NOTE 9 —Commitments and Contingencies

Employee Retention Credit—On September 14, 2023, the Company filed claims with the IRS for the Employee Retention Credit. The total amount of the claims by the Company is $1.2 million. On September 14, 2023, the IRS announced an immediate stop to the processing of new Employee Retention Credit claims. Because of the uncertainty of if and when the IRS will process the Company’s claims, the Company has not accrued a receivable for these claims as of September 30, 2023. The Company will record this claim if the Company receives payment for the claim by the IRS or receives correspondence from the IRS indicating that the Company’s claims have been approved.

Purchase Commitments—The aggregate amount of noncancelable purchase orders as of September 30, 2023 and December 31, 2022, was approximately $20,839 and $19,975, respectively, and were related to the purchase of inventory and components of our devices.

In 2021, the Company outsourced substantially all of its software development to a third party and the Company entered into an agreement of future business volume over the next three years. The agreement was renegotiated in 2022 and the remaining commitment as of September 30, 2023 and December 31, 2022 is $289 and $1,154 respectively.

Royalty payments— The Company is required to pay per unit royalties to wireless essential patent holders and other providers of integrated technologies on mobile devices delivered, which, in aggregate, amount to less than 5% of net revenues associated with each unit and expire between 2024 and 2033. Royalty expense for the nine months ended September 30, 2023, and 2022 was $793 and $964, respectively and is included in Cost of Revenues. The Company may be required to pay additional royalties to additional patent holder and technology providers on future products.

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)

General litigation—The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these other matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

The results of any future litigation cannot be predicted with certainty and, regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources and other factors.

Indemnification—Under the terms of its agreements with wireless carriers and other partners, the Company has agreed to provide indemnification for intellectual property infringement claims related to the Company’s products sold by them to their end customers. From time to time, the Company receives notices from these wireless carriers and other partners of a claim for infringement of intellectual property rights potentially related to their products. These infringement claims have been settled, dismissed, have not been further pursued by the customers, or are pending for further action by the Company.

Contingent severance obligations—The Company has agreements in place with certain key employees (Executive Severance Arrangements) guaranteeing severance payments under certain circumstances. Generally, in the event of termination by the Company without cause, termination due to death or disability, or resignation for good reason, the Company is obligated to pay the employees in accordance with the terms of the agreements. On July 13, 2022, Robert Tirva, the CFO and President of the Company, resigned and became eligible for $1 million in severance payments over 20 months, plus certain health insurance benefits. The severance costs were charged to expense as of the severance date.