10q10k10q10k.net

What changed in DNA X, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of DNA X, Inc.'s 2023 and 2024 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 2024 report.

+302 added−344 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-27)

Top changes in DNA X, Inc.'s 2024 10-K

302 paragraphs added · 344 removed · 174 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

39 edited+21 added−34 removed60 unchanged
Biggest changeAs 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.
Biggest changeWe have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names, and copyrights. We also have contractual rights to standard essential patents for 2G, 3G, 4G, and 5G wireless technologies, some of which require significant royalty payments. We opportunistically negotiate licenses with other patent holders where appropriate for our technology.
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.
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. 7 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.
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.
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. 5 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.
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.
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. 6 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.
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.
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, 2024, our sales and marketing team consisted of 19 professionals located in the United States, Canada and Europe.
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.
Our expansion into the connected solutions markets opens up opportunities with additional carrier partners globally. 3 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.
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.
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 smartphones, provides reliable communication options for transportation and logistics workers.
Channel partner marketing focuses on go-to-market strategy as well as developing supplemental sales tools, carrier and non-carrier marketing campaigns, industry trade show materials and brand awareness. Corporate marketing consists of public relations, social and digital marketing and lead generation operations.
Channel partner marketing focuses on go-to-market strategy as well as developing supplemental sales tools, carrier and non-carrier marketing campaigns, and industry trade show material. Corporate marketing consists of public relations, brand awareness, social and digital marketing, and lead generation operations.
We offer workers in the construction industry crush-, puncture-, scratch- and impact-resistant devices, which we believe to be crucial in environments where there is a high risk of such occurrences. Jobsites also value the PTT capabilities that are tightly integrated into Sonim devices.
We offer workers in the construction industry crush-, puncture-, scratch- and impact-resistant devices, which we believe to be crucial in environments where there is a high risk of such occurrences. Job sites also value the PTT capabilities that are tightly integrated into Sonim devices.
Our Strategy The three pillars of our go-forward strategy are as follows: ● Enhance and expand our leadership position in rugged enterprise and public sector markets. Expand into Europe and other markets.
Our Strategy The three pillars of our go-forward strategy are as follows: ● Enhance and expand our leadership position in rugged enterprise and public sector markets.
Further, the Company’s references to website URLs are intended to be inactive textual references only. 11
Further, the Company’s references to website URLs are intended to be inactive textual references only. 9
Enterprises and agencies can leverage the millions of applications available on the Google Play Store, our dozens of device-specific APIs, and our industrial accessories to create a purpose-built solution to meet the specific use cases of their task workers.
Enterprises and agencies can leverage the millions of applications available on the Google Play Store, our dozens of device-specific Application Programing Interfaces (“APIs”), and our industrial accessories to create a purpose-built solution to meet the specific use cases of their task workers.
We will be launching a new semi-rugged smartphone that is sleeker and lighter than our ultra-rugged phones, in the second half of 2024. These phones will be targeted at small business users. Home and Small Business Internet Users Mobile hotspots are used by businesses, government employees and consumers.
In the fourth quarter of 2024, we launched a new semi-rugged smartphone that is sleeker and lighter than our ultra-rugged phones. These phones will be targeted at small business users. Home and Small Business Internet Users Mobile hotspots are used by businesses, government employees and consumers.
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.
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. The Sonim XP Pro was launched in the fourth quarter of 2024 with Verizon.
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.
Reliable communication devices are often mission-critical for workers to stay safe while performing energy- and utility-related operations. 4 Public Sector Public Safety. In the United States, AT&T’s FirstNet, T-Mobile’s T-Priority, and Verizon’s Frontline public safety prioritization provide optimized networks for this sector.
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.
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 had 131 full-time employees and 29 contractors as of December 31, 2024.
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.
Key features of our rugged devices include the following, some of which apply only to phones, such as audio: ● 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.
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 (and at times share the connection) in a secure way wherever the customers go is essential to many users.
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.
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.
Customers While we are actively committed to expanding our customer base on various levels, our sales model for the phone business mainly focuses on sales through our channel partners. As a result, a small number of customers account for a large percentage of our net revenue.
Customers While we are actively committed to expanding our customer base on various levels, our sales model mainly focuses on sales through our carrier customers in North America and our distribution partners in Europe, the Middle East, South Africa, and Australia. As a result, a small number of customers account for a large percentage of our net revenue.
For example, school bus operators can combine our ruggedized phones, an industrial mounting kit, a PTT application that leverages our APIs and a location-tracking application to ensure that they have a solution that enables constant communication with dispatchers that is compliant with the U.S. Department of Transportation’s hands-free driving regulations and that can also automatically alert parents of route delays.
For example, school bus operators can combine our ruggedized phones, an industrial mounting kit, a Push-To-Talk (“PPT”) application that leverages our APIs and a location-tracking application to ensure that they have a solution that enables constant communication with dispatchers that is compliant with the U.S.
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.
Whether it is a salesperson visiting their customers, a police officer using their computer in their patrol car, a small business in need of failover for business continuity in the event of an internet outage, 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.
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.
Mobile hotspots provide the perfect vehicle for enabling these use cases. We will be launching additional mobile hotspots in 2025. 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.
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.
Department of Transportation’s hands-free driving regulations and that can also automatically alert parents of route delays. 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. 2 ● Ease of use.
These devices replace cable internet access and provide new access to rural areas. The market for these devices is growing tremendously in North America and in Europe. We created a division to design, develop and sell connected solutions devices.
Mobile operators receive data subscription revenue by providing these devices to their customers to access the internet. These devices replace cable internet access and provide new access to rural areas. The market for these solutions continues to grow in North America and in Europe. We created a division to design, develop and sell connected solutions devices.
Although the net revenue from our largest customer (and consequently from tablet sales) ended in October 2023, as we generate more net revenue from other customers, we expect that net revenue from a relatively small group of customers will continue to account for a significant portion of our net revenue in the near term.
Although the net revenue from our white label products customer ended in the first quarter of 2024 as the product reached its end of life, as we generate more net revenue from other customers, we expect that net revenue from a relatively small group of customers will continue to account for a significant portion of our net revenue in the near term.
For the fiscal year ended December 31, 2023, the purchaser of our tablets (our largest customer) and the three largest U.S. wireless carriers (our channel partners) accounted for approximately 48% and 35% of our net revenue, respectively, collectively constituted approximately 83% of our net revenue.
For the year ended December 31, 2024, the purchaser of our white label products (related party customer) and the three largest U.S. wireless carriers (our channel partners) collectively accounted for approximately 74% of our net revenue.
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.
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.
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.
Our mobile phones and connected solutions 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.
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.
They enable us to cost-effectively scale our business without employing a large direct sales force of our own.
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.
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. Key Features of Our Ruggedized Solutions ● Durability and reliability.
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.
Accessories Our portfolio of industrial-grade accessories extends beyond the traditional consumer cellular ecosystem of wall chargers and cases.
We are expanding our sales force and increasing our service infrastructure to serve customers that were previously served by Bullitt. 2 Connected Solutions Market Products include mobile hotspots and fixed wireless devices that connect to the internet through the cell phone networks. The carriers have created new revenue streams by providing these devices to their customers to access the internet.
We have expanded our sales force and increased our service infrastructure to serve customers that were previously served by Bullitt. 1 Connected Solutions Market Our Connected Solutions product portfolio includes mobile hotspots and fixed wireless access (“FWA”) devices that connect to the internet through the 4G and 5G cellular networks.
The Sonim XP Pro will be launched in the second half of 2024 with three North American carriers. The XP Pro is an Android-based 5G smartphone that is sleeker and lighter than our XP10 and will be marketed to small businesses that need a phone that is more durable than a consumer phone.
The XP Pro is an Android-based 5G smartphone that is sleeker and lighter than our XP10 and will be marketed to small businesses, enterprise, and mission critical users that need a phone that is significantly more durable than a consumer phone and can be used as their primary or sole phone .
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.
Continue our expansion into Europe and other markets. ● 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. These channel partners have large sales forces who sell our solutions to end customers in our target markets.
Our phones are certified to work on multiple mobile network operators and come equipped with LTE Band 14 to support FirstNet (built with AT&T).
Our phones are certified to work on multiple mobile network operators and come equipped with LTE Band 14 to support FirstNet (built with AT&T). We support the latest technologies, including 5G, and we have incorporated 5G into our product roadmap. Our Devices Mobile Phone Products ● Sonim XP10. The Sonim XP10 is an Android-based 5G smartphone. ● Sonim XP5plus.
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.
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 We hold numerous utility and design patents both inside and outside the United States and have filed additional utility and design patent applications in the United States.
We will launch a new consumer durable phone in the fourth quarter of 2024 and we will use this as a gage of consumer demand for a more durable consumer smartphone. Our strategy includes the following: ● Strategically grow the Company. Continue to increase the competencies of the Company to develop new connected solutions and rugged products.
Introduce products designed for the European and Australian market to distributors and carriers throughout Australia, Europe, the Middle East, and Africa. Our strategy includes the following: ● Strategically grow the Company. Continue to increase the competencies of the Company to develop new connected solutions and rugged products. Develop innovative products such as a new smartphone with a thermal camera.
Take advantage of sales opportunities due to the shutdown of the Bullitt. ● Approach the data device and connected solutions market with feature-rich devices that are affordably priced and leverage the Company’s high-quality approach to product design and procurement. We have received five product awards for new hotspot devices from U.S. and Canadian carriers, as well as an Australian carrier.
Develop innovative products such as a smartphone with a built-in thermal camera that we expect to launch in the second half of 2025. ● Approach the data device and connected solutions market with feature-rich devices that are affordably priced and leverage the Company’s high-quality approach to product design and procurement. ● Expand into Australia, Europe and other international markets.
Removed
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.
Added
Item 1. Business. Overview Sonim Technologies, based in the United States, is a leading provider of enterprise 5G solutions, offering a robust portfolio that includes rugged handsets, smartphones, wireless internet devices, software, services, and accessories.
Removed
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.
Added
Our products are engineered to deliver reliable communication in challenging and unpredictable environments, serving sectors such as critical communications, first responders, government, industrial, construction, hospitality, and logistics. We distribute our products primarily through major wireless carriers. We currently have products available at all three U.S.
Removed
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.
Added
Tier-one carriers – AT&T, T-Mobile and Verizon as well as the three primary carriers in Canada – Bell, Telus and Rogers, Telstra in Australia, and multiple carriers throughout Europe. These carriers resell our products, along with network services, to end customers focusing on two primary-end markets: industrial enterprise and the public sector.
Removed
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.
Added
Sonim is executing a strategic expansion initiative, focusing on broadening its market reach with new products, geographical footprint, and customer segments including enterprise, small and medium business, and prosumers. This strategy is underpinned by a strong emphasis on execution.
Removed
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.
Added
We have introduced new product categories: Connected Solutions featuring wireless internet products, a next-generation rugged smartphone, and a new range of mid and low-tier professional rugged phones, all boasting IP ratings, MIL-STD-810H standards, and elements of Sonim’s Rugged Performance Standards (“RPS”), highlighting our value proposition to target markets.
Removed
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.
Added
During the second half of 2024 and through the filing date of this report, Sonim launched the following products: ● Sonim H500-series of 5G mobile hotspots available through Verizon, UScellular, and Bell in North America; ● Sonim H700, the world’s first 5G Release 17 and Wi-Fi 7 rugged mobile hotspot, available through Telstra in Australia; ● Sonim H100 4G mobile hotspot available through Telia Finland and distribution partners in Europe; ● XP100 4G and XP400 5G professional rugged phones available through Deutsche Telekom in Germany and distribution partners in Europe and South Africa; ● XP Pro 5G rugged smartphone available through Verizon in the United States; and ● XP3plus 5G rugged flip phone available through T-Mobile and certified for T-Priority.
Removed
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.
Added
Additionally, the XP10 is now available through our distribution partners in EMEA and Australia. Most of these products are supported by the SonimWare platform and enterprise services. In the first quarter of 2025, the XP Pro 5G and H500 5G each received Verizon Frontline certification.
Removed
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.
Added
In the first quarter of 2025 we also announced the upcoming launch and availability of the XP Pro Thermal 5G smartphone for Europe which includes an SDK-enabled Sonim IRIS software for custom application development and an integrated thermal camera by FLIR® that benefits a number of vertical trades such as electricians, plumbers, public safety, construction, agriculture, amongst others.
Removed
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.
Added
Geographic market expansion continues with agreements and product availability through new distribution partners in Europe and South Africa, catering to carrier, reseller, and enterprise sales channels. New partners include TCCM, Brodos, Modino, Ingram Micro, and Cernotech, which bolster our presence in these regions. This strategic alignment supports our commitment to offering reliable solutions and expanding our customer base.
Removed
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.
Added
During the first half of 2024, Sonim undertook a strategic shift away from low-margin white label products, a transition that was expedited due to manufacturing challenges faced by our partners. This shift resulted in a decline in revenue for the year, with 2024 revenue totaling $58.3 million, compared to $93.6 million in 2023.
Removed
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.
Added
Our net loss for 2024 was $33.6 million, compared to $0.1 million in 2023. However, with the introduction of new product lines in the fourth quarter of 2024 and in the first half of 2025, we anticipate a return to revenue growth and improved profitability in 2025.
Removed
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.
Added
With the primary sales channels in the U.S. and Canada consisting of large wireless carriers, the Company’s customer base is highly concentrated. For the year ended December 31, 2024, wireless carriers contributed 75% of our total net revenues, with our top three carrier customers accounting for 62% of our total net revenues.
Removed
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.
Added
Our rugged smartphones represented 45% of our total net revenues, while feature phones were 35%, white label products (related party revenue) were 13%, and connected solutions, including our mobile hotspots, were 6% of our total net revenues.
Removed
They then sell these products through their enterprise and retail sales teams to end customers, often on a subsidized or financed basis.
Added
Sonim is committed to maintaining the highest standards of quality, reliability, and regulatory compliance, with a particular focus on the Trade Agreements Act (“TAA”) initiatives. TAA compliance is crucial in enhancing our market strategy, particularly in expanding opportunities within government and enterprise markets, which demand stringent adherence to regulatory standards.
Removed
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).
Added
By ensuring our products meet TAA requirements, we reinforce our position as a trusted provider of enterprise 5G solutions. This initiative underscores our dedication to delivering products that not only meet industry-leading standards but also comply with U.S. federal procurement regulations, thereby enhancing our competitiveness in securing government contracts.
Removed
Under these arrangements, we and the channel partners determine sales channel distribution in connection with pricing (including any discounts and price protection) and market positioning of each particular mobile phone product. We also offer our channel partners channel marketing and other promotional incentives, such as sales volume incentives, in exchange for retail price reductions.
Added
Looking ahead to 2025, Sonim is focused on executing its growth strategy by bringing its expanded portfolio of rugged devices, connected solutions, and enterprise services to its constantly increasing global customer base. Our Products Ruggedized Cell Phones Communication, data collection, productivity and safety among task workers have always been central requirements in business-critical and mission-critical environments.
Removed
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.
Added
The Sonim XP5plus is a purpose-built 4G feature phone designed for task workers with Push-to-Talk capabilities and seamless LMR interoperability to enhance communication for first responders. ● Sonim XP3plus.
Removed
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.
Added
Connected Solutions Products ● Sonim H100 Low-range Mobile Hotspot. The H100 is a 4G mobile hotspot that is available through select distributors in Europe and Telia in Finland. This model launched in the first quarter of 2025. ● Sonim H500 Mid-Range Mobile Hotspot.
Removed
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.
Added
The H500 series 5G mobile hotspot was launched beginning in the second quarter of 2024 with multiple carriers in North America. ● Sonim H700 Premium Mobile Hotspot. The Sonim H700 mobile hotspot t was launched in the second half of 2024 with Telstra in Australia. It is the world’s first rugged mobile hotspot with 5G release 17 and Wi-Fi 7.
Removed
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.
Added
Manufacturing We have outsourced the manufacturing and the final assembly to third-party ODM partners for our phones and data devices. We have moved the manufacturing of our newest products outside of China and expect to phase out all manufacturing in China during 2025.
Removed
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.

… 14 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+38 added−73 removed216 unchanged
Biggest changeExamples of these laws include but are not limited to: ● various comprehensive U.S. state and foreign privacy laws, which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data; ● the General Data Protection Regulation and the United Kingdom General Data Protection Regulations, which apply to all of our activities conducted from an establishment in the EU or the United Kingdom, respectively, or related to products and services that we offer to EU or the United Kingdom users or customers, respectively, or the monitoring of their behavior in the EU or the UK, respectively; and ● the California Internet of Things Security Law, which regulates the security of data used in connection with internet-connected devices. 25 We may incur substantial expense in complying with the obligations imposed by various jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.
Biggest changeExamples of these laws include but are not limited to: ● various U.S. federal, U.S. state, and foreign privacy laws related to the processing and security of personal data, including: (1) comprehensive privacy laws that provide data privacy rights (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data; (2) laws imposing obligations on businesses that collect or disclose biometric information (including, in Illinois, Texas, and Washington); and (3) laws regulating internet-connected devices (such as, in California, the Internet of Things Security Law). ● the EU General Data Protection Regulation and the United Kingdom General Data Protection Regulations, which apply to all of our activities conducted from an establishment in the EU or the United Kingdom, respectively, or related to products and services that we offer to the EU or the United Kingdom users or customers, respectively, or the monitoring of their behavior in the EU or the UK, respectively. 23 We may incur substantial expense in complying with the obligations imposed by various jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.
We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations. Our operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.
Our operations and the products we manufacture or sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions than you desire.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions than you desire.
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.
If our revenue or operating results do not meet the expectations of investors, the price of our common stock may decline substantially. 30 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 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.
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 our business, financial condition, and results of operations. If we are unable to successfully protect our intellectual property, our competitive position may be harmed.
If any of these providers experience (i) difficulties in obtaining sufficient supplies of components, (ii) component prices significantly exceeding anticipated costs, (iii) an interruption in their operations, or (iv) otherwise suffers capacity constraints, we could experience a delay in production and shipping of these products, which would have a negative impact on our revenue.
If any of these providers experience (i) difficulties in obtaining sufficient supplies of components, (ii) component prices significantly exceeding anticipated costs, (iii) an interruption in their operations, or (iv) otherwise suffers capacity constraints, we experience a delay in production and shipping of these products, which would have a negative impact on our revenue.
If we are unable to efficiently manage our supply and satisfy purchase orders on a timely basis to our channel partners, we may be in breach of our sales arrangements and lose potential sales. Our sales arrangements also generally include technical performance standards for our mobile phones and accessories sold, which vary by channel partner.
If we are unable to efficiently manage our supply and satisfy purchase orders on a timely basis to our channel partners, we may be in breach of our sales arrangements and lose potential sales. Our sales arrangements also generally include technical performance standards for our mobile phones, mobile hotspots, and accessories sold, which vary by channel partner.
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.
Our channel partners are primarily wireless carriers who sell our products 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.
There can be no assurance that we will generate sufficient revenue to offset the cost of maintaining our remaining operations, including significant accounting, legal, administrative, and other costs associated with being a public company, and successfully expand our business in accordance with our growth strategy.
There can be no assurance that we will generate sufficient revenue to offset the cost of maintaining our operations, including significant accounting, legal, administrative, and other costs associated with being a public company, and successfully expand our business in accordance with our growth strategy.
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.
Personal privacy and information security are significant issues in the United States, Europe 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 and other economic factors can materially adversely affect the Company’s business, results of operations, financial condition, and stock price. Economic uncertainties or downturns, or political changes, could limit the availability of funds available to our customers and potential customers, which could significantly adversely impact our business.
These and other economic factors can materially adversely affect the Company’s business, results of operations, financial condition, and stock price. Economic uncertainties or downturns, or political changes, could limit the availability of funds to our customers and potential customers, which could significantly adversely impact our business.
The projections and timelines that our management may provide from time to time (including with respect to financial or operational matters and the expansion of our product portfolio and business lines) reflect numerous assumptions made by our management with respect to our specific, as well as general business, economic, market and financial conditions, including our ability to correctly assess the demand to such products from different consumers and other matters, all of which may be difficult to predict and many of which are beyond our control. 32 Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate or that our organic growth and expansion may be curtailed.
The projections and timelines that our management may provide from time to time (including with respect to financial or operational matters and the expansion of our product portfolio and business lines) reflect numerous assumptions made by our management with respect to our specific, as well as general business, economic, market and financial conditions, including our ability to correctly assess the demand to such products from different consumers and other matters, all of which may be difficult to predict and many of which are beyond our control. 31 Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate or that our organic growth and expansion may be curtailed.
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.
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. 16 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.
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.
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. 11 We participate in a competitive industry, which may become more competitive.
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.
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. 14 Further, we have made and will continue to make judgments as to whether we should further reduce, relocate, or otherwise change our workforce.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, infectious disease outbreaks, and warfare and terrorist attacks in North America, Europe, the Asia Pacific region or elsewhere, could cause a decrease in funds available to our customers and potential customers and negatively affect the growth rate of our business.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, infectious disease outbreaks, geopolitical tensions and warfare and terrorist attacks in North America, Europe, the Asia Pacific region or elsewhere, could cause a decrease in funds available to our customers and potential customers and negatively affect the growth rate of our business.
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.
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. 33 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.
Due to the investment by AJP Holding Company, LLC in 2022 and the resulting ownership change, the future use of the NOLs to reduce future taxable income of the Company is severely limited.
Due to the investment by AJP Holding Company, LLC (“AJP”) in 2022 and the resulting ownership change, the future use of the NOLs to reduce future taxable income of the Company is severely limited.
If we are unable to succeed in closing sales with new and existing customers, our business, operating results, and financial condition will be harmed. 19 If we fail to adequately forecast demand for our inventory and supply needs, we could incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales.
If we are unable to succeed in closing sales with new and existing customers, our business, operating results, and financial condition will be harmed. 17 If we fail to adequately forecast demand for our inventory and supply needs, we could incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales.
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.
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. 26 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.
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.
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. 35 Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets.
Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition, or require us to devote additional research and development resources to change our technology platform. 24 With respect to open-source operating systems, if third parties cease continued development of such operating systems or restrict our access to such operating systems, our business and financial results could be adversely impacted.
Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition, or require us to devote additional research and development resources to change our technology platform. 22 With respect to open-source operating systems, if third parties cease continued development of such operating systems or restrict our access to such operating systems, our business and financial results could be adversely impacted.
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.
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. 25 The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.
If federal funding is reduced or eliminated and our end customers cannot find alternative sources of funding to purchase our solutions, our business will be harmed. 21 Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business.
If federal funding is reduced or eliminated and our end customers cannot find alternative sources of funding to purchase our solutions, our business will be harmed. 19 Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business.
While we may offer limited customer incentives, we generally have limited to no control over which products our channel partners decide to offer or promote, which directly impacts the number of products that our partners will purchase from us. 15 Our channel partners may be unsuccessful in marketing, selling and supporting our solutions.
While we may offer limited customer incentives, we generally have limited to no control over which products our channel partners decide to offer or promote, which directly impacts the number of products that our partners will purchase from us. 13 Our channel partners may be unsuccessful in marketing, selling and supporting our solutions.
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.
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, 2024 and 2023). Increasing end-customer brand awareness requires investment in our sales and marketing efforts.
The inclusion of projections or timelines in this Annual Report on Form 10-K or any other filing we make with the SEC or otherwise communicated to investors by us should not be regarded as an indication that we or our management or representatives considered or consider such projections and timelines to be a reliable prediction of future events, and the projections and timelines should not be relied upon as such.
The inclusion of projections or timelines in our Annual Report on Form 10-K or any other filings we make with the SEC or otherwise communicated to investors by us should not be regarded as an indication that we or our management or representatives considered or consider such projections and timelines to be a reliable prediction of future events, and the projections and timelines should not be relied upon as such.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our certificate of incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
The interpretation and implementation of the various provisions of the Communications Act of 1924, as amended, and the FCC rules implementing said act continue to be heavily debated and may have a material adverse effect on our business.
The interpretation and implementation of the various provisions of the Communications Act of 1934, as amended, and the FCC rules implementing said act continue to be heavily debated and may have a material adverse effect on our business.
Risks Related to Our Business and Industry To remain competitive and stimulate consumer and business demand, we must successfully manage the introductions of new products and product lines and the transition and enhancement of existing products.
Risks Related to Our Business and Industry To remain competitive and stimulate consumer and business demand, we must successfully manage the introduction of new products and product lines and the transition and enhancement of existing products.
If we are unable to maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected. In the years ended December 31, 2023 and 2022, approximately 35% and 41% of our revenues, respectively, were derived from the three largest U.S. wireless carriers, our channel partners.
If we are unable to maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected. In the years ended December 31, 2024 and 2023, approximately 62% and 35% of our revenues, respectively, were derived from the three largest U.S. wireless carriers, our channel partners.
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.
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.
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.
Consequently, if our revenue does not meet projected levels in the short term, our inventory levels, cost of revenues and operating expenses would be high relative to revenue, resulting in potential operating losses.
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.
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.
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, 2024 and 2023, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $120.1 million and $95.2 million, respectively, due to prior period losses, a portion of which expire in various years beginning in 2037 and 2035, respectively, if not utilized.
You should read this summary together with the more detailed description of each risk factor contained below in the section titled “Risk Factors.” Risks Related to Our Business and Industry ● Our ability to compete effectively depends on multiple factors and we may not be able to continue to develop solutions to address user needs effectively; ● We face strong competitors with greater resources and more extensive experience in the industry; ● A small number of customers account for a significant portion of our revenue; ● We are materially dependent on some customer relationships that are characterized by non-binding product award letters and the loss of such relationships could harm our business and operating results; ● We rely primarily on third-party contract manufacturers and partners; ● We continue to restructure and transform our business; ● Our entry into the data device sector may divert financial and managerial resources; ● Lengthy customization and certification process for each wireless carrier customer; ● We are dependent on the continued services and performance of our management and key personnel; ● Our products may contain defects or errors; Risks Related to Our Financial Condition ● We may not generate sufficient liquidity to operate our business and maintain its growth; ● Our liquidity has been adversely impacted by our ongoing net losses; ● We have not been profitable in recent years and may not achieve or maintain profitability; Risks Related to Information Technology and Intellectual Property ● Without successful protection of our intellectual property, our competitive position may be harmed; ● The occurrence of security breaches, improper access to or disclosure of our data or customer data, and other cyber incidents can inflict monetary and reputational damages; ● Others may claim that we infringe on their intellectual property rights; 12 Risks Related to Legal and Regulatory Matters ● Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business; ● Changes in U.S. trade policy including tariffs can adversely impact our business; Risks Related to Ownership of Our Common Stock ● We are not in compliance with the listing standards of the Nasdaq Stock Market and as a result, our common stock may become delisted; ● Sales of our common stock under the currently effective registration statement or the perception of such sales can result in a decline in the price of our common stock; ● Our quarterly results may vary significantly from period to period; ● Financial projections we communicate to the markets from time to time may be inaccurate; and General Risk Factors ● We face risks related to the impact of various economic, political, environmental, social, and market events beyond our control can impact our business and results of operations.
You should read this summary together with the more detailed description of each risk factor contained below in the section titled “Risk Factors.” Risks Related to Our Business and Industry ● Our ability to compete effectively depends on being able to develop solutions that address users’ needs effectively; ● We face strong competitors with greater resources and more extensive experience in the industry; ● A small number of customers account for a significant portion of our revenue; ● We are materially dependent on some customer relationships that are characterized by non-binding product award letters and the loss of relationship with these customers could harm our business and operating results; ● We rely primarily on third-party contract manufacturers and partners; ● We rely on related-party transactions for certain business operations; ● We continue to restructure and transform our business; ● Lengthy customization and certification process for each wireless carrier customer; ● We are dependent on the continued services and performance of our management and key personnel; ● Our products may contain defects or errors; Risks Related to Our Financial Condition ● We may not generate sufficient liquidity to operate our business and maintain its growth; ● Our liquidity has been adversely impacted by our ongoing net losses; ● We have not been profitable in recent years and may not achieve or maintain profitability; Risks Related to Information Technology and Intellectual Property ● Without successful protection of our intellectual property, our competitive position may be harmed; ● The occurrence of security breaches, improper access to or disclosure of our data or customer data, and other cyber incidents can inflict monetary and reputational damages; ● Others may claim that we infringe on their intellectual property rights; 10 Risks Related to Legal and Regulatory Matters ● Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business; ● Changes in U.S. trade policy including tariffs can adversely impact our business; Risks Related to Ownership of Our Common Stock ● We face risks related to potential hostile bids and stockholder activists; ● Sales of our common stock under resale registration statements or the perception of such sales can result in a decline in the price of our common stock; ● Our quarterly results may vary significantly from period to period; ● Financial projections we communicate to the markets from time to time may be inaccurate; and General Risk Factors ● We face risks related to the impact of various economic, political, environmental, social, and market events beyond our control can impact our business and results of operations.
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.
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.
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.
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.
We are subject to the risks and uncertainties associated with the development and release of new products. Our principal sources of liquidity as of December 31, 2023 consist of existing cash and cash equivalents totaling $9.4 million.
We are subject to the risks and uncertainties associated with the development and release of new products. Our principal sources of liquidity as of December 31, 2024, consist of existing cash and cash equivalents totaling $5.3 million.
As a result, we expect our sales and marketing expenses to increase in the future, primarily from increased sales personnel expenses, which will require us to cost-efficiently ramp up our sales and marketing capabilities and effectively target end customers.
As a result, we expect our sales and marketing expenses to increase in the future, primarily from increased use of third-party service providers, which will require us to cost-efficiently ramp up our sales and marketing capabilities and effectively target end customers.
Risks Related to Our Financial Condition We may not generate sufficient liquidity to operate our business and maintain its growth. We will require significant funds to implement our business strategy, upgrade and expand our product portfolio, and meet our other liquidity needs.
Risks Related to Our Financial Condition We may not generate sufficient liquidity to operate our business and maintain its growth. We will require significant funds to implement our business strategy, upgrade and expand our product portfolio, and meet our other liquidity needs. Our historical revenue is not indicative of our future performance.
Until such time that this registration statement is no longer effective, the registration statement will permit the resale of these shares. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time.
Until such time that these registration statements are no longer effective, they will permit the resale of the registered shares. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time.
Adverse macroeconomic conditions, including inflation or recession, new or increased tariffs and other barriers to trade, changes to the U.S. fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, and currency fluctuations can adversely impact consumer confidence and spending and materially adversely affect demand for our products and services.
Adverse macroeconomic conditions, including inflation or recession, new or increased tariffs and other barriers to trade, changes to the U.S. fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, currency fluctuations, changes in the volume and relative mix of U.S. government spending, international disputes, geopolitical tensions, and conflict can adversely impact consumer confidence and spending and materially adversely affect demand for our products and services.
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.
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.
The majority of our suppliers and manufacturing facilities are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
We are highly susceptible to the global supply chain and any disruptions. The majority of our suppliers and manufacturing facilities are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
These activities may divert management’s attention from other business concerns, which could have a significant adverse impact on our results of operations, financial condition or business.
These activities may divert management’s attention from other business concerns, which could have a significant adverse impact on our results of operations, financial condition or business. Being a public company requires significant resources and management oversight.
An inability to maintain adequate cash on hand, generate sufficient cash flow from our operations, or access capital financing on acceptable terms will reduce our chances to compete successfully and expand our business in the manner currently contemplated and adversely affect our business and results of operations.
An inability to maintain adequate cash on hand, generate sufficient cash flow from our operations, or access capital financing on acceptable terms will reduce our chances to compete successfully and expand our business in the manner currently contemplated and adversely affect our business and results of operations. 20 We have not been profitable in recent years and may not achieve or maintain profitability in the future.
Moreover, experienced and capable employees in the technology industry remain in high demand, and there is continual competition for their talents. Given our size, we may be at a disadvantage, relative to our larger competitors, in the competition for these personnel. 14 We currently generate significant net revenue from a small number of customers, and our channel partners.
Moreover, experienced and capable employees in the technology industry remain in high demand, and there is continual competition for their talents. Given our size, we may be at a disadvantage, relative to our larger competitors, in the competition for these personnel. 12 We rely on our channel partners to generate a substantial amount of our revenue.
Additionally, like other mobile device manufacturers, we use open-source software from time to time, which may be more susceptible to cybersecurity vulnerabilities that may not be identified timely. We are also dependent upon third-party manufacturers and service providers to adequately protect our IT systems.
Attacks against the Company can escalate during periods of geopolitical tensions or conflict. Additionally, like other mobile device manufacturers, we use open-source software from time to time, which may be more susceptible to cybersecurity vulnerabilities that may not be identified timely. We are also dependent upon third-party manufacturers and service providers to adequately protect our IT systems.
There can be no assurance that we will have sufficient resources to complete the development of our new products and bring them to market. Even if we are able to introduce our new ruggedized mobile phones to the market, there can be no assurance that these new product introductions will lead to any sales or increase in revenue.
Even if we are able to introduce our new ruggedized mobile phones and data devices to the market, there can be no assurance that these new product introductions will lead to any sales or increase in revenue.
While we employ a small direct sales force, our channel partners have significantly larger sales teams who are not contractually obligated to promote any of our devices and often have multiple competing devices in stock to offer their customers.
In the event there is not sufficient demand for our products, our channel partners may stop selling our products completely. While we employ a small direct sales force, our channel partners have significantly larger sales teams who are not contractually obligated to promote any of our devices and often have multiple competing devices in stock to offer their customers.
In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial condition and results of operations.
In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial condition and results of operations. We are subject to a wide range of product-, consumer-, worker- safety and environmental laws and regulations.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such provision.
However, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce a duty or liability created by the Securities Act or the rules and regulations thereunder; accordingly, we cannot be certain that a court would enforce such provision.
These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes- Oxley Act requires that we attest to having internal controls over financial reporting.
As a public company, we are subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition.
The sale of shares of our common stock in the public market or otherwise, including sales pursuant to the Form S-3 Registration Statement and Prospectus, dated December 1, 2023, or the perception that such sales could occur, could reduce the prevailing market price of shares of our common stock and increase the volatility of our share price.
The sale of shares of our common stock in the public market or otherwise, including sales pursuant to two effective Form S-3 Registration Statements and prospectuses, dated, respectively, December 1, 2023, (the “AJP Registration Statement”) and September 16, 2024 (the “Liu Registration Statement”) or the perception that such sales could occur, could reduce the prevailing market price of shares of our common stock and increase the volatility of our share price.
Sales of our common stock under the currently effective registration statement or the perception of such sales in the public market or otherwise could cause the market price for our common stock to decline, even if our business is doing well.
Sales of our common stock under resale registration statements or the perception of such sales in the public market or otherwise could cause the market price for our common stock to decline, even if our business is doing well. Resales of our common stock may cause the market price of our securities to drop significantly.
Wang may control a majority of the voting power, and we may then be a “controlled company” within the meaning of applicable rules of the Nasdaq at the time of conversion.
Wang, in the event of purchasing more shares of our common stock, Mr. Wang may control a majority of the voting power, and we may then be a “controlled company” within the meaning of applicable rules of the Nasdaq at the time of conversion.
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 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 contract manufacturing, product assembly, and some of our software development operations to third parties located in Asia.
Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our results of operations, financial condition or business. As a public company, we are subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act.
We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our results of operations, financial condition or business.
New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock. Additionally, we may be limited as to the amount of funds we can raise pursuant to SEC rules and the continued listing requirements of the Nasdaq Stock Market or Nasdaq.
Additionally, we may be limited as to the amount of funds we can raise pursuant to SEC rules and the continued listing requirements of the Nasdaq Stock Market or Nasdaq.
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.
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. 32 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 stockholder litigation matters and the U.S. federal district courts as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion.
We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion.
In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency and providing additional accessibility.
In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency and providing additional accessibility. The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence.
Our certificate of incorporation further provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above; however, our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any disruptions in our operations could negatively impact our business and operating results and harm our reputation. For example, our headquarters in Austin, Texas were shut down without power or water for several days in 2021. In addition, we may not carry business insurance or may not carry sufficient business insurance to compensate for losses that may occur.
Any disruptions in our operations could negatively impact our business and operating results and harm our reputation. In addition, we may not carry business insurance or may not carry sufficient business insurance to compensate for losses that may occur. Any such losses or damages could have a significant adverse impact on our business, operating results and financial condition.
From time to time, we are a party to litigation, arbitration, or administrative actions. Our business may bring us into conflict with third parties with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours.
Our business may bring us into conflict with third parties with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us.
If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us. Our financial results and reputation could be negatively impacted by unfavorable outcomes to any future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K.
Our financial results and reputation could be negatively impacted by unfavorable outcomes to any future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K. Bribery Act, or other anti-corruption laws.
Due to the small size of our Company and our limited number of employees, each member of our executives, managers and other key personnel serves a critical role to our success.
Beginning in 2021, we outsourced substantially all of our manufacturing work to third parties. As of December 31, 2024, our worldwide employee headcount was 131 employees. Due to the small size of our Company and our limited number of employees, each member of our executives, managers and other key personnel serves a critical role to our success.
If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a significant impact on our business, financial condition and results of operations.
While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provision to be inapplicable or unenforceable, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition and results of operations and result in a diversion of the time and resources of our employees, management and the board of directors.
To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies.
The Sarbanes-Oxley Act requires that we attest to having internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight.
As a result, we are currently prioritizing spending on research and development of our consumer durable mobile phones and other data devices. However, the research and development necessary to launch our new products will require us to incur additional costs and our liquidity continues to be adversely impacted by our ongoing net losses.
However, the research and development necessary to launch our new products will require us to incur additional costs and our liquidity continues to be adversely impacted by our ongoing net losses. There can be no assurance that we will have sufficient resources to complete the development of our new products and bring them to market.
Any such disruption could negatively affect our reputation and our operating results. 17 In addition, we rely on third parties to provide certain services to us, or to our customers, including software development, hosting services, and providers of other cloud-based services.
Additionally, our reliance on third parties could, in certain instances, result in reputational damage or even disqualify us from sales opportunities with certain customers. 15 In addition, we rely on third parties to provide certain services to us, or to our customers, including hosting services, and providers of other cloud-based services.
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. We also expect our costs to increase in future periods, which would negatively impact our future operating results if our revenues do not increase.
We also expect our costs to increase in future periods, which would negatively impact our future operating results if our revenues do not increase.
If necessary, we will seek to raise additional capital from new debt. There can be no assurance that additional financing will be available to us on acceptable terms, or at all. Additionally, if we issue additional equity securities to raise funds, whether to existing investors or others, the ownership percentage of our existing stockholders would be reduced.
Our existing capital is expected to allow the company to continue operations for at least the next twelve months. If necessary, we will seek to raise additional capital. There can be no assurance that additional financing will be available to us on acceptable terms, or at all.
If we rely on these exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements. Jefferey Wang, a member of our board of directors and the sole manager of AJP, beneficially owns approximately 45.3% of the issued and outstanding shares of our common stock as of December 31, 2023.
If we rely on these exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements .
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.
For example, the development and implementation of AI technologies may further increase our exposure to or exacerbate the risks of cyber attacks or other security incidents, particularly where such technologies are exploited by third parties to breach our IT systems or those of our third-party service providers. 21 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.
If we face relevant litigation and are unable to enforce this provision, we may incur additional costs associated with resolving such matters in other jurisdictions, which could harm our business, financial condition, or results of operations. The market price of our common stock is likely to be volatile and could fluctuate or decline, resulting in substantial loss of your investment.
The market price of our common stock is likely to be volatile and could fluctuate or decline, resulting in substantial loss of your investment.
This exclusive choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons.
The forum selection provisions in our certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.
As 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.
We have incurred significant net losses since 2013 and have an accumulated deficit of $284 million as of December 31, 2024. 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.
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.
Any of these developments could have a material adverse effect on our business, operating results, and financial condition. 24 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. From time to time, we are a party to litigation, arbitration, or administrative actions.

… 117 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−0 removed10 unchanged
Biggest changeIn addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. Cybersecurity Risks Oversight by our Management Our management team, including our Head of Information Technology, is responsible for addressing, assessing, and managing our material risks from cybersecurity threats.
Biggest changeIn addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. Cybersecurity Risks Oversight by our Management Our management team, including our Chief Information Security Officer (“CISO”), is responsible for addressing, assessing, and managing our material risks from cybersecurity threats .
Risk Factors” of this annual report on Form 10-K. 37 Corporate Governance Cybersecurity Risks Oversight by the Members of our Board The Audit Committee has oversight responsibility for risks and incidents relating to cybersecurity threats as a part of its overall risk oversight responsibilities.
Risk Factors” of this annual report on Form 10-K. 36 Corporate Governance Cybersecurity Risks Oversight by the Members of our Board The Audit Committee has oversight responsibility for risks and incidents relating to cybersecurity threats as a part of its overall risk oversight responsibilities.
Our head of Information Technology supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants (when applicable). Our management team’s experience includes demonstrated expertise in cybersecurity, mobile and data devices, and smartphone software.
Our CISO supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants (when applicable). Our management team’s experience includes demonstrated expertise in cybersecurity, mobile and data devices, and smartphone software.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties. We maintain our corporate headquarters in a leased facility in San Diego, California. In addition, we lease a facility in Shenzhen, China, and a facility in Beijing, China for employees that perform engineering and logistics services. We believe that our facilities are suitable to meet our current needs.
Biggest changeItem 2. Properties. We maintain our corporate headquarters in a leased facility in San Diego, California. In addition, we lease facilities in Shenzhen, China, in Beijing, China and in Bangalore, India for employees that perform engineering, logistics services, software development. We believe that our facilities are suitable to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
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
Biggest changeItem 3. Legal Proceedings. For information regarding our material legal proceedings, see “Note 10—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. 37 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−1 removed0 unchanged
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.
Biggest changeItem 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. Reserved 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48 Item 8.
Removed
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

1 edited+1 added−2 removed3 unchanged
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.
Biggest changeMarket Information Our common stock is traded on The Nasdaq Stock Market LLC under the symbol “SONM.” Holders of Record As of March 24 , 2025, there were 81 holders of record of our common stock based on information furnished by Equiniti Trust Company, LLC, formerly American Stock Transfer and Trust Company, LLC, the transfer agent for our securities.
Removed
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
Recent Sales of Unregistered Securities None Purchase of Equity Securities None
Removed
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

42 edited+68 added−60 removed35 unchanged
Biggest changeIn 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.
Biggest changeIn 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. 44 Results of Operations Years Ended December 31, 2024 and 2023: The following tables present key components of our results of operations for the respective periods (in thousands): Year Ended December 31, 2024 vs 2023 2024 2023 Increase (Decrease) % Net revenues $ 50,919 $ 93,632 $ (42,713 ) -46 % Related party net revenues 7,379 — 7,379 N/A Total net revenues 58,298 93,632 (35,334 ) -38 % Cost of revenues 48,378 74,308 (25,930 ) -35 % Gross profit 9,920 19,324 (9,404 ) -49 % Operating expenses: Research and development 14,235 1,772 12,463 703 % Sales and marketing 12,962 8,768 4,194 48 % General and administrative 12,384 8,271 4,113 50 % Impairment of contract fulfillment costs 3,464 — 3,464 N/A Restructuring charges 514 — 514 N/A Total operating expenses 43,559 18,811 24,748 132 % Net income (loss) from operations (33,639 ) 513 (34,152 ) -6,657 % Interest expense (29 ) (15 ) (14 ) 93 % Other income (expense), net 246 (214 ) 460 -215 % Net income (loss) before income taxes (33,422 ) 284 (33,706 ) -11,868 % Income tax expense (226 ) (374 ) 148 -40 % Net loss $ (33,648 ) $ (90 ) $ (33,558 ) 37,287 % Total net revenues.
When a customer agreement includes NRE services which involve significant design modification and customization of the product software that is essential to the functionality of the hardware, revenues are also recognized as control transfers to the customer under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . All of our revenues are derived from a single segment.
When a customer agreement includes NRE services which involve significant design modification and customization of the product software that is essential to the functionality of the hardware, revenues are recognized as control transfers to the customer under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . All of our revenues are derived from a single segment.
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.
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. 41 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. 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.
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. 42 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.
Contract Fulfillment Assets and Amortization The Company determined that the NRE technical approval costs and the NRE field test costs are contract fulfillment costs and recognizes the associated NRE asset as these costs are incurred.
Contract Fulfillment Assets, Amortization and Impairment The Company determined that the NRE technical approval costs and the NRE field test costs are contract fulfillment costs and recognizes the associated NRE asset as these costs are incurred.
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.
Research and development activities include the design of new products, the refinement of existing products, and the design of test methodologies to ensure compliance with required specifications. We consider costs associated with achieving technical acceptance with each product for each carrier to be a contract fulfillment cost that we capitalize.
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.
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 include the costs of developing new products and upgrading existing products.
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.
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 $0.5 million and $3 million.
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.
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, restructuring charges, and impairment of contract fulfillment assets are not considered a key measure of our operating performance.
The Company tracks the NRE assets by product and customer, then amortizes the NRE assets to Cost of Revenues over a period of four years, which is management’s estimated average product life for each model phone, starting from the date of the first significant sales.
The Company tracks the NRE assets by product and customer, then amortizes the NRE assets to cost of revenues over a period of three to four years, which is management’s estimated average product life for each model phone or connected device, starting from the date of the first significant sales.
While the hardware design of our phones is generally the same for all wireless carriers, each device must be configured to conform to the requirements of each wireless carrier’s network, resulting in higher development expenses as the number of wireless carriers we sell through increases.
While the hardware design of our phones and connected devices is generally the same for all wireless carriers, each device must be configured to conform to the requirements of each U.S. wireless carrier’s network, resulting in higher development expenses as the number of wireless carriers we sell through increases.
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.
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, 2024, we did not have any equity financing or convertible loans in place.
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.
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.
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.
Prior to the 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.
We have implemented and continue to implement measures to address those challenges. We also continue to actively manage our inventory and establish a relationship with third-party manufacturers in an effort to minimize supply chain disruptions.
We also continue to actively manage our inventory and establish a relationship with third-party manufacturers in an effort to minimize supply chain disruptions.
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.
Marketing expenses include all social media and collateral print media, brand development expenses, and trade shows. 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, external audit fees, IT costs, and insurance costs. Impairment of contract fulfillment assets.
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.
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.
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.
NRE services in 2024 and 2023 were less than 1% of our revenues. The Company recognizes revenue primarily from the sale of products, including our mobile phones, connected devices, and accessories, and most of the Company’s contracts include only one performance obligation, namely the delivery of the product.
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%.
With the primary sales channels in the U.S. and Canada consisting of large wireless carriers, the Company’s customer base is highly concentrated. For the year ended December 31, 2024, wireless carriers contributed 75% of our total net revenues, with our top three carrier customers accounting for 62% of our total net revenues.
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.
The number of smartphone units sold during the year ended December 31, 2024 compared to the same period in 2023 decreased by 17%, primarily because 2023 had higher sales of the XP10 after it was launched in November 2022.
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.
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.
Set forth below is units sold by product category (in thousands): Year Ended December 31, 2023 2022 Smartphones 70 37 Feature phones 69 102 Tablets and other 508 330 Total Units Sold 647 469 Adjusted EBITDA In addition to our financial results determined in accordance with U.S.
Set forth below is units sold by product category (in thousands): Year Ended December 31, 2024 2023 Smartphones 58 70 Feature phones 97 69 Connected solutions 17 – White label products (including related party) and other 142 508 Total Units Sold 314 647 Adjusted EBITDA In addition to our financial results determined in accordance with U.S.
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.
Adjusted EBITDA was negative $21.3 million for the year ended December 31, 2024, compared to $4.0 million for the year ended December 31, 2023. This decrease was primarily due to the same factors mentioned in the categories above.
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.
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. 47 Material Cash Requirements We had approximately $15.8 million in noncancelable purchase orders for inventory and other operating expenses as of December 31, 2024.
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.
Non-cash charges primarily consisted of $2.2 million in depreciation and amortization, $1.5 million in stock-based compensation, and $0.4 million in payment for services with common stock.
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.
Set forth below is a reconciliation from net loss to Adjusted EBITDA (in thousands): Year Ended December 31, 2024 2023 Net loss $ (33,648 ) $ (90 ) Depreciation and amortization 3,557 2,206 Stock-based compensation 1,525 1,496 Restructuring charges 514 – Impairment of contract fulfillment assets 6,484 – Interest expense 29 15 Income taxes 226 374 Adjusted EBITDA $ (21,313 ) $ 4,001 We define Adjusted EBITDA as net loss adjusted to exclude the impact of stock-based compensation expense, depreciation and amortization, interest expense, income taxes, restructuring charges, and asset impairment charges.
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.
Compliance with Nasdaq Listing Rules On September 14, 2023, the Company received a letter from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”) notifying it that, because the bid price for its common stock had fallen below $1.00 per share for 30 consecutive business days, the Company no longer complied with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) for continued listing.
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.
Historically, we have been dependent on a small number of North American wireless carriers to purchase our products. We have invested, and expect to continue to invest, in our sales and marketing efforts to drive new customer acquisitions. We are currently pursuing new customers in Europe and the Middle East to introduce our products.
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.
The change in net operating assets and liabilities was primarily due to an increase in contract fulfillment assets due to the capitalization of certification costs, an increase in accounts receivable due to the timing of sales at year-end, and an increase in inventory due to the timing of shipments at year-end, partially offset by a decrease in non-trade receivables due to the timing of parts deliveries to our manufacturers.
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.
The number of feature phone units sold during the year ended December 31, 2024 compared to the same period in 2023 increased by 41%, primarily because 2024 had higher sales of the XP3plus and XP5plus.
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.
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 model sold in 2024 and 2023, and our XP Pro and XP400 models sold in the fourth quarter of 2024.
These cash decreases were partially offset by a decrease of $1.3 million in non-trade receivables due to the timing of parts deliveries to our manufacturers. 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.
These increases were partially offset by a $7.1 million increase to contract fulfillment assets. For the year ended December 31, 2023, cash used in operating activities was $4.1 million, primarily attributable to non-cash charges of $4.3 million and net cash used in a change in net operating assets and liabilities of $8.3 million.
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.
A key part of our strategy is to further expand our connected solutions products. As a result, we expect our sales and marketing costs to increase as we seek to acquire new customers.
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.
Income tax provision for the year ended December 31, 2024, decreased $0.1 million compared to the same period in 2023 primarily due to the Company’s decrease in foreign tax expense for its foreign subsidiaries in 2024 as compared to 2023. Adjusted EBITDA.
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.
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, and Telstra in Australia. These carriers then resell our products, along with network services, to end customers focusing on two primary end markets: industrial enterprise and public sector.
This decrease was primarily due to severance costs of $1.2 million incurred in 2022 due to a change in the management team, a decrease in finance headcount, and lower directors and officers insurance costs. Interest expense. Interest expense is less than $0.1 million in both years because the Company had minimal debt. Other income (expense), net.
Restructuring charges . Restructuring charges for the year ended December 31, 2024, was $0.5 million, and consisted of severance costs incurred in connection with the reduction of our workforce. Interest expense. Interest expense is less than $0.1 million in both years because the Company had minimal debt. Other income (expense), net.
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.
Cost of revenues as a percentage of net revenue increased due to the $3.0 million impairment charge. Gross profit and margin.
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.
However, with the launch of new products in the fourth quarter of 2024 and in the first half of 2025, we anticipate significant revenue growth and improved profitability. 43 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.
Non-cash charges were $1.3 million and changes in operating assets and liabilities were $0.2 million. Non-cash charges primarily consisted of $1.5 million in stock-based compensation, $0.5 million in payment for services with common stock, partially offset by non-cash lease liability amortization, and $0.7 million in a non-cash gain on the termination of a lease.
Non-cash charges primarily consisted of $3.6 million in depreciation and amortization, $1.5 million in stock-based compensation, $6.5 million in impairment of contract fulfillment assets, and $2.3 million in the provision for credit loss.
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.
We expect to meet all obligations with existing cash and operating cash flow for a period of at least one year from the date of release of the consolidated financial statements included in this Annual Report on Form 10-K. 46 Cash Flows The following table summarizes our sources and uses of cash for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (8,486 ) $ (4,052 ) Net cash used in investing activities (214 ) (36 ) Net cash provided by financing activities 4,646 272 Net decrease in cash and cash equivalents $ (4,054 ) $ (3,816 ) Cash flows from operating activities For the year ended December 31, 2024, cash used in operating activities was $8.5 million, primarily attributable to a net loss of $33.6 million, partially offset by non-cash charges of $14.9 million and net cash provided by a change in net operating assets and liabilities of $10.3 million.
We capitalize these certification costs as contract fulfillment assets and amortize them over the estimated life of the product. Prior to the commencement of development of a product for certification, we generally do not receive any purchase orders or commitments.
For certifications outside the U.S., there may be one certification requirement for an entire country or region. Certification requirements for distributors vary by product and by region. We capitalize these certification costs as contract fulfillment assets and amortize them over the estimated life of the product.
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.
Cash flows from investing activities For the years ended December 31, 2024 and 2023, there were no significant investing activities. Cash flows from financing activities For the year ended December 31, 2024, cash provided by financing activities was $4.6 million, primarily due to $4.0 million in proceeds from an investor for the purchase of shares, as well as ATM sales.
Removed
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.
Added
Company Overview Sonim Technologies, based in the United States, is a leading provider of enterprise 5G solutions, offering a robust portfolio that includes rugged handsets, smartphones, wireless internet devices, software, services, and accessories. These products are engineered for reliable communication in challenging and unpredictable environments, serving sectors such as critical communications, first responders, government, industrial, construction, hospitality, and logistics.
Removed
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.
Added
We also sell our products through distributors and resellers in various markets, including Europe and South Africa. In 2023, Sonim announced a strategic expansion initiative, focusing on broadening its market reach with new products, geographical markets, and customer segments including enterprise, small and medium business, and prosumers. This strategy is underpinned by a strong emphasis on execution.
Removed
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.
Added
We have introduced new product categories: Connected Solutions featuring wireless internet products, a next-generation rugged smartphone, and a new range of mid and low-tier professional rugged phones, all boasting IP ratings, MIL-STD-810H standards, and elements of Sonim’s RPS, highlighting our value proposition to target markets.
Removed
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.
Added
During the second half of 2024 and through the filing date of this report, Sonim launched the following products: ● Sonim H500-series of 5G mobile hotspots available through Verizon, UScellular, and Bell in North America; ● Sonim H700, the world’s first 5G Release 17 and Wi-Fi 7 rugged mobile hotspot, available through Telstra in Australia; ● Sonim H100 4G mobile hotspot available through Telia Finland and distribution partners in Europe; ● XP100 4G and XP400 5G professional rugged phones available through Deutsche Telekom in Germany and distribution partners in Europe and South Africa; ● XP Pro 5G rugged smartphone available through Verizon in the United States; and ● XP3plus 5G rugged flip phone available through T-Mobile and certified for T-Priority.
Removed
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.
Added
Additionally, the XP10 is now available through our distribution partners in EMEA and Australia. Most of these products are supported by the SonimWare platform and enterprise services. In the first quarter of 2025, the XP Pro 5G and H500 5G each received Verizon Frontline certification.
Removed
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.
Added
In the first quarter of 2025 we also announced the upcoming launch and availability of the XP Pro Thermal 5G smartphone for Europe which includes an SDK-enabled Sonim IRIS software for custom application development and an integrated thermal camera by FLIR® that benefits a number of vertical trades such as electricians, plumbers, public safety, construction, agriculture, amongst others.
Removed
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.
Added
Geographic market expansion continues with agreements and product availability through new distribution partners in Europe and South Africa, catering to carrier, reseller, and enterprise sales channels. New partners include TCCM, Brodos, Modino, Ingram Micro, and Cernotech, which bolster our presence in these regions. This strategic alignment supports our commitment to offering reliable solutions and expanding our customer base.
Removed
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.
Added
During the first half of 2024, the Company was in a transition period, phasing out low margin white label products and commencing selling new products through our carrier channels. Our strategy of moving away from the white label business was accelerated when our manufacturing partners had difficulty maintaining production of our white label products.
Removed
To help contain costs and improve the efficiency of our operations, we have outsourced substantially all of our manufacturing functions, software development and quality control functions to third parties, transferring the employees who previously performed this work. We continue to develop differentiated products to attract and retain customers.
Added
Revenue in 2024 decreased compared to 2023 due to this transition away from white label products. However, with the launch of new products in the fourth quarter of 2024 and in the first half of 2025, we anticipate significant revenue growth and improved profitability in 2025.
Removed
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.
Added
Our rugged smartphones represented 45% of our total net revenues, while feature phones were 35% of our total net revenues, white label products (related party revenue) were 13% of our total net revenues, and connected solutions were 6% of our total net revenues.
Removed
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.
Added
In alignment with Sonim Technologies’ commitment to quality, reliability, and regulatory compliance, we have prioritized our Trade Agreements Act (“TAA”) initiatives. TAA compliance is crucial in enhancing our market strategy, particularly in expanding opportunities within government and enterprise markets, which demand stringent adherence to regulatory standards.
Removed
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.
Added
By ensuring our products meet TAA requirements, we reinforce our position as a trusted provider of enterprise 5G solutions. This initiative underscores our dedication to delivering products that not only meet industry-leading standards but also comply with U.S. federal procurement regulations, thereby enhancing our competitiveness in securing government contracts.
Removed
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.
Added
Looking ahead, Sonim is focused on bringing our new products and solutions offering to our expanded portfolio throughout 2025. 39 Recent Developments Recent Product Awards The first step in selling our products through wireless telecommunications carriers is to receive a product award from the carrier.
Removed
In the third quarter of 2023, the Company received five separate product awards for the new hotspot devices that connect users to the internet through the 4G or 5G phone network. These devices can replace a cable modem at a much lower monthly cost, are portable, and can be used anywhere that is covered by the 4G or 5G networks.
Added
As of the filing date of this report, Sonim is completing the development, testing and certification of new products that it expects to launch with various carriers in 2025. Reverse Stock Split On July 17, 2024, the Company effected a 1-for-10 reverse stock split of its issued and outstanding common stock (the “Reverse Stock Split”).
Removed
These product awards are from three tier-one carriers in the U.S., one tier-one carrier in Canada, and one tier-one carrier in Australia. The Company expects to launch the hotspots with different carriers beginning in the second quarter of 2024, through the fourth quarter of 2024. Incremental revenue and incremental net income are expected once these products are launched.
Added
Our common stock began trading on the Nasdaq Capital Market on a post-split basis on July 18, 2024. As a result of the Reverse Stock Split, each share of common stock issued and outstanding immediately prior to July 18, 2024, was automatically converted into one-tenth (1/10) of a share of common stock.
Removed
In the third quarter of 2023 and in the first quarter of 2024, the Company received three product awards for a new rugged smartphone from U.S. carriers.
Added
The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s equity, except to the extent that the Reverse Stock Split would result in a stockholder owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split.
Removed
This phone is sleeker than our ultra-rugged smartphone and will be targeted to small businesses that are exposed to challenging environments and who want a more durable phone that looks and feels like other consumer phones and has the same great features as other Android phones. This product is expected to launch in the second half of 2024.
Added
Stockholders who otherwise would be entitled to receive a fractional share instead were entitled to receive one whole share in lieu of such fractional share. The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock.
Removed
In the third quarter of 2023, the Company also received a product award for a value 5G smartphone from a tier-one U.S. carrier. This phone looks and feels like other consumer phones and has the same great Android features. The differentiator is that it is much more durable than other phones, and it does not require a separate protective case.
Added
All outstanding stock options, restricted stock units, and warrants entitling their holders to purchase or obtain or convert into shares of our common stock were adjusted, as required by the terms of these securities. All common share and per-share amounts in this Form 10-K have been retroactively restated to reflect the effect of the Reverse Stock Split.
Removed
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.
Added
Equity Financing On April 29, 2024, we consummated a private placement with a single investor and sold 350,000 shares of our common stock (as adjusted for the Reverse Stock Split) and warrants to purchase up to 350,000 shares of our common stock for an exercise price of $11.00 per share (as adjusted for the Reverse Stock Split) for an aggregate purchase price of $3.85 million.

… 90 more changes not shown on this page.

Other SONM 10-K year-over-year comparisons