Company: SONM
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0001641172-25-022821
Chunk: 39

Company: SONIM TECHNOLOGIES INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Item 8
Chunk 39
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, to the condensed consolidated
financial statements contained within this report.

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 June 30, 2025, and December 31, 2024, the net contract fulfillment assets were $8,014 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 three months ended June 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 three months ended June 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