022,~~2023, we had inventory totaling ~~$13.1~~$11.3 million, of which non-current inventory accounted for ~~$3.2~~$2.9 million. This compares to total inventories of ~~$13.6~~$11.7 million and non-current inventory of ~~$3.6~~ $2.7 million as of December 31, ~~2021.~~2022.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 31, ~~2022~~2023 (in millions):

	Payment Due by Period										Payment Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More than 5 years		Total		Less Than 1 Year		1-3 Years		3-5 Years		More than 5 years
Senior convertible notes	$	2.4	$	0.5	$	1.9	$	—	$	—	$	1.7	$	1.7	$	—	$	—	$	—
Payroll Protection Plan loan		0.6		0.6		—		—		—
Operating lease obligations		1.6		0.6		0.9		0.1		—		1.5		0.4		0.7		0.4		—
Purchase obligations		4.8		4.8		—		—		—		1.6		1.6		—		—		—
Total	$	9.4	$	6.5	$	2.8	$	0.1	$	—	$	4.8	$	3.7	$	0.7	$	0.4	$	—

OFF-BALANCE SHEET ARRANGEMENTS

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our results of operations and financial position are based upon our unaudited condensed consolidated financial statements included under Item 1 of this Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the United States. We review the accounting policies used in reporting our financial results on a regular basis. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. There have been no changes to the critical accounting policies as explained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Note 1: “Business Description, Basis of Presentation and Significant Accounting Policies” in the notes to our unaudited condensed consolidated financial statements included under Item 1 of this Form 10-Q.

	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Current:
Raw materials	$	3,821	$	4,085	$	4,552	$	4,499
Finished goods		6,044		5,948		3,843		4,462
	$	9,865	$	10,033	$	8,395	$	8,961

Long-term:
Raw materials	$	1,576	$	1,980	$	928	$	1,068
Finished goods		1,634		1,587		1,957		1,639
	$	3,210	$	3,567	$	2,885	$	2,707

	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Operating lease right-of-use assets	$	1,383		$	1,537		$	1,259		$	1,047

Current portion of operating lease liabilities, included in accrued liabilities	$	618		$	623		$	382		$	641
Operating lease liabilities, net of current portion		871			1,026			949			492
Total operating lease liabilities	$	1,489		$	1,649		$	1,331		$	1,133

Weighted average remaining lease term for operating leases (in years)		2.42			2.64			4			2.12
Weighted average discount rate for operating leases		5.89	%		5.87	%		6.37	%		5.93	%

Exhibit No.		Title of Document

~~10.1~~		~~Securities Purchase Agreement dated January 4, 2022 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on January 4, 2022 and incorporated herein by reference)~~.

~~10.2~~		~~Registration Rights Agreement dated January 4, 2022 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on January 4, 2022 and incorporated herein by reference).~~

31.1		Section 302 Certification of Chief Executive Officer (filed herewith)

31.2		Section 302 Certification of Principal Financial Officer (filed herewith)

32.1		Section 906 Certification of Chief Executive Officer (filed herewith)

32.2		Section 906 Certification of Principal Financial Officer (filed herewith)

101.INS		XBRL Instance Document (filed herewith)

101.SCH		XBRL Taxonomy Extension Schema (filed herewith)

101.CAL		XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

101.DEF		XBRL Taxonomy Extension Definitions Linkbase (filed herewith)

101.LAB		XBRL Taxonomy Extension Label Linkbase (filed herewith)

101.PRE		XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

104.1		The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL.

	ClearOne, Inc., (Registrant)

	By:	/s/ ~~Zeynep Hakimoglu~~Derek L. Graham
May ~~19, 2022~~15, 2023		~~Zeynep Hakimoglu~~Derek L. Graham ~~President and~~ Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Narsi Narayanan
May ~~19, 2022~~15, 2023		Narsi Narayanan ~~Senior Vice President of Finance~~Chief Financial Officer (Principal Accounting and Principal Financial Officer)

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
March 31, 2022
Available-for-sale securities:
Corporate bonds and notes	$	511	$	1	$	(13)		$	499
Municipal bonds		454		—		(13)			441
Total available-for-sale securities	$	965	$	1	$	(26)		$	940

December 31, 2021
Available-for-sale securities:
Corporate bonds and notes	$	1,434	$	8	$	(2	)	$	1,440
Municipal bonds		1,573		—		(3	)		1,570
Total available-for-sale securities	$	3,007	$	8	$	(5	)	$	3,010

	Amortized cost		Estimated fair value
Due within one year	$	402	$	398
Due after one year through five years		563		542
Due after five years		—		—
Total available-for-sale securities	$	965	$	940

	Less than 12 months				More than 12 months				Total
	Estimated fair value		Gross unrealized holding losses		Estimated fair value		Gross unrealized holding losses		Estimated fair value		Gross unrealized holding losses
As of March 31, 2022
Corporate bonds and notes	$	254	$	8	$	144	$	5	$	398	$	13
Municipal bonds		292		11		150		2		442		13
Total	$	546	$	19	$	294	$	7	$	840	$	26

	March 31, 2022		December 31, 2021
Current portion of the PPP Loan included under short-term debt	$	571	$	761
Long-term portion of the PPP Loan included under long-term debt		—		—
Liability component total	$	571	$	761

	Level 1		Level 2		Level 3		Total
March 31, 2022
Corporate bonds and notes	$	—	$	499	$	—	$	499
Municipal bonds		—		441		—		441
Total	$	—	$	940	$	—	$	940
December 31, 2021
Corporate bonds and notes	$	—	$	1,440	$	—	$	1,440
Municipal bonds		—		1,570		—		1,570
Total	$	—	$	3,010	$	—	$	3,010