DNA X, Inc.: Form 10-Q for the period ended Sep 30, 2025

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations together with “Cautionary Note About Forward-Looking Statements” and our condensed consolidated financial statements and related notes included under Item 1 of this Quarterly Report as well as our most recent Annual Report on Form 10-K for the year ended December 31, 2024 as amended, including Part 1, Item 1A “Risk Factors.”

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. 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. 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. 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.

During the second half of 2024 and through the filing date of this report, the Company launched the following products:

• Sonim H500-series of 5G mobile hotspots available at Verizon and Verizon Frontline Verified, UScellular, and Bell in North America, as well as at select carriers and through our distribution partners in Europe;
• Sonim MegaConnect, the world’s first 5G High Powered User Equipment (HPUE) rugged mobile hotspot, available at AT&T Business and FirstNet® in the United States, and is also FirstNet Trusted;
• 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 and Verizon Frontline Verified, AT&T and FirstNet Ready, and T-Mobile and certified for T-Priority in the United States, Bell, Telus, Rogers, and SaskTel in Canada, and through select distributors in Europe, the Middle East, and Africa;
• XP Pro Thermal 5G rugged smartphone available in Europe, the Middle East, and Africa through select distributors; and
• XP3plus 5G rugged flip phone available through T-Mobile and certified for T-Priority.

Most of these products are supported by the SonimWare™ platform and enterprise services. In 2025, all of our new products that launched with tier-one carriers in the United States included a certification associated with carrier first responder initiatives, including FirstNet Ready, FirstNet Trusted, Verizon Frontline Certified, and T-Mobile certified for T-Priority. In 2025, we launched 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.

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. Partners include 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.

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 nine months ended September 30, 2025, wireless carriers contributed 83% of our total net revenues, 12% of which related to the expiration of customer allowance agreements as three of our legacy phones approach end-of-life, with our top three carrier customers accounting for 69% of our total net revenues, 11% of which related to the expiration of customer allowance agreements. Our rugged smartphones represented 54% of our total net revenues, 12% of which related to the expiration of customer allowance agreements, while feature phones were 28% of our total net revenues, and connected solutions were 16% of our total net revenues. For the three months ended September 30, 2025, wireless carriers contributed 78% of our total net revenues, with our top three carrier customers accounting for 59% of our total net revenues. Our rugged smartphones represented 50% of our total net revenues, while feature phones were 23% of our total net revenues, and connected solutions were 25% of our total net revenues.

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. 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.

Looking ahead, Sonim is focused on bringing our new products and solutions offering to our expanded portfolio throughout 2025.

Pending Asset Purchase Agreement with Social Mobile and Company’s Strategic Initiatives

On July 17, 2025, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) by and among the Company, as seller, Pace Car Acquisition LLC, as buyer, (the “Buyer”), the Seller Representative named in the Asset Purchase Agreement, and, Social Mobile Technology Holdings LLC (the “Parent”), solely for the purpose of guaranteeing complete payment and performance obligations of the Buyer contained in the Asset Purchase Agreement.

Pursuant to the Asset Purchase Agreement, the Buyer agreed to acquire substantially all assets of the Company and its subsidiaries related to the Company’s enterprise 5G solutions business, including rugged handsets, smartphones, wireless internet devices, software, services, and accessories (collectively, the “Business”) for a purchase price of $15.0 million in cash, subject to (i) customary working capital, indebtedness and transaction expense adjustments (referred to in the Asset Purchase Agreement as the “Adjustment Amount,” which may be a positive or a negative number) and (ii) up to $5.0 million in the form of an earn-out payment, if earned.

Because the transaction contemplates the sale of substantially all of the Company’s assets, the Company is pursuing alternative strategies, in addition to completing the asset sale, with the objective of maximizing stockholder value. There can be no assurance that the Asset Purchase Agreement or any additional transaction will ultimately be consummated timely or at all.

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. The award documents the intent of the carrier to carry the proposed product and offer it to customers through their stores or online. The carrier and Sonim agree to a launch date that is generally nine months or longer from the date of the product award. After the product award, the Company and its partners complete the design that includes the unique specifications from the carrier, test the device, obtain certification from the carrier to sell the device, and begin full scale manufacturing of the product based on purchase orders issued by the carrier.

As of the filing date of this report, Sonim is completing the development, testing and certification of an updated 5G version of the Company’s XP5plus.

2025 Reverse Stock Split

On October 27, 2025, the Company effected a 1-for-18 reverse stock split of its issued and outstanding common stock (the “2025 Reverse Stock Split”). On the same date, our common stock began trading on the Nasdaq Capital Market on a post-split basis. As a result of the 2025 Reverse Stock Split, each share of common stock issued and outstanding immediately prior to October 27, 2025, was automatically converted into one-eighteenth (1/18) of a share of common stock. 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. Stockholders who otherwise would be entitled to receive a fractional share instead received a cash payment equal to the fraction of which a stockholder would otherwise be entitled multiplied by $16.8678, which is the closing price per share of common stock on October 20, 2025 (as reported by the Nasdaq Capital Market), as adjusted to give effect to the reverse stock split.

The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock. 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-Q have been retroactively restated to reflect the effect of the 2025 Reverse Stock Split.

Capital Structure

We prioritized adjustments to the Company’s capital structure to better align with our long-term strategy. On October 16, 2025, at a special meeting of stockholders, our stockholders approved an amendment to our amended and restated certificate of incorporation increasing the authorized shares of our common stock from 100,000,000 to 1,000,000,000. The amendment was filed with the Secretary of State of the State of Delaware on October 16, 2025. Our board believes it is in the best interests of the Company and its stockholders to have additional authorized shares available. The primary purpose of the amendment is to provide greater flexibility in managing our common stock for general corporate purposes that our board may, from time to time, deem advisable, which could include, without limitation: (i) financing activities, including the ChEF facility; (ii) stock dividends or splits; (iii) conversions of convertible securities; (iv) issuances of stock options and other equity awards under our incentive plans; and (v) establishing strategic relationships. Having an increased number of authorized but unissued shares allows the Company to act promptly on corporate opportunities without the delay and expense of convening a special meeting of stockholders to approve a further increase in capitalization.

ChEF Purchase Agreement

On September 29, 2025, the Company entered into a ChEF purchase agreement (the “ChEF Agreement”) and registration rights agreement (the “Registration Rights Agreement”), each with Chardan Capital Markets LLC (“Chardan”) related to a “ChEF,” Chardan’s committed equity facility (the “Facility”).

Pursuant to the ChEF Agreement, the Company has the right from time to time at its option to sell to Chardan up to the lesser of (i) $500.0 million in aggregate gross purchase price of newly issued shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) the Exchange Cap (as defined in the ChEF Agreement), subject to certain conditions and limitations set forth in the Purchase Agreement and applicable Nasdaq listing rules. The Company is under no obligation to sell any securities to Chardan under the ChEF Agreement.

While there are distinct differences, the facility pursuant to the ChEF Agreement is structured similarly to a traditional “at-the-market” equity facility, insofar as it allows the Company to raise primary equity capital on a periodic basis. The net proceeds from any sales under the ChEF Purchase Agreement will depend on the frequency with, and prices at, which the shares of our common stock are sold to Chardan. The registration statement in connection with the Facility became effective on October 29, 2025.

For additional information, refer to Note 5, Stockholders’ Equity, to the condensed consolidated financial statements contained within this report under the title “ChEF Purchase Agreement.”

Equity Financings

On May 12, 2025, we consummated a private placement with two investors and sold 61,111 shares of our common stock, as adjusted for the Reverse Stock Splits, and warrants to purchase up to 30,555 shares of our common stock, as adjusted for the Reverse Stock Splits, for an exercise price of $24.9552 per share, as adjusted for the Reverse Stock Splits, for an aggregate purchase price of $1.38 million. We used the net proceeds from the private placement for working capital and general corporate purposes. On August 7, 2025, the Company and the investor entered into an amendment to reduce the exercise price of the warrants to $13.50 per share, as adjusted for the Reverse Stock Splits.

In connection with the close on the capital investment on May 12, 2025, the Company issued warrants to Roth to purchase up to 1,375 shares of our common stock, as adjusted for the Reverse Stock Splits, on July 2, 2025. Each warrant has an exercise price of $24.912 per share, as adjusted for the Reverse Stock Splits.

On April 29, 2024, we consummated a private placement with a single investor and sold 19,444 shares of our common stock, as adjusted for the Reverse Stock Splits, and warrants to purchase up to 19,444 shares of our common stock for an exercise price of $198.00 per share, as adjusted for the Reverse Stock Splits, for an aggregate purchase price of $3.85 million. We used the net proceeds from the private placement for working capital and general corporate purposes. On August 7, 2025, the Company and the investor entered into an amendment to reduce the exercise price of the warrants to $13.50 per share, as adjusted for the Reverse Stock Splits.

ATM Offering

On August 6, 2024, the Company entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”). Pursuant to the Sales Agreement, the Company could sell up to an aggregate of $8.9 million in shares of common stock through Roth, as sales agent. During the nine months ended September 30, 2025, a total of 193,405 shares of common stock, as adjusted for the Reverse Stock Splits, were sold under the Sales Agreement for net proceeds of $8.2 million after payment of commission fees and other related expenses of $0.3 million. In the second quarter of 2025, the Company completed its sales of shares of common stock under the Sales Agreement and terminated the ATM program.

Sales of shares of our common stock made pursuant to the Sales Agreement were made under the effective Registration Statement on Form S-3. Roth was entitled to compensation at a commission rate of 3% of the gross sales price per share. For additional information, refer to Note 5, Stockholders’ Equity, to the condensed consolidated financial statements contained within this report under the title “ATM Offering.”

Registered Public Offering

On July 2, 2025, the Company consummated a best-efforts public offering (the “Offering”) of 411,111 shares of its common stock, as adjusted for the Reverse Stock Splits, at a public offering price of $13.50 per share, as adjusted for the Reverse Stock Splits. In connection with the Offering, the Company entered into a securities purchase agreement with certain investor signatories thereto for the purchase of shares of common stock described above.

Roth served as the exclusive placement agent in connection with the Offering. The Company paid Roth a cash fee of 7.0% of the aggregate gross proceeds raised at the closing of the Offering, and reimbursement of certain expenses and legal fees in the amount of $0.1 million. The Company also issued to designees of Roth warrants to purchase up to an aggregate of 11,604 shares of common stock, as adjusted for the Reverse Stock Splits (the “Placement Agent Warrants”). The Placement Agent Warrants have an exercise price of $13.50 per share, as adjusted for the Reverse Stock Splits, are not exercisable until January 2, 2026, and expire on July 2, 2030.

The net proceeds of the Offering are approximately $4.8 million, after deducting the Placement Agent fees and expenses and other estimated offering expenses payable by the Company. The Company used the net proceeds of the Offering for overall business strategy, for working capital purposes and for general corporate purposes.

Receivables Financing Agreements

To improve its liquidity, on September 23, 2024, the Company entered into an invoice purchase agreement with LS DE LLC (“LS”), pursuant to which LS will provide receivables factoring to the Company, pursuant to which LS will advance 80% of the face value of the receivables being sold by the Company, up to a maximum of $2.5 million of eligible customer invoices from the Company. As of September 30, 2025, this agreement is terminated.

To improve its liquidity, on August 7, 2025, the Company entered into a factoring agreement (the “Receivables Financing Agreement”) with Tradewind GmbH (“Tradewind”), pursuant to which Tradewind will provide international receivables factoring to the Company, pursuant to which Tradewind will advance 85% of the face value of the receivables being sold by the Company, up to a maximum of €3.0 million of eligible customer invoices from the Company. For additional information, refer to Note 3, Significant Balance Sheet Components, to the condensed consolidated financial statements contained within this report under the title “Receivables Financing Agreement.”

Promissory Notes

On February 21, 2025, the Company entered into the Purchase Agreement with the Lender pursuant to which the Company issued and sold to the Lender the Note. Starting on August 21, 2025, the Lender may exercise its right to redeem up to $330,000 of the Note per calendar month. During the three months ended September 30, 2025, the Company and the Lender entered into certain exchange agreements whereby the Company issued 30,188 shares, as adjusted for the Reverse Stock Splits, in exchange for payment-in-full of $375 in principal balance of the February Note. For additional information, refer to Note 4, Promissory Notes, to the condensed consolidated financial statements contained within this report under the title “February Purchase Agreement.”

On July 11, 2025, the Company entered into an additional note purchase agreement with the Lender pursuant to which the Company issued and sold to the Lender an additional promissory note (the “July Note,” and together with the February Note, the “Notes”). Starting on January 11, 2026, the Lender may exercise its right to redeem up to $275,000 of the July Note per calendar month. Additionally, the July Note was secured by a first-priority interest in all of the Company’s assets. The July Note requires the Company to prepay an amount equal to not less than 33% of the net proceeds received from any equity or debt financing. For additional information, refer to Note 4, Promissory Notes, to the condensed consolidated financial statements contained within this report under the title “July Purchase Agreement.”

The exercise of the Lender’s redemption rights under either note or the Company’s obligation to make prepayments under the July Note may reduce the Company’s liquidity.

Impairment of Contract Fulfillment Assets

The non-recurring costs associated with design and development of new products for technical approval represent costs to fulfill a contract pursuant to ASC 340-40, Other Assets and Deferred Costs. Accordingly, the Company capitalizes these contract fulfillment costs and amortizes such costs over the estimated period of time that the product will be sold, which is typically three to four years. As of September 30, 2025, and December 31, 2024, the net contract fulfillment assets were $9,053 and $6,399, respectively.

If the Company determines that such contract fulfillment costs are not expected to be recovered, it records an impairment in the period such determination is made. During the nine months ended September 30, 2024, the Company recorded an impairment of contract fulfillment assets of $3.2 million due to a decrease in projected profit of one of its hotspots and the cancellation of a consumer durable product. This product was cancelled because higher than anticipated manufacturing costs eliminated the expected profit margin on the product. During the nine months ended September 30, 2025, the Company recorded an impairment of contract fulfillment assets of $1.1 million due to the end of life of a legacy smartphone, which is included in cost of revenues in the Condensed Consolidated Statements of Operations.

Macroeconomic Events

Worldwide economic and political uncertainties and negative trends, including tariffs and increasing trade protectionism, inflation, tensions between the U.S. and China, financial and credit market fluctuations, recession risks, labor shortages, supply chain disruptions, political election cycles, changes in laws and interpretations of laws, changes in the volume and relative mix of U.S. government spending, cost-cutting and efficiency initiatives and potential disruptions from international conflicts and acts of terrorism, have impacted and may continue to impact our business and the business of our customers, while also disrupting sales channels and advertising and marketing activities. See “Part II. Item 1A. Risk Factors” in this Form 10-Q for further discussion of the possible impact of these factors and other risks on our business.

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. 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.

Results of Operations

The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the operating results to be expected for the full year or in any future period. Historically, we have experienced higher revenues following the release of new products and start of sales with additional carriers and distributors.

The following tables present key components of our results of operations (dollars in thousands):

Total Net Revenues

Total net revenues for the three months ended September 30, 2025, increased by $1.2 million compared to 2024. This increase reflects $2.4 million in sales of the H500 hotspot that launched in the fourth quarter of 2024 and $1.6 million in sales of the MegaConnect hotspot that was launched in 2025. These increases were partially offset by a net decrease of $3.0 million in sales of our feature phones, due to declining demand for our legacy feature phones.

Total net revenues for the fourth quarter of 2025 are expected to decline sequentially from the third quarter due to holiday-related seasonality. We do not expect to generate revenue from the current business following the closing of the Asset Purchase Agreement, which we anticipate occurring in late 2025 or early 2026. If the Asset Purchase Agreement does not close in 2025, we expect a further decline in operating revenue from the current business in 2026, because we anticipate permitting the Buyer to manufacture and sell our products pending the consummation of the Asset Purchase Agreement as one of the contemplated approaches to our transition plan.

Total net revenues for the nine months ended September 30, 2025, increased by $0.8 million compared to 2024. Hotspot revenue increased $6.5 million with the launch of the H500 and the MegaConnect hotspots. Smartphone revenue also increased by $4.1 million due to the expiration of customer allowance in 2025. The nine months ended September 30, 2024, include $7.7 million in revenue from white label products sold to a related party, and we had no white label revenue in 2025.

Cost of Revenues

Cost of revenues for the three months ended September 30, 2025, increased by $3.6 million as compared to 2024. This increase reflects the lower margins on the H500 as compared to phones and the lower margins on the XP Pro as compared to the XP10.

Cost of revenues for the nine months ended September 30, 2025, decreased by $0.1 million as compared to 2024. The nine months ended September 30, 2025, include $5.4 million in revenue related to the expiration of customer allowance agreements, which had no related cost of revenues. The nine months ended September 30, 2024, had higher cost of revenues from white label product sales that had a cost of revenues percentage of approximately 94%.

Gross Profit and Margin

Gross profit for the three months ended September 30, 2025, decreased by $2.4 million compared to 2024. This increase reflects the lower margins on the H500 as compared to phones, and the lower margins on the XP Pro as compared to the XP10.

Gross profit for the nine months ended September 30, 2025, increased by $0.9 million compared to 2024 primarily due to the $5.4 million in revenue related to the expiration of customer allowance agreements in 2025. Gross margin for the nine months ended September 30, 2025, was 25%, which reflects the positive impact from the expiration of customer allowance agreements that have no related cost of sales, net of the impact of the decrease in sales of our legacy products, which had higher margins in the aggregate, and the increase in the sales of our new and replacement products, which have lower margins in aggregate, compared to 23% in 2024, which reflects the negative impact of white label products that had a gross margin of approximately 6%.

Research and Development

R&D expenses for the three months ended September 30, 2025, decreased by $0.5 million compared to 2024, primarily due to there being limited R&D projects during the third quarter of 2025 since most our new products launched throughout the first three quarters of 2025.

R&D expenses for the nine months ended September 30, 2025, increased by $1.0 million compared to 2024, primarily due to there being limited R&D projects during the first half of 2024. In 2025, R&D expenses were primarily from internal work on the development of new variants of our XP Pro, including a version with a thermal camera, the HPUE hotspot, the XP400 phone for Europe, and the updated 5G version of our XP3plus.

Sales and Marketing

Sales and marketing expenses for the three months ended September 30, 2025, decreased by $0.6 million compared to 2024 primarily due to a shift in executive costs from sales and marketing to general and administrative expenses.

Sales and marketing expenses for the nine months ended September 30, 2025, increased by $0.4 million compared to 2024 primarily due to an increase in marketing spend to support new products in the first half of 2025, and compliance work for Europe.

General and Administrative

General and administrative expenses for the three months ended September 30, 2025, increased by $0.3 million compared to 2024 primarily due to an increase in legal and other expenses related to the hostile takeover attempt and the divestiture activity being pursued by the Company.

General and administrative expenses for the nine months ended September 30, 2025, increased by $1.3 million compared to 2024 primarily due to an increase in legal and other expenses related to the hostile takeover attempt and the divestiture activity being pursued by the Company.

Impairment of Contract Fulfillment Assets

Impairment of contract fulfillment assets for the nine months ended September 30, 2024, was $3.2 million, resulting from the Company’s determination that it would not recover the contract fulfillment costs capitalized due to a decrease in projected profit for one of its hotspots and the cancellation of the consumer durable product.

Interest Expense

Interest expense for the three and nine months ended September 30, 2025, primarily relates to the Notes, which includes contractual interest expense and the amortization of the debt discount and debt issuance costs, and interest related to accounts receivable financing.

Liquidity and Capital Resources

Historically, we have funded operations from a combination of public and private equity financings, and through the issuance of debt. During the nine months ended September 30, 2025 we received net proceeds of $13.8 million from the sale of our common stock, and we received net proceeds of $5.1 million from the issuance of the Notes.

During the nine months ended September 30, 2025, we reported a net loss of $11.8 million and used $21.5 million in operating cash flow. As of September 30, 2025, our principal source of liquidity consisted of cash and cash equivalents totaling $2.1 million. The Company expects to close the Asset Purchase Agreement at the end of 2025 or the beginning of 2026. Once the Asset Purchase Agreement closes, the Company will have no revenue from the existing business. The Company is investigating strategic alternatives for the remaining assets of the Company following the closure of the Asset Purchase Agreement. The uncertainty regarding the Asset Purchase Agreement and the ability of the Company to implement strategic alternatives after the closing of the Asset Purchase Agreement creates uncertainty regarding the Company’s ability to forecast beyond the asset sale date. There is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

Cash Flows

The following table summarizes our sources and uses of cash for the periods presented (in thousands):

Cash flows from operating activities

For the nine months ended September 30, 2025, cash used in operating activities was $21.5 million, primarily attributable to a net loss of $11.7 million and net cash used in a change in net operating assets and liabilities of $9.7 million. The change in net operating assets and liabilities was primarily due to net payments made on accounts payable, an increase in non-trade receivables, and an increase in contract fulfillment assets, which are capitalized costs for product certifications, partially offset by a decrease in accounts receivable and certain prepaid expenses. Non-cash charges primarily consist of $5.4 million related to the expiration of customer allowance agreements, $2.8 million in depreciation and amortization, $1.4 million for stock-based compensation, and $1.1 million for the impairment of contract fulfillment assets related to the end of life of our legacy products.

For the nine months ended September 30, 2024, cash used in operating activities was $4.0 million, primarily attributable to a net loss of $12.0 million and net cash used in a change in net operating assets and liabilities of $0.3 million, partially offset by non-cash charges of $8.3 million. The change in net operating assets and liabilities was primarily due to a decrease in accounts receivable, net, due to the timing of payments and an increase in accrued liabilities, partially offset by an increase in inventory (primarily due to raw materials inventory), non-trade receivables (primarily purchasing raw materials for our ODMs), related party receivables, and contract fulfillment assets (capitalized costs for product certifications). Non-cash charges primarily consist of $3.2 million in impairment charges related to contract fulfillment assets, $2.6 million in depreciation and amortization, $1.2 million for stock-based compensation, and $1.0 million in inventory write-downs.

Cash flows from investing activities

For the nine months ended September 30, 2025, and 2024, there were no significant investing activities.

Cash flows from financing activities

For the nine months ended September 30, 2025, the Company received $13.8 million in cash, net of issuance costs, from sales of common stock, as well as $5.1 million in net proceeds from the issuance of the Note and repaid $0.6 million borrowed under the LSQ Receivables Financing Agreement.

For the nine months ended September 30, 2024, the Company received $3.8 million in cash, net of issuance costs, from an investor for the purchase of shares and the issuance of warrants, as well as ATM sales.

Material Cash Requirements

There have been no material changes to our material cash requirements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical Accounting Policies and Estimates

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

A description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our consolidated financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2024, that have had a material impact on our condensed consolidated financial statements and related notes.

Segment Information

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

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

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, prior to filing this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

Limitations on Effectiveness of Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There are no material changes to the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024, except as set forth below.

The risk factor titled “We may become a ‘controlled company’ within the meaning of the applicable rules of Nasdaq and, as a result, may qualify for exemptions from certain corporate governance requirements. 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” is deleted in its entirety.

The risk factor titled “Changes in U.S. trade policy, including the imposition of tariffs and restrictions and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition” is amended and restated as follows:

Changes in U.S. trade policy, including the imposition of tariffs and restrictions and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition.

We cannot predict what changes to trade policy will be made, or the economic impact that changes to trade policy will have, including significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured abroad, including China and other countries, and the length of time such tariffs may remain in place, or whether the entry into new bilateral or multilateral trade agreements will occur. The U.S. has imposed tariffs on foreign imports into the United States on 180 countries and territories, which range from 10% to 145%, including, most relevant to us, an additional 145% tariff on all imports from China, provided, that an exemption was granted to smartphones and certain other items. These tariffs may further increase the cost of our products and could negatively impact our results of operations. At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of additional tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, or other trade matters. Although the ultimate scope and timing of any such actions is currently indeterminable, if implemented, they could have a material impact on our financial condition and results of operations. If further tariffs are imposed on a broader range of imports, further retaliatory trade measures are taken by various countries in response to tariffs, or efforts are made to withdraw from or substantially modify such agreements, then we may be required to raise our prices or incur additional expenses.

In addition, the FCC rules prohibit communications equipment deemed to pose an unacceptable risk to national security from obtaining the equipment authorization that allows the products to be imported, marketed, or sold in the U.S. If any of our product components were to be classified under these restrictions, we could face regulatory hurdles, supply chain disruptions, and lost revenue opportunities, which could have a material impact on our operations and financial results. Additionally, evolving national security policies and heightened scrutiny of foreign-manufactured telecommunications equipment may further increase compliance costs and restrict our market access.

The adoption or expansion of trade restrictions, the escalation of a trade war, or other governmental actions related to tariffs, trade agreements, or prohibition of components of communication equipment, could negatively impact demand for our products, increase costs, disrupt our supply chain, and adversely affect our customers and suppliers. Any of these developments could have a material adverse effect on our business, operating results, and financial condition.

The risk factor titled “Our business and operations could be negatively affected if we become subject to stockholder activism or hostile bids, which could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price” is amended and restated as follows:

Our business and operations could be negatively affected if we become subject to stockholder activism or hostile bids, which could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.

Stockholder activism—ranging from proxy contests and hostile bids to public campaigns and litigation—has become increasingly prevalent. Declines in our stock price may heighten our vulnerability to unsolicited approaches, potentially disrupting our business strategy and operations.

Sonim has already been subjected to such activism. In January 2025, Orbic North America, LLC (“Orbic”), an affiliate of a competitor currently engaged in intellectual property litigation against us, commenced its campaign to acquire Sonim. In the course of its campaign, it formed a Section 13 with a major stockholder of Sonim, nominated an alternative slate of director nominees for the 2025 meeting of our stockholders, and purportedly submitted multiple bids to acquire Sonim. While Orbic ultimately failed in all fronts — stockholders elected the Company’s director nominees at the 2025 annual meeting and the Company entered into the Asset Purchase Agreement — we incurred significant expenses in connection with our defense against Orbic’s actions, and there can be no assurance that Orbic would not attempt to disrupt the Company’s initiatives, including the RTO search and the consummation of the Asset Purchase Agreement.

Responding to such actions by activist stockholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our board of directors. If AJP and Orbic are successful in the litigation and proxy contest, they could gain control of our board of directors, potentially pursuing actions advanced by our competitor that conflict with our long-term strategic objectives. Actions of AJP and Orbic may also discourage or deter a potential acquirer of Sonim from considering Sonim as a desirable acquisition target. The presence of an activist stockholder or the perception of a potential hostile takeover may create uncertainty regarding our future direction, strain relationships with business partners, and impact our ability to attract and retain key personnel.

The risk factor titled “We are required to meet the Nasdaq continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.” is amended and restated as follows:

We are required to meet the Nasdaq continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.

We are required to meet the continued listing requirements of the Nasdaq and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share (which we previously failed to meet resulting in two reverse stock splits in a five-year period in order to regain compliance) and either a minimum stockholders’ equity of $2,500,000, or a minimum market value of our common stock of at least $35,000,000. If we do not meet these continued listing requirements, our common stock could be delisted.

We have a history of receiving deficiency letters from Nasdaq. On August 13, 2025, we received notice that we were not in compliance with the $1.00 minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). On August 22, 2025, we received notice that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) because our stockholders’ equity was below $2.5 million. While we are working to address these deficiencies and have received an extension through December 31, 2025, to regain compliance with Listing Rule 5550(b)(1), there can be no assurance that we will regain compliance with, or continue to satisfy, any applicable Nasdaq requirements within the relevant cure periods, if at all.

If Nasdaq delists our common stock from trading on its exchange and we are not able to list our common stock on another national securities exchange, we expect our common stock could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

• a limited availability of market quotations for our common stock;
• reduced liquidity for our common stock;
• a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
• negative publicity;
• a limited amount of news and analyst coverage;
• loss of eligibility to register the sale or resale of our securities on Form S-3; and
• a decreased ability to issue additional securities or obtain additional financing in the future.

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The risk factor titled “Some provisions of Delaware law and our certificate of incorporation and bylaws may delay or prevent a change in control and may discourage bids for our common stock at a premium over its market price” is amended and restated as follows:

Some provisions of Delaware law and our certificate of incorporation and bylaws and the adoption of the rights plan may delay or prevent a change in control and may discourage bids for our common stock at a premium over its market price.

Our certificate of incorporation and bylaws provide for, among other things:

• the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
• advance notice requirements for stockholder proposals; and
• certain limitations on convening special stockholder meetings.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their common stock over then current market prices. 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.

Additionally, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware (“DGCL”), which prohibit a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. 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.

Additionally, in April of 2025, we entered into the Rights Agreement, which was previously approved by our board. In connection with the Rights Agreement, a dividend was declared of one preferred stock purchase right for each share of the Common Stock of the Company outstanding at the Record Date (individually, a “Right” and collectively, the “Rights”). In general terms, the Rights Agreement imposes a significant penalty upon any person or group that acquires beneficial ownership of 15.5% (or, in the case of passive institutional investors, an amount of “less than 20%”) or more of the outstanding shares of Common Stock without the approval of the Board. The Rights will expire on April 21, 2026

The Rights Agreement could have the effect of discouraging, delaying or preventing a change in management or control over us. While there is no plan to do so at this time, our board may choose to extend the current Rights Agreement or adopt a new rights agreement in the future.

The risk factor titled “We are dependent on the continued services and performance of a concentrated and limited group of senior management and other key personnel, the loss of any of whom could adversely impact our business” is amended and restated as follows:

We are dependent on the continued services and performance of a concentrated and limited group of senior management and other key personnel, the loss of any of whom could adversely impact our business.

Our future success depends in large part on the continued contributions of a concentrated and limited group of senior management and other key personnel. 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 we are unable to retain sufficiently experienced and capable employees, including those who can help us increase revenues generated from our end market segments, our business and financial results may suffer. The loss of the services of any additional executives, managers or other key personnel could impede the achievement of our strategic objectives, seriously harm our ability to successfully implement our business strategy and adversely impact our operating results. In addition, if additional executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, including due to global pandemics, we may not be able to replace them in a timely manner and we could experience significant declines in productivity and/or errors due to insufficient staffing or managerial oversight. 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.

Moreover, our stockholders did not approve the proposed amendment to the Sonim Technologies, Inc. 2019 Equity Incentive Plan at our 2025 annual meeting, which would have authorized an additional 600,000 shares of common stock for issuance. As a result, no shares remain available for equity awards to our independent directors, officers, or employees. Combined with our limited cash resources, this restriction may limit our ability to offer competitive compensation packages, potentially undermining our efforts to retain and incentivize key talent. The inability to retain or adequately compensate our senior management and other key personnel could materially and adversely affect our business, results of operations, and long-term value.

A group of risk factors titled “Risks Related to the Proposed Asset Purchase Agreement and Announced Strategic Initiatives” shall be added as follows:

The conditions under the Asset Purchase Agreement to our consummation of the proposed transaction may not be satisfied in the anticipated timeframe or at all.

Under the terms of the Asset Purchase Agreement, the consummation of the proposed transaction is subject to customary closing conditions. There is no guarantee that all closing conditions will be satisfied (or waived, if permitted by the Asset Purchase Agreement and applicable law). Many of the conditions to consummation of the Asset Purchase Agreement are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, if permitted by the Asset Purchase Agreement and applicable law). Difficulties in otherwise satisfying the conditions may prevent, delay, or otherwise materially adversely affect the consummation of the proposed transaction.

If an event occurs delaying or preventing the proposed transaction, such delay or failure to complete the proposed transaction may create uncertainty or otherwise have negative consequences, including the payment to the Buyer an amount equal to the transaction expenses reasonably incurred by the Buyer and its affiliates, plus a termination fee equal to $1 million, which may materially and adversely affect our sales, financial condition and results of operations, as well as the price per share for our common stock, and could cause us not to realize some or all of the benefits that we expect to achieve if the transactions contemplated by the Asset Purchase Agreement are successfully completed within its expected timeframe.

While the proposed transaction is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the proposed transaction is consummated, the proposed transaction may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The uncertainties about the effect of the proposed transaction may impact our ability to retain, recruit, and hire employees and key personnel while the transaction is pending or if it fails to close. We may incur unexpected costs, charges or expenses resulting from the proposed transaction. Furthermore, we cannot predict how our current customers, prospective customers and other partners will view or react to the proposed transaction during the pendency or upon consummation of the proposed transaction. If we are unable to reassure our partners to continue their partnerships or affiliations with us, our revenues, financial condition and results of operations may be adversely affected.

Employees and key personnel could experience uncertainty or face significant burdens from their commitment of substantial amounts of time and attention toward the completion of the proposed transaction. If, despite our efforts, key personnel depart because of these uncertainties and burdens, or because they do not wish to transition with the Social Mobile business post-closing, our business and results of operations may be adversely affected. In addition, whether or not the proposed transaction is consummated, while it is pending we will continue to incur costs, fees, expenses and charges related to the proposed transaction, including legal, accounting, financial advisor, filing, printing and mailing fees, which may materially and adversely affect our financial condition and results of operations.

In addition, the Asset Purchase Agreement generally requires the Company to operate its business in the ordinary course of business consistent with past practice, pending consummation of the Asset Purchase Agreement, and also restricts us from taking certain actions with respect to our business and financial affairs without the consent of Social Mobile. Such restrictions will be in place until the Asset Purchase Agreement is either consummated or terminated. Such restrictions could adversely affect our business and results of operations prior to completion of the Asset Purchase Agreement.

We may never consummate a transaction complementary to the Asset Purchase Agreement, and even if we do, we may not be able to complete the transaction timely, which may negatively impact our financial condition, results of operations, and our ability to raise capital.

We publicly announced our intent to pursue two contemporaneous strategic tracks: to enter into and consummate the Asset Purchase Agreement and to identify an RTO target and to consummate an RTO.

Expected disposition of our legacy assets and operations under the Asset Purchase Agreement will render Sonim a “shell company,” unless we either (a) initiate a new line of business that is unrelated to and does not compete with the divested business, or (b) complete an alternative transaction (such as an RTO) before the closing of the Asset Purchase Agreement. Accordingly, identifying a suitable RTO target or investors for an alternative transaction and completing an alternative transaction in a timely manner—or otherwise ensuring the continuation of meaningful business operations—is critical to avoiding shell company status.

If Sonim becomes a shell company, we would be subject to significant regulatory and market disadvantages, including:

• ineligibility to use Form S-3 until 12 full calendar months after filing “Form 10 information” with the SEC;
• holders of our common stock will not be able to sell their restricted shares due to Rule 144(i), until one year after the Form 10 information is filed with the SEC;
• the Company will become an “ineligible issuer for three years following the closing, which will prevent the combined company from (i) incorporating by reference in its Form S-1 filings, (ii) using a free writing prospectus, or (iii) taking advantage of well-known seasoned issuer status despite its public float;
• potential delisting from Nasdaq; and
• market perception risks, including a potential depressive effect on the trading price of our common stock due to our classification as a “former shell company.”

In addition, our stockholders may be less inclined to approve the Asset Purchase Agreement in the absence of a concurrently announced RTO transaction or an alternative transaction creating stockholder value complementary to the Asset Purchase Agreement. Failure to obtain stockholder approval would result in the termination of the Asset Purchase Agreement and would require us to pay the Buyer (i) reimbursement of transaction-related expenses reasonably incurred by the Buyer and its affiliates, and (ii) a termination fee of $1 million. These outcomes could materially and adversely affect our sales, financial condition, and results of operations, as well as the trading price of our common stock. They may also prevent us from realizing some or all of the expected benefits associated with completing the Asset Purchase Agreement and any related strategic transactions within the anticipated timeframe.

Even if we complete an RTO or another alternative transaction, we may be deemed a “former shell company,” which would impose significant regulatory limitations and adversely affect our ability to access capital markets and the liquidity of our common stock.

Even if we identify and consummate an RTO or an alternative transaction intended to avoid shell company status and launch a new line of business, the SEC Staff could nevertheless determine—based on its recent, broadened interpretation in reverse merger contexts—that we may be deemed as a former “shell company.” The uncertainty stemming from a potential post-closing SEC determination could introduce additional execution and timing risk to our financing and strategic plans following any RTO or alternative transaction.

In the event that the proposed transactions are not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.

The conditions to the consummation of the proposed transactions — either the Asset Purchase Agreement or an alternative transaction, including RTO — may not be satisfied as noted above. If the proposed transactions are not consummated, we would remain liable for significant transaction costs and termination fees, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed transactions.

For these and other reasons, not consummating the proposed transactions could adversely affect our business and results of operations. Furthermore, if we do not consummate the proposed transaction, the price of our common stock may decline significantly from the current market price, and you may not recover your investment. Certain costs associated with the proposed transactions have already been incurred or may be payable even if the proposed transactions are not consummated. Finally, any disruptions to our business resulting from the announcement and pendency of the transaction, including any adverse changes in our relationships with our customers, vendors, and employees or recruiting and retention efforts, could accelerate in the event of or continue following a failed transaction.

The Asset Purchase Agreement contains a termination fee and restrictions on solicitation that limit our ability to pursue alternatives to the Asset Purchase Agreement.

Under the Asset Purchase Agreement, we are restricted from soliciting, initiating, inducing, or knowingly encouraging or knowingly facilitating alternative acquisition proposals from third parties, and/or providing non-public information to third parties relating to any inquiries, proposals or offers that would reasonably be expected to lead to certain transactions involving a third party, including a merger, business combination or similar transaction, subject to specified exceptions, including the solicitation of an RTO transaction that is not impacting the disposition of the legacy business. The Asset Purchase Agreement also contains termination provisions for both us and Buyer, including the right of the Company to terminate the Asset Purchase Agreement to accept a Superior Proposal (as defined in the Asset Purchase Agreement), subject to and in accordance with the terms and conditions of the Asset Purchase Agreement, and provides that, in connection with the termination of the Asset Purchase Agreement by us to enter into an alternative acquisition agreement providing for a Superior Proposal, we will pay the Buyer (i) reimbursement of transaction-related expenses reasonably incurred by the Buyer and its affiliates, and (ii) a termination fee of $1 million. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of our business from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the consideration in the Asset Purchase Agreement.

We may face litigation filed against us over the Asset Purchase Agreement, an RTO, or an alternative transaction.

Currently, the Company is not aware of any complaints filed or litigation pending related to the Asset Purchase Agreement. However, litigation is a common occurrence in connection with transactions similar to the proposed transaction, so we face potential for litigation or other disputes that relate to the Asset Purchase Agreement, an RTO, or an alternative transaction, including claims related to our process or disclosures and investigatory demands under Delaware law. We can provide no assurance that such litigation, disputes, or demands will not arise in the future. Any such litigation, disputes, or demands, whether successful or not, could delay the closing of the Asset Purchase Agreement, an RTO, or an alternative transaction, or could have a material adverse effect on our business, results of operations, and financial condition.