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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

 

FORM 10-Q/A

Amendment No. 1

 

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from __________ to ____________

Commission File Number: 001-38907

 

Sonim Technologies, Inc.

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

 

Delaware

 

94-3336783

( State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

6500 River Place Boulevard, Bldg. 7, S#250,

Austin, TX 78730

 

(Address of principal executive offices and Zip Code)

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock par value $0.001 per share

 

SONM

 

The Nasdaq Stock Market LLC

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

As of July 30, 2021, the registrant had 85,161,187 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 

 


 

 

EXPLANATORY NOTE

 

This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) amends our Quarterly Report for the fiscal quarter ended June 30, 2021 filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 16, 2021 (“the “Original Filing”). We are filing Amendment No. 1 solely for the purpose of (i) correcting the signatories included within Exhibits 31.1 and 32.1 and (ii) adding the management certification regarding any change in internal control over financial reporting in paragraph 4(d) of Exhibits 31.1 and 31.2 as required by Item 601(b)(31) of Regulation S-K.  Except as otherwise noted in this Explanatory Note, no other changes were made to the Original Filing. This Amendment No. 1 speaks as of the Original Filing date, and does not reflect events that may have occurred subsequent to the Original Filing date.

 

i


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholder’s Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

Signatures

32

 

 

 

ii


 

 

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

PER SHARE AMOUNTS)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,896

 

 

$

22,141

 

Accounts receivable, net

 

 

6,308

 

 

 

4,152

 

Non-trade receivable

 

 

4,438

 

 

 

453

 

Inventory

 

 

11,910

 

 

 

11,344

 

Prepaid expenses and other current assets

 

 

7,416

 

 

 

7,481

 

Total current assets

 

 

36,968

 

 

 

45,571

 

Property and equipment, net

 

 

645

 

 

 

843

 

Other assets

 

 

3,260

 

 

 

3,898

 

Total assets

 

$

40,873

 

 

$

50,312

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

177

 

 

$

177

 

Accounts payable

 

 

16,268

 

 

 

8,856

 

Accrued expenses

 

 

7,921

 

 

 

9,906

 

Warranty liability

 

 

1,293

 

 

 

1,530

 

Deferred revenue

 

 

872

 

 

 

5

 

Total current liabilities

 

 

26,531

 

 

 

20,474

 

Income tax payable

 

 

1,269

 

 

 

1,243

 

Long-term debt, less current portion

 

 

111

 

 

 

185

 

Total liabilities

 

 

27,911

 

 

 

21,902

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value per share; 100,000,000 shares authorized: and

   66,953,307 and 66,310,867 shares issued and outstanding at June 30, 2021, and

   December 31, 2020, respectively.

 

 

67

 

 

 

66

 

Preferred stock, $0.001 par value per share, 5,000,000 shares authorized, and no

   shares issued and outstanding at June 30, 2021, and December 31,

   2020, respectively.

 

 

 

 

 

 

Additional paid-in capital

 

 

225,039

 

 

 

224,522

 

Accumulated deficit

 

 

(212,144

)

 

 

(196,178

)

Total stockholders’ equity

 

 

12,962

 

 

 

28,410

 

Total liabilities and stockholders’ equity

 

$

40,873

 

 

$

50,312

 

 

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

1


 

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30

 

 

June 30

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues

 

$

11,954

 

 

$

21,058

 

 

$

24,194

 

 

$

33,764

 

Cost of revenues

 

 

9,300

 

 

 

16,140

 

 

 

19,077

 

 

 

26,681

 

Gross profit

 

 

2,654

 

 

 

4,918

 

 

 

5,117

 

 

 

7,083

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,670

 

 

 

3,256

 

 

 

8,334

 

 

 

7,192

 

Sales and marketing

 

 

2,188

 

 

 

2,596

 

 

 

4,369

 

 

 

5,727

 

General and administrative

 

 

2,379

 

 

 

2,604

 

 

 

4,641

 

 

 

5,167

 

Legal expenses

 

 

903

 

 

 

3,082

 

 

 

3,309

 

 

 

3,591

 

Restructuring costs

 

 

 

 

 

 

 

 

 

 

 

1,087

 

Total operating expenses

 

 

9,140

 

 

 

11,538

 

 

 

20,653

 

 

 

22,764

 

Loss from operations

 

 

(6,486

)

 

 

(6,620

)

 

 

(15,536

)

 

 

(15,681

)

Interest expense

 

 

 

 

 

(302

)

 

 

 

 

 

(621

)

Other income (expense), net

 

 

(124

)

 

 

6

 

 

 

(293

)

 

 

(395

)

Loss before income taxes

 

 

(6,610

)

 

 

(6,916

)

 

 

(15,829

)

 

 

(16,697

)

Income tax expense

 

 

(76

)

 

 

(180

)

 

 

(137

)

 

 

(363

)

Net loss

 

$

(6,686

)

 

$

(7,096

)

 

$

(15,966

)

 

$

(17,060

)

Net loss per share, basic and diluted

 

$

(0.10

)

 

$

(0.22

)

 

$

(0.24

)

 

$

(0.65

)

Weighted–average shares used in computing net loss per

   Share, basic and diluted

 

 

66,506,956

 

 

 

31,638,250

 

 

 

66,412,365

 

 

 

26,126,037

 

 

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

 

 

2


 

 

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2021, AND 2020 (UNAUDITED)

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

 

 

 

Common stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

For the Three Months Ended June 30, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at April 1, 2021

 

 

66,317,949

 

 

$

66

 

 

$

224,823

 

 

$

(205,458

)

 

$

19,431

 

Issuance of common stock upon exercise of ESPP

 

 

99,983

 

 

 

 

 

38

 

 

 

 

 

38

 

Net settlement of common stock upon release of RSU

 

 

535,375

 

 

1

 

 

 

(1

)

 

 

 

 

Employee and nonemployee stock-based compensation

 

 

 

 

 

 

179

 

 

 

 

 

179

 

Net loss

 

 

 

 

 

 

 

 

(6,686

)

 

 

(6,686

)

Balance at June 30, 2021

 

 

66,953,307

 

 

$

67

 

 

$

225,039

 

 

$

(212,144

)

 

$

12,962

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Stockholders’

 

For the Six Months Ended June 30, 2021,

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2021

 

 

66,310,867

 

 

$

66

 

 

$

224,552

 

 

$

(196,178

)

 

$

28,410

 

Issuance of common stock upon exercise of stock options

 

 

7,082

 

 

 

 

5

 

 

 

 

5

 

Issuance of common stock upon exercise of ESPP

 

 

99,983

 

 

 

 

38

 

 

 

 

38

 

Net settlement of common stock upon release of RSU

 

 

535,375

 

 

1

 

 

 

(1

)

 

 

 

 

Employee and nonemployee stock-based compensation

 

 

 

 

 

475

 

 

 

 

475

 

Net loss

 

 

 

 

 

 

 

 

(15,966

)

 

 

(15,966

)

Balance at June 30, 2021

 

 

66,953,307

 

 

$

67

 

 

$

225,039

 

 

$

(212,144

)

 

$

12,962

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Stockholders’

 

For the Three Months Ended June 30, 2020

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2020

 

 

20,677,360

 

 

$

21

 

 

$

192,183

 

 

$

(176,210

)

 

$

15,994

 

Issuance of common stock, net of issuance costs

 

 

36,800,000

 

 

37

 

 

 

24,955

 

 

 

 

 

24,992

 

Issuance of common stock, debt repayment

 

 

8,226,834

 

 

8

 

 

 

5,993

 

 

 

 

 

6,001

 

Issuance of common stock upon exercise of stock options

 

 

119,942

 

 

 

 

93

 

 

 

 

93

 

Issuance of common stock upon exercise of ESPP

 

 

68,110

 

 

 

 

42

 

 

 

 

42

 

Net settlement of common stock upon release of RSU

 

 

35,070

 

 

 

 

 

(6

)

 

 

 

(6

)

Employee and nonemployee stock-based compensation

 

 

 

 

 

235

 

 

 

 

235

 

Net loss

 

 

 

 

 

 

 

(7,096

)

 

 

(7,096

)

Balance at June 30, 2020

 

 

65,927,316

 

 

$

66

 

 

$

223,495

 

 

$

(183,306

)

 

$

40,255

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Stockholders’

 

For the Six Months Ended June 30, 2020,

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2020

 

 

20,437,235

 

 

$

20

 

 

$

191,751

 

 

$

(166,246

)

 

$

25,525

 

Issuance of common stock, net of issuance costs

 

 

36,800,000

 

 

37

 

 

 

24,955

 

 

 

 

 

24,992

 

Issuance of common stock, debt repayment

 

 

8,226,834

 

 

8

 

 

 

5,993

 

 

 

 

 

6,001

 

Issuance of common stock upon exercise of stock options

 

 

363,857

 

 

1

 

 

 

302

 

 

 

 

 

303

 

Issuance of common stock upon exercise of ESPP

 

 

64,320

 

 

 

 

 

42

 

 

 

 

 

42

 

Net settlement of common stock upon release of RSU

 

 

35,070

 

 

 

 

 

(6

)

 

 

 

 

(6

)

Employee and nonemployee stock-based compensation

 

 

 

 

 

 

458

 

 

 

 

 

458

 

Net loss

 

 

 

 

 

 

 

 

(17,060

)

 

 

(17,060

)

Balance at June 30, 2020

 

 

65,927,316

 

 

$

66

 

 

$

223,495

 

 

$

(183,306

)

 

$

40,255

 

 

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

 

 

3


 

 

SONIM TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS OF U.S. DOLLARS)

 

 

 

Six Months Ended

 

 

June 30

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(15,966

)

 

$

(17,060

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,045

 

 

 

1,647

 

Stock-based compensation

 

 

475

 

 

 

458

 

Inventory write-downs

 

 

 

 

 

407

 

Non-cash interest expense

 

 

 

 

 

166

 

Accretion of debt discount

 

 

 

 

 

159

 

Loss on disposal of asset

 

 

27

 

 

 

 

Deferred income taxes

 

 

(5

)

 

 

30

 

Bad debt expense (benefit)

 

 

(45

)

 

 

289

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,111

)

 

 

5,278

 

Non-trade receivable

 

 

(3,985

)

 

 

(464

)

Inventory

 

 

(544

)

 

 

3,899

 

Prepaid expenses and other current assets

 

 

38

 

 

 

(150

)

Other assets

 

 

(226

)

 

 

138

 

Accounts payable

 

 

7,412

 

 

 

4,000

 

Accrued expenses

 

 

(1,985

)

 

 

6,866

 

Warranty liability

 

 

(237

)

 

 

(235

)

Deferred revenue

 

 

867

 

 

 

55

 

Income tax payable

 

 

26

 

 

 

179

 

Net cash provided by (used in) operating activities

 

 

(15,214

)

 

 

5,662

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(193

)

Net cash used in investing activities

 

 

 

 

 

(193

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment on long-term debt

 

 

(74

)

 

 

(4,036

)

Proceeds from PPP Loan

 

 

 

 

 

2,289

 

Repayment of PPP Loan

 

 

 

 

 

(2,289

)

Proceeds from issuance of common stock, net of costs

 

 

 

 

 

24,992

 

Taxes paid on net issuance of restricted stock units

 

 

 

 

 

(6

)

Proceeds from ESPP purchase of stock

 

 

38

 

 

 

42

 

Proceeds from exercise of stock options

 

 

5

 

 

 

303

 

Net cash provided by (used in) financing activities

 

 

(31

)

 

 

21,295

 

Net increase (decrease) in cash and cash equivalents

 

 

(15,245

)

 

 

26,764

 

Cash and cash equivalents at beginning of period

 

 

22,141

 

 

 

11,298

 

Cash and cash equivalents at end of period

 

$

6,896

 

 

$

38,062

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

260

 

Cash paid for income taxes

 

 

40

 

 

 

77

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Other assets included in accounts payable

 

 

 

 

 

110

 

Settlement of long-term debt with issuance of common stock

 

 

 

 

 

6,001

 

 

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

 

 

4


 

SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTE 1 —The Company and its significant accounting policies

Basis of presentation and preparation

The condensed consolidated financial statements include the accounts of Sonim Technologies, Inc. and its wholly owned subsidiaries (collectively “Sonim” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

 

Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with generally accepted accounting principles in the United States of America.

 

Pursuant to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these condensed consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

 

The Company had cash and cash equivalents of $6,896 and an accumulated deficit of $212,144 at June 30, 2021, and a net loss of $6,686 for the quarter ended June 30, 2021. Since inception, the Company has been developing ultra-rugged mobile phones and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles. The Company’s ability to continue as a going concern is dependent on its ability to complete ongoing and future development of its ultra-rugged mobile phones and accessories, continue commercial scale production and sell its products. The Company believes that its current level of cash and cash equivalents are not sufficient to fund commercial scale production and product sales. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.

To alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds or through obtaining credit from government or financial institutions. As the Company seeks additional sources of financing, there can be no assurance that such financing would be available to the Company on favorable terms or at all. The Company’s ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance and investor sentiment with respect to the Company and its industry.

 

 

5


SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

 

New accounting pronouncements:

Pronouncements adopted in 2021:

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC 740 in order to reduce cost and complexity of its application.  The ASU removes the exception related to the incremental approach for intra-period tax allocation, as well as two exceptions related to account for outside basis differences of equity method investments and foreign subsidiaries. This guidance is effective for fiscal years beginning after December 31, 2021, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have an impact on the Company’s condensed consolidated financial statements.

Pronouncements not yet adopted:

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended, which requires lessees to recognize a liability associated with obligations to make payments under the terms of the arrangement in addition to a right-of-use asset representing the lessee’s right to use, or to control the use of the given asset assumed under the lease. As an emerging growth company, the Company has elected to adopt the standard based on nonpublic business entities implementation dates for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating this new standard and the impact it will have on its condensed consolidated financial statements, information technology systems, process, and internal controls.

 

NOTE 2 —Revenue recognition

 

 

 

The Company recognizes revenue primarily from the sale of products, including its mobile phones, barcode scanners and accessories, and the majority of the Company’s contracts include only one performance obligation, namely the delivery of product. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition under Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. The Company also recognizes revenue from other contracts that may include a combination of products and non-recurring engineering (NRE) services or from the provision of solely NRE services. Where there is a combination of products and NRE services, the Company accounts for the promises as individual performance obligations if they are concluded as distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. During the three and six months ended June 30, 2021, and 2020, the Company did not have any contracts in which the products and NRE services were concluded to be a single performance obligation. In certain cases, the Company may offer tiered pricing based on volumes purchased for specific products. To date, all tiered pricing provisions have fallen into observable ranges of pricing to existing customers, thus, not resulting in any material right which could be concluded as its own performance obligation. In addition, the Company does not offer material post-contract support services to its customers.

 

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

 

6


SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

 

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

Disaggregation of revenue

The following table presents our net revenue disaggregated by product category:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30

 

 

June 30

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Smartphones

 

$

3,946

 

 

$

6,138

 

 

$

8,315

 

 

$

12,356

 

Feature Phones

 

 

7,780

 

 

 

13,835

 

 

 

14,339

 

 

 

19,736

 

Scanners

 

 

36

 

 

 

 

 

1,091

 

 

 

Accessories/Other

 

 

192

 

 

 

1,085

 

 

449

 

 

 

1,672

 

 

 

$

11,954

 

 

$

21,058

 

 

$

24,194

 

 

$

33,764

 

 

Shipping and handling costs

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

 

Distributor returns allowance

The Company records reductions to net revenues related to future distributor product returns based on the Company’s expectation. The Company had allowances for distributor product returns totaling approximately $237 as of June 30, 2021.

Contract costs

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

 

The non-recurring costs associated with design and development of new products for technical approval, represent costs to fulfill a contract pursuant to ASC 340-40 Other Assets and Deferred Costs. Accordingly, the Company capitalizes these non-recurring engineering costs and amortizes such costs over the estimated period of time over which they are expected to be recovered, which is typically 4 years, the estimated life of a particular model phone.

 

The total capitalized costs to fulfill a contract is primarily associated with Company’s introduction of the XP8 model phone. As of June 30, 2021, and December 31, 2020, the total costs to fulfill a contract included in other assets were $2,071 and $2,889, respectively.

 

Contract balances

The Company records accounts receivable when it has an unconditional right to consideration. As of June 30, 2021, the Company did not have a contract receivable balance. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are presented as a component of deferred revenue on the condensed consolidated balance sheets. As of January 1, 2021, and June 30, 2021, the contract liabilities were $5 and $872, respectively.

7


SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

The following table is a rollforward of contract balances as of June 30, 2021:

 

 

 

Contractual

 

 

 

Liability

 

Balance at, January 1, 2021

 

$

5

 

Recognition of revenue

 

 

(8

)

Addition to deferred revenue

 

 

875

 

Balance at, June 30, 2021

 

$

872

 

 

Concentration of Customers

Revenue from customers with concentration greater than 10% in the three and six months ended June 30, 2021, and 2020 accounted for approximately the following percentage of total revenues:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Customer A

 

14%

 

 

*

 

 

12%

 

 

*

 

Customer B

 

14%

 

 

58%

 

 

24%

 

 

46%

 

Customer C

 

13%

 

 

*

 

 

13%

 

 

*

 

Customer D

 

*

 

 

*

 

 

*

 

 

12%

 

Customer E

 

41%

 

 

12%

 

 

31%

 

 

13%

 

 

*

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

 

NOTE 3 —Fair value measurement

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

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

Level 2—Inputs to the valuation methodology include:

 

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

 

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

 

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

 

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

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

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

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

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at June 30, 2021, and December 31, 2020.

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

8


SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

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

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

 

 

 

June 30, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds *

 

$

1,500

 

 

$

 

 

$

 

 

$

1,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds *

 

$

17,905

 

 

$

 

 

$

 

 

$

17,905

 

 

 

*

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

 

NOTE 4 —Inventory

The following table presents the components of the Company’s inventory as of June 30, 2021, and December 31, 2020:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Finished goods

 

$

8,094

 

 

$

7,792

 

Raw materials

 

 

2,793

 

 

 

2,590

 

Accessories

 

 

1,023

 

 

962

 

 

 

$

11,910

 

 

$

11,344

 

 

Distributor returns allowance

The Company records reductions to cost of goods sold related to future distributor product returns based on the Company’s expectation. The Company had inventory related to distributor product returns totaling approximately $158 as of June 30, 2021.

 

NOTE 5 — Accounts Receivable

The following table presents the components of the Company’s receivables as of June 30, 2021, and December 31, 2020:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Trade receivables

 

$

6,328

 

 

$

4,217

 

Allowance for doubtful accounts

 

 

(20)

 

 

 

(65)

 

Accounts receivable, net

 

 

6,308

 

 

 

4,152

 

Vendor non-trade receivables

 

 

4,438

 

 

 

453

 

Total accounts receivable

 

$

10,746

 

 

$

4,605

 

 

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

9


SONIM TECHNOLOGIES, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

The Company analyzes the need for reserves for potential credit losses and records allowances for doubtful accounts when necessary. The Company had allowances for such losses totaling approximately $20 and $65 as of June 30, 2021, and December 31, 2020, respectively.

Trade receivables from two customers approximated 22% and 20% of total accounts receivable at June 30, 2021, and receivables from two customers approximated 26% and 10% of total trade receivables at, December 31, 2020.

 

NOTE 6 —Warranty Liability

The table below sets forth the activity in the warranty liability for the six months ended June 30, 2021, and 2020:

 

Balance, January 1, 2021

 

$

1,530

 

Additions

 

 

479

 

Cost of warranty claims

 

 

(716

)

Balance, June 30, 2021

 

$

1,293

 

 

 

 

 

 

Balance, January 1, 2020

 

$

1,154

 

Additions

 

 

882

 

Cost of warranty claims

 

 

(647

)

Balance, June 30, 2020

 

$

1,389

 

 

NOTE 7 —Long-Term Debt

 

 

In 2014 and 2017, the Company entered into agreements with one of its suppliers, whereby certain of its trade payables for royalties and royalty up-front payments were converted to payment plans. In December 2018, the Company amended its accounts payable financing agreements, effective January 1, 2019, which provides for the $736 outstanding balance to be paid in twenty equal quarterly installments. The amounts due under these agreements are paid in quarterly installments over periods from two to four years, with interest ranging up to 8%. Remaining balances are $288 and $362, at June 30, 2021, and December 31, 2020, respectively.

 

 

 

NOTE 8 —Stock-based Compensation

Stock-based compensation expense for the three and six months ended June 30, 2021, and 2020 is as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenues

 

$

16

 

 

$

13

 

 

$

32

 

 

$

23

 

Sales and marketing

 

55

 

 

49

 

 

111

 

 

106

 

General and administrative

 

63

 

 

102

 

 

237

 

 

198

 

Research and development

 

45

 

 

71

 

 

95

 

 

131

 

 

 

$

179