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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

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, 2023

OR

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number: 001-38907

Sonim Technologies, Inc.

(Exact name of -registrant as specified in its charter)

Delaware |  | 94-3336783
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

4445 Eastgate Mall, Suite 200

San Diego, CA 92121

(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (650) 378-8100

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 par value $0.001 per share |  | SONM |  | The Nasdaq Stock Market LLC

Indicate by check mark 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, 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.

Large 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. ☐

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

On July 31, 2023, there were 41,284,613 shares of the registrant’s common stock, par value $0.001, outstanding.

Table of Contents

|  | Page
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Operations | 2
| Condensed Consolidated Statements of Stockholder’s Equity | 3
| Condensed Consolidated Statements of Cash Flows | 4
| Notes to Unaudited Condensed Consolidated Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20
Item 4. | Controls and Procedures | 20
PART II. | OTHER INFORMATION |
Item 1. | Legal Proceedings | 21
Item 1A. | Risk Factors | 21
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21
Item 3. | Defaults Upon Senior Securities | 21
Item 4. | Mine Safety Disclosures | 21
Item 5. | Other Information | 21
Item 6. | Exhibits | 22
Signatures | 23

i

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2023 AND DECEMBER 31, 2022 (UNAUDITED)

(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE AND

PER SHARE AMOUNTS)

|  | June 30, 2023 |  |  | December 31, 2022 |
Assets |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 9,720 |  |  | $ | 13,213 |
Accounts receivable, net |  |  | 26,576 |  |  |  | 22,433 |
Non-trade receivable |  |  | 1,008 |  |  |  | 2,269 |
Inventory |  |  | 4,736 |  |  |  | 3,910 |
Prepaid expenses and other current assets |  |  | 1,428 |  |  |  | 1,807 |
Total current assets |  |  | 43,468 |  |  |  | 43,632 |
Property and equipment, net |  |  | 83 |  |  |  | 168 |
Right-of-use assets |  |  | 183 |  |  |  | 66 |
Contract fulfillment assets |  |  | 7,028 |  |  |  | 6,848 |
Other assets |  |  | 2,978 |  |  |  | 2,972 |
Total assets |  | $ | 53,740 |  |  | $ | 53,686 |
Liabilities and stockholders’ equity |  |  |  |  |  |  |  |
Current portion of long-term debt |  | $ | 74 |  |  | $ | 147 |
Accounts payable |  |  | 20,913 |  |  |  | 21,126 |
Accrued expenses |  |  | 9,475 |  |  |  | 10,692 |
Current portion of lease liability |  |  | 183 |  |  |  | 66 |
Deferred revenue |  |  | — |  |  |  | 31 |
Total current liabilities |  |  | 30,645 |  |  |  | 32,062 |
Income tax payable |  |  | 1,446 |  |  |  | 1,429 |
Accrued severance |  |  | — |  |  |  | 150 |
Total liabilities |  |  | 32,091 |  |  |  | 33,641 |
Commitments and contingencies (Note 9) |  |  | - |  |  |  | - |
Stockholders’ equity |  |  |  |  |  |  |  |
Common stock, $0.001 par value per share; 100,000,000 shares authorized: and 41,110,279 and 40,774,687 shares issued and outstanding at June 30, 2023, and December 31, 2022, respectively. |  |  | 41 |  |  |  | 41 |
Preferred stock, $0.001 par value per share, 5,000,000 shares authorized, and no shares issued and outstanding at June 30, 2023, and December 31, 2022, respectively. |  |  | — |  |  |  | — |
Additional paid-in capital |  |  | 270,742 |  |  |  | 269,874 |
Accumulated deficit |  |  | (249,134 | ) |  |  | (249,870 | )
Total stockholders’ equity |  |  | 21,649 |  |  |  | 20,045 |
Total liabilities and stockholders’ equity |  | $ | 53,740 |  |  | $ | 53,686 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30 |  |  | Six Months Ended June 30 |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net revenues |  | $ | 26,835 |  |  | $ | 11,955 |  |  | $ | 52,636 |  |  | $ | 25,213 |
Cost of revenues |  |  | 22,409 |  |  |  | 9,108 |  |  |  | 44,035 |  |  |  | 20,838 |
Gross profit |  |  | 4,426 |  |  |  | 2,847 |  |  |  | 8,601 |  |  |  | 4,375 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  |  | — |  |  |  | 2,721 |  |  |  | 105 |  |  |  | 6,889 |
Sales and marketing |  |  | 1,827 |  |  |  | 2,073 |  |  |  | 3,584 |  |  |  | 4,243 |
General and administrative |  |  | 1,852 |  |  |  | 2,273 |  |  |  | 3,832 |  |  |  | 4,545 |
Total operating expenses |  |  | 3,679 |  |  |  | 7,067 |  |  |  | 7,521 |  |  |  | 15,677 |
Net income (loss) from operations |  |  | 747 |  |  |  | (4,220 | ) |  |  | 1,080 |  |  |  | (11,302 | )
Interest expense |  |  | (5 | ) |  |  | (35 | ) |  |  | (5 | ) |  |  | (74 | )
Other income (expense), net |  |  | (161 | ) |  |  | 91 |  |  |  | (154 | ) |  |  | 68 |
Net income (loss) before income taxes |  |  | 581 |  |  |  | (4,164 | ) |  |  | 921 |  |  |  | (11,308 | )
Income tax expense |  |  | (72 | ) |  |  | (61 | ) |  |  | (185 | ) |  |  | (129 | )
Net income (loss) |  | $ | 509 |  |  | $ | (4,225 | ) |  | $ | 736 |  |  | $ | (11,437 | )
Net income (loss) per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.01 |  |  | $ | (0.22 | ) |  | $ | 0.02 |  |  | $ | (0.60 | )
Diluted |  | $ | 0.01 |  |  | $ | (0.22 | ) |  | $ | 0.02 |  |  | $ | (0.60 | )
Weighted–average shares used in computing net income (loss) per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 41,039,405 |  |  |  | 19,283,496 |  |  |  | 40,973,594 |  |  |  | 19,197,859 |
Diluted |  |  | 43,398,189 |  |  |  | 19,283,496 |  |  |  | 41,903,630 |  |  |  | 19,197,859 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2023, AND 2022 (UNAUDITED)

(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE AMOUNTS)

For the Three Months Ended June 30, 2022 |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
|  | Common stock |  |  | Additional Paid-in |  |  | Accumulated |  |  | Stockholders’ |
For the Three Months Ended June 30, 2022 |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance at April 1, 2022 |  |  | 19,269,338 |  |  | $ | 19 |  |  | $ | 253,997 |  |  | $ | (242,995 | ) |  | $ | 11,021 |
Net settlement of common stock upon release of RSU |  |  | 71,222 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Employee and nonemployee stock-based compensation |  |  | — |  |  |  | — |  |  |  | 216 |  |  |  | — |  |  |  | 216 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,225 | ) |  |  | (4,225 | )
Balance at June 30, 2022 |  |  | 19,340,560 |  |  | $ | 19 |  |  | $ | 254,213 |  |  | $ | (247,220 | ) |  | $ | 7,012 |

|  | Common Stock |  |  | Additional Paid-in |  |  | Accumulated |  |  | Stockholders’ |
For the Six Months Ended June 30, 2022 |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance at January 1, 2022 |  |  | 18,808,885 |  |  | $ | 19 |  |  | $ | 253,416 |  |  | $ | (234,805 | ) |  | $ | 18,630 |
Issuance of common stock, net of issuance costs |  |  | 45,305 |  |  |  | — |  |  |  | 45 |  |  |  | — |  |  |  | 45 |
Issuance of common stock, compensation |  |  | 415,023 |  |  |  | — |  |  |  | 253 |  |  |  | — |  |  |  | 253 |
Adoption of ASC 842 – leases |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (978 | ) |  |  | (978 | )
Net settlement of common stock upon release of RSU |  |  | 71,347 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Employee and nonemployee stock-based compensation |  |  | — |  |  |  | — |  |  |  | 499 |  |  |  | — |  |  |  | 499 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (11,437 | ) |  |  | (11,437 | )
Balance at June 30, 2022 |  |  | 19,340,560 |  |  | $ | 19 |  |  | $ | 254,213 |  |  | $ | (247,220 | ) |  | $ | 7,012 |

|  | Common stock |  |  | Additional Paid-in |  |  | Accumulated |  |  | Stockholders’ |
For the Three Months Ended June 30, 2023 |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance at April 1, 2023 |  |  | 40,995,430 |  |  | $ | 41 |  |  | $ | 270,293 |  |  | $ | (249,643 | ) |  | $ | 20,691 |
Net settlement of common stock upon release of RSU |  |  | 19,849 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Issuance of common stock for payment of services |  |  | 95,000 |  |  |  |  |  |  |  | 91 |  |  |  |  |  |  |  | 91 |
Employee and nonemployee stock-based compensation |  |  | — |  |  |  | — |  |  |  | 358 |  |  |  | — |  |  |  | 358 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 509 |  |  |  | 509 |
Balance at June 30, 2023 |  |  | 41,110,279 |  |  | $ | 41 |  |  | $ | 270,742 |  |  | $ | (249,134 | ) |  | $ | 21,649 |

|  | Common Stock |  |  | Additional Paid-in |  |  | Accumulated |  |  | Stockholders’ |
For the Six Months Ended June 30, 2023 |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
Balance at January 1, 2023 |  |  | 40,774,687 |  |  | $ | 41 |  |  | $ | 269,874 |  |  | $ | (249,870 | ) |  | $ | 20,045 |
Net settlement of common stock upon release of RSU |  |  | 19,849 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Issuance of common stock for payment of services |  |  | 315,743 |  |  |  | — |  |  |  | 201 |  |  |  | — |  |  |  | 201 |
Employee and nonemployee stock-based compensation |  |  | — |  |  |  | — |  |  |  | 667 |  |  |  | — |  |  |  | 667 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 736 |  |  |  | 736 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 736 |  |  |  | 736 |
Balance at June 30, 2023 |  |  | 41,110,279 |  |  | $ | 41 |  |  | $ | 270,742 |  |  | $ | (249,134 | ) |  | $ | 21,649 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)

(IN THOUSANDS OF U.S. DOLLARS)

|  | 2023 |  |  | 2022 |
|  | Six Months Ended June 30 |
|  | 2023 |  |  | 2022 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 736 |  |  | $ | (11,437 | )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,183 |  |  |  | 390 |
Stock-based compensation |  |  | 667 |  |  |  | 499 |
Stock issued under bonus plan |  |  | — |  |  |  | 253 |
Stock issued for services |  |  | 201 |  |  |  | — |
Amortization of lease liability and lease interest expense |  |  | (138 | ) |  |  | (404 | )
Bad debt expense (benefit) |  |  | — |  |  |  | 2 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (4,143 | ) |  |  | 5,485 |
Non-trade receivable |  |  | 1,261 |  |  |  | 997 |
Inventory |  |  | (826 | ) |  |  | 2,122 |
Prepaid expenses and other current assets |  |  | 437 |  |  |  | 2,131 |
Contract fulfillment costs |  |  | (1,117 | ) |  |  | (436 | )
Other assets |  |  | (64 | ) |  |  | 893 |
Accounts payable |  |  | (213 | ) |  |  | (1,343 | )
Accrued expenses |  |  | (1,367 | ) |  |  | 834 |
Deferred revenue |  |  | (31 | ) |  |  | 144 |
Income tax payable |  |  | 17 |  |  |  | 26 |
Net cash provided by (used in) operating activities |  |  | (3,397 | ) |  |  | 156 |
Cash flows from investing activities: |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (23 | ) |  |  | (6 | )
Net cash used in investing activities |  |  | (23 | ) |  |  | (6 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Repayment of debt |  |  | (73 | ) |  |  | (73 | )
Proceeds from subscription agreement prior to issuance of common stock |  |  | — |  |  |  | 6,800 |
Proceeds from issuance of common stock, net of costs |  |  | — |  |  |  | 45 |
Net cash provided by (used in) financing activities |  |  | (73 | ) |  |  | 6,772 |
Net increase (decrease) in cash and cash equivalents |  |  | (3,493 | ) |  |  | 6,922 |
Cash and cash equivalents at beginning of period |  |  | 13,213 |  |  |  | 11,233 |
Cash and cash equivalents at end of period |  | $ | 9,720 |  |  | $ | 18,155 |
Supplemental disclosure of cash flow information: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 5 |  |  | $ | 74 |
Cash paid for income taxes |  | $ | 69 |  |  | $ | 103 |
Non-cash operating and financing activities: |  |  |  |  |  |  |  |
Deferred offering costs in accrued expenses |  | $ | — |  |  | $ | 694 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

NOTE 1 —The Company and its significant accounting policies

Description of Business —Sonim Technologies, Inc. was incorporated in the state of Delaware on August 5, 1999, and is headquartered in San Diego, California. The Company is a leading provider of rugged and consumer durable mobile devices designed to provide extra protection for users that demand more durability in their work and everyday lives. Historically, the company has focused on handsets and accessories in the enterprise and government sectors, however we believe there is a greater market need for additional devices in both the consumer and data device spaces that could benefit from a more durable feature set which is embedded in the Company’s DNA. In 2022, we introduced a tablet line that has generated a significant portion of the Company’s revenue since its introduction. The tablet was designed with a large screen that allows customers to easily access and process IoT data. This was the beginning of diversification of the Company’s portfolio.

Liquidity and Ability to Continue as a Going Concern – The Company’s condensed consolidated financial statements account for the continuation of our business as a going concern. The Company is subject to the risks and uncertainties associated with the development and release of new products. The Company’s principal sources of liquidity as of June 30, 2023, consist of existing cash and cash equivalents totaling $9.7 million, and positive cash flow from the sale of products over the next year. The Company had net income for the three months ended June 30, 2023 of $0.5 million. Based on these facts, the company has the ability to continue as a going concern for a period of at least one year from the date of issuance of these condensed consolidated financial statements.

Basis of presentation and preparation

The condensed consolidated financial statements include the accounts of Sonim Technologies, Inc. and its wholly owned subsidiaries (collectively “Sonim” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

New accounting pronouncements:

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Pronouncements adopted in 2023:

None.

5

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

NOTE 2 —Revenue recognition

The Company recognizes revenue primarily from the sale of products, which are primarily mobile phones, tablets, and related accessories, and the majority of the Company’s contracts include only one performance obligation, namely the delivery of product. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company also recognizes revenue from other contracts that may include a combination of products and non-recurring engineering (NRE) services or from the provision of solely NRE services. Where there is a combination of products and NRE services, the Company accounts for the promises as individual performance obligations if they are concluded as distinct. Performance obligations are considered distinct if they are both capable of being identified and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. During the three and six months ended June 30, 2023, and 2022, the Company did not have any contracts in which the products and NRE services were concluded to be a single performance obligation. In certain cases, the Company may offer tiered pricing based on volumes purchased for specific products. To date, all tiered pricing provisions have fallen into observable ranges of pricing to existing customers, thus, not resulting in any material right which could be concluded as its own performance obligation. In addition, the Company does not offer material post-contract support services to its customers.

Net revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring the goods and/or services. The transaction price for product sales is calculated as the product selling price, net of variable consideration, which may include estimates for marketing development funds, sales incentives, and price protection and stock rotation rights. The Company records reductions to net revenues related to future product returns based on the Company’s expectations and historical experience. Typically, variable consideration does not need to be constrained as estimates are based on specific contract terms. However, the Company continues to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The transaction price for a contract with multiple performance obligations is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for products are determined based on the prices charged to customers, which are directly observable. Standalone selling price of the professional services are mostly based on time and materials. The Company determines its estimates of variable consideration based on historical collection experience with similar payor classes, aged accounts receivable by payor class, terms of payment agreements, correspondence from payors related to revenue audits or reviews, the Company’s historical settlement activity of audited and reviewed claims and current economic conditions using the portfolio approach. Revenue is recognized only to the extent that it is probable that a significant reversal of the cumulative amount recognized will not occur in future periods.

Revenue is then recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware is recognized at the time control of the product transfers to the customer. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s revenue attributable to hardware, control transfers when products are shipped. Revenue attributable to professional services is recognized as the Company performs the professional services for the customer.

Disaggregation of revenue

The following table presents the Company’s net revenue disaggregated by product category:

Schedule of Net Revenue Disaggregate by Product Category

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30 |  |  | Six Months Ended June 30 |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Smartphones |  | $ | 8,869 |  |  | $ | 5,862 |  |  | $ | 15,296 |  |  | $ | 9,449 |
Feature Phones |  |  | 3,012 |  |  |  | 6,001 |  |  |  | 6,853 |  |  |  | 14,838 |
Tablets |  |  | 14,737 |  |  |  | — |  |  |  | 29,994 |  |  |  | — |
Accessories / Other |  |  | 217 |  |  |  | 92 |  |  |  | 493 |  |  |  | 926 |
Total Revenue |  | $ | 26,835 |  |  | $ | 11,955 |  |  | $ | 52,636 |  |  | $ | 25,213 |

Shipping and handling costs

The Company has elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

6

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

Contract costs

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in sales and marketing expenses.

The non-recurring costs associated with design and development of new products for technical approval represent costs to fulfill a contract pursuant to ASC 340-40 Other Assets and Deferred Costs. Accordingly, the Company capitalizes these contract fulfillment costs and amortizes such costs over the estimated period of time over which they are expected to be recovered, which is typically 4 years, the estimated life of a particular model phone. As of June 30, 2023, and December 31, 2022, the total net contract fulfillment assets were $7,028 and $6,848, respectively.

Contract balances

The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are presented as a component of deferred revenue on the condensed consolidated balance sheets. As of June 30, 2023 and December 31, 2022, the contract liabilities were zero and $31, respectively.

NOTE 3 —Fair value measurement

The fair value measurements standard establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the standard are described below:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2—Inputs to the valuation methodology include:

| ● | Quoted market prices for similar assets or liabilities in active markets;

| ● | Quoted prices for identical or similar assets or liabilities in inactive markets;

| ● | Inputs other than quoted prices that are observable for the asset or liability;

| ● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at June 30, 2023, and December 31, 2022.

Money market funds are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices.

7

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:

Summary of Fair Value Assets and Liabilities

|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
|  | June 30, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds * |  | $ | 281 |  |  | $ | — |  |  | $ | — |  |  | $ | 281 |

|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
|  | December 31, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds * |  | $ | 1,501 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,501 |

* | Included in cash and cash equivalents on the condensed consolidated balance sheets.

NOTE 4 —Significant Balance Sheet Components

Accounts Receivable consists of the following:

Schedule of Accounts Receivable

|  | June 30, 2023 |  |  | December 31, 2022 |
Trade receivables |  | $ | 26,689 |  |  | $ | 22,546 |
Allowance for doubtful accounts |  |  | (113 | ) |  |  | (113 | )
Accounts receivable, net |  |  | 26,576 |  |  |  | 22,433 |
Vendor non-trade receivables |  |  | 1,008 |  |  |  | 2,269 |
Total accounts receivable |  | $ | 27,584 |  |  | $ | 24,702 |

The Company has non-trade receivables from a manufacturing vendor resulting from the sale of components to this vendor who manufactures and assembles final products for the Company.

The Company analyzes the need for reserves for potential credit losses and records allowances for doubtful accounts when necessary. The Company had allowances for such losses totaling $113 as of June 30, 2023 and December 31, 2022.

Trade receivables from the customer that purchases tablets from the Company account for 78% and 84% of total accounts receivable at June 30, 2023 and December 31, 2022 respectively. The tablets business uses the Original Device Manufacturer (“ODM”) model where the customer imports the tablets to the U.S., the tablets are rebranded, and the tablets are sold to a U.S. retailer. Due to the delay in shipping the product to the end customer, the payment terms for accounts receivable are much longer than our traditional direct sales to carriers. The customer is making regular payments, and the Company believes that the entire accounts receivable balance as of June 30, 2023 is collectible, and that no reserve is required.

Inventory consists of the following:

Schedule of Inventory

|  | June 30, 2023 |  |  | December 31, 2022 |
Devices – for resale |  | $ | 4,139 |  |  | $ | 3,473 |
Raw materials |  |  | 3 |  |  |  | 14 |
Accessories |  |  | 594 |  |  |  | 423 |
Inventory , net |  | $ | 4,736 |  |  | $ | 3,910 |

8

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

The Company purchases raw materials in bulk to obtain a lower price. The raw materials are resold to third-party manufacturers at the Company’s cost.

Distributor returns allowance

The Company records reductions to cost of goods sold related to future distributor product returns based on the Company’s expectation. The Company had inventory related to distributor product returns totaling approximately $4 as of June 30, 2023 and December 31, 2022.

Other assets consisted of the following:

Schedule of Other Assets

|  | June 30, 2023 |  |  | December 31, 2022 |
Advances to third party manufacturers |  | $ | 2,000 |  |  | $ | 2,000 |
Director and officer insurance |  |  | 467 |  |  |  | 525 |
Deposits |  |  | 310 |  |  |  | 311 |
Other |  |  | 201 |  |  |  | 136 |
Total Other Assets |  | $ | 2,978 |  |  | $ | 2,972 |

Accrued Expenses consisted of the following:

Schedule of Accrued Expenses

|  | June 30, 2023 |  |  | December 31, 2022 |
Customer allowances |  | $ | 5,397 |  |  | $ | 4,130 |
Employee-related liabilities |  |  | 972 |  |  |  | 1,365 |
Warranties |  |  | 507 |  |  |  | 636 |
Accrual for goods received not invoiced |  |  | 58 |  |  |  | 301 |
Contractual obligations |  |  | 1,048 |  |  |  | 1,107 |
Royalties |  |  | 364 |  |  |  | 256 |
Contract fulfillment liabilities |  |  | 541 |  |  |  | 1,469 |
Credits due to customers |  |  | 318 |  |  |  | 961 |
Legal |  |  | 104 |  |  |  | 296 |
Other |  |  | 166 |  |  |  | 171 |
Accrued liabilities, current |  | $ | 9,475 |  |  | $ | 10,692 |

NOTE 5 —Leases

The Company adopted ASU 2016-02 on January 1, 2022. The Company elected to use “the effective date” method where the comparative reporting periods is unchanged from legacy US GAAP. The Company elected the package of practical expedients to not reassess the classifications of existing leases and to not reassess if initial direct costs qualify for capitalization. All of the Company’s leases are for office space. The Company has elected the practical expedient to not separate lease components from nonlease components for all leases. The Company elected the practical expedient for short-term leases for leases that have terms of one year or less. ROU assets and lease liabilities were not established for these short-term leases and rent payments are recorded as rent expense.

9

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

On January 1, 2022 the Company began recording all lease payments as the payment of lease interest expense and a reduction of the lease liability for the leases that are not short-term. ROU assets are amortized over the life of the Company’s lease. The following table shows the activity of the ROU assets and lease liability for the six months ending on June 30, 2023 and 2022:

Summary of Activity of ROU Assets and Liability

|  | Lease Liability |
Balance, December 31, 2022 |  | $ | 66 |
Adoption of ASC 842 |  |  | - |
Additions |  |  | 255 |
Principal payments |  |  | (138 | )
Balance, June 30, 2023 |  |  | 183 |
Less short-term portion |  |  | (183 | )
Long term lease liability |  | $ | — |

|  | ROU Assets |
Balance, December 31, 2022 |  | $ | 66 |
Adoption of ASC 842 |  |  | - |
Derecognition of deferred rent liability |  |  | - |
Impairment of ROU asset |  |  | - |
Additions |  |  | 255 |
Amortization |  |  | (138 | )
Balance, June 30, 2023 |  | $ | 183 |

|  | Lease Liability |
Balance, December 31, 2021 |  | $ | — |
Adoption of ASC 842 |  |  | 1,976 |
Principal payments |  |  | (403 | )
Balance, June 30, 2022 |  |  | 1,573 |
Less short-term portion |  |  | (662 | )
Long term lease liability |  | $ | 911 |

|  | ROU Assets |
Balance, December 31, 2021 |  | $ | — |
Adoption of ASC 842 |  |  | 1,976 |
Derecognition of deferred rent liability |  |  | (142 | )
Impairment of ROU asset |  |  | (978 | )
Amortization |  |  | (303 | )
Balance, June 30, 2022 |  | $ | 553 |

Future minimum lease payments under noncancelable operating lease commitments are as follows as of June 30, 2023:

Schedule of Future Minimum Lease Payments under Noncancelable Operating Lease Commitments

Year Ending, December 31st, |  |  |
2023 |  | $ | 132 |
2024 |  |  | 56 |
Total undiscounted minimum lease commitments |  |  | 188 |
Effect of discounting |  |  | (5 | )
Lease liabilities at June 30, 2023 |  | $ | 183 |

In connection with leases, for the six months ended June 30, 2023 and 2022, the Company recognized $138 and $266 for the amortization of ROU assets, $5 and $74 for interest expense on lease liabilities, and $74 and $70 of rent expense was included in Cost of Revenues. Variable lease payments, including reimbursements to the landlord for property taxes and operating expenses, of approximately zero and $140, and short-term rent payments of $2 and $7 were included in rent expense for the six months ended June 30, 2023 and 2022. The Company does not have any lease extension or termination options on any lease that it expects to execute. There are no residual value guarantees in any lease. The weighted average remaining lease term of the operating leases is approximately 9 months.

10

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

NOTE 6 —Borrowings

Promissory Notes Payable —In 2014 and 2017, the Company entered into agreements with one of its suppliers, whereby certain of its trade payables for royalties and royalty up-front payments were converted to payment plans. In December 2018, the Company amended its accounts payable financing agreements, effective January 1, 2019, which provides for the $736 outstanding balance to be paid in twenty equal quarterly installments. The amounts due under these agreements are paid in quarterly installments over periods from two to four years, with interest ranging up to 8%. Remaining balances are all current liabilities and are $74 and $147 at June 30, 2023, and December 31, 2022, respectively.

NOTE 7 —Stock-based Compensation

Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 is as follows:

Schedule of Stock-based Compensation Expense

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Cost of revenues |  | $ | 50 |  |  | $ | 9 |  |  | $ | 202 |  |  | $ | 20 |
Sales and marketing |  |  | 86 |  |  |  | (28 | ) |  |  | 132 |  |  |  | (2 | )
General and administrative |  |  | 222 |  |  |  | 240 |  |  |  | 333 |  |  |  | 465 |
Research and development |  |  | — |  |  |  | (5 | ) |  |  | — |  |  |  | 16 |
Stock-based compensation expenses |  | $ | 358 |  |  | $ | 216 |  |  | $ | 667 |  |  | $ | 499 |

Stock Options:

Stock option activity for the six months ended June 30, 2023, is set forth in the table below:

Summary of Stock Option Activity

|  |  |  |  | Weighted |  |  | Weighted average |  |  |  |
|  |  |  |  | average |  |  | remaining |  |  | Aggregate |
|  |  |  |  | exercise price |  |  | contractual life |  |  | Intrinsic |
|  | Options |  |  | per share |  |  | (in years) |  |  | Value* |
Outstanding at January 1, 2023 |  |  | 4,476,215 |  |  | $ | 0.95 |  |  |  | 9.76 |  |  | $ | 358 |
Options granted |  |  | 1,373,000 |  |  | $ | 0.54 |  |  |  |  |  |  |  |  |
Options exercised |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Options forfeited |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Options expired |  |  | (7,833 | ) |  |  | 4.50 |  |  |  |  |  |  |  |  |
Outstanding at June 30, 2023 |  |  | 5,841,382 |  |  | $ | 0.85 |  |  |  | 9.35 |  |  | $ | 4,065 |
Exercisable at June 30, 2023 |  |  | 1,051,896 |  |  | $ | 2.45 |  |  |  | 9.15 |  |  | $ | 734 |

* |  | The intrinsic value is calculated as the difference between the exercise price and the fair value of the common stock on the balance sheet date.

As of June 30, 2023, there was approximately $2,646 of unamortized stock-based compensation cost related to unvested stock options and Restricted Stock Units (“RSU’s”), which is expected to be recognized over a weighted average period of 2.22 years.

Restricted Stock Units:

RSU activity for the six months ended June 30, 2023, is set forth in the table below:

Schedule of Outstanding Restricted Stock Units

|  | RSUs |
Outstanding at January 1, 2023 |  |  | 860,888 |
Granted |  |  | 87,100 |
Released |  |  | (19,849 | )
Forfeited |  |  | (5,200 | )
Outstanding at June 30, 2023 |  |  | 922,939 |

NOTE 8 —Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date profit or loss, adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate primarily as a result of state taxes, foreign taxes, and changes in the Company’s valuation allowance against its deferred tax assets. For the six months ended June 30, 2023, and 2022, the Company recorded provisions for income taxes of $185 and $129, respectively.

11

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

NOTE 9 —Commitments and Contingencies

Purchase Commitments—The aggregate amount of noncancelable purchase orders as of June 30, 2023 and December 31, 2022, was approximately $16,327 and $19,975, respectively, and were related to the purchase of inventory and components of our devices.

In 2021, the Company outsourced substantially all of its software development to a third-party and the Company entered into an agreement of future business volume over the next three years. The agreement was renegotiated in 2022 and the remaining commitment as of June 30, 2023 and December 31, 2022 is $577 and $1,154 respectively.

Royalty payments— The Company is required to pay per unit royalties to wireless essential patent holders and other providers of integrated technologies on mobile devices delivered, which, in aggregate, amount to less than 5% of net revenues associated with each unit and expire between 2023 and 2026. Royalty expense for the six months ended June 30, 2023, and 2022 was $406 and $807, respectively and is included in Cost of Revenues. The Company may be required to pay additional royalties to additional patent holder and technology providers on future products.

General litigation—The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these other matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

The results of any future litigation cannot be predicted with certainty and, regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources and other factors.

Indemnification—Under the terms of its agreements with wireless carriers and other partners, the Company has agreed to provide indemnification for intellectual property infringement claims related to Company’s product sold by them to their end customers. From time to time, the Company receives notices from these wireless carriers and other partners of a claim for infringement of intellectual property rights potentially related to their products. These infringement claims have been settled, dismissed, have not been further pursued by the customers, or are pending for further action by the Company.

Contingent severance obligations—The Company has agreements in place with certain key employees (Executive Severance Arrangements) guaranteeing severance payments under certain circumstances. Generally, in the event of termination by the Company without cause, termination due to death or disability, or resignation for good reason, the Company is obligated to the pay the employees in accordance to the terms of the agreements. On July 13, 2022, Robert Tirva, the CFO and President of the Company, resigned and became eligible for $1 million in severance payments over 20 months, plus certain health insurance benefits, if he meets certain requirements. The severance costs were charged to expense as of the severance date.

NOTE 10 —Net Earnings (Loss) Per Share Attributable to Common Stockholders

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share attributable to common stockholders for the three and six months shown below:

Schedule of Computation of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net profit (loss) |  | $ | 509 |  |  | $ | (4,225 | ) |  | $ | 736 |  |  | $ | (11,437 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average shares used in computing net earnings (loss) per share, basic |  |  | 41,039,405 |  |  |  | 19,283,496 |  |  |  | 40,973,594 |  |  |  | 19,197,859 |
Net earnings (loss) per share, basic |  |  | 0.01 |  |  |  | (0.22 | ) |  |  | 0.02 |  |  |  | (0.60 | )
Weighted-average shares used in computing net earnings (loss) per share, diluted |  |  | 43,398,189 |  |  |  | 19,283,496 |  |  |  | 41,903,630 |  |  |  | 19,197,859 |
Net earnings (loss) per share, diluted |  | $ | 0.01 |  |  | $ | (0.22 | ) |  | $ | 0.02 |  |  | $ | (0.60 | )

12

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

The dilutive common shares that were used in the calculation of diluted earnings for 2023 are presented in the table below. The 2022 amounts were not used as they were antidilutive.

Summary of Dilutive Common Shares were Excluded from Calculation of Diluted Net Loss Per Share

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Shares subject to options to purchase common stock |  |  | 5,841,382 |  |  |  | 83,356 |  |  |  | 5,841,382 |  |  |  | 83,356 |
Unvested restricted stock units |  |  | 922,939 |  |  |  | 235,102 |  |  |  | 922,939 |  |  |  | 235,102 |
Shares subject to warrants to purchase common Stock |  |  | 2 |  |  |  | 2 |  |  |  | 2 |  |  |  | 2 |
Total |  |  | 6,764,323 |  |  |  | 318,460 |  |  |  | 6,764,323 |  |  |  | 318,460 |

NOTE 11 —Entity Level Information

The Company operates in one reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer and the chief financial officer, in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker allocates resources and assesses performance based upon discrete financial information at the consolidated level.

The following table summarizes the revenue by region based on ship-to destinations for the three and six months ended:

Schedule of Revenue by Region

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
U.S. |  | $ | 8,236 |  |  | $ | 8,520 |  |  | $ | 13,386 |  |  | $ | 19,920 |
Canada and Latin America |  |  | 3,032 |  |  |  | 2,896 |  |  |  | 5,772 |  |  |  | 4,277 |
Europe and Middle East |  |  | 829 |  |  |  | 536 |  |  |  | 2,913 |  |  |  | 893 |
Asia Pacific |  |  | 14,738 |  |  |  | 3 |  |  |  | 30,565 |  |  |  | 123 |
Total revenues |  | $ | 26,835 |  |  | $ | 11,955 |  |  | $ | 52,636 |  |  | $ | 25,213 |

The following table summarizes the composition of revenues for the three and six months ended:

Schedule of Composition of Revenues

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Product Sales |  | $ | 26,834 |  |  | $ | 11,943 |  |  | $ | 52,635 |  |  | $ | 25,187 |
Services |  |  | 1 |  |  |  | 12 |  |  |  | 1 |  |  |  | 26 |
Total revenues |  | $ | 26,835 |  |  | $ | 11,955 |  |  | $ | 52,636 |  |  | $ | 25,213 |

Revenue from customers with concentration greater than 10% in three and six months ended June 30, 2023 and 2022 accounted for approximately the following percentage of total revenues:

Schedule of Percentage of Total Revenues

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Customer A |  |  | 55 | % |  |  | — * |  |  |  | 57 | % |  |  | — * |
Customer B |  |  | 35 | % |  |  | 51 | % |  |  | 25 | % |  |  | 41 | %
Customer C |  |  | — * |  |  |  | 15 | % |  |  | — * |  |  |  | 14 | %
Customer D |  |  | — * |  |  |  | —* |  |  |  | — * |  |  |  | 21 | %
Customer E |  |  | -* |  |  |  | 13 | % |  |  | -* |  |  |  | 13 | %

* | Customer revenue did not exceed 10% in the respective period.

NOTE 12 —Subsequent Events

None

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

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, as amended, for the year ended December 31, 2022. Certain statements in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding our business strategies, growth prospects, operating and financial performance, plans, estimates and projections. These statements are based on management’s current expectations and beliefs and on information currently available to us. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements, including but not limited to:

| ● | The availability of cash on hand and other sources of liquidity to fund our capital expenditures.
| ● | We may not be able to continue to develop solutions to address user needs effectively, including our next generation products, which could materially adversely affect our liquidity and our ability to continue operations;
| ● | Our ability to incorporate emerging technologies into our new consumer products given the lengthy development cycle;
| ● | Our ability to adapt to shortened customer lead times and tightened inventory controls from our key customers;
| ● | A small number of customers account for a significant portion of our revenue;
| ● | We are materially dependent on some customer relationships that are characterized by product award letters and the loss of such relationships could harm our business and operating results;
| ● | Our quarterly results may vary significantly from period to period;
| ● | We rely primarily on third-party contract manufacturers and partners;
| ● | If our products contain defects or errors, we could incur significant unexpected expenses, experience product returns and lost sales, experience product recalls, suffer damage to our brand and reputation, and be subject to product liability or other claims;

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| ● | We are required to undergo a lengthy customization and certification process for each wireless carrier customer;
| ● | We are dependent on the continued services and performance of a concentrated and limited group of senior management and other key personnel;
| ● | We face risks related to the impact of global macroeconomic events, inflation, and COVID-19;
| ● | Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business;
| ● | If we are unable to successfully protect our intellectual property, our competitive position may be harmed;
| ● | Others may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could delay or otherwise impair the development and commercialization of our products; and
| ● | We have identified one material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements

The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and we cannot predict all of them. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. You should review the “Risk Factors” contained in Part I, Item 1A. of our Annual Report on Form 10-K, for the year ended December 31, 2022, and Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Company Overview

Sonim Technologies is a leading U.S.-based provider of ultra-rugged mobile devices and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles. As part of our expansion efforts, the Company will be introducing our Connected Solutions division which will begin launching products in 2024 in the U.S., Canada and Asia/Pacific. Connected Solutions will primarily consist of mobile hotspots, fixed wireless and USB dongle devices. In addition to this, the Company will be launching a line of consumer durable products to address consumers that need more protection in their devices without sacrificing key design elements and maintaining an attractive price point.

Revenues are primarily generated from sales of our mobile phones and industrial-grade accessories, predominantly to wireless carriers in the United States and Canada. We currently have product available at all 3 U.S. Tier 1 carriers – AT&T, T-Mobile and Verizon as well as the 3 primary carriers in Canada – Bell, Telus and Rogers. These carriers then resell our products, along with network services, to end customers focusing on two primary end markets: industrial enterprise and public sector. We also sell our tablets to a customer who rebrands them for sale in the U.S.

Given our primary sales channels in the U.S. and Canada consist of large wireless carriers, our customer base is somewhat concentrated. As of June 30, 2023, large wireless carriers contributed 38% of our revenues, with our top three carrier customers accounting for 34%. Our tablet customer represents 57% of our revenue. During this period, smartphones constituted 29% of our revenues, feature phones 13%, and tablets 57%. We anticipate tablet sales will continue through 2024.

While we continue to design ultra rugged phones and accessories, we are broadening our product range to appeal to a more diverse audience. Our core value proposition, which has earned us a loyal following, remains the foundation of our expanded offerings, including rugged durable phones and wireless data devices. These new products will not only expand our portfolio of products but will allow the Company to diversify our customer base into new markets. New product launches will begin in 2024 and continue over the next few years.

Our key value proposition in the market is to incorporate specific elements of our rugged roots into our new products with added durability without sacrificing attractive design and value pricing. We believe this is an underserved market opportunity in the consumer space. Our expertise in carrier mobility leads us to a natural extension into data devices, where we can leverage our technical expertise as well as our streamlined organization to bring better quality, better specs and low cost to the marketplace.

To ensure quality, cost-effectiveness, and reliability in our supply chain, we directly manage the procurement of certain final assembly materials for our products, including memory and LCDs. To optimize costs and operational efficiency, we’ve largely outsourced manufacturing functions, software development, and quality control to third parties. Our ongoing commitment at Sonim is to maintain the exceptional durability and reliability our brand is known for, while developing differentiated products that attract and retain a broader customer base.

15

Recent Developments

The Company has achieved compliance with the minimum bid price requirement of Nasdaq

In a letter dated May 1, 2023, Nasdaq informed the Company that it has achieved compliance with the minimum bid price rule required for continued listing on the Nasdaq Capital Market.

Results of Operations

The following tables present key components of our results of operations for the three and six months ended June 30, 2023, compared to results for the same period in 2022:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | Increase (Decrease) |  |  | % |  |  | 2023 |  |  | 2022 |  |  | Increase (Decrease) |  |  | % |
Net revenues |  | $ | 26,835 |  |  | $ | 11,955 |  |  | $ | 14,880 |  |  |  | 124 | % |  | $ | 52,636 |  |  | $ | 25,213 |  |  | $ | 27,423 |  |  |  | 109 | %
Cost of revenues |  |  | 22,409 |  |  |  | 9,108 |  |  |  | 13,301 |  |  |  | 146 | % |  |  | 44,035 |  |  |  | 20,838 |  |  |  | 23,197 |  |  |  | 111 | %
Gross profit |  |  | 4,426 |  |  |  | 2,847 |  |  |  | 1,579 |  |  |  | 55 | % |  |  | 8,601 |  |  |  | 4,375 |  |  |  | 4,226 |  |  |  | 97 | %
Operating expenses |  |  | 3,679 |  |  |  | 7,067 |  |  |  | (3,388 | ) |  |  | (48 | )% |  |  | 7,521 |  |  |  | 15,677 |  |  |  | (8,156 | ) |  |  | (52 | %)
Income (loss) from operations |  |  | 747 |  |  |  | (4,220 | ) |  |  | 4,967 |  |  |  | 118 | % |  |  | 1,080 |  |  |  | (11,302 | ) |  |  | 12,382 |  |  |  | 110 | %
Interest and other expense, net |  |  | (166 | ) |  |  | 56 |  |  |  | (222 | ) |  |  | (396 | )% |  |  | (159 | ) |  |  | (6 | ) |  |  | (153 | ) |  |  | (2550 | %)
Income (loss) before income taxes |  |  | 581 |  |  |  | (4,164 | ) |  |  | 4,745 |  |  |  | 114 | % |  |  | 921 |  |  |  | (11,308 | ) |  |  | 12,229 |  |  |  | 108 | %
Income tax expense |  |  | (72 | ) |  |  | (61 | ) |  |  | (11 | ) |  |  | (18 | )% |  |  | (185 | ) |  |  | (129 | ) |  |  | (56 | ) |  |  | (43 | %)
Net income (loss) |  | $ | 509 |  |  | $ | (4,225 | ) |  | $ | 4,734 |  |  |  | 112 | % |  | $ | 736 |  |  | $ | (11,437 | ) |  | $ | 12,173 |  |  |  | 106 | %

Net Revenues

For the three months ended June 30, 2023, net revenues increased 124% to $26.8 million, from $12.0 million for the three months ended June 30, 2022. The increase in net revenues was due to $14.7 million in tablet sales. The tablet sales are expected to continue over the next year. Smartphone sales increased as XP10 sales of $8.9 million in 2023 were higher than the $5.9 million of XP8 sales in the prior year. This was offset by a decrease in feature phone sales as demand for feature phones has declined, as compared to the previous product cycle. Feature phone subscribers tend to hold on to their devices longer than the typical two-year upgrade cycle. As a result, the product lifecycle of these devices is longer, and we will continue to see revenue from these products over the next few years. Subsequent to June 30, 2023, we received product awards from carriers for our connected solutions suite of products as well as our consumer durable line of devices that will be available in 2024.

For the six months ended June 30, 2023, net revenues increased 109% to $52.6 million, from $25.2 million in 2022. The increase is due to $30.0 million in tablet sales in 2023. The tablet was not launched until the third quarter of 2022. We expect sales of our smartphones to increase in the third quarter as we launched the XP10 in the third quarter with Verizon. Both XP10 and XP3plus are available on all 3 U.S. Tier 1 carriers beginning in Q3 2023. Additionally, XP10 is available on all 3 major Canadian carrier networks making Sonim products the most widely distributed rugged brand in North America.

Gross Profit

Gross profit for the three months ended June, 30, 2023 increased 55% from 2022 due to higher revenue from tablet sales in 2023. We expect gross profit to increase in the third quarter as we sell more smartphones, which have higher profit margins than the tablets.

Gross profit for the six months ended June 30, 2023 increased 97% to $8.6 million from $4.4 million in 2022. The higher gross profit is from higher revenue from tablets and because smartphone sales were higher, and smartphones have a higher profit margin as compared to tablets and feature phones. We expect smartphone sales to increase in the third quarter of 2023 and this should improve gross profit.

Operating Expenses and Net Operating Income

Net operating income for the three months ended June 30, 2023 improved by $5.0 million compared to the three months ended June 30, 2022, driven by increased gross profit of $1.5 million due to tablet sales in 2023, a decrease in research & development expenses of $2.7 million because there were no R&D projects in 2023. We expect R&D expenses to remain low as much of the R&D activity will be performed by our third-party manufacturers who will pass along these costs through higher per unit prices to us.

Net operating income for the six months ended June 30, 2023 improved by $12.4 million compared to the six months ended June 30, 2022. R&D expenses decreased by $6.8 million because we had no R&D projects in 2023, and profits from tablet sales increased operating income by 3.0 million. The remaining improvement was from lower payroll costs in sales and marketing, and general and administrative areas due to cost cutting.

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Operating expenses are summarized as follows:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | Change |  |  | % Change |  |  | 2023 |  |  | 2022 |  |  | Change |  |  | % Change |
|  | (in thousands, except %) |  |  | (in thousands, except %) |
Research and development expense |  | $ | — |  |  | $ | 2,721 |  |  | $ | (2,721 | ) |  |  | (100 | %) |  | $ | 105 |  |  | $ | 6,889 |  |  | $ | (6,784 | ) |  |  | (98 | %)
Sales and marketing expense |  |  | 1,827 |  |  |  | 2,073 |  |  |  | (246 | ) |  |  | (12 | %) |  |  | 3,584 |  |  |  | 4,243 |  |  |  | (659 | ) |  |  | (16 | %)
General and administrative expense |  |  | 1,852 |  |  |  | 2,273 |  |  |  | (421 | ) |  |  | (19 | %) |  |  | 3,832 |  |  |  | 4,545 |  |  |  | (713 | ) |  |  | (16 | %)
Total Operating Expenses |  | $ | 3,679 |  |  | $ | 7,067 |  |  | $ | (3,388 | ) |  |  | (48 | %) |  | $ | 7,521 |  |  | $ | 15,677 |  |  | $ | (8,156 | ) |  |  | (52 | %)

Research and Development.

Research and development expenses for the three months ended June 30, 2023 were zero as compared to $2.7 million for the three months ended June 30, 2022, because 2022 included R&D for the XP5plus and the XP10, but there were no R&D projects during 2023. Although we received new product awards subsequent to June 30, 2023, we expect R&D to remain low as we expect our third-party device manufacturers to pay for the majority of R&D on new products. They will pass along those costs through higher product costs to us.

R&D expenses for the six months ended June 30, 2023 were $0.1 million as compared to $6.9 million in 2022. R&D in 2022 was for the XP10, our new smartphone, and the XP5plus, a new feature phone. Our third-party manufacturers are expected to pay for a significant portion of R&D on new products in the future.

Sales and Marketing.

Sales and marketing expenses for the three months ended June 30, 2023 were $0.2 million or 12% lower than the three months ended June 30, 2022, due to lower payroll related expenses. After the 2022 first quarter, the Company reduced headcount for sales and marketing.

Sales and Marketing expenses for the six months ended June 30, 2023 were $0.7 million or 16% lower than 2022 due to lower payroll related expenses. Headcount was reduced during the second quarter of 2022.

General and Administrative.

General and administrative expenses for the three months ended June 30, 2023 decreased by $0.4 million or 19% as compared to the three months ended June 30, 2022, because of a reduction in outside consultants for finance, accounting, and equity administration.

General and administrative expenses for the six months ended June 30, 2023 decreased $0.7 million or 16% as compared to 2022 because of a reduction in outside consultants.

Income Tax Expense

Income tax expense increased for both the three months and six months ending June 30, 2023 because higher net income caused higher income tax expense. This income tax expense for the U.S. is accrued as we do not expect to pay cash for a few years due to Net Loss Carryforwards for our U.S. federal taxes.

Liquidity and Capital Resources

Historically, we have funded operations from a combination of public and private equity financings, convertible loans from existing investors and borrowings under loan agreements. As of June 30, 2023, we did not have any convertible loans or any other borrowing structures in place.

Currently, our principal source of liquidity consists of cash and cash equivalents totaling $9.7 million, as of June 30, 2023. During the six months ended June 30, 2023, our net income was $0.7 million and our use of cash from operations was $3.4 million. Our cash balance is expected to cover any negative cash flow that may be caused by developing new products over the next year. Increased revenue from new products are expected to increase cash flow in 2024. We expect to meet all obligations with existing cash and operating cash flow for a period of at least one year from the date of release of the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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We are investigating various options to raise capital through the issuance of debt. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from an inability to pay obligations. Cash at June 30, 2023, was $9.7 million, or $3.5 million lower than net cash of $13.2 million on December 31, 2022. The decrease was driven by an increase in accounts receivable of $4.2 million due to longer delivery times to the end customer for tablets that cause longer than traditional payment cycle.

The following table summarizes our sources and uses of cash for the periods presented:

|  | Six Months ended June 30, |
(in thousands) |  | 2023 |  |  | 2022 |
Net cash provided by (used in) operating activities |  | $ | (3,397 | ) |  | $ | 156 |
Net cash used in investing activities |  |  | (23 | ) |  |  | (6 | )
Net cash provided by (used in) financing activities |  |  | (73 | ) |  |  | 6,772 |
Net increase (decrease) in cash and cash equivalents |  |  | (3,493 | ) |  |  | 6,922 |

Cash flows from operating activities

For the six months ended June 30, 2023, cash used in operating activities was $3.4 million, primarily attributable to a net increase in our net operating assets and liabilities of $6.0 million, which was partially offset by net non-cash charges of $1.9 million and net income of $0.7 million. The change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $4.1 million (increased sales to our tablet customer), and an increase in contract fulfillment assets of $1.1 million (capitalized costs for phone certifications). Additionally, accrued severance and accrued bonuses decreased by $1.2 million due to payments in 2023. Non-cash charges primarily consist of $1.2 million in depreciation and amortization, and $0.7 million for stock-based compensation.

For the six months ended June 30, 2022, cash provided by operating activities was $0.2 million. Our net loss of $11.4 million was offset by positive improvements in account receivable of $5.5 million (collection of a customer’s receivables from the fourth quarter of 2021), inventory $2,1 million (sale of end-of-life products and fewer inventory purchases of next generation products), prepaid expenses $2.8 million (amortization of insurance prepaids), and non-trade receivables $1.0 million. Non-cash charges primarily consisted of $0.4 million in depreciation and amortization and $0.8 million in stock-based compensation expense.

Cash flows from investing activities

For the six months ended June 30, 2023 and 2022, there were no significant investing activities.

Cash flows from financing activities

For the six months ended June 30, 2023, there were no significant financing activities.

For the six months ended June 30, 2022, cash provided by financing activities was $6.8 million due to cash received from investors for the purchase of the Company’s common stock.

Material Cash Requirements

There have been no material changes to our material cash requirements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

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Critical Accounting Estimates

See Note 1 for critical accounting policies and estimates

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

A description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our consolidated financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2022, that have had a material impact on our condensed consolidated financial statements and related notes,

Recently Issued Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements.

Segment Information

We have one business activity and operate in one reportable segment.

JOBS Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) December 31, 2024 (the last day of the fiscal year following May 14, 2024, the fifth anniversary of the consummation of our initial public offering), (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1,235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and reduced disclosure obligations regarding executive compensation in our prospectuses and in our periodic reports and proxy statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, prior to filing this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting.

Material Weaknesses in Internal Control and Plan for Remediation

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, we identified a material weakness in our internal controls over financial reporting related to the design and implementation of our IT general controls including a failure to document reviews of changes to user roles in our financial reporting systems and subsystems. Management has taken and continues to take significant and comprehensive actions to remediate the material weakness. Although we have made progress with the remediation of these issues, these remediation actions are ongoing, During the second quarter of 2023, we were unable to remediate this internal control weakness because the new control was not in effect the entire period.

As part of our remediation efforts, we improved our IT general controls by removing most elevated (administrator) access to financial reporting systems and by providing additional controls over administrator system access. During the three months ended June 30, 2023, we improved our IT general controls by implementing new auditable evidence of ongoing reviews of changes in user roles.

The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect this material weakness to be fully remediated by the end of 2023.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

Changes in Internal Control Over Financial Reporting

Except for the changes related to the Company’s remediation efforts described above, there was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding our material legal proceedings, see “Note 9, Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Item 1A. Risk Factors.

There are no material changes to the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, except as set forth below.

1. | The risk factor titled “We have failed, and may continue to fail, to meet the listing standards of Nasdaq, and as a result our common stock may become delisted, which could have a material adverse effect on the liquidity of our common stock” shall be amended and restated as follows:

There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.

Previously, we experienced several instances where the Company was unable to meet the Nasdaq minimum bid price requirement, and the Company had to implement a reverse stock split in some of those events. If we fail to satisfy the continued listing requirements of Nasdaq such as the corporate governance requirements or the minimum share price requirement, Nasdaq may take steps to delist our securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase our securities when you wish to do so.

In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum share price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell our securities unless a market can be established or sustained.

2. | The following additional risk factor shall be added supplementally:

Our entry into the data device sector could divert our management team’s attention from existing products, cause delays in launching our new products, or otherwise have a significant adverse impact on our business, operating results, and financial condition.

In August of 2023, as part of our expansion efforts, we announced an expansion of our product portfolio and introduced a new Connected Solutions division which is set to begin launching products in 2024 in the U.S., Canada, Europe, and Asia/Pacific. Connected Solutions will primarily consist of mobile hotspots, fixed wireless, and USB dongle devices. The success of this new division depends in large part on our team’s ability to correctly identify and address the market opportunity, to execute our plans to develop, manufacture, market, and sell our new family of data devices.

We will need to find efficient manufacturing capabilities of our ODM partners and processes and develop the supply chains necessary to support our expansion into the data device sector. Our production plan for this product expansion is based on many key assumptions, including that:

| ● | we correctly estimated customer demand for our new product portfolio;
| ● | we will be able to timely engage manufacturers for the manufacturing of these products on terms and conditions that are acceptable to us;
| ● | manufacturers will be able to obtain needed components on a timely basis and in the necessary quantities;
| ● | we will be able to complete the final product design for delivery to our manufacturers in a timely manner; and
| ● | manufacturers will be able to produce these devices in a timely manner.

Our entry into these next-generation devices, and in the overall data device sector other than smartphones, may divert our management team’s attention from existing products development and may cause our inability to achieve the planned product portfolio expansion which could negatively impact our business, financial condition, and results of operations.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number |  | Description |  | Form |  | File No. |  | Incorporated by Exhibit Reference |  | Filing Date
3.1 |  | Amended and Restated Certificate of Incorporation of the Registrant. |  | 8-K |  | 001-38907 |  | 3.1 |  | May 17, 2019
3.2 |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation, effective September 15, 2021. |  | 8-K |  | 001-38907 |  | 3.1 |  | September 15, 2021
3.3 |  | Amended and Restated Bylaws of the Registrant. |  | 8-K |  | 001-38907 |  | 3.1 |  | November 8, 2021
31.1 |  | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
31.2 |  | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
32.1* |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
32.2* |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
101.INS |  | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |  |  |  |  |  |  |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document. |  |  |  |  |  |  |  |
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  |  |  |  |  |  |  |
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. |  |  |  |  |  |  |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. |  |  |  |  |  |  |  |
101PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |  |  |  |  |  |  |  |
104 |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |  |  |  |  |  |  |  |

| * | The certifications furnished in Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| SONIM TECHNOLOGIES, INC.
Date: August 14, 2023 | By: | /s/ Hao Liu
|  | Hao (Peter) Liu
|  | Chief Executive Officer (Principal Executive Officer)

Date: August 14, 2023 | By: | /s/ Clay Crolius
|  | Clay Crolius
|  | Chief Financial Officer (Principal Financial and Accounting Officer)

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