UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~June 30, 2022~~March 31, 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 ☐ 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 ~~August 11, 2022~~May 12, 2023 was ~~23,952,555.~~23,955,767.

Table of Contents

CLEARONE, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

INDEX


	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~2022	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	5

	Unaudited Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2523

Item 4.	Controls and Procedures	2523

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2624

Item 1A.	Risk Factors	2624

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2624

Item 3.	Defaults Upon Senior Securities	2624

Item 4.	Mine Safety Disclosures	2624

Item 5.	Other Information	2624

Item 6.	Exhibits	2725

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CLEARONE, INC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

June 30, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$
1,203

$
1,071

Marketable securities

—

1,790

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

4,112

4,991

Inventories, net

9,858

10,033

Income tax receivable

7,535

7,535
Prepaid expenses and other assets

2,924

4,021

Total current assets

25,632

29,441

Long-term marketable securities

—

1,220

Long-term inventories, net

2,985

3,567

Property and equipment, net

614

744

Operating lease - right of use assets, net

1,237

1,537

Intangibles, net

24,289

25,086

Other assets

4,592

4,597

Total assets

$
59,349

$
66,192

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$
2,047

$
5,388

Accrued liabilities

2,570

2,549

Deferred product revenue

43

54

Short-term debt

810

3,481
Total current liabilities

5,470

11,472

Long-term debt, net

1,184

1,535

Operating lease liability, net of current

717

1,026

Other long-term liabilities

655

655

Total liabilities

8,026

14,688

Shareholders' equity:

Common stock, par value $0.001, 50,000,000 shares authorized, 23,952,555 and 22,410,126 shares issued and outstanding, respectively

24

22

Additional paid-in capital

74,861

72,795

Accumulated other comprehensive loss

(266
)

(241
)
Accumulated deficit

(23,296
)

(21,072
)
Total shareholders' equity

51,323

51,504

Total liabilities and shareholders' equity

$
59,349

$
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

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CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

(Dollars in thousands, except per share amounts)

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2022			2021			2022			2021			2023			2022
Revenue	$	7,375		$	7,735		$	14,920		$	14,773		$	4,178		$	7,545
Cost of goods sold		4,568			4,311			9,297			8,346			2,863			4,729
Gross profit		2,807			3,424			5,623			6,427			1,315			2,816

Operating expenses:
Sales and marketing		1,562			1,755			3,122			3,328			1,192			1,560
Research and product development		1,177			1,487			2,530			2,761			1,043			1,353
General and administrative		1,717			1,668			3,473			3,348			1,269			1,756
Total operating expenses		4,456			4,910			9,125			9,437			3,504			4,669

Operating loss		(1,649	)		(1,486	)		(3,502	)		(3,010	)		(2,189	)		(1,853	)

Interest expense		(94	)		(107	)		(195	)		(219	)		(292	)		(101	)
Other income, net		1,505			15			1,508			10			1,666			3

Loss before income taxes		(238	)		(1,578	)		(2,189	)		(3,219	)		(815	)		(1,951	)

Provision for income taxes		19			8			35			22			17			16

Net loss	$	(257	)	$	(1,586	)	$	(2,224	)	$	(3,241	)	$	(832	)	$	(1,967	)

Basic weighted average shares outstanding		23,948,631			18,775,817			23,923,110			18,775,795			23,955,767			23,897,305
Diluted weighted average shares outstanding		23,948,631			18,775,817			23,923,110			18,775,795			23,955,767			23,897,305

Basic loss per share	$	(0.01	)	$	(0.08	)	$	(0.09	)	$	(0.17	)	$	(0.03	)	$	(0.08	)
Diluted loss per share	$	(0.01	)	$	(0.08	)	$	(0.09	)	$	(0.17	)	$	(0.03	)	$	(0.08	)


Comprehensive loss:
Net loss	$	(257	)	$	(1,586	)	$	(2,224	)	$	(3,241	)	$	(832	)	$	(1,967	)
Unrealized gain (loss) on available-for-sale securities, net of tax		26			(3	)		(2	)		(5	)
Unrealized loss on available-for-sale securities, net of tax														—			(28	)
Change in foreign currency translation adjustment		(12	)		(10	)		(23	)		(22	)		5			(11	)
Comprehensive loss	$	(243	)	$	(1,599	)	$	(2,249	)	$	(3,268	)	$	(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)

	Six months ended June 30,						Three months ended March 31,
	2022			2021			2023			2022
Cash flows from operating activities:
Net loss	$	(2,224	)	$	(3,241	)	$	(832	)	$	(1,967	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		1,593			1,330			221			794
Amortization of right-of-use assets		300			291			129			154
Share-based compensation expense		65			65			23			36
Change of inventory to net realizable value		27			682			23			—
Gain recognized on Paycheck Protection Plan Loan forgiveness		(1,528	)		—
Gain from disposal of assets								(8	)		—
Changes in operating assets and liabilities:
Receivables		879			(111	)		62			(86	)
Legal settlement receivable								55,000			—
Inventories		730			1,189			365			525
Prepaid expenses and other assets		1,097			261			4,176			651
Accounts payable		(3,341	)		96			536			(1,263	)
Accrued liabilities		33			842			(551	)		286
Income taxes receivable		—			(51	)		1,293			(5	)
Deferred product revenue		(11	)		(67	)		8			(8	)
Operating lease liabilities		(312	)		(301	)		(124	)		(160	)
Net cash provided by (used in) operating activities		(2,692	)		985			60,321			(1,043	)

Cash flows from investing activities:
Purchase of property and equipment		(16	)		(25	)		(27	)		(8	)
Purchase of intangibles		(58	)		(147	)		(42	)		(70	)
Capitalized patent defense costs		(497	)		(3,206	)		—			(189	)
Proceeds from maturities and sales of marketable securities		3,008			1,394			—			2,042
Purchases of marketable securities		—			(517	)
Net cash provided by (used in) investing activities		2,437			(2,501	)		(69)			1,775

Cash flows from financing activities:
Net proceeds from equity-based compensation programs		2			7			—			2
Paycheck Protection Program loan refund upon full forgiveness net of loan payments		768			—
Principal payments of long-term debt		(360	)		(180	)
Net cash provided by (used in) financing activities		410			(173	)
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		(23	)		(26	)		4			(13	)

Net increase in cash and cash equivalents		132			(1,715	)		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	$	1,203		$	2,088		$	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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the results of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021,~~2022, and the cash flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. The results of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 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 ~~June 30, 2022~~quarter ended March 31, 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 June 30, 2022, our cash and cash equivalents were approximately $1,203 compared to $1,071 as of December 31, 2021. Our working capital was $20,162 as of June 30, 2022. Net cash used in operating activities was $2,692 for the six months ended June 30, 2022, an increase of $3,677 from $985 of cash provided by operating activities in the six months ended June 30, 2021. The Company is currently pursuing all available legal remedies to defend its strategic patents from infringement. The Company has already spent approximately $28,653 from 2016 through June 30, 2022 towards this litigation and may be required to spend more to continue its legal defense. In order to maintain liquidity, the Company has been actively engaged in preserving cash by implementing company-wide cost reduction measures and raising additional capital. The company raised additional capital in 2019 by issuing senior convertible notes, in 2020 by borrowing through the CARES Act Paycheck Protection Program 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 termination of the short-term notes. In addition, the Company has been generating additional cash as our inventory levels are brought down to historical levels.

Table of Contents

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 operating activities for thethree 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 $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, ~~including collecting on the income taxes receivable balance,~~ will provide the liquidity needed to meet our operating needs through at least ~~August 12, 2023.~~May 15, 2024. The Company also 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 its short and long-term financing needs; however, there can be no assurance that, if needed, the 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 June 30,				Six months ended June 30,				Three months ended March 31,
	2022		2021		2022		2021		2023		2022
Audio conferencing	$	3,277	$	3,096	$	6,453	$	5,931	$	2,329	$	3,176
Microphones		3,123		3,218		6,051		5,568		1,195		2,928
Video products		975		1,421		2,416		3,274		654		1,441
	$	7,375	$	7,735	$	14,920	$	14,773	$	4,178	$	7,545

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

	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2022		2021		2022		2021		2023		2022
North and South America	$	3,184	$	3,640	$	6,960	$	7,164	$	1,570	$	3,776
Asia Pacific (includes Middle East, India and Australia)		2,468		1,797		4,542		4,023		1,696		2,074
Europe and Africa		1,723		2,298		3,418		3,586		912		1,695
	$	7,375	$	7,735	$	14,920	$	14,773	$	4,178	$	7,545

Table of Contents

5. Intangible Assets

Intangible assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:

	Estimated useful lives (years)			June 30, 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		34,107			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					37,966			37,412						10,953			10,912
Accumulated amortization					(13,677	)		(12,326	)					(8,958	)		(8,841	)
Total intangible assets, net				$	24,289		$	25,086					$	1,995		$	2,071

The amortization of intangible assets for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ was as follows:

Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

Amortization of intangible assets

$ 682

$ 543

$
1,352

$
1,054

	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)	$	1,370
2023		2,733
2023 (Remainder)			$	398
2024		2,469		253
2025		2,408		192
2026		2,408		191
2027				61
Thereafter		12,901		900
Total	$	24,289	$	1,995

1110

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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 ~~June 30, 2022:~~March 31, 2023:

87. Shareholders' Equity

	Three months ended June 30,						Six Months Ended June 30,						Three months ended March 31,
	2022			2021			2022			2021			2023			2022
Common stock and additional paid-in capital
Balance, beginning of period	$	74,855		$	63,413		$	72,818		$	63,378		$	74,934		$	72,818
Issuance of common stock and warrants, net		—			—			2,000			—			—			2,000
Share-based compensation expense		30			34			65			65			22			35
Proceeds from employee stock purchase plan		—			3			2			7			1			2
Balance, end of period	$	74,885		$	63,450		$	74,885		$	63,450		$	74,957		$	74,855

Accumulated other comprehensive loss
Balance, beginning of period	$	(280	)	$	(200	)	$	(241	)	$	(186	)	$	(288	)	$	(241	)
Unrealized loss on available-for-sale securities, net of tax		26			(3	)		(2	)		(5	)		—			(28	)
Foreign currency translation adjustment		(12	)		(10	)		(23	)		(22	)		5			(11	)
Balance, end of period	$	(266	)	$	(213	)	$	(266	)	$	(213	)	$	(283	)	$	(280	)

Accumulated deficit
Balance, beginning of period	$	(23,039	)	$	(15,033	)	$	(21,072	)	$	(13,378	)	$	(516	)	$	(21,072	)
Net loss		(257	)		(1,586	)		(2,224	)		(3,241	)		(832	)		(1,967	)
Balance, end of period	$	(23,296	)	$	(16,619	)	$	(23,296	)	$	(16,619	)	$	(1,348	)	$	(23,039	)

Total shareholders' equity	$	51,323		$	46,618		$	51,323		$	46,618		$	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 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)

	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Liability component:
Principal	$	2,280		$	2,640		$	1,695		$	1,920
Less: debt discount and issuance costs, net of amortization		(286	)		(385	)		(139	)		(188	)
Net carrying amount	$	1,994		$	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	$	810		$	720		$	1,556		$	1,920
Long-term portion of liability component included under long-term debt		1,470			1,920
Liability component total	$	2,280		$	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 ~~and six~~ months ended ~~June 30,~~March 31, 2023 and March 31, 2022amortization of debt discount and issuance costs was $49 and ~~$98, respectively and for the three and six months ended June 30, 2021, amortization of debt discount and issuance costs was~~ $49, ~~and $98,~~ respectively. The following table represents schedule of maturities of principal amount contained in the Notes as of ~~June 30, 2022:~~March 31, 2023:

Year ending December 31,

Principal Amount Maturing

2022 (Remainder)

$
360

2023

1,920

2024

—

2025

—

Total principal amount

$
2,280

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 as of December 31, 2021.~~ On January 4, 2022, the Company entered into a Securities Purchase Agreement with Edward D. Bagley, pursuant to which the Company issued and sold to 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 was the cancellation and termination of Mr. Bagley’s outstanding bridge loan to the Company in the principal amount of $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 had 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 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,~~October 28, 2023. Mr. Bagley is an affiliate of the Company ~~is not required to repay the principal amount of $1,499~~and the ~~interest~~Company’s single largest stockholder. This Bridge Loan of $$2,000 is included under short-term debt as of December 31,~~. The Company received $953~~ ~~back that it had already paid towards principal and interest payments toward~~ 2022. In January 2023, the ~~PPP Loan. The Company treated the forgiveness as extinguishment~~2022 Bridge loan of ~~debt in this quarter ended June 30, 2022 and reported the entire principal amount forgiven of $1,499~~$2,000 along with applicable interest ~~already accounted for of $29~~ was repaid in full.~~as a gain on extinguishment of debt.~~

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UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

June 30, 2022

December 31, 2021

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

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

—

—
Liability component total
$ —

$ 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 December 31, 2021:

Level 1

Level 2

Level 3

Total

December 31, 2021

Corporate bonds and notes

$
—

$
1,440

$
—

$
1,440

Municipal bonds

—

1,570

—

1,570

Total

$
—

$
3,010

$
—

$
3,010

~~There were 0 financial instruments that were re-measured by the Company as of June 30, 2022.~~

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 ~~six~~three months ended ~~June 30, 2022~~March 31, 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 ~~June 30, 2022.~~March 31, 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.

Item 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 in Part I, Item 1A “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. DIALOG 10 USB won its second award in May 2022 by winning the 2022 Top New Technology (TNT) Award in the Microphone category. ~~In June 2022,~~ at ~~Infocomm~~ ~~2022 in Las Vegas, Nevada,~~ ~~DIALOG 10 USB won two additional awards - Commercial Integrator 2022 BEST Award in the Microphones category and 2022 Sound & Video Contractor Magazine Infocomm Best in Market Award.~~

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.~~original CHAT® 150 speakerphone, including Advanced Noise Cancellation, Full Duplex Distributed Echo Cancellation™ and Automatic Level Control algorithms, to ensure highly intelligible, natural audio capture and playback. It also supports NFC tap-to-pair and includes a wired USB connection for compatibility with the full variety of modern devices.

~~Table of Contents~~

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

In early March 2022, we were awarded a new patent titled “Conferencing Apparatus”, that describes, among other things, a beamforming microphone array with acoustic echo cancellation and a set of configurable fixed beams. The patent goes on to describe performing a direction of arrival determination, and in response to that determination, selecting one or more of those fixed beams for audio transmission.

In early April 2022, a ClearOne patent issued titled “Ceiling Tile Microphone,” that claims, among other things, a ceiling tile beamforming microphone that is powered through Power over Ethernet (PoE). Later in the same month another ClearOne patent was granted, also titled “Ceiling Tile Microphone,” that claims, among other things, a ceiling tile microphone that includes beamforming, acoustic echo cancellation, and auto voice tracking.

In May 2022, for the sixth time since its groundbreaking debut in 2020, the ClearOne BMA 360 microphone has been recognized by the world’s most discerning AV buyers with the prestigious Best in Market Award at ISE 2022. The microphone was one of only three winners in this year’s award program. The Best in Market Award program is presented by leading industry publication Sound & Video Contractor at Integrated Systems Europe (ISE), the world’s largest AV and systems integration show. The program recognizes the most innovative technology within the AV industry, and the judges include respected AV and IT managers, directors, engineers, industry consultants and integrators.

~~During the first six months of 2022, we continued our efforts, primarily through litigation, to stop the infringement of our strategic patents.~~ We believe the decision by the U.S. District Court in August 2019 granting our request 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 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.

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 resulting in the latest in a long string of defeats for Shure.

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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 decreased by 5%45% in the ~~second~~first quarter of ~~2022~~2023 when compared to the ~~second~~first quarter of ~~2021,~~2022, primarily due to a significant decrease in revenues from ~~video~~all product categories, especially microphones. The revenue decline was primarily due to our continued inability to source adequate inventory to meet the demand for professional audio products and ~~a further decrease~~BMA due to the ongoing transition of manufacturing of our products from China to Singapore by our electronics manufacturing services provider and due to the decline in ~~revenues~~demand for video products. We expect the challenges with the manufacturing transition from ~~microphones, which were partially offset by an increase in revenues from audio conferencing products. Overall revenue increased by 1% during the first six months of 2022 when compared~~China to ~~revenue~~Singapore to ease in the ~~first six months~~second half of ~~2021 due to increases in revenues from audio conferencing products and microphones, which were partially offset by a decrease in revenues from video products.~~ 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 being 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 to2023. 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. The patent infringement also has negatively impacted directly the revenue from ClearOne’s other products not related to the infringed patents. Our revenue performance in ~~2022-Q2 and the first six months of 2022~~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. We expect these supply shortages and associated increased costs to continue through at least the end of ~~2022.~~2023.

Our gross profit margindecreased to ~~38.1% during the second quarter of~~ ~~2022~~ ~~from 44.3% during the second quarter of 2021. Our gross profit margin decreased to 37.7%~~31.5% during the first ~~six months~~quarter of ~~2022 compared to 43.5%~~ 2023 from 37.3% during the first ~~six months~~quarter of ~~2021.~~2022. Gross Profit margin decreased year over year mainly due to increase in administration and overhead costs as a percentage of revenue and increase in inventory obsolescence costs.

Net loss decreased from ~~$1.6~~$2.0 million in the ~~second~~first quarter of ~~2021~~2022 to ~~$0.3 million in the second quarter of~~ ~~2022~~. ~~Our net loss decreased from $3.2~~$0.8 million in the first ~~half~~quarter of ~~2021 to $2.2 million in the first half of 2022.~~ 2023. The decrease in net loss was mainly due to ~~the recognition~~a receipt of ~~$1.5~~$1.35 million from a one-time legal settlement of a contract dispute. This receipt, included in ~~gain from the forgiveness of CARES Act Paycheck Protection Program Loan, which~~other income was partially offset by ~~(a) decrease~~an increase in ~~absolute gross profit dollars as a result~~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 ~~are~~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, a 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 ~~the~~highly advanced BMA360 and BMA-CT 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 ~~the ability of~~ 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 ~~the~~ 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, ~~the~~ 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 ~~primarily~~ resulting from COVID-19 have caused significant fluctuations in our costs of goods resulting in a reduction of our gross margins in ~~the first half of~~2021 and 2022. We expect these fluctuations to continue ~~through at least the end of 2022.~~in 2023. If ~~the global economy’s recovery from~~ the pandemic continues to ~~experience supply chain disruptions, it~~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 ~~$43~~$71 thousand on ~~June 30, 2022~~March 31, 2023 compared to ~~$54~~$63 thousand on December 31, ~~2021.~~2022.

A detailed discussion of our results of operations follows below.

2119

Table of Contents

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

Results of Operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023

The following table sets forth certain items from our unaudited condensed consolidated statements of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 (“~~2022~~2023-Q2Q1”) ("~~2022-H1"~~2023-YTD") and ~~2021~~2022 ("~~2021~~2022-Q2Q1") ("~~2021-H1"~~2022-YTD"), respectively, together with the percentage of total revenue which each such item represents:

	Three months ended June 30,									Six months ended June 30,									Three months ended March 31,
(dollars in thousands)	2022			2021			Change Favorable (Adverse) in %			2022			2021			Change Favorable (Adverse) in %			2023			2022			Change Favorable (Adverse) in %
Revenue	$	7,375		$	7,735			(5	)	$	14,920		$	14,773		$	1		$	4,178		$	7,545			(45	)
Cost of goods sold		4,568			4,311			(6	)		9,297			8,346			(11	)		2,863			4,729			39
Gross profit		2,807			3,424			(18	)		5,623			6,427			(13	)		1,315			2,816			(53	)
Sales and marketing		1,562			1,755			11			3,122			3,328			6			1,192			1,560			24
Research and product development		1,177			1,487			21			2,530			2,761			8			1,043			1,353			23
General and administrative		1,717			1,668			(3	)		3,473			3,348			(4	)		1,269			1,756			28
Total operating expenses		4,456			4,910			9			9,125			9,437			3			3,504			4,669			25
Operating loss		(1,649	)		(1,486	)		(11	)		(3,502	)		(3,010	)		(16	)		(2,189	)		(1,853	)		(18	)
Other income (expense), net		1,411			(92	)		1,634			1,313			(209	)		728			1,374			(98	)		1,502
Loss before income taxes		(238	)		(1,578	)		85			(2,189	)		(3,219	)		32			(815	)		(1,951	)		58
Provision for income taxes		19			8			(138	)		35			22			(59	)		17			16			(6	)
Net loss	$	(257	)	$	(1,586	)		84			(2,224	)		(3,241	)		31		$	(832	)	$	(1,967	)		58

Our revenue decreased to ~~$7.4~~$4.2 million in ~~2022-Q2~~2023-Q1 compared to ~~$7.7~~$7.5 million in ~~2021-Q2~~2022-Q1 ~~primarily~~ due to a ~~31%~~59% decline in microphones, a 55% decline in video products, and a 3%27% decline ~~in microphones, which were partially offset by a 6% increase~~ in audio conferencing. ~~Despite~~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 were negatively impacted by our inability to source adequate inventory to meet the ~~overall decline in microphones, our BMA-CT~~demand for professional audio products and BMA ~~360~~ ~~solutions continue~~due to ~~exhibit growth while~~the ongoing transition of manufacturing of our products from China to Singapore by our electronics manufacturing services provider. Our traditional ceiling mics, personal audio conferencing products, video cameras and video conferencing equipment suffered ~~significant~~ revenue ~~decrease. Audio Conferencing category as a whole increased mainly due to a significantly strong revenue performance of our professional mixers.~~ declines~~Video products suffered declines in 2022-Q2 compared to 2021-Q2~~ due to lack of ~~demand for video products.~~demand. During the ~~second~~first quarter of ~~2022,~~2023, revenues from Americas declined by ~~13%~~58% primarily due to decreased revenues from ~~USA despite revenue increases~~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 ~~increased~~decline by ~~a significant 37%~~18% primarily due to ~~overall~~ ~~increase~~declines in revenues from all sub-markets except India ~~the Middle East~~ and ~~Japan, and~~Australia. Finally, revenues from Europe and Africa decreased significantly by ~~25%~~46% in 2023-Q1 primarily due to ~~significant revenue decrease from Southern~~decreases across all the sub-markets except Central Europe.

~~During the six months ended June 30, 2022 our revenues increased from $14.8 million to $14.9 million compared to same period in 2021 due to revenues from microphones~~ ~~increasing~~ ~~by 9%, video products~~ ~~decreasing~~ by 26% and audio conferencing increasing by 9%. The increase in revenue from microphones continued to be led by our BMA-CT and BMA 360 solutions. Audio Conferencing category as a whole increased mainly due to a strong revenue performance by our professional mixers. During 2022-H1 Americas ~~declined~~ ~~by 3%, Asia Pacific, including the Middle East and India~~ ~~increased~~ ~~by 13% and Europe and Africa~~ ~~declined~~ ~~by 5%. India, the Middle East and Northern Europe led in revenue growth while USA, China and Southern Europe suffered major revenue decreases.~~

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

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 ~~44.3%~~37.3% during ~~2021-Q2~~2022-Q1 to ~~38.1~~31.5% during ~~2022~~2023~~-Q2~~-Q1. The gross profit margin was negatively impacted due to ~~increase~~increases in material costs due to ~~continuing supply chain constraints, which was partially offset by reduced~~ ~~freight~~mainly due to increase in administration and ~~tariff~~overhead costs as a percentage of revenue and ~~a decrease~~increase in inventory obsolescence costs ~~in 2022-Q2.~~.

~~Our gross profit margin decreased from 43.5% during 2021-H1 to 37.7% during 2022-H1. The gross profit margin decreased primarily due~~ to ~~increase in material costs due to continuing supply chain constraints, which was partially offset by reduced~~ ~~freight and tariff costs and a decrease in inventory obsolescence costs in 2022-H1~~.

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 $0.5 million of wireless microphone-related finished goods and assemblies, $0.3 million of Converge Pro and Beamforming microphone array products, ~~$0.7~~$1.0 million of video products, and ~~$1.4~~$0.9 million of raw materials that will be used primarily for manufacturing professional audio conferencing products and BMA microphones. Any business changes that are adverse to these product lines could potentially impact our ability to sell our long-term inventory in addition to our current inventory.

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 $4.5~~in 2023-Q1 was $3.5 million compared to $4.7 million in ~~2022-Q2 compared to $4.9 million in 2021-Q2. Total operating expenses were $9.1 million for 2022-H1 compared to $9.4 million for 2021-H1.~~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-Q2~~2023-Q1 decreased to $~~1.6~~1.2 million from ~~$1.8~~$1.6 million for ~~2021-Q2.~~2022-Q1. The decrease was primarily due to decreases in employment expenses and consultant expenses due to a reduction in the headcount ~~were offset by an increase~~and due to decrease in ~~trade-show related expenses.~~commissions paid to employees and consultants.

~~S&M expenses for 2022-H1 decreased to $3.1 million from $3.3 million for 2021-H1. The~~ ~~decreases~~ ~~in employment expenses and consultant expenses due to a reduction in the headcount were offset by increases in trade-show related expenses and advertising~~.

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 decreased to ~~$1.2~~$1.0 million in ~~2022-Q2~~2023-Q1 compared to ~~$1.5~~$1.4 million for ~~2021-Q2.~~2022-Q1. The decrease was primarily due to reduction in employment expenses due to reduction in the ~~headcount.~~

~~R&D expenses decreased to $2.5 million in 2022-H1, from $2.8 million in 2021-H1.~~ ~~The~~headcount and a decrease ~~in employment expenses due to reduction in the headcount was partially offset by increase~~ 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 ~~remained the same at $1.7~~decreased to $1.3 million in ~~2021-Q2 and 2022-~~2023-Q1 compared to $1.8 million in 2022-Q1.Q2. The ~~increase~~reduction was primarily due to (i) a decrease in amortization costs relating to our capitalized patent defense costs, ~~were~~which 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.

~~G&A expenses increased from $3.3 million in 2021-H1 to $3.5 million in 2022-H1.~~ ~~The increases in~~ ~~amortization costs relating to our capitalized patent defense costs and insurance costs were partially offset by decreases in legal expenses and consulting expenses~~.

Other income (expense), net includes interest income, ~~and~~ foreign currency ~~changes.~~changes and gain or loss on disposal of assets. Other income in ~~2022-Q2 and 2022-H1 includes $1.5~~2023-Q1 included a receipt of $1.35 million ~~recognized on the gain arising~~ from ~~the CARES Act Paycheck Protection Program loan forgiveness.~~ a one-time legal settlement of a contract dispute. Other items included in other income remained immaterial during ~~the second 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-Q2 when compared~~2022-Q1. primarily due to ~~2021-Q2. Interest expense~~ interest associated with the prepayment of the $2 million bridge loan in January 2023.~~remained consistent at $0.2 million in 2022-~~H1 ~~and 2021-H1~~.

During each of the ~~six~~three months ended ofMarch 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 for 2022-Q2 and 2022-H1 primarily relates to foreign jurisdictions~~.

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

As of ~~June 30, 2022,~~March 31, 2023, our cash and cash equivalents were approximately ~~$1.2~~$59.0 million compared to ~~$1.1~~$1.0 million as of December 31, ~~2021.~~2022. Our working capital was $~~20.2~~68.7 million and ~~$18.0~~$69.3 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Net cash ~~used in~~provided by operating activities was approximately ~~$2.7~~$60.3 million in ~~2022~~2023~~-H1~~-Q1, an increase of cash ~~used in~~provided by ope ~~operating~~rating activities of approximately ~~$3.7~~$61.4 million from $1.0 million of cash ~~provided~~used by operating activities in ~~2021-H1.~~2022-Q1. The increase in cash ~~outflow~~inflow was primarily due to $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 $2.8 million, and increase in net loss by $0.9 million after adjusting for non-cash charges.~~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 $2.4 million~~ in ~~2022-H1compared to net~~2022-Q1. In 2022-Q1 cash ~~used in~~provided by investing activities primarily consisted of ~~$2.5~~$2.0 million ~~in 2021-H1,~~ ~~a change in cash flow of $4.9~~ ~~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 $0.9 million in 2021-H1 to $3.0 million in 2022-H2, and (b)~~partially offset by ~~a decrease in~~ capitalized patent defense costs ~~by $2.7 million~~of $0.2 million. .

Net cash ~~provided by~~used in financing activities in ~~2022-H1~~2023-Q1 was ~~a $0.4~~$2.2 million, comprised primarily of ~~a $0.8 million refund~~repayment of the ~~CARES Act Paycheck Protection Program Loan with interest offset by $0.4~~bridge loan of $2.0 million ~~repayment~~and $0.2 million payments of principal amounts due on senior convertible ~~notes~~ ~~compared~~debt. This compares to ~~cash~~$0.4 million used in ~~financing activities of $0.2 million in 2021-H1, which consisted primarily of~~ ~~repayment of~~ principal amounts due on senior convertible ~~notes.~~debt in 2022-Q1 .

~~Capitalization of patent defense costs~~. We capitalize external legal costs incurred in 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 10 to 20 years. During ~~2022-~~Q2 ~~we spent $0.3 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 $28.7 million from 2016 through June 30, 2022 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 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 believe 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 the 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.

As of ~~June 30, 2022,~~March 31, 2023, our cash and cash equivalents were approximately ~~$1,203~~$59.0 million compared to ~~$1,071~~$1.0 million as of December 31, ~~2021.~~2022. Our working capital was ~~$20,162~~$68,7 million as of ~~June 30, 2022.~~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 ~~was $2,692~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2022 ~~an increase~~. The company announced a special one-time cash dividend of ~~$3,677 from $985~~$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 ~~cash provided by operating activities~~approximately $29.0 million. The Company also paid approximately $6.6 million towards income taxes in April 2023. The Company believes that the six months ended June 30, 2021. We are currently pursuing all available legal remedies to defend our strategic patents from infringement. We have already spent approximately $28,653 from 2016 through June 30, 2022 towards this litigation and may be required to spend more to continue our legal defense. In order to maintain liquidity, we have been actively engaged in preserving cash by implementing company-wide cost reduction measures and raising additional capital. We raised additional capital in 2019 by issuing senior convertible notes, in 2020 by borrowing through the CARES Act Paycheck Protection Program and issuing common stock and warrants and in 2021 by issuing short-term notes and issuing common stock and warrants. In January 2022, we issued $2,000 in common stock as consideration for the cancellation and termination of the short-term notes. In addition, we have been generating additional cash as our inventory levels are brought down to historical levels.

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, ~~including collecting on the income tax receivable balance,~~ will provide the liquidity needed to meet our operating needs through at least ~~August 12, 2023. We~~May 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 ~~June 30, 2022,~~March 31, 2023, we had open purchase orders of approximately ~~$6.4~~$1.6 million mostly for the purchase of inventory.

As of ~~June 30, 2022~~March 31, 2023, we had inventory totaling ~~$12.8~~$11.3 million, of which non-current inventory accounted for ~~$3.0~~$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.

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

The following table summarizes our contractual obligations as of ~~June 30, 2022~~March 31, 2023 (in millions):

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.

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.

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.

	June 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Current:
Raw materials	$	4,501	$	4,085	$	4,552	$	4,499
Finished goods		5,357		5,948		3,843		4,462
	$	9,858	$	10,033	$	8,395	$	8,961

Long-term:
Raw materials	$	1,417	$	1,980	$	928	$	1,068
Finished goods		1,568		1,587		1,957		1,639
	$	2,985	$	3,567	$	2,885	$	2,707

	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Operating lease right-of-use assets	$	1,237		$	1,537		$	1,259		$	1,047

Current portion of operating lease liabilities, included in accrued liabilities	$	620		$	623		$	382		$	641
Operating lease liabilities, net of current portion		717			1,026			949			492
Total operating lease liabilities	$	1,337		$	1,649		$	1,331		$	1,133

Weighted average remaining lease term for operating leases (in years)		2.19			2.64			4			2.12
Weighted average discount rate for operating leases		5.90	%		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/ Derek L. Graham
~~August 12, 2022~~May 15, 2023		Derek L. Graham ~~Interim~~ Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Narsi Narayanan
~~August 12, 2022~~May 15, 2023		Narsi Narayanan Chief Financial Officer (Principal Accounting and Principal Financial Officer)

	Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Estimated fair value
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

	June 30, 2022		December 31, 2021
Current portion of the PPP Loan included under short-term debt	$	—	$	761
Long-term portion of the PPP Loan included under long-term debt		—		—
Liability component total	$	—	$	761

	Level 1		Level 2		Level 3		Total
December 31, 2021
Corporate bonds and notes	$	—	$	1,440	$	—	$	1,440
Municipal bonds		—		1,570		—		1,570
Total	$	—	$	3,010	$	—	$	3,010

	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	$	2.7	$	0.8	$	1.9	$	—	$	—	$	1.7	$	1.7	$	—	$	—	$	—
Operating lease obligations		1.4		0.6		0.8		—		—		1.5		0.4		0.7		0.4		—
Purchase obligations		6.4		6.4		—		—		—		1.6		1.6		—		—		—
Total	$	10.5	$	7.8	$	2.7	$	—	$	—	$	4.8	$	3.7	$	0.7	$	0.4	$	—