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What changed in DNA X, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DNA X, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+384 added−440 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-20)

Top changes in DNA X, Inc.'s 2023 10-K

384 paragraphs added · 440 removed · 246 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

64 edited+25 added−85 removed44 unchanged
Biggest changeEnterprises and fleet workers across supply chain, delivery services and field management rely on mobile devices to operate safely and efficiently in environments that are often susceptible to inclement weather. For enterprises looking to improve supply chain functionality, our mobile resource management applications such as location tracking, mileage tracking, and job dispatch can help businesses monitor operations more efficiently.
Biggest changeOur ruggedized mobility solutions target three end markets: industrial enterprise, public sector, and consumers that demand a more durable product. Industrial Enterprise Transportation and Logistics. Enterprises and fleet workers across supply chain, delivery services, airport workers, and field management rely on mobile devices to operate safely and efficiently in environments that are often susceptible to inclement weather.
All of our devices run on the Android operating system, providing a familiar and intuitive user interface, and our smartphones have access to a library of millions of applications available through the Google Play Store.
All of our devices run on the Android operating system, providing a familiar and intuitive user interface. Our smartphones have access to a library of millions of applications available through the Google Play Store.
Ltd, or Samsung. to the extent end users decide to purchase traditional devices and add a rugged case for use in environments that we believe are better suited for purpose built ruggedized mobile phones.
Ltd, or Samsung, to the extent that end users decide to purchase traditional devices and add a rugged case for use in environments that we believe are better suited for purpose built ruggedized mobile phones.
We are looking to expand the functionality of SafeGuard to extend to the consumer market for key features such as parental controls. ● Sonim Kiosk Mode lets user administrators configure devices with the minimum required functionality, a critical customer need in hazardous environments or anywhere that user safety is paramount. ● Scout App Updater lets administrators control when and where updates are sent to users’ phones. ● Sonim SOS provides emergency alert capabilities for users of Sonim devices to help ensure worker and job-site safety.
We are looking to expand the functionality of SafeGuard to extend to the consumer market for key features such as parental controls. ● Sonim Kiosk Mode lets user administrators configure devices with the minimum required functionality, a critical customer need in hazardous environments or anywhere where user safety is paramount. ● Scout App Updater lets administrators control when and where updates are sent to users’ phones. ● Sonim SOS provides emergency alert capabilities for users of Sonim devices to help ensure worker and job-site safety.
Our mobile phones consolidate radio, guard tour verification, panic button systems and scanners, which otherwise would require separate and single-purpose equipment. Our devices can improve business operations through functionalities such as automated work order dispatch and job completion verification tools delivered via proprietary third-party applications integrated with our devices. Energy and Utilities.
Our mobile phones consolidate radio, guard tour verification, panic button systems and scanners, which otherwise would require separate and single-purpose equipment. Our devices can improve business operations through functionalities such as automated work order dispatch and job completion verification tools delivered via proprietary third-party applications integrated with our devices. Energy, Mining, and Utilities.
As a result of these key attributes, we believe that our ruggedized, purpose-built mobile phones can increase the productivity of task workers and significantly reduce total cost of ownership for entities deploying our solutions.
As a result of these key attributes, we believe that our ruggedized, purpose-built mobile solutions can increase the productivity of task workers and significantly reduce the total cost of ownership for entities deploying our solutions.
We have also implemented dozens of application programming interfaces, or APIs, specific to our mobile phones and have partnered with third-party application developers to create a purpose-built experience for our end users using these applications on our mobile phones. This includes working with the leading providers of PTT and mission-critical-PTT, or MCPTT applications to deliver a seamless instant communications experience.
We have also implemented dozens of application programming interfaces (“APIs”) specific to our mobile phones and have partnered with third-party application developers to create a purpose-built experience for our end users using these applications on our mobile phones. This includes working with the leading providers of PTT and mission-critical-PTT, or MCPTT applications to deliver a seamless instant communications experience.
Ruggedized mobile phones are well suited for industrial enterprise and other critical infrastructure applications due to their durability and functionality in a range of environments. Equipping workers with smarter mobile phones also helps enable more efficient communication with and between field employees and enhance the information that decision-makers use to deploy resources within their organizations.
Ruggedized mobile phones are well suited for industrial enterprise and other critical infrastructure applications due to their durability and functionality in a range of environments. Equipping workers with smarter mobile phones also helps enable more efficient communication with and between field employees and enhances the information that decision-makers use to deploy resources within their organizations.
As of December 31, 2022, we held 17 utility and design patents in the United States and 11 outside the United States and have filed 1 utility and design patent applications in the United States. We also have contractual rights to standard essential patents for 2G, 3G, 4G, and 5G wireless technologies, some of which require significant royalty payments.
As of December 31, 2023, we held 17 utility and design patents in the United States and 11 outside the United States and have filed 1 utility and design patent applications in the United States. We also have contractual rights to standard essential patents for 2G, 3G, 4G, and 5G wireless technologies, some of which require significant royalty payments.
The Sonim XP3plus is a 4G feature phone in a clamshell form factor that offers our customers a cost-effective voice and/or PTT solution without distracting end users from doing their jobs with things like an application store or email.
The Sonim XP3plus is a 4G feature phone in a clamshell form factor that offers our customers a cost-effective voice and/or PTT solution without distracting end users from doing their jobs with things like an application store or email. ● Sonim XP Pro.
Reliable communication devices are often mission- critical for workers to stay safe while performing energy- and utility-related operations. 7 Public Sector Public Safety. In the United States, AT&T’s FirstNet network and Verizon’s public safety prioritization provide optimized networks for this sector.
Reliable communication devices are often mission-critical for workers to stay safe while performing energy- and utility-related operations. 6 Public Sector Public Safety. In the United States, AT&T’s FirstNet network and Verizon’s public safety prioritization provide optimized networks for this sector.
Additionally, our devices are designed to survive blunt force and can be sanitized and sterilized for safe use in food or medical processing facilities. We believe that these features can enhance the productivity of workers in the manufacturing industry. Facilities Management. Service-based operations in large indoor and outdoor facilities require management of mobile teams.
Additionally, our devices are designed to survive blunt force and can be sanitized and sterilized for safe use in food or medical processing facilities. We believe that these features can enhance the productivity of workers in the manufacturing industry. Facilities Management. Service-based operations in large indoor and outdoor facilities, including recreation parks, require management of mobile teams.
The ability for enterprises and agencies to customize their solutions allows their task workers to use a single device for tasks that would previously require multiple and often more costly devices. 5 ● Ease of use.
The ability for enterprises and agencies to customize their solutions allows their task workers to use a single device for tasks that would previously require multiple and often more costly devices. 4 ● Ease of use.
We also face competition from manufacturers of rugged mobile phones such as Samsung, Bullitt Mobile Ltd. and Kyocera Corporation as well as from large system integrators and manufacturers of private and public wireless network equipment and devices.
We also face competition from manufacturers of rugged mobile phones such as Samsung, and Kyocera Corporation as well as from large system integrators and manufacturers of private and public wireless network equipment and devices.
In addition, as of December 31, 2022, we held 16 trademarks in the United States and 17 trademarks outside the United States and have filed 9 trademark applications in the United States and 11 outside the United States. We opportunistically negotiate licenses with other patent holders where appropriate for our technology.
As of December 31, 2023, we held 16 trademarks in the United States and 17 trademarks outside the United States and have filed 9 trademark applications in the United States and 11 outside the United States. We opportunistically negotiate licenses with other patent holders where appropriate for our technology.
Additionally, given recent events that highlight school safety concerns, we are working on implementing this solution in our consumer handset line as well as our data solutions products. Sales and Marketing As of December 31, 2022, our sales and marketing team consisted of 11 professionals located in the United States, Canada and Europe.
Additionally, given recent events that highlight school safety concerns, we are working on implementing this solution in our consumer handset line as well as our data solutions products. Sales and Marketing As of December 31, 2023, our sales and marketing team consisted of 19 professionals located in the United States, Canada and Europe.
In this model, we identify a customer, design a product to meet their needs, outsource the production to a third-party partner, and manage the production and quality control of the product. We use our expertise and experience to efficiently and quickly develop new products that are designed based on a customer’s specifications.
Original Design Manufacturing (“ODM”) Business Model In this model, we identify a customer, design a product to meet their needs, outsource the production to a third-party partner, and manage the production and quality control of the product. We use our expertise and experience to efficiently and quickly develop new products that are designed based on a customer’s specifications.
We may also offer Non-Recurring Engineering, or NRE services in the form of third-party design services relating to the design of materials and software licenses used in the manufacturing of our products. In the years ended December 31, 2022 and 2021, approximately 83% and 76% respectively, of our revenues were derived from our top four customers.
We may also offer Non-Recurring Engineering, or NRE, services in the form of third-party design services relating to the design of materials and software licenses used in the manufacturing of our products. For the years ended December 31, 2023 and 2022, approximately 88% and 83%, respectively, of our revenues were derived from our top four customers.
Our solutions include ultra-rugged mobile phones that are capable of attaching to both public and private wireless networks, industrial-grade accessories that meet the requirements of specific applications, and software applications and cloud-based tools that provide management and deployment services to our customers.
Our solutions include ultra-rugged mobile phones capable of connecting to both public and private wireless networks, industrial-grade accessories that meet specific application requirements, and software applications and cloud-based tools that provide management and deployment services to our customers.
Sonim believes that this market is currently underserved with only higher cost devices offering the features that are needed. Sonim’s value proposition will be to offer an overall lower total cost of ownership as a consumer will not need to lose valuable downtime and money repairing or replacing their device as often as other devices in the market.
We believe that this market is currently underserved with only higher cost devices offering the features that are needed. Sonim’s value proposition will be to offer an overall lower total cost of ownership as a small business will not need to lose valuable downtime and money repairing or replacing their device as often as other devices in the market.
Once defined, our engineering organization develops and tests the solution against these requirements and works to achieve technical certification and approval from the wireless carriers which allows the solutions to be sold to our end users. Employees We have 54 full time employees and 23 contractors as of December 31, 2022.
Once defined, our engineering organization develops and tests the solution against these requirements and works to achieve technical certification and approval from the wireless carriers which allows the solutions to be sold to our end users. Employees We have 67 full time employees and 25 contractors as of December 31, 2023.
Further, the Company’s references to website URLs are intended to be inactive textual references only. 12
Further, the Company’s references to website URLs are intended to be inactive textual references only. 11
Our devices’ PTT functionality and extra-loud speakerphones are designed to keep lines of communication open and functional in fast-changing and loud environments, while our glove-friendly touch screen displays allow for workers to have access to real-time data, thus reducing production down time.
Our devices’ PTT functionality and extra-loud speakerphones are designed to keep lines of communication open and functional in fast-changing and loud environments, while our glove-friendly touchscreen displays allow workers to have access to real-time data, thus reducing production downtime.
Consumer Durables Everyday consumers and small business users. As consumers grow more reliant upon mobile devices to support all of our daily activities, mobile devices are now more than ever being placed into situations and environments that are more prone to physical damage including screen breakage and water damage.
Small Business Users As small businesses grow more reliant upon mobile devices to support all of their daily activities, mobile devices are now more than ever being placed into situations and environments that are more prone to physical damage including screen breakage and water damage.
Whether it is a salesperson visiting their customers, a police officer using their computer in their patrol car, a student working on a paper or a family going on vacation, the need for reliable internet has become a necessity in today’s world.
Whether it is a salesperson visiting their customers, a police officer using their computer in their patrol car, a student working on a paper or a family going on vacation, the need for reliable internet has become a necessity in today’s world. Mobile hotspots provide the perfect vehicle for taking advantage of these features.
For the years ended December 31, 2022 and 2021, revenues from our top four customers were $58 million and $42 million, respectively. 2 Our Industry Communication, data collection, productivity and safety among task workers has always been a central requirement in business-critical and mission-critical environments.
Moreover, net revenues from our top four customers were approximately $82 million and $58 million, for the years ended December 31, 2023, and 2022 respectively. Our Products Ruggedized Cell Phones Communication, data collection, productivity and safety among task workers has always been a central requirement in business-critical and mission-critical environments.
Our smartphone devices use the standard Android operating system and our feature phones use an operating system based on the Android Open Source Project. We additionally integrate third-party licensed software on commercially reasonable terms. Several Android-based apps and extension enablers of Android are developed internally by our employees.
Our smartphone devices use the standard Android operating system and our feature phones use an operating system based on the Android Open Source Project. We additionally integrate third-party licensed software on commercially reasonable terms.
Intellectual Property Our competitiveness and future success are dependent on our ability to protect our own proprietary technology and to access other important intellectual property. We protect our freedom to operate in the markets and mitigate intellectual property costs by proactively securing licenses with key patent holders, filing our own patents, trademarks, and copyrights and participating in defensive patent pools.
We protect our freedom to operate in the markets and mitigate intellectual property costs by proactively securing licenses with key patent holders, filing our own patents, trademarks, and copyrights and participating in defensive patent pools.
These channel partners have large sales forces who sell our solutions to end customers in our target markets. They enable us to cost-effectively scale our business without employing a large direct sales force of our own. Our expansion into the consumer durable and connected solutions markets opens up opportunities with additional carrier partners globally.
These channel partners have large sales forces who sell our solutions to end customers in our target markets. They enable us to cost-effectively scale our business without employing a large direct sales force of our own.
Consumers had little choice when it came to options for internet service. With 5G, wireless operators are using fixed wireless access as a way to add new revenue streams to their businesses. Additionally, fixed wireline operators are using fixed wireless access as a way to quickly deploy to new areas.
Historically internet connectivity was effectively a monopoly business with major fixed wireline operators dividing up the country. Consumers had little choice when it came to options for internet service. With 5G, wireless operators are using fixed wireless access as a way to add new revenue streams to their businesses.
Our tablets are sold unbranded, and are imported by our customer to the U.S., for sale in the U.S. Our devices and accessories connect users with voice, data, workflow and lifestyle applications that enhance the user experience while providing an extra level of protection.
Our devices and accessories connect users with voice, data, workflow, and lifestyle applications that enhance the user experience while providing an extra level of protection.
The key attributes of our solutions are specifically tailored for the needs of our end users, including impact resistance, waterproof, chemical resistant, and dustproof construction, extended battery life and extra loud audio, supported by a three-year comprehensive warranty.
These customers primarily purchase our devices and accessories through their wireless carriers. The key attributes of our core solutions, tailored for the needs of our end users, include impact resistance, waterproofing, chemical resistant, and dustproof construction, extended battery life and extra loud audio, supported by a three-year comprehensive warranty.
We believe that the durability of our phones combined with their purpose-built functionality, provide a lower total cost of ownership compared to similar products, which is highly attractive to city and state decision-makers. Federal Government.
The durability of our phones, combined with their purpose-built functionality, provides a lower total cost of ownership compared to similar products, which is highly attractive to city and state decision-makers. Federal Government. Whether during natural disasters or day-to-day operations, our devices help provide functionality and reliability that is crucial for federal workers to protect and serve their nation.
Through enhanced communication capabilities, we believe our devices can decrease the response time of first responders and help public safety workers stay safe and connected in hazardous, isolated or emergency conditions.
Through our partnerships with the major wireless carriers, we believe we are in a strong position to provide mission-critical solutions to the public safety market as public safety networks mature. Through enhanced communication capabilities, our devices can decrease the response time of first responders and help public safety workers stay safe and connected in hazardous, isolated or emergency conditions.
We currently have stocked phone and accessory products with the three largest U.S. wireless carriers: AT&T, T-Mobile and Verizon, meaning that these carriers test and certify our mobile phones on their networks and maintain inventory in their warehouses that they then sell through their enterprise and retail sales teams to end customers, often on a subsidized or financed basis.
We currently have stocked phone and accessory products with the three largest U.S. wireless carriers: AT&T, T-Mobile and Verizon. This means that these carriers test and certify our mobile phones on their networks and maintain inventory in their warehouses.
Competition We operate in a highly competitive environment serving end customers in the industrial enterprise and public sector markets. These markets are highly fragmented, evolving and increasingly competitive.
Manufacturing We have outsourced the manufacturing and the final assembly to third-party ODM partners for our phones and data devices. Competition We operate in a highly competitive environment serving end customers in the industrial enterprise and public sector markets. These markets are highly fragmented, evolving and increasingly competitive.
We enter into master sales arrangements with carriers (including channel partners contributing over 53% of our total revenues for the year ended December 31, 2022) under which our partners purchase our solutions for distribution on a purchase order basis.
Our full product portfolio is also stocked with the three largest Canadian wireless carriers. 1 We enter into master sales arrangements with carriers, including channel partners that contributed approximately 45% of our total revenues for the year ended December 31, 2023 (under which our partners purchase our solutions for distribution on a purchase order basis).
None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good. Corporate Information Sonim Technologies, Inc. was incorporated in the state of Delaware on August 5, 1999, and is headquartered in San Diego, California.
We tightly integrate PTT capabilities into both the hardware and software of our mobile phones, including a dedicated hard key that can initiate a PTT call even if the phone is in a sleep-state.
We integrate Push-to-Talk (“PTT”) capabilities into both the hardware and software of our mobile phones, including a dedicated hard key that can initiate a PTT call even if the phone is in a sleep-state. The end customers of our solutions include construction, energy and utility, mining, recreation and hospitality, logistics, manufacturing, public sector and transportation entities.
Data Devices Mobile hotspots are used by businesses, government employees and consumers. Having the ability to access the internet in a secure way wherever the customers go is essential to many users.
Having the ability to access the internet in a secure way wherever the customers go is essential to many users.
With competition exiting the carrier space as well as non-competitively priced products in the market, Sonim believes that this space is a great opportunity for expansion. Sonim plans to address these segments with feature-rich devices that are competitively priced.
With competition exiting the carrier space as well as non-competitively priced products in the market, Sonim believes that this space is a great opportunity for expansion. Sonim has developed feature-rich devices that are competitively priced. The mobile hotspot segment has millions of LTE devices that customers will be upgrading to 5G as the cost of the devices becomes more affordable.
Whether during natural disasters or day-to-day operations, we believe our devices help provide functionality and reliability that is crucial for federal workers to protect and serve their nation. Our mobile solutions support purpose-built voice communications and data capture applications that allow federal workers to stay connected and quickly make more informed decisions while in the field.
Our mobile solutions support purpose-built voice communications and data capture applications that allow federal workers to stay connected and quickly make more informed decisions while in the field.
We believe that a weather-resistant and long-battery ruggedized device, combined with productivity applications and services with the native camera on our XP10 smartphone—provides reliable communication options for transportation and logistics workers.
For enterprises looking to improve supply chain functionality, our mobile resource management applications such as location tracking, mileage tracking, and job dispatch can help businesses monitor operations more efficiently. We believe that a weather-resistant and long-battery ruggedized device, combined with productivity applications and services with the native camera on our XP10 smartphone—provides reliable communication options for transportation and logistics workers.
Our solutions are used to track locations, update and manage various tasks and enable communication with and between task workers. For example, location tracking and data analytics enable fleet optimization, help enterprises make asset allocation and deployment decisions and ensure that fleets are at the right place at the right time.
For example, location tracking and data analytics enable fleet optimization, help enterprises make asset allocation and deployment decisions and ensure that fleets are at the right place at the right time. In addition, our solutions are specifically designed to capture, store and analyze multiple data types for enterprise needs, enabling them to make decisions.
Our solutions allow end customers and task workers to customize our mobile phones using Android-based applications and vertical- specific accessories to address their varying needs.
This can also result in improved safety for employees that work in high-risk environments. ● Enhanced functionality through software and hardware configurations. Our solutions allow end customers and task workers to customize our mobile phones using Android-based applications and vertical-specific accessories to address their varying needs.
Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc. and Tait International Limited. 10 We believe the principal competitive factors affecting the market for our products are the products’ performance, features (including security features), quality, design innovation, reliability, price, customer service, reputation in the industry, brand loyalty and a strong third-party software and accessories ecosystem.
A large competitor in the rugged phone space, Bullitt Group Ltd., ceased operations in January 2024, which has created an opportunity for us, particularly in Europe. 9 We believe the principal competitive factors affecting the market for our products are the products’ performance, features (including security features), quality, design innovation, reliability, price, customer service, reputation in the industry, brand loyalty and a strong third-party software and accessories ecosystem.
Organizations with remote and disparate workers—from police and firefighters to construction, oil rig, logistics and manufacturing workers—need an extremely durable solution that provides reliable and secure voice, data and workflow applications. Historically, task workers had limited options, and in many cases resorted to using pen and paper.
Organizations with remote and disparate workers—from police and firefighters to construction, oil rig, logistics and manufacturing workers—need an extremely durable solution that provides reliable and secure voice, data and workflow applications. The global market for rugged devices continues to grow and we believe that the use of consumer phones in line-of-business applications provides an attractive market opportunity.
We believe that the restructuring will allow the Company to reach profitability. ● Invest in sales channel partnerships and brand marketing to drive sales . Our channel partners are leading global wireless carriers, distributors of data devices, communications system integrators and electronics resellers.
Expand the sales force in Europe to take advantage of opportunities for connected solutions devices and for rugged phones following the shutdown of Bullitt. ● Invest in sales channel partnerships and build the Sonim brand to drive sales . Our channel partners are leading global wireless carriers, distributors of data devices, communications system integrators and electronics resellers.
We also support a wide range of in-vehicle solutions that enable hands-free voice communications for those end users who work from the road. 9 SonimWare Software In addition to the ecosystem of Android developers and their applications, which are supported on our devices, we provide a suite of applications and tools that help customers manage, deploy and support their Sonim devices.
We work with a number of accessory manufacturers and design partners to deliver innovative purpose-built accessories that enhance the functionality and usability of our devices. 8 SonimWare Software In addition to the ecosystem of Android developers and their applications, which are supported on our devices, we provide a suite of applications and tools that help customers manage, deploy and support their Sonim devices.
The mobile hotspot segment has millions of LTE devices that customers will be upgrading to 5G as the cost of the devices becomes more affordable. The fixed wireless access segment is a greenfield opportunity for wireless operators to establish new revenue streams with their customers. It is in both of these areas that Sonim plans to gain market share.
The fixed wireless access segment is a greenfield opportunity for wireless operators to establish new revenue streams with their customers. In both areas, Sonim plans to gain market share. We received five product awards for hotspot devices from the U.S. and Canadian carriers, as well as an Australian carrier.
Finally, by providing a reliable mode of communication between employees, supervisors and command centers, those not in the field have crucial insight into the status and performance of task workers in the field. This can also result in improved safety for employees that work in high-risk environments. ● Enhanced functionality through software and hardware configurations.
For example, by leveraging this data, task workers such as first responders can more strategically plan their logistics resulting in decreased response times. Finally, by providing a reliable mode of communication between employees, supervisors and command centers, those not in the field have crucial insight into the status and performance of task workers in the field.
Our Target Markets We believe that our solutions can improve communication reliability, operational efficiency and safety for end customers and task workers in commercial sectors, public sectors, and for individual retail customers. Our ruggedized mobility solutions target three end markets: industrial enterprise, public sector, and consumers that demand a more durable product. Industrial Enterprise Transportation and Logistics.
Our expansion into the connected solutions markets opens up opportunities with additional carrier partners globally. 5 Our Target Markets We believe that our solutions can improve communication reliability, operational efficiency and safety for end customers and task workers in commercial sectors, public sectors, and for individual retail customers.
We will utilize our design, engineering, and production experience to increase the Company’s profitability. 8 Products and Technology Features of Our Ruggedized Mobile Phones Our mobile phones can withstand a variety of harsh environments and are supported by our industry-leading three-year comprehensive manufacturer’s warranty for our ultra-rugged devices.
Additionally, fixed wireline operators are using fixed wireless access as a way to quickly deploy to rural areas that were not served by cable companies. 7 Products and Technology Features of Our Ruggedized Mobile Phones Our mobile phones can withstand a variety of harsh environments and are supported by our industry-leading three-year comprehensive manufacturer’s warranty for our ultra-rugged devices.
Screens and buttons responsive to touch through gloves and water. ● Operational in and resistant to extreme temperatures . Protective exterior prevents damage to our devices’ hardware from very cold and hot temperatures. ● Chemical resistance. Ability to effectively sterilize and sanitize, regardless of potential contaminants. ● Increased communication and visibility through an enterprise.
Produces high sound quality at high volumes and uses noise cancellation technology for loud background noise environments. ● Glove-friendly design. Screens and buttons responsive to touch through gloves and water. ● Operational in and resistant to extreme temperatures . Protective exterior prevents damage to our devices’ hardware from very cold and hot temperatures. ● Chemical resistance.
Durable rubber and Gorilla Glass construction to protect against damage from sharp objects, falls, vigorous movements and compression by heavy weights. ● Waterproof and dustproof construction. Reinforced seals and waterproof mesh membranes to prevent potential damage caused by moisture and debris. ● Multi-shift battery life .
Key features of our rugged devices include: ● Puncture, shock, pressure and drop and impact resistance. Durable rubber and Gorilla Glass construction to protect against damage from sharp objects, falls, vigorous movements and compression by heavy weights. ● Waterproof and dustproof construction.
The model allows us to reduce our risk by preventing us from having to commit resources for the development, production, and the financing of the raw materials and inventory. We are able to efficiently scale production without committing additional resources. We expect to continue to sell products through this ODM model. Our Ruggedized Solution ● Durability and reliability.
The model allows us to reduce our risk by preventing us from having to commit resources for the development, production, and financing of the raw materials and inventory. This is not a core business for the Company, but we will continue to take advantage of opportunities. In 2022 we began selling a tablet under the ODM model.
Replaceable battery designed to provide sufficient power to last through a dual eight-hour shift in most real-world conditions. ● Extra-loud audio . Produces high sound quality at high volumes and uses noise cancellation technology for loud background noise environments. ● Glove-friendly design.
Reinforced seals and waterproof mesh membranes to prevent potential damage caused by moisture and debris. ● Multi-shift battery life . Replaceable battery designed to provide sufficient power to last through a dual eight-hour shift in most real-world conditions. ● Extra-loud audio .
Our mobile phones can withstand a variety of harsh environments and are supported by our industry-leading three-year comprehensive manufacturer’s warranty, which includes physical damage. Key features of our rugged devices include: ● Puncture, shock, pressure and drop and impact resistance.
Products under the ODM model have lower costs, lower margins, and shorter life cycles than our other products. 3 Key Features of Our Ruggedized Solutions ● Durability and reliability. Our mobile phones can withstand a variety of harsh environments and are supported by our industry-leading three-year comprehensive manufacturer’s warranty, which includes damage from glass breakage, water, dust, and punctures.
We currently have device placements in the three largest wireless carriers in the United States - ATT, Verizon and T-Mobile – as well as the three largest wireless carriers in Canada – Bell, Telus and Rogers. While we primarily sell through the wireless carrier channel, we also sell through distribution channels in North America and Europe.
In 2022 we began selling tablets under this ODM model and ceased tablet sales in October 2023 as their life cycle ended. We currently have device placements with the three largest wireless carriers in the United States – AT&T, Verizon and T-Mobile – as well as the three largest wireless carriers in Canada – Bell, Telus and Rogers.
Fixed wireless access provides an economical way for operators to quickly deploy internet to new customers as compared to digging up roads and laying cable or fiber. This service is used by businesses and consumers alike. Historically internet connectivity was effectively a monopoly business with major fixed wireline operators dividing up the country.
We will be launching two new mobile hotspots beginning in the second quarter of 2024 in the U.S., Canada, and Australia. Fixed wireless access provides an economical way for operators to quickly deploy internet to new customers without having to lay costly new cable or fiber. This service is used by businesses and consumers alike.
For the years ended December 31, 2022 and 2021, our revenue was $69.8 million and $54.6 million, respectively. For the years ended December 31, 2022 and 2021, our net loss was $14.1 million and $38.6 million, respectively.
As we expand our portfolio and increase sales in Europe and Australia in 2024, we expect our revenues to be less heavily concentrated among our top customers. For the years ended December 31, 2023, and 2022, our revenue was $93.6 million and $69.8 million, respectively. For the same periods, our net loss was $0.1 million and $14.1 million, respectively.
Accessories Our portfolio of industrial-grade accessories extends beyond the traditional consumer cellular ecosystem of wall chargers and cases. We work with a number of accessory manufacturers and design partners to deliver innovative purpose-built accessories that enhance the functionality and usability of our devices.
The Sonim Premium Mobile Hotspot is expected to be launched in the second half of 2024. Accessories Our portfolio of industrial-grade accessories extends beyond the traditional consumer cellular ecosystem of wall chargers and cases.
The Sonim XP5plus is a purpose-built 4G feature phone designed for task workers who have a “no frills” attitude about their communications tool. It comes equipped with a 2.8 inch non-touch display, dual front-facing loudspeakers, a large PTT button, and the Secure Audio connector ports, enabling full access to our complete ecosystem of industrial accessories.
The Sonim XP10 is an Android-based 5G smartphone. ● Sonim XP5plus. The Sonim XP5plus is a purpose-built 4G feature phone designed for task workers who have a “no frills” attitude about their communications tool. ● Sonim XP3plus.
In order to compete, we will be required to continue to respond promptly and effectively to the challenges of technological changes and our competitors’ innovations. With regard to competition from LMR providers, traditional LMR providers have chosen to not fully enter the LTE market primarily to avoid harming their significant existing LMR business.
In order to compete, we will be required to continue to respond promptly and effectively to the challenges of technological changes and our competitors’ innovations. Intellectual Property Our competitiveness and future success are dependent on our ability to protect our own proprietary technology and to access other important intellectual property.
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Item 1. Business. Introduction Sonim Technologies, Inc. was incorporated in the state of Delaware on August 5, 1999 and is headquartered in San Diego, California. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Sonim” refer to Sonim Technologies, Inc. and its wholly owned and consolidated subsidiaries.
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Item 1. Business. Overview We are a leading U.S.-based provider of rugged solutions, including rugged phones, connected devices, and consumer durable phones. The Company’s growth strategy aims to enhance our leadership position in the rugged market by offering a comprehensive product portfolio that serves a broader customer base.
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Overview We are a leading provider of rugged and consumer durable mobile devices including phones and accessories designed to provide extra protection for users that demand more durability in their work and everyday lives. In 2022, we introduced a tablet product that has generated a significant portion of the Company’s revenue since its introduction.
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We plan to penetrate the connected solutions market with high quality and competitively priced products and enter the consumer durable phone market, where we offer more durable devices to mid and value tiers.
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This new product has a large screen that allows customers to easily access and process IoT data. It allows the Company to gain experience with data devices and diversifies the Company’s portfolio. The Company is developing additional data devices to further diversify the Company’s portfolio.
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Since the second quarter of 2023 through the filing date of this report, we have won thirteen product awards for our expanded portfolio from carriers and channel partners. These new products will launch throughout 2024.
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Task workers in the Enterprise and Government sectors have historically been limited to pen and paper, older radio technology and/or single-purpose electronic devices, such as barcode scanners, location-tracking devices and sensors, to accomplish specific tasks.
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Additionally, we have a non-core business using the ODM model, where we design products based on a customer’s specifications and find the manufacturer for the product. These products typically have low margins, high volume, and a short life cycle.
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These single-purpose devices have historically operated on proprietary networks, such as Land Mobile Radio 94 or LMR networks that enable Push-to-Talk or PTT services for voice communications.
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While we primarily sell through the wireless carrier channel, we also sell through distribution channels in North America and Europe. Our tablets were sold unbranded and were imported by our customer to the U.S., for sale in the U.S.
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We provide communication devices that consolidate and integrate multiple functions including PTT, into a single ruggedized solution running on commercial wireless networks at a total cost of ownership that we believe is significantly lower than other solutions and that provides improved productivity and safety of task workers.
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They then sell these products through their enterprise and retail sales teams to end customers, often on a subsidized or financed basis.
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End customers of our solutions include construction, energy and utility, hospitality, logistics, manufacturing, public sector and transportation entities that primarily purchase our devices and accessories through their wireless carriers.
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Similarly, for the years ended December 31, 2023 and 2022, approximately 48% and 42%, respectively, of our revenue came from our tablet product, which had only one customer. We ceased selling tablets in October 2023 as their life cycle ended.
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Our full product portfolio has also been stocked with the three largest Canadian wireless carriers. In 2022, we sold approximately 25,000 mobile phones in Canada and 111,000 in the United States.
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The timing of our growth into Europe and other areas outside of North America has accelerated due to the shutdown of a former competitor, Bullitt Group Ltd. (“Bullitt”), in January 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

122 edited+60 added−81 removed193 unchanged
Biggest changeWe have incurred significant net losses since 2013 and have an accumulated deficit of $249.9 million as of December 31, 2022. We are not certain whether or when we will obtain a high enough volume of sales of our products to sustain or increase our growth or achieve or maintain profitability in the future.
Biggest changeAs a result, we may be required to delay, reduce, or cease our operations and seek bankruptcy protection. 22 We have not been profitable in recent years and may not achieve or maintain profitability in the future. We have incurred significant net losses since 2013 and have an accumulated deficit of $250.0 million as of December 31, 2023.
They may also market, sell and support solutions that are competitive with ours, and may devote more resources to the marketing, sales and support of such products. They may have incentives to promote our competitors’ products in lieu of our products, particularly for competitors who do a large volume business with the channel partner.
They may also market, sell and support solutions that are competitive with ours, and may devote more resources to the marketing, sales, and support of such products. They may have incentives to promote our competitors’ products in lieu of our products, particularly for competitors who do a large volume of business with the channel partner.
Currently, we have no second source of manufacturing for a portion of our products. In addition, switching from one provider to another is an expensive, difficult and a time-consuming process, with serious risks to our ability to successfully transfer our development and/or manufacturing operations.
Currently, we have no second source of manufacturing for a portion of our products. In addition, switching from one provider to another is an expensive, difficult, and time-consuming process, with serious risks to our ability to successfully transfer our development and/or manufacturing operations.
Our competitors may also be able quickly and cost-effectively respond to new or emerging technologies and changes in customer requirements.
Our competitors may also be able to quickly and cost-effectively respond to new or emerging technologies and changes in customer requirements.
If any of our larger competitors were to commit greater technical, sales, marketing and other resources to our markets, our ability to compete would be adversely impacted. If we are unable to successfully compete with our competitors, our sales would suffer and as a result our financial condition will be adversely impacted.
If any of our larger competitors were to commit greater technical, sales, marketing, and other resources to our markets, our ability to compete would be adversely impacted. If we are unable to successfully compete with our competitors, our sales will suffer and as a result, our financial condition will be adversely impacted.
To manage our growth successfully, we will need to continue to invest in sales and marketing, research and development, and general and administrative functions and other areas.
To manage our growth successfully, we will need to continue to invest in sales and marketing, research and development, general and administrative functions, and other areas.
Defending any such claims, with or without merit, including pursuant to indemnity obligations, could be time consuming, expensive, cause product shipment delays or require us to enter into a royalty or licensing agreement, any of which could delay the development and commercialization of our products or reduce our margins.
Defending any such claims, with or without merit, including pursuant to indemnity obligations, could be time-consuming, and expensive, cause product shipment delays, or require us to enter into a royalty or licensing agreement, any of which could delay the development and commercialization of our products or reduce our margins.
We cannot assure you that we will be able to effectively control the level of licensing and royalty fees paid to third parties, and significant increase in such fees could have a significant and adverse impact on our future profitability.
We cannot assure you that we will be able to effectively control the level of licensing and royalty fees paid to third parties, and a significant increase in such fees could have a significant and adverse impact on our future profitability.
This means that if we are unable maintain the listing of our common stock on a national securities exchange, the ability of stockholders to sell their common stock in the secondary market could be adversely affected.
This means that if we are unable to maintain the listing of our common stock on a national securities exchange, the ability of stockholders to sell their common stock in the secondary market could be adversely affected.
We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities. The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.
We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. 27 The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.
If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or upgrades to our existing solutions, satisfy customer requirements, maintain the quality and security of our solutions or execute on our business plan, any of which could harm our business, operating results and financial condition.
If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or upgrades to our existing solutions, satisfy customer requirements, maintain the quality and security of our solutions, or execute our business plan, any of which could harm our business, operating results and financial condition.
Changes in the permitted uses of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities, manufacture, importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products before they are sold, or limit our ability to sell those products in to our target markets.
Changes in the permitted uses of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities, manufacture, importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products before they are sold, or limit our ability to sell those products into our target markets.
We expect our revenues to remain heavily concentrated among these top wireless carriers, and we will be substantially dependent on these wireless carriers continuing to purchase and promote our products to their sales channels as well as customer demand for devices and services from these wireless carriers (factors over which we do not have any control).
We expect our revenues from mobile devices to remain heavily concentrated among these top wireless carriers, and we will be substantially dependent on these wireless carriers continuing to purchase and promote our products to their sales channels as well as customer demand for devices and services from these wireless carriers (factors over which we do not have any control).
Any interruption of supply for any material components of our products for any reason, including but not limited to a global or local health crises, or inability to obtain required components from our third-party suppliers, could significantly delay the production and shipment of our products and harm our revenues, profitability and financial condition.
Any interruption of supply for any material components of our products for any reason, including but not limited to global or local health crises, or inability to obtain required components from our third-party suppliers, could significantly delay the production and shipment of our products and harm our revenues, profitability and financial condition.
Changes in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers. Many of our public sector end customers rely to some extent on funds from the U.S. federal government in order to purchase and pay for our solutions.
Changes in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers. Many of our public sector end customers rely to some extent on funds from the U.S. federal government to purchase and pay for our solutions.
Further, the development of new or enhanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends. We may experience design, manufacturing, marketing, and other difficulties that could delay or prevent the development, introduction or marketing of our new products and enhancements.
The development of new or enhanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends. We may experience design, manufacturing, marketing, and other difficulties that could delay or prevent the development, introduction, or marketing of our new products and enhancements.
Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance. 35 Laws focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly.
Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance. 28 Laws focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly.
Our channel partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresents the functionality of our products or services to their customers or violate laws or our corporate policies. Additionally, some of our master agreements with our wireless carrier customers contain most “favored nation” clauses.
Our channel partner sales structure could subject us to lawsuits, potential liability, and reputational harm if, for example, any of our channel partners misrepresents the functionality of our products or services to their customers or violates laws or our corporate policies. Additionally, some of our master agreements with our wireless carrier customers contain most “favored nation” clauses.
If one of our suppliers or subcontractors fails to procure the necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact the saleability of our products and expose us to financial obligations to a third party. Any of these events could have a negative impact on our sales and results of operations.
If one of our suppliers or subcontractors fails to procure the necessary license rights to trademarks, copyrights, or patents, legal action could be taken against us that could impact the salability of our products and expose us to financial obligations to a third party. Any of these events could have a negative impact on our sales and results of operations.
Any such failure to accurately forecast demand and manufacturing and supply requirements, and any need to obtain alternative supply sources, could materially harm our business, results of operations and financial condition. 21 The markets for our devices and related accessories may not develop as quickly as we expect or may not develop at all.
Any such failure to accurately forecast demand and manufacturing and supply requirements, and any need to obtain alternative supply sources, could materially harm our business, results of operations, and financial condition. The markets for our mobile devices and related accessories may not develop as quickly as we expect or may not develop at all.
The cost structure of the company has been significantly reduced and many aspects of product development and operational support have been outsourced to add additional spending flexibility if needed. Existing capital at December 31, 2022 is expected to allow the company to continue operations for at least the next twelve months.
The cost structure of the company has been significantly reduced and many aspects of product development and operational support have been outsourced to add additional spending flexibility if needed. Existing capital at December 31, 2023 is expected to allow the company to continue operations for at least the next twelve months.
Should there be any disruption in services due to natural disaster, economic or political difficulties, transportation restrictions, acts of terror, quarantines or other restrictions associated with infectious diseases, or other similar events, or any other reason, such disruption could have a material adverse effect on our business.
Should there be any disruption in services due to natural disasters, economic or political difficulties, transportation restrictions, acts of terror, quarantines, or other restrictions associated with infectious diseases, or other similar events, or any other reason, such disruption could have a material adverse effect on our business.
Unauthorized parties may attempt to copy aspects of our products or obtain and use information which we regard as proprietary. Policing unauthorized use of our products is difficult, time consuming and costly, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.
Unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, time-consuming, and costly, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.
We cannot provide any assurance that we will be able to secure sufficient liquidity to fund our operations, including through additional capital from the sale of equity securities or financings, or that we will be able achieve profitability through cost efficiencies implemented in 2022 and 2021.
We cannot provide any assurance that we will be able to secure sufficient liquidity to fund our operations, including through additional capital from the sale of equity securities or financings, or that we will be able to achieve profitability through cost efficiencies implemented in 2023 and 2022.
Besides an adverse impact on demand for our products, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on our counteragents including suppliers, contract manufacturers, logistics providers, cellular network carriers, and other channel partners.
Besides an adverse impact on demand for our products, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on our counteragents including customers, suppliers, contract manufacturers, logistics providers, cellular network carriers, and channel partners.
If the market does not develop as we expect, our business, operating results and financial condition would be significantly harmed. Our dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales.
If the market does not develop as we expect, our business, operating results, and financial condition will be significantly harmed. Our dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales.
The components business has, from time to time, experienced periods of extreme shortages in product supply, generally as the result of demand exceeding available supply. Many companies utilize the same raw materials and supplies that we do in the production of their products.
The components business has, from time to time, experienced periods of extreme shortages in product supply, generally as the result of demand exceeding available supply. Many companies use the same raw materials and supplies that we do in the production of their products.
Factors that may contribute to fluctuations in our quarterly results, many of which are outside our control and may be difficult to predict, include: ● fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures or to secure long-term customer relationships, as well as the timing of purchases by our key customers; ● fluctuations in our customer, product or geographic mix, including the impact of new customer deployments, which typically carry lower gross margins, customer consolidation, which may affect our ability to grow revenue, and products powered by our next-generation technologies, which initially tend to be lower margin due to higher per unit production costs and greater variability in production yields; ● the timing, market acceptance and rate of adoption of our new product releases and our competitors’ new product releases; ● our ability to manage manufacturing costs, maintain or improve quality, and increase volumes and yields on products; ● our ability to successfully restructure or transform our operations within our anticipated time frame and realize our anticipated savings; ● the price, quality and timing of delivery of key components from suppliers, including any shipping cost increases or delays in the supply of components, as well as impacts due to consolidations amongst our suppliers; ● order cancellations, reductions or delays in delivery schedules by our customers; ● any delay in collecting or failure to collect accounts receivable; ● our ability to control costs, including our operating expenses and the costs and availability of components we purchase for our products; ● any significant changes in the competitive dynamics of the markets we serve, including any new entrants, new technologies, or customer or competitor consolidation, as well as aggressive pricing tactics by our competitors; ● our ability to manage inventory while timely meeting customer demand and avoiding charges for excess or obsolete inventory; ● the availability of third-party service partners to provide contract development and manufacturing services for us; ● the timing of revenue recognition and revenue deferrals; ● any future changes in U.S.
If our revenue or operating results do not meet the expectations of investors, the price of our common stock may decline substantially. 31 Factors that may contribute to fluctuations in our quarterly results, many of which are outside our control and may be difficult to predict, include: ● fluctuations in demand, sales cycles and prices for products and services, including discounts given in response to competitive pricing pressures or to secure long-term customer relationships, as well as the timing of purchases by our key customers; ● fluctuations in our customer, product or geographic mix, including the impact of new customer deployments, which typically carry lower gross margins, customer consolidation, which may affect our ability to grow revenue, and products powered by our next-generation technologies, which initially tend to be lower margin due to higher per unit production costs and greater variability in production yields; ● the timing, market acceptance and rate of adoption of our new product releases and our competitors’ new product releases; ● our ability to manage manufacturing costs, maintain or improve quality, and increase volumes and yields on products; ● our ability to successfully restructure or transform our operations within our anticipated time frame and realize our anticipated savings; ● the price, quality and timing of delivery of key components from suppliers, including any shipping cost increases or delays in the supply of components, as well as impacts due to consolidations amongst our suppliers; ● order cancellations, reductions or delays in delivery schedules by our customers; ● any delay in collecting or failure to collect accounts receivable; ● our ability to control costs, including our operating expenses and the costs and availability of components we purchase for our products; ● any significant changes in the competitive dynamics of the markets we serve, including any new entrants, new technologies, or customer or competitor consolidation, as well as aggressive pricing tactics by our competitors; ● our ability to manage inventory while timely meeting customer demand and avoiding charges for excess or obsolete inventory; ● the availability of third-party service partners to provide contract development and manufacturing services for us; ● the timing of revenue recognition and revenue deferrals; ● any future changes in U.S.
We do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers and third-party sales representatives, or TPSRs, and cannot provide assurance that they will operate in compliance with applicable rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing.
We do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers, and third-party sales representatives (the “TPSRs”), and cannot provide assurance that they will operate in compliance with applicable rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing.
In addition, if additional executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, including due to COVID-19, we may not be able to replace them in a timely manner and we could experience significant declines in productivity and/or errors due to insufficient staffing or managerial oversight.
In addition, if additional executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, including due to global pandemics, we may not be able to replace them in a timely manner and we could experience significant declines in productivity and/or errors due to insufficient staffing or managerial oversight.
We currently rely on the three largest U.S. wireless carriers, and two of the three largest Canadian wireless carriers, for the majority of our revenue.
We currently rely on the three largest U.S. wireless carriers, and two of the three largest Canadian wireless carriers, for the majority of our revenues.
If we are unable to increase our revenues at a rate sufficient to offset the expected increase in our costs, our business, operating results and financial position may be harmed, and we may not be able to achieve or maintain profitability over the long term or continue as a going concern.
If we are unable to increase our revenues at a rate sufficient to offset the expected increase in our costs, our business, operating results, and financial position may be harmed, and we may not be able to achieve or maintain profitability over the long term.
Although we intend to closely manage the transition process when manufacturing changes, we could experience disruption to our operations during any such transition. Other significant risks include limited control over assembly and testing capacity, delivery schedules, quality assurance, manufacturing yields, production costs, tariffs and uncertainty over political unrest. Any such disruption could negatively affect our reputation and our operating results.
Although we intend to closely manage the transition process when manufacturing changes, we could experience disruption to our operations during any such transition. Other significant risks include limited control over assembly and testing capacity, delivery schedules, quality assurance, manufacturing yields, production costs, tariffs, and uncertainty over political unrest.
Our primary competitors in the rugged mobile device market include Bullitt Mobile Ltd., and Kyocera Corporation. We also face competition from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc., or MSI, and Tait International Limited.
Our primary competitor in the rugged mobile device market is Kyocera Corporation. We also face competition from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc., MSI, and Tait International Limited.
As of December 31, 2022 and 2021, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $88.4 million and $7.4 million, respectively, due to prior period losses, a portion of which expire in various years beginning in 2037 and 2035, respectively, if not utilized.
As of December 31, 2023 and 2022, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $95.2 million and $88.4 million, respectively, due to prior period losses, a portion of which expire in various years beginning in 2037 and 2035, respectively, if not utilized.
As of December 31, 2021, we have identified one material weakness in internal control over financial reporting that pertain to (i) a deficiency in the design and implementation of IT general controls, including elevated (administrator) access to financial reporting systems and subsystems, which are not appropriately restricted and segregated.
As of December 31, 2022 and 2021, we identified one material weakness in internal control over financial reporting that pertains to a deficiency in the design and implementation of IT general controls, including elevated (administrator) access to financial reporting systems and subsystems, which are not appropriately restricted and segregated.
A security breach or other significant disruption of our IT systems or those of our partners, suppliers or manufacturers, caused by cyberattacks or other means, could have a negative impact on our operations, sales, and operating results. We rely extensively on our information systems to manage our business operations.
Risks Related to Information Technology and Intellectual Property A security breach or other significant disruption of our IT systems or those of our partners, suppliers, or manufacturers, caused by cyberattacks or other means, could have a negative impact on our operations, sales, and operating results. We rely extensively on our information systems to manage our business operations.
If we experience delays with new products, if our expectations regarding market demand and direction are incorrect, if sales of our existing products begin to decline more rapidly, or if the rate of decline continues to exceed the rate of growth of our next generation products, it will materially and adversely affect our business, results of operations and financial condition, and may require us to significantly reduce or even eliminate certain research and development programs.
If we experience delays with new products, if our expectations regarding market demand and direction are incorrect, if sales of our existing products begin to decline more rapidly, or if the rate of decline continues to exceed the rate of growth of our next-generation products, it will materially and adversely affect our business, results of operations and financial condition, and may require us to significantly reduce or even eliminate certain research and development programs. 13 We participate in a competitive industry, which may become more competitive.
Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.
Moreover, if any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.
Monitoring, initiating and defending against legal actions is time-consuming for our management, likely to be expensive and may detract from our ability to fully focus our internal resources on our business activities. In addition, despite the availability of insurance, we may incur substantial legal fees and costs in connection with litigation.
Bribery Act, or other anti-corruption laws. Monitoring, initiating, and defending against legal actions is time-consuming for our management, likely to be expensive, and may detract from our ability to fully focus our internal resources on our business activities. In addition, despite the availability of insurance, we may incur substantial legal fees and costs in connection with litigation.
As previously disclosed, beginning in 2021, we outsourced substantially all of our software development and manufacturing work to third parties and, as part of these outsourcings, we transferred or eliminated a significant number of employees. As of December 31, 2022, our worldwide employee headcount was 54 employees.
Beginning in 2021, we outsourced substantially all of our software development and manufacturing work to third parties and, as part of these outsourcings, we transferred or eliminated a significant number of employees. As of December 31, 2023, our worldwide employee headcount was 67 employees.
GAAP or new interpretations of existing accounting rules; ● the impact of a significant natural disaster, as well as interruptions or shortages in the supply of utilities such as water and electricity; ● general economic and political conditions in domestic and international markets, and other factors beyond our control and ● additional developments regarding our intellectual property portfolio and regulatory exclusivity protections, if any 18 We participate in a competitive industry, which may become more competitive.
GAAP or new interpretations of existing accounting rules; ● the impact of a significant natural disaster, as well as interruptions or shortages in the supply of utilities such as water and electricity; ● general economic and political conditions in domestic and international markets, and other factors beyond our control; and ● additional developments regarding our intellectual property portfolio and regulatory exclusivity protections, if any.
Our contract manufacturers now produce all of our products in facilities located in Asia. All manufacturing of our products is performed in accordance with detailed specifications and product designs furnished or approved by us and is subject to rigorous quality control standards. We periodically review our product manufacturing operations and consider changes we believe may be necessary or appropriate.
All manufacturing of our products is performed in accordance with detailed specifications and product designs furnished or approved by us and is subject to rigorous quality control standards. We periodically review our product manufacturing operations and consider changes we believe may be necessary or appropriate.
As such, our operating expenses related to end-customer marketing efforts have historically been very small, representing less than 1.0% of our total sales and marketing expenses during the years ended December 31, 2022 and 2021. To increase end-customer brand awareness requires investments in our sales and marketing efforts.
As such, historically, our operating expenses related to end-customer marketing efforts have historically been very small, representing less than 1.0% of our total sales and marketing expenses (including during the years ended December 31, 2023 and 2022). Increasing end-customer brand awareness requires investment in our sales and marketing efforts.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements, or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, operating results and financial condition.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements, or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, operating results and financial condition. 26 The unfavorable outcome of any future litigation, arbitration, or administrative action could have a significant adverse impact on our financial condition or results of operations.
Our industry is characterized by: ● evolving industry standards; ● frequent new product and service introductions; ● evolving distribution channels; ● increasing demand for customized product and software solutions; ● rapid competitive developments; and ● changing customer demands. 13 Technological advancements could render our products obsolete, which typically erodes prices and causes products to become unmarketable.
We operate in a highly competitive, quickly changing environment characterized by evolving industry standards, frequent new product and service introductions, evolving distribution channels, increasing demand for customized product and software solutions, rapid competitive developments; and changing customer demands. Technological advancements could render our products obsolete, which typically erodes prices and causes products to become unmarketable.
If the economic conditions of the general economy or industries in which we operate worsen from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating results and financial condition could be adversely impacted.
If the economic conditions of the general economy or industries in which we operate worsen from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating results and financial condition could be adversely impacted. 36 Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets.
Our success will depend on our ability to respond to changing technologies and customer requirements, and our ability to develop and introduce new and enhanced products in a cost-effective and timely manner.
Our success will depend on our ability to respond to changing technologies and customer requirements, effectively stimulate customer and business demands for new and upgraded products, and our ability to develop and introduce new and enhanced products in a cost-effective and timely manner.
These factors can result in reduced supply, higher prices of components used in the assembly of our products and delays in the receipt of certain of our key components, which in turn may generate increased costs, lower margins and delays in product delivery, with a corresponding adverse effect on revenues and customer relationships.
These factors can result in reduced supply, higher prices of components used in the assembly of our products, and delays in the receipt of certain of our key components, which in turn may generate increased costs, lower margins, and delays in product delivery, with a corresponding adverse effect on revenues and customer relationships. 20 We also do not have long-term supply agreements with any of our suppliers.
All IT systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyberattacks, cyber intrusions, computer viruses, security breaches, energy blackouts, natural disasters, terrorism, sabotage, war, insider trading and telecommunication failures.
All IT systems are potentially vulnerable to damage, unauthorized access, or interruption from a variety of sources, including but not limited to, cyberattacks, cyber intrusions, computer viruses, security breaches, denial-of-service attacks, ransomware or other malware, energy blackouts, natural disasters and severe weather conditions, terrorism, sabotage, war, insider trading, human error, and computer and telecommunication failures.
To the extent our channel partners are unsuccessful in selling or do not promote our products, or we are unable to obtain and retain a sufficient number of high-quality channel partners, our business and operating results could be significantly harmed.
Our channel partners are primarily wireless carriers who sell our phones through their sales channels. To the extent our channel partners are unsuccessful in selling or do not promote our products, or we are unable to obtain and retain a sufficient number of high-quality channel partners, our business and operating results could be significantly harmed.
Personal privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Personal privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly evolving and may be inconsistent from jurisdiction to jurisdiction.
These changes in foreign end-customer costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. These changes may also negatively impact the financial condition of some foreign customers and reduce or eliminate their future orders of our products.
The relative change in currency values creates fluctuations in product pricing for international customers. These changes in foreign end-customer costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. These changes may also negatively impact the financial condition of some foreign customers and reduce or eliminate their future orders of our products.
We may not be successful in these efforts, in which case, we may need to seek to raise additional capital from the sale of equity securities or the incurrence of indebtedness to allow us to invest in growth opportunities. There can be no assurance that additional financing will be available to us on acceptable terms, or at all.
We may need to seek to raise additional capital from the sale of securities or the incurrence of indebtedness to allow us to maintain our operations and invest in growth opportunities. There can be no assurance that any debt or equity financing will be available to us on acceptable terms, or at all.
Furthermore, our workforce efforts may impair our ability to achieve our current or future business objectives. 17 We are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other markets.
We are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other markets.
If the markets for our solutions do not develop as we expect, our revenues may not grow. 22 Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits, the effectiveness of our marketing programs, the costs of our solutions, our ability to attract, retain and effectively train sales and marketing personnel, and our ability to develop relationships with wireless carriers and other partners.
Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits, the effectiveness of our marketing programs, the costs of our solutions, our ability to attract, retain and effectively train sales and marketing personnel, and our ability to develop relationships with wireless carriers and other partners.
We also do not have long-term supply agreements with any of our suppliers. Our current contracts with certain suppliers may be canceled or not extended by such suppliers and, therefore, do not afford us with sufficient protection against a reduction or interruption in supplies.
Our current contracts with certain suppliers may be canceled or not extended by such suppliers and, therefore, do not afford us sufficient protection against a reduction or interruption in supplies.
We rely on a combination of patents, patent applications, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights.
Our ability to compete is heavily affected by our ability to protect our intellectual property. We rely on a combination of patents, patent applications, copyright and trademark laws, trade secrets, confidentiality procedures, and contractual provisions to protect our proprietary rights.
These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, systemic, political, and market conditions, such as recessions, interest rate changes, or international currency fluctuations, may negatively affect the market price of our common stock.
The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk Factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us.
The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk Factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us. 34 Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Our operations, and consequently our revenues and profitability, could be materially adversely affected if we are forced to switch from any of our providers to another provider due to any of a number of factors, including financial difficulties faced by the manufacturer, disagreements in pricing negotiations between us and the manufacturer or organizational changes in the manufacturer.
Our operations, and consequently our revenues and profitability, could be materially adversely affected if we are forced to switch from any of our providers to another provider due to any of a number of factors, including financial difficulties faced by the manufacturer, disagreements in pricing negotiations between us and the manufacturer or organizational changes in the manufacturer. 16 Further, we have made and will continue to make judgments as to whether we should further reduce, relocate, or otherwise change our workforce.
Consequently, if our revenue does not meet projected levels in the short-term, our inventory levels, cost of goods sold and operating expenses would be high relative to revenue, resulting in potential operating losses. If our revenue or operating results do not meet the expectations of investors, the price of our common stock may decline substantially.
Consequently, if our revenue does not meet projected levels in the short-term, our inventory levels, cost of goods sold and operating expenses would be high relative to revenue, resulting in potential operating losses.
We rely primarily on third-party contract manufacturers and partners. If these relationships are disrupted and we are unable to obtain substitute manufacturers or partners, on favorable terms or at all, our business, operating results and financial condition may be harmed. We have outsourced our software development, third-party contract manufacturing, and product assembly operations to third-parties located in India and China.
We rely primarily on third-party contract manufacturers and partners. If these relationships are disrupted and we are unable to obtain substitute manufacturers or partners, on favorable terms or at all, our business, operating results, and financial condition may be harmed.
Because our production volumes are based on a forecast of channel partner demand rather than firm purchase commitments from our major customers, our forecasts have been, and there is a risk that our forecasts could be in the future, inaccurate and there is a risk that we will be unable to sell our products at the volumes and prices we expect, which may result in excess inventory.
Because our production volumes are based on a forecast of channel partner demand rather than firm purchase commitments from our major customers, our forecasts have been, and there is a risk that our forecasts could be inaccurate in the future.
If we are unable to generate or obtain the requisite amount of financing needed to fund our business operations, our liquidity and ability to continue operations could be materially adversely affected. As a result, we may be required to delay, reduce or cease our operations and we may be required to seek bankruptcy protection.
If we are unable to generate or obtain the requisite amount of financing needed to fund our business operations, our liquidity and ability to continue operations could be materially adversely affected.
An adverse outcome of litigation or legal matters could result in us being responsible for significant damages. Any of these negative effects resulting from litigation, regulatory investigations, and other legal matters could materially adversely affect our business, financial condition, and results of operations.
An adverse outcome of litigation or legal matters could result in us being responsible for significant damages. Any of these negative effects resulting from litigation, regulatory investigations, and other legal matters could materially adversely affect our business, financial condition, and results of operations. We are subject to anti-corruption, anti-bribery, anti-money laundering, economic sanctions, export control, and similar laws.
We are required to undergo a lengthy customization and certification process for each wireless carrier customer, which increases our operating expenses, and failure to obtain such certification would adversely impact our results of operations and financial condition. Each wireless carrier requires each of our devices to complete a thorough technical acceptance process before it can be stocked and sold.
We are required to undergo a lengthy customization and certification process for each wireless carrier customer, which increases our operating expenses and cost of revenue, and failure to obtain such certification would adversely impact our results of operations and financial condition.
We are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts).
As a result, our channel partners are not contractually obligated to purchase from us any minimum quantity of products. We are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts).
Generally, the certification process commences within one to three months of product concept development. During this development stage, certain carriers provide a technology roadmap and target demographics, allowing us to define product specifications to meet carrier goals, while other carriers provide defined specifications and preferred price points.
During this development stage, certain carriers provide a technology roadmap and target demographics, allowing us to define product specifications to meet carrier goals, while other carriers provide defined specifications and preferred price points. Once we receive approval of a product concept by the carrier, we and the carrier advance the product to the development stage.
Moreover, any failure of our suppliers, subcontractors, distributors, resellers and TPSRs, for any reason, including bankruptcy or other business disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations. We are subject to a wide range of privacy and data security laws, regulations and other legal obligations.
Moreover, any failure of our suppliers, subcontractors, distributors, resellers, and TPSRs, for any reason, including bankruptcy or other business disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations. We are exposed to risks associated with strategic transactions.
In addition, we will need to appropriately scale our internal business systems and our services organization, including the suppliers of our detection equipment and customer support services, to serve our growing customer base.
In addition, we will need to appropriately scale our internal business systems and our services organization, including the suppliers of our detection equipment and customer support services, to serve our growing customer base. Any failure of, or delay in, these efforts could impair the performance of our solutions and reduce customer satisfaction.
Our certificate of incorporation and bylaws provide for, among other things: ● the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; ● advance notice requirements for stockholder proposals; and ● certain limitations on convening special stockholder meetings. 29 These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company.
Our certificate of incorporation and bylaws provide for, among other things: ● the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; ● advance notice requirements for stockholder proposals; and ● certain limitations on convening special stockholder meetings.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
These provisions of DGCL may have the effect of delaying, deferring or preventing a change in control, and may discourage bids for our common stock at a premium over its market price. 33 Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Increasing scrutiny and evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders regarding environmental, social and governance, or ESG-related practices and disclosures may adversely affect our reputation, adversely impact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community or enforcement authorities or otherwise adversely impact our business and results of operations.
In addition, the facilities of significant vendors may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or significant adverse impact on our business. 35 Increasing scrutiny and evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders regarding environmental, social and governance, or ESG-related practices and disclosures may adversely affect our reputation, adversely impact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community or enforcement authorities or otherwise adversely impact our business and results of operations.
We could face regulatory penalties, enforcement actions, remediation obligations, or private litigation by parties whose data is improperly disclosed or misused. Any or all of the foregoing could have a negative impact on our business, financial condition, and results of operations.
We could face regulatory penalties, enforcement actions, remediation obligations, or private litigation by parties whose data is improperly disclosed or misused. Any or all of the foregoing could negatively impact on our business, financial condition, and results of operations. If we are unable to successfully protect our intellectual property, our competitive position may be harmed.
Our ability to successfully grow our business depends on a number of factors including our ability to: ● accelerate the adoption of our solutions by new end customers; ● expand into new vertical markets; ● develop and deliver new products and services; ● increase awareness of the benefits that our solutions offer; ● become more cost effective and scalable by utilizing contract manufacturing.
Our ability to successfully grow our business depends on a number of factors including our ability to: ● accelerate the adoption of our solutions by new end customers; ● expand into new geographical areas and into new vertical markets; ● develop and deliver new products and services; ● increase awareness of the benefits that our solutions offer; and ● become more cost-effective and scalable by utilizing contract manufacturing. 18 As usage of our solutions grows, we will need to continue to make investments to develop and implement new or updated solutions, technologies, security features, and cloud-based infrastructure operations.
A cyberattack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or manufacturers could result in the unauthorized release of proprietary, confidential or sensitive information of ours or result in virus and malware installation on our devices.
We do not have direct oversight or influence over how third parties manage the security, quality, or resiliency of their networks. 23 A cyberattack or other significant disruption involving our IT systems or those of our outsource partners, suppliers, or manufacturers could result in the unauthorized release of proprietary, confidential, or sensitive information of ours or result in virus and malware installation on our devices.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until August 15, 2022, in which to regain compliance.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or through March 12, 2024, to regain compliance with the Bid Price Rule.
If we cannot grow our revenue run-rate or raise needed funds, we might be forced to make additional reductions in our operating expenses, which could adversely affect our ability to implement our business plan and ultimately our viability as a Company. We rely on our channel partners to generate a substantial majority of our revenues.
If we cannot grow our revenue run-rate or raise needed funds, we might be forced to make additional reductions in our operating expenses, which could adversely affect our ability to implement our business plan and ultimately our viability as a Company. Our ability to use our net operating losses to offset future taxable income will be subject to certain limitations.
We produce highly complex products that incorporate leading-edge technology, including both hardware and software. The industry standards upon which many of our products are based are also complex, experience change over time and may be interpreted in different manners. Software often contains defects or programming flaws that can unexpectedly interfere with expected operations.
The industry standards upon which many of our products are based are also complex, experience changes over time, and may be interpreted in different manners. Software often contains defects or programming flaws that can unexpectedly interfere with expected operations. In addition, our products are complex and are designed to be deployed in large quantities across complex and varying networks.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. For information regarding our material legal proceedings, see “Note 12. Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report, which information is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable. 36 PART II
Biggest changeItem 3. Legal Proceedings. For information regarding our material legal proceedings, see “Note 12. Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report, which information is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable. 38 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 36 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Item 6. Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 38 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. Reserved 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Added
Financial Statements and Supplementary Data 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 50 Item 9A. Controls and Procedures 50 Item 9B. Other Information 51

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket Information Our common stock is traded on The Nasdaq Stock Market LLC under the symbol “SONM.” Holders of Record As of March 20, 2023, there were 83 holders of record of our common stock based on information furnished by American Stock Transfer and Trust Company, LLC, the transfer agent for our securities.
Biggest changeMarket Information Our common stock is traded on The Nasdaq Stock Market LLC under the symbol “SONM.” Holders of Record As of March 20, 2024, there were 81 holders of record of our common stock based on information furnished by American Stock Transfer and Trust Company, LLC, the transfer agent for our securities.
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Recent Sales of Unregistered Securities None Purchase of Equity Securities None
Added
Recent Sales of Unregistered Securities On October 18, 2023, we issued 230,000 shares of our common stock to a service provider in consideration of consulting services to the Company. The issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act.
Added
The service provider described above represented the intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions. Purchase of Equity Securities None

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLabor is charged to each product based on the actual time required to build that specific product. ● Indirect manufacturing expense associated with producing our products, such as rent on production facilities, depreciation on production equipment and tooling, engineering and support salaries and other indirect manufacturing costs. 42 For both products manufactured by third parties and for products manufactured by the Company, cost of revenues includes other direct costs related to the shipment of the final product to the customer, including such items as shipping costs, royalties on third-party technology included in the product, warranty cost accruals and packaging and handling costs.
Biggest changeCost of revenues includes other direct costs related to the final product to the customer, including such items as shipping costs, royalties on third-party technology included in the product, warranty cost accruals, supply chain costs, logistics costs, and packaging and handling costs. Amortization of NRE expenses and contract fulfillment costs are part of cost of revenues.
For products shipped on consignment, revenue is not recognized until the products is sold to the end customer. Any discounts, marketing development funds, product returns or other revenue reductions are treated as offsets to revenues, which is presented on a net basis. A return reserve reduces revenue for products that are sold to distributors with a right of return.
For products shipped on consignment, revenue is not recognized until the products are sold to the end customer. Any discounts, marketing development funds, product returns or other revenue reductions are treated as offsets to revenues, which is presented on a net basis. A return reserve reduces revenue for products that are sold to distributors with a right of return.
Marketing expenses include all social media and collateral print media, and brand development expenses. General and administrative. General and administrative expenses consist primarily of personnel-related expenses, including salaries, bonuses, stock-based compensation, travel costs and employee benefits, as well as professional and consulting fees, legal fees, insurance, and occupancy costs. Income taxes.
Marketing expenses include all social media and collateral print media, and brand development expenses. General and administrative. General and administrative expenses consist primarily of personnel-related expenses, including salaries, bonuses, stock-based compensation, travel costs and employee benefits, as well as professional and consulting fees, legal fees, and insurance costs. Income taxes.
We use Adjusted EBITDA: ● as a measure of operating performance; ● for planning purposes, including the preparation of budgets and forecasts; ● to allocate resources to enhance the financial performance of our business; ● to evaluate the effectiveness of our business strategies; ● in communications with our board of directors concerning our financial performance; and ● as a consideration in determining compensation for certain key employees. 40 Adjusted EBITDA has limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
We use Adjusted EBITDA: ● as a measure of operating performance; ● for planning purposes, including the preparation of budgets and forecasts; ● to allocate resources to enhance the financial performance of our business; ● to evaluate the effectiveness of our business strategies; ● in communications with our board of directors concerning our financial performance; and ● as a consideration in determining compensation for certain key employees. 43 Adjusted EBITDA has limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Sales and marketing investments will often occur in advance of any sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our sales and marketing resources. 41 Seasonality and New Product Introduction We have historically experienced lower net revenue in our first quarter compared to other quarters in our fiscal year due to seasonal demand associated with the introduction of new products to our lead customers.
Sales and marketing investments will often occur in advance of any sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our sales and marketing resources. 44 Seasonality and New Product Introduction We have historically experienced lower net revenue in our first quarter compared to other quarters in our fiscal year due to seasonal demand associated with the introduction of new products to our lead customers.
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 December 31, 2022, we did not have any convertible loans or any other borrowing structures in place.
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 December 31, 2023, we did not have any convertible loans or any other borrowing structures in place.
Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications. We consider costs associated with achieving technical acceptance with each product at each carrier to be a contract fulfillment cost.
Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications. We consider costs associated with achieving technical acceptance with each product at each carrier to be a contract fulfillment cost that we capitalize.
In addition to the design and configuration costs, each device must undergo a multi-month technical approval process at each carrier before it can be certified to be stocked at each carrier. The approval process for each device for each carrier has historically cost between $1 million and $2 million.
In addition to the design and configuration costs, each device must undergo a multi-month technical approval process at each carrier before it can be certified to be stocked at each carrier. The approval process for each device for each carrier has historically cost between $1 million and $3 million.
Research and development expenses consist primarily of personnel-related expenses, including salaries, bonuses, stock-based-compensation and employee benefits, as well as outsourced costs incurred through our ODM partnerships. Research and development expenses also include the costs of developing new products and supporting existing products.
Research and development expenses consist primarily of personnel-related expenses, including salaries, bonuses, stock-based compensation and employee benefits, as well as outsourced costs incurred through our ODM partnerships and other third parties. Research and development expenses also include the costs of developing new products and supporting existing products.
We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including: ● non-cash equity grants made to employees at a certain price do not necessarily reflect the performance of our business at such time, and as such, stock-based compensation expense is not a key measure of our operating performance; and ● costs associated with certain events, such as restructuring costs, are not considered a key measure of our operating performance.
We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including: ● non-cash equity grants made to employees at a certain price do not necessarily reflect the performance of our business at such time, and as such, stock-based compensation expense is not a key measure of our operating performance; and ● non-cash depreciation and amortization are not considered a key measure of our operating performance.
Under certain of our customer agreements, we may also offer NRE services in the form of third-party design services relating to the design of materials and software licenses used in the manufacturing of our products. Our tablet sales are with a customer that imports the tablets to the U.S., the tablets are branded, and sold to a U.S. retailer.
Under certain of our customer agreements, we may also offer NRE services in the form of third-party design services relating to the design of materials and software licenses used in the manufacturing of our products. Our tablet sales were with a customer that imported the tablets to the U.S., where the tablets were branded, and sold to a U.S. retailer.
The Company recognizes revenue primarily from the sale of products, including our mobile phones, tablets, and accessories, and the majority of the Company’s contracts include only one performance obligation, namely the delivery of product.
The Company recognizes revenue primarily from the sale of products, including our mobile phones, connected devices, tablets, and accessories, and most of the Company’s contracts include only one performance obligation, namely the delivery of product.
If our research and development efforts are not successful, then we will not recover these investments that we make. New Customer Acquisitions We are focused on continuing to acquire new customers, both in North America and overseas, to support our long-term growth. Historically, we have been dependent on a small number of wireless carriers distributing our products.
If our research and development efforts are not successful, then we will not recover these investments that we make. New Customer Acquisitions We are focused on continuing to acquire new customers, in North America, Europe, the Middle East, and Australia, to support our long-term growth. Historically, we have been dependent on a small number of wireless carriers distributing our products.
The number of feature phone units sold during the year ended December 31, 2022 compared to the year ended December 31, 2021 decreased by 49%, primarily because 2021 had higher sales of the XP3 and the XP3plus after it was launched in September 2021.
The number of feature phone units sold during the year ended December 31, 2023 compared to the year ended December 31, 2022 decreased by 32%, primarily because 2022 had higher sales of the XP3plus after it was launched in September 2021.
Nevertheless, the above-described events had and will continue to impact the global macroeconomic and geopolitical environments, capital and commodity markets, and global supply chains, which may have an adverse impact on our operations and hinder our ability to access capital, if needed. Our cost of revenue may increase if the component prices increase.
Nevertheless, the above-described events had and will continue to impact the global macroeconomic and geopolitical environments, capital and commodity markets, and global supply chains, which may have an adverse impact on our operations and hinder our ability to access capital, if needed.
Prior to commencement of development of a product for certification, we generally do not receive any purchase orders or commitments. Following a carrier’s review of product concepts, we may receive a product award letter from that carrier to move forward with the development and certification process, at which time we may begin receiving advance purchase orders or commitments.
Following a carrier’s review of product concepts, we may receive a product award letter from that carrier to move forward with the development and certification process, at which time we may begin receiving advance purchase orders or commitments.
Adjusted EBITDA was negative $9.9 million, for the year ended December 31, 2022, compared to negative $34.7 million, for the year ended December 31, 2021. This improvement was primarily due to the same factors in the improvement to the Net Loss.
Adjusted EBITDA was $4.0 million for the year ended December 31, 2023, compared to negative $9.9 million for the year ended December 31, 2022. This improvement was primarily due to the same factors in the improvement to Net Loss.
Item 7. Management’s Discussion and Analysis of Financial Condition, Results of Operations. The following commentary should be read in conjunction with the Consolidated Financial Statements and related notes thereto contained in Part IV of this Annual Report on Form 10-K. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties.
Item 7. Management’s Discussion and Analysis of Financial Condition, Results of Operations. The following commentary should be read in conjunction with the Consolidated Financial Statements and related notes thereto contained in Part IV of this Annual Report on Form 10-K.
Tablet sales are expected to continue through 2023. Cost of Revenues and Gross Profit/Gross Margin Cost of revenues for products manufactured by third parties is the negotiated price that the Company pays for the products.
Tablet sales ended in October 2023 and are not expected to be resumed in 2024. 45 Cost of Revenues and Gross Profit/Gross Margin Cost of revenues for products manufactured by third parties is the negotiated price that the Company pays for the products.
The increase in tax expense in 2022 was primarily due to the Company’s increase in foreign tax expense for the foreign subsidiaries in 2022 as compared to 2021. Net loss. The net loss for December 31, 2022, was $14.1 million compared to net loss of $38.6 million for December 31, 2021.
This increase in tax expense in 2023 is primarily due to the Company’s increase in foreign tax expense for its foreign subsidiaries in 2023 as compared to 2022. Net loss. The net loss for December 31, 2023, was $0.1 million compared to $14.1 million for December 31, 2022.
Macroeconomic Events During the fiscal year 2022, we operated under challenging market conditions, influenced by global events beyond our control such as the COVID-19 pandemic, tensions between the U.S. and China, Russia’s invasion of Ukraine, and other events discussed in “Part I. Item 1A. Risk Factors” in this Form 10-K.
Macroeconomic Events During the fiscal year 2023, we operated under challenging market conditions, influenced by global events beyond our control such as inflation, supply chain disruptions, tensions between the U.S. and China, war in Ukraine, the overall international instability, and other events discussed in “Part I. Item 1A. Risk Factors” in this Form 10-K.
We expect that our gross margin may fluctuate from period to period, primarily as a result of changes in average selling price, changes in the price that we pay for inventory, revenue mix among our devices, and manufacturing costs.
Gross profit is defined as revenues less cost of revenues. Gross margin is gross profit expressed as a percentage of revenues. We expect that our gross margin may fluctuate from period to period, primarily because of changes in average selling price, changes in the price that we pay for inventory, revenue mix among our devices, and shipping costs.
Cash Flows The following table summarizes our sources and uses of cash for the periods presented: 2022 2021 Net cash used in operating activities $ (12,360 ) $ (38,476 ) Net cash used in investing activities (8 ) (46 ) Net cash provided by financing activities 14,348 27,614 Cash flows from operating activities For the year ended December 31, 2022, cash used in operating activities was $12.4 million, primarily attributable to a net loss of $14.1 million.
Cash Flows The following table summarizes our sources and uses of cash for the periods presented (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (4,052 ) $ (12,360 ) Net cash used in investing activities (36 ) (8 ) Net cash provided by financing activities 272 14,348 Cash flows from operating activities For the year ended December 31, 2023, cash used in operating activities was $4.1 million.
To help control and manage the quality, cost and reliability of our supply chain, we directly manage the procurement of certain final assembly materials used in our products, which include memory and LCDs, .
Our tablet customer represented 48% of our revenue while smartphones constituted 34% of our revenues and feature phones 17% of our revenues. To help control and manage the quality, cost and reliability of our supply chain, we directly manage the procurement of certain final assembly materials used in our products, which include memory and LCDs.
While these factors present significant opportunities for our business, they also pose important challenges that we must successfully address in order to improve our results of operations.
Factors Affecting Our Results of Operations We believe that the growth and future success of our business depend on many factors. While these factors present significant opportunities for our business, they also pose important challenges that we must successfully address to improve our results of operations.
As a result, we expect our sales and marketing costs to increase as we seek to acquire new customers.
We also intend to continue to invest in and expand our international sales teams. As a result, we expect our sales and marketing costs to increase as we seek to acquire new customers.
Our partnerships with ODMs are expected to enable us to shift between different types and numbers of devices under development without the need to adjust the size of our internal team.
Our partnerships with ODMs are expected to enable us to shift between different types and numbers of devices under development while increasing the size of our internal team at a slower pace than our growth in revenue.
Currently, our principal source of liquidity consists of cash and cash equivalents totaling $13.2 million, as December 31, 2022. During the year ended December 31, 2022, our net loss was $14.1 million.
Liquidity and Capital Resources Currently, our principal source of liquidity consists of cash and cash equivalents totaling $9.4 million, as of December 31, 2023. During the year ended December 31, 2023, our net loss was $0. 1 million and our use of cash in operations was $4.1 million.
Other expense, net improved by $0.9 million primarily due to a $0.7 million gain on the termination of the San Mateo lease (Note 6) in 2022. Income tax expense. We recognized income tax provision of $184 during 2022 as compared to $167 during 2021.
Other income (expense), net, decreased by $0.7 million primarily because 2022 had a $0.7 million gain on the termination of the San Mateo office lease. Income tax expense. We recognized an income tax provision of $0.4 million in 2023 as compared to $0.2 million in 2022.
These were partially offset by a $11.3 million increase in accounts receivable from the tablet customer, an increase in capitalized contract fulfillment costs of $4.8 million, and a decrease in accrued expenses of $1.1 million. For the year ended December 31, 2021, cash used in operating activities was $38.5 million, primarily attributable to a net loss of $38.6 million.
These were partially offset by a $11.3 million increase in accounts receivable from the tablet customer, an increase in capitalized contract fulfillment costs of $4.8 million, and a decrease in accrued expenses of $1.1 million.
Recent Developments Closure of the SEC Investigation with No Enforcement Action On March 6, 2023, we received a letter from the SEC that states that the Commission has concluded the investigation of the Company and does not intend to recommend any enforcement action against the Company. As a result, the Company expects to reduce its legal expense in 2023.
This product is expected to launch in the fourth quarter of 2024. Closure of the SEC Investigation with No Enforcement Action On March 6, 2023, we received a letter from the SEC that stated that the SEC has concluded the investigation of the Company and does not intend to recommend any enforcement action against the Company.
Cash flows from investing activities For the year ended December 31, 2022, cash used in investing activities was less than $0.01 million, attributable to the purchases of property and equipment. For the year ended December 31, 2021, cash used in investing activities was $0.05 million, attributable to the purchases of property and equipment.
Cash flows from investing activities For the years ended December 31, 2023 and 2022, cash used in investing activities was less than $0.1 million each year.
Gross profit for the year ended December 31, 2022, increased $5.2 million, or 81.2%, to $11.6 million, or 16.6% of revenues, from $6.4 million, or 11.8% of revenues for the year ended December 31, 2021. This increase to gross profit was primarily due to higher revenue from tablet sales and higher margins on the XP10. Research and development.
Gross profit for the year ended December 31, 2023, increased $7.7 million, or 66.3%, to $19.3 million, or 20.6% of net revenues, from $11.6 million, or 16.6% of net revenues for the year ended December 31, 2022. This increase in gross profit was primarily due to higher revenue from smartphone and tablet sales.
For the year ended December 31, 2021, cash provided by financing activities was $27.6 million, primarily due to proceeds from issuance of common stock through the at-the-market stock sales program. 46 Material Cash Requirements We had approximately $20.0 million in noncancelable purchase orders for inventory and other operating expenses as of December 31, 2022.
For the year ended December 31, 2022, cash provided by financing activities was $14.3 million, primarily due to proceeds from the AJP transaction (see Note 9). 49 Material Cash Requirements We had approximately $13.5 million in noncancelable purchase orders for inventory and other operating expenses as of December 31, 2023.
Total cost of revenues for the year ended December 31, 2022, increased $10.0 million, or 20.9%, to $58.2 million, or 83.4% of revenues, compared to $48.2 million, or 88.2% of revenues for the year ended December 31, 2021. This increase was attributable to the increase in tablet sales.
Total cost of revenues for the year ended December 31, 2023, increased $16.1 million, or 27.7%, to $74.3 million, or 79.4% of net revenues, compared to $58.2 million, or 83.4% of net revenues for the year ended December 31, 2022. This increase was attributable to the increase in net revenues.
Sales and marketing expenses for the year ended December 31, 2022, decreased by $2.3 million, or 24.0% to $7.3 million compared to $9.6 million for the year ended December 31, 2021.
Sales and marketing expenses for the year ended December 31, 2023, increased by $1.5 million, or 20.5%, to $8.8 million compared to $7.3 million for the year ended December 31, 2022.
In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 43 Results of Operations Years Ended December 31, 2022 and 2021: The following tables present key components of our results of operations for the respective periods (In thousands): Year Ended December 31, 2022 vs 2021 2022 2021 Increase (Decrease) % (in thousands) Net revenues $ 69,828 $ 54,570 $ 15,258 28.0 % Cost of revenues 58,205 48,156 10,049 20.9 % Gross profit 11,623 6,414 5,209 81.2 % Operating expenses: Research and development 7,973 17,696 (9,723 ) -54.9 % Sales and marketing 7,274 9,566 (2,292 ) -24.0 % General and administrative 9,612 10,284 (672 ) -6.5 % Legal expenses 1,054 6,869 (5,815 ) -84.7 % Total operating expenses 25,913 44,415 (18,502 ) -41.7 % Loss from operations (14,290 ) (38,001 ) 23,711 -62.4 % Interest expense (97 ) — (97 ) -100.0 % Other expense, net 484 (459 ) 943 -205.4 % Loss before income taxes (13,903 ) (38,460 ) 24,557 -63.9 % Income tax (expense) benefit (184 ) (167 ) (17 ) -10.2 % Net loss $ (14,087 ) $ (38,627 ) $ 24,540 -63.5 % Net revenues.
In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 46 Results of Operations Years Ended December 31, 2023 and 2022: The following tables present key components of our results of operations for the respective periods (in thousands): Year Ended December 31, 2023 vs 2022 2023 2022 Increase (Decrease) % Net revenues $ 93,632 $ 69,828 $ 23,804 34.1 % Cost of revenues 74,308 58,205 16,103 27.7 % Gross profit 19,324 11,623 7,701 66.3 % Operating expenses: Research and development 1,772 7,973 (6,201 ) -77.8 % Sales and marketing 8,768 7,274 1,494 20.5 % General and administrative 8,271 10,666 (2,395 ) -22.5 % Total operating expenses 18,811 25,913 (7,102 ) -27.4 % Net income (loss) from operations 513 (14,290 ) 14,803 -103.6 % Interest expense (15 ) (97 ) 82 -84.5 % Other income (expense), net (214 ) 484 (698 ) -144.2 % Net income (loss) before income taxes 284 (13,903 ) 14,187 -102.0 % Income tax expense (374 ) (184 ) (190 ) 103.3 % Net loss $ (90 ) $ (14,087 ) $ 13,997 -99.4 % Net revenues.
The lower cost of revenue as a percentage of revenue in 2022 was due to sales mix and specifically the sale of relatively higher margin XP10’s in 2022. The tablets have a lower profit margin percentage than the XP10plus, but it is higher than the profit margin percentage for the XP3 in 2021. Gross profit and margin.
The lower cost of revenues as a percentage of net revenues in 2023 was due to sales mix and specifically the sale of relatively higher margin smartphones in 2023. Gross profit and margin.
The effects of the ongoing pandemic are unpredictable, and as a result, we may experience increased costs and/or disruption as long as the pandemic persists. 39 Key Metrics We review a variety of key financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies.
Our cost of revenue may increase if the component prices increase. 42 Key Metrics We review a variety of key financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies.
Units Sold Our smartphones include the XP10, and XP8 models. The number of smartphone units sold during the year ended December 31, 2022 compared to the year ended December 31, 2021 increased by 26%, primarily because the XP10 was launched in November 2022. Our feature phones include the XP3plus, XP3, XP5, XP5s, and XP5plus models.
The number of smartphone units sold during the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by 89%, primarily because the XP10 was launched in November 2022 and had a full year of sales in 2023.
Set forth below is a reconciliation from net loss to Adjusted EBITDA for the respective periods: Year Ended December 31, 2022 2021 (in thousands) Net loss $ (14,087 ) $ (38,627 ) Depreciation and amortization 2,375 2,129 Stock-based compensation 1,551 1,085 Interest expense 97 — Income taxes 184 167 Adjusted EBITDA $ (9,880 ) $ (34,746 ) Factors Affecting Our Results of Operations We believe that the growth and future success of our business depend on many factors.
Set forth below is a reconciliation from net loss to Adjusted EBITDA (in thousands): Year Ended December 31, 2023 2022 Net loss $ (90 ) $ (14,087 ) Depreciation and amortization 2,206 2,375 Stock-based compensation 1,496 1,551 Interest expense 15 97 Income taxes 374 184 Adjusted EBITDA $ 4,001 $ (9,880 ) We define Adjusted EBITDA as net loss adjusted to exclude the impact of stock-based compensation expense, depreciation and amortization, interest expense, and income taxes.
Non-cash charges of $5.7 million were partially offset by changes in operating assets and liabilities of $5.6 million. Non-cash charges primarily consisted of $1.1 million in stock-based compensation, $1.6 million in inventory write-downs, $2.1 million in depreciation and amortization, and $0.9 million for an increase to the provision for doubtful accounts.
Non-cash charges were $4.3 million and changes in operating assets and liabilities were a net use of $8.3 million. Non-cash charges primarily consisted of $2.2 million in depreciation and amortization, $1.5 million in stock-based compensation, $0.4 million in payment for services with common stock, partially offset by non-cash lease liability amortization.
Cash flows from financing activities For the year ended December 31, 2022, cash provided by financing activities was $14.3 million, primarily due to proceeds from the AJP transaction (see Note 9).
Cash flows from financing activities For the year ended December 31, 2023, cash provided by financing activities was $0.3 million, primarily due to $0.4 million in proceeds from the exercise of stock options, partially offset by $0.1 million for the repayment of debt.
This $24.4 million improvement in the net loss is primarily due to a $9.7 million decrease to Research & Development expense, a $5.9 million decrease in legal expense, $5.2 million in higher gross sales margin due to higher revenue, and a $2.3 million decrease in Sales & Marketing expenses. Adjusted EBITDA.
This $14.0 million improvement is primarily due to a $7.7 million increase in gross profit due to higher revenue, a $6.2 million decrease in R&D expenses, and a $2.4 million decrease in General and Administrative expenses, partially offset by a $1.5 million increase in Sales and Marketing expenses. Adjusted EBITDA.
Net revenues for the year ended December 31, 2022, increased by $15.3 million, or 28.0% to $69.8 million compared to $54.6 million for the year ended December 31, 2021. The increase in net revenues was due to $25.5 million in tablet sales.
Net revenues for the year ended December 31, 2023, increased by $23.8 million, or 34.1% to $93.6 million compared to $69.8 million for the year ended December 31, 2022.
Research and development expenses (‘R&D”) for the year ended December 31, 2022, decreased by $9.7 million or 54.9%, to $8.0 million compared to $17.7 million for the year ended December 31, 2021.
General and administrative expenses for the year ended December 31, 2023, decreased by $2.4 million, or 22.5%, to $8.3 million compared to $10.7 million for the year ended December 31, 2022.
Liquidity and Going Concern Currently, our principal source of liquidity consists of cash and cash equivalents totaling $13.2 million, as December 31, 2022. During the year ended December 31, 2022, our net loss was $14.1 million, and we have narrowed our net loss each quarter in 2022.
Currently, our principal source of liquidity consists of cash and cash equivalents totaling $9.4 million as of December 31, 2023. During the year ended December 31, 2023, our net loss was $0.1 million. In 2024 we will be launching new products beginning in the second quarter, and these new products are expected to incrementally improve cash flow.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until August 15, 2022, in which to regain compliance. On August 16, 2022 we received notice of an additional 180-day period from Nasdaq to regain compliance through February 13, 2023. On February 14, 2023 we received a deficiency letter from the Staff.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or through March 12, 2024, to regain compliance with the Bid Price Rule. On March 13, 2024, such period was extended by an additional 180 calendar days, or through September 9, 2024.
We have invested, and expect to continue to invest, in our sales and marketing efforts to drive new customer acquisition. A key part of our strategy is to further expand the use of our solutions over cellular networks in the public safety and industrial enterprise markets. We also intend to continue to invest in and expand our international sales teams.
We have invested, and expect to continue to invest, in our sales and marketing efforts to drive new customer acquisitions. We are currently pursuing former customers of Bullitt in Europe and the Middle East to introduce our rugged phone products. A key part of our strategy is to further expand our connected solutions products.
Company Overview We are a leading U.S. provider of ultra-rugged mobile devices, including phones and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles.
Company Overview Sonim Technologies is a leading U.S.-based provider of rugged mobile devices and accessories designed for workers physically engaged in their work environments, often in mission-critical roles. As part of our expansion efforts, the Company has introduced our Connected Solutions division which will begin launching products in 2024 in the U.S., Canada and Asia/Pacific.
The changes in our net operating assets and liabilities were primarily due to a $7.5 million increase in accounts receivable, an increase in other assets of $2.7 million, and an increase in non-trade receivable of $1.8 million, partially offset by a $4.2 million decrease in inventory, a $1.6 million decrease in prepaid expenses, and a $1.2 million increase in accounts payables and accrued liabilities.
The changes in our net operating assets and liabilities were primarily due to an increase in contract fulfillment assets of $4.5 from the capitalization of certification costs, an increase of $3.0 million in accounts receivable due to the timing of sales at year-end, and an increase of $2.6 million in inventory due to the timing of shipments at year-end.
As a result of the foregoing, substantial doubt exists regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of the audited consolidated financial statements included in this Annual Report on Form 10-K. 45 To mitigate the risks noted above, our management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds, or through obtaining credit from government or financial institutions.
We will adjust our spending to ensure that our cash is sufficient to cover any future negative cash flow. 48 Our management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, or through arrangements with strategic or investment partners with greater resources or access to funds, or through obtaining credit from government or financial institutions.
We currently sell our ruggedized mobile phones and accessories to the three largest wireless carriers in the United States— AT&T, T-Mobile and Verizon—as well as the three largest wireless carriers in Canada—Bell, Rogers and Telus Mobility. We also sell our ruggedized phones and accessories through distribution channels in North America, South America and Europe.
Revenues in 2023 were 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 products available at all three U.S. Tier-one carriers – AT&T, T-Mobile and Verizon as well as the three primary carriers in Canada – Bell, Telus and Rogers.
Nasdaq Delisting and Reverse Stock Split On February 16, 2022, we received a deficiency letter from the Staff of Nasdaq notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below $1.00 per share, which is the minimum closing price required to maintain the Minimum Bid Requirement.
We expect higher sales in Europe in 2024 and in future years. 41 Nasdaq Delisting and Reverse Stock Split On September 14, 2023, we received a letter from Nasdaq notifying us that, because the bid price for our common stock has fallen below $1.00 per share for 30 consecutive business days, we no longer comply with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) for continued listing.
The decrease was because 2021 included R&D on the XP3plus that was launched in 2021, a full year of R&D on the XP5plus that was launched in June 2022, and much of the R&D for the XP10 that was launched in November 2022. No new R&D projects were started in 2022. Sales and marketing.
The decrease was due to 2022 including R&D on the XP10 and the XP5plus that were launched in 2022. R&D expense in 2023 included spending on the new mobile hotspots, and two new smartphones that will launch in 2024. Sales and marketing.
We sell our mobile phones and accessories primarily to wireless carriers in both the United States and Canada, who then resell our products in conjunction with network services to end customers. We sell our tablets to a customer that rebrands them, and sells to customers in the U.S.
These carriers then resell our products, along with network services, to end customers focusing on two primary end markets: industrial enterprise and public sector. In 2023 and 2022, tablets were sold to a customer who resold them to a carrier in the U.S.
Because our U.S. sales channel is primarily comprised of large wireless carriers, the number of customers that we sell to is limited. For the year ended December 31, 2022, 53% of our revenues came from large wireless carriers and 41% came from our top three carrier customers. Our tablet customer accounts for 42% of our revenue.
Given our primary sales channels in the U.S. and Canada consist of large wireless carriers, our customer base is somewhat concentrated. For the year ended December 31, 2023, large wireless carriers contributed 45% of our revenues, with our top three carrier customers accounting for 40%.
Removed
Our devices and accessories connect workers with voice, data and workflow applications in two end markets: industrial enterprise and public sector. In the third quarter of 2022, we began selling tablet data devices. We generate revenues primarily from sales of our mobile phones, data devices, and industrial-grade accessories.
Added
As discussed in the section titled “ Cautionary Note About Forward-Looking Statements ,” this discussion contains forward-looking statements based on current expectations that involve risks and uncertainties.
Removed
For the year ended December 31, 2022, our smartphones accounted for 27% of our revenues, our feature phones accounted for 31% of our revenues, and our tablets accounted for 42% of our revenues. Our tablet data devices are a new line of devices for the Company and tablet sales will continue through 2023.
Added
Connected Solutions will primarily consist of devices that connect to the internet including mobile hotspots, fixed wireless devices and USB dongle devices. In addition to this, the Company has expanded its rugged phone portfolio by developing a semi-rugged smartphone that is designed for small businesses through three U.S. carriers beginning in the second half of 2024.
Removed
Although we remain subject to the risks and uncertainties associated with the development and release of new products, among others, we believe our operations have been streamlined to enable us to conduct business more effectively and efficiently despite near term economic uncertainty.
Added
The Company is also launching a consumer durable product in late 2024 to address consumers who need more protection in their devices without sacrificing key design elements and maintaining an attractive price point.
Removed
However, we need to develop new products in 2023 to replace revenue of any declining sales of our existing products that continue to approach their end-of-life cycle.
Added
In 2023, the Company sold tablets that connect to the internet to a customer who rebranded them for sale in the U.S., but such sales have been discontinued in the fourth quarter of 2023. Since June 2023, the Company has received thirteen product awards from U.S., Canadian, and an Australian carrier for products that will launch in 2024.
Removed
As a result of the foregoing, substantial doubt exists regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of the audited consolidated financial statements included in this Annual Report on Form 10-K.
Added
This includes seven product awards for rugged phones, five product awards for mobile hotspots, and one product award for a consumer durable smartphone. The thirteen product awards compare to one or two product awards per year that the Company received in years prior to 2023.
Removed
Next Generation of Phones and Data Devices The Company is developing new consumer durable phones and new data devices. 38 Investment from AJP Holding Company On April 13, 2022, the Company entered into a subscription agreement (the “Subscription Agreement”) with AJP Holding Company, LLC (“AJP”) whereby, subject to the terms thereof, AJP agreed to purchase from the Company an aggregate of 20,833,333 shares of the Company’s common stock (the “Purchased Shares”) for a purchase price of $0.84 per share, for an aggregate purchase price of $17.5 million.
Added
The tablet business was not part of our core business as it was under the ODM model where we designed a product for a specific customer, and we found a manufacturer to produce the product. ODM products have lower margins and shorter product lives as compared to our other products.
Removed
The transaction was completed in July and August 2022. The Company incurred approximately $3.1 million of transaction related expenses that were offset against the proceeds. In conjunction with the AJP transaction, Peter Liu was appointed CEO in April 2022 and Robert Tirva, the President and CFO resigned in July 2022. Clay Crolius was appointed CFO in July 2022.
Added
While we continue to design ultra rugged phones and accessories, we have broadened 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.
Removed
Upon completion of the transaction, AJP held 52% of the voting shares of the Company. The new management implemented a new strategy of expanding the Company’s portfolio of cell phones into the semi-rugged and consumer durable markets.
Added
These new products will not only expand our portfolio of products but will also allow the Company to diversify our customer base into new markets. New product launches for hotspots, our new rugged phone for small businesses, and our consumer-oriented phone will begin in 2024 and sales are expected to grow over the next few years.
Removed
We have requested a hearing to ask for additional time to comply. On October 26, 2022, the shareholders approved up to a 1 to 15 stock split. We plan on executing the reverse split if our stock price does not remain above $1.00 as required prior to the expiration of any extension period that we obtain during our upcoming hearing.
Added
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 small business and consumer spaces.
Removed
COVID-19 Pandemic The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and work force participation and created significant volatility and disruption in financial markets. As a result of COVID-19, our workforce shifted to operating in a primarily remote working environment, which has created productivity, connectivity, and oversight challenges.
Added
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. 40 Recent Developments Recent Product Awards The first step in selling our products through cell phone carriers is to receive a product award from the carrier.
Removed
We have been experiencing and expect to continue to experience supply chain delays and higher shipping costs.
Added
The award documents the intent of the carrier to carry the proposed product and offer it to customers through their stores or online. The carrier and Sonim agree to a launch date that is generally nine months or longer from the date of the product award.
Removed
The launch of the XP5plus had lower sales as a carrier delayed shipments due to excess inventory of other products. The Company’s expansion into data devices generated 326,000 units of tablet sales in 2022. Adjusted EBITDA In addition to our financial results determined in accordance with U.S.

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