Smith Micro Software, Inc. (“Smith Micro” or “the Company”) develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless and cable service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, the Company strives to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer Internet of Things (“IoT”) devices. Smith Micro’s portfolio includes a wide range of products for creating, sharing, and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on various product sets.

The accompanying interim consolidated balance sheet as of March 31, 2023,2024, and the related consolidated statements of operations and stockholders’ equity for the three months ended March 31, 2024 and 2023, and the consolidated statements of cash flows for the three months ended March 31, 20232024 and 2022,2023, are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“USU.S. GAAP”) have been omitted.

In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments which are normal and recurring, and necessary to fairly state the financial position, results of operations, and cash flows of the Company. These unaudited consolidated financial statements should be read in

conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 filed with the SEC on March 23, 2023February 26, 2024 (the "2022"2023 Form 10-K").

Intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three months ended March 31, 20232024 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2023.2024.

In June 2016,November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement2023-07, "Improvements to Reportable Segment Disclosures". This update was issued to improve and enhance reportable segment disclosure requirements. The amendments in this update require annual and interim disclosures on significant segment expenses that are regularly provided to the chief operating decision maker and require annual and interim disclosures on “other segment items” that comprise the difference between segment revenue less segment expense compared to the reported measure of Credit Lossessegment profit or loss. In addition, the amendments will require all annual disclosures that are currently required to be reported on Financial Instruments." This updated guidance sets forthan interim basis and requires disclosure of the title and position of the chief operating decision maker and how that position uses the information to assess segment performance and the allocation of resources. ASU 2023-07 also requires entities that have a current expected credit loss model based on expected losses. Undersingle reportable segment, such as the Company, to provide all disclosures required in this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditionsupdate and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This guidance becomesexisting segment disclosures in Topic 280. The amendments in this update are effective for the Companyfiscal years beginning inafter December 15, 2023, and interim periods starting inwithin fiscal year 2023.years beginning after December 15, 2024. The impactCompany is evaluating the accounting and disclosure requirements of adopting the new standard didASU 2023-07 and does not expect them to have a material impacteffect on the Company'sconsolidated financial statements.

Certain reclassifications have been made to the prior year financial statements to conform to the current presentation.

On December 27, 2023, the Company received a notice (the "Notice") from the Nasdaq Stock Market ("Nasdaq") that the Company was not in compliance with the 2022 Notes and Warrants Offering referred to$1.00 minimum bid price requirement for continued listing, as set forth in Note 4, on August 11, 2022,Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement"), as the Company entered into a Securities Purchase Agreement (the “Additional Purchase Agreement” and together with the Securities Purchase Agreement further discussed in Note 4, the “Purchase Agreements”) with certain accredited investors to sell at a purchaseclosing bid price of $2.65 per share an aggregate of 1,132,075 shares of the Company’s common stock and warrants to purchase up to an aggregate of 1,132,075 shares of the Company’s common stock (the “Additional Warrants”) (the “Stock and Additional Warrants Offering”). Each Additional Warrant is exercisable on the sixth month anniversaryhad been below $1.00 per share for more than thirty (30) consecutive business days as of the date of its issuancethe Notice.

As previously noted, the Company undertook the Reverse Stock Split, which became effective April 10, 2024 at 11:59 pm Eastern time, to enable the Company to regain compliance with the Minimum Bid Price Requirement. On April 29, 2024, the Company received notice from Nasdaq that it had regained compliance with the Minimum Bid Price Requirement, and the matter is now closed.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

During the three months ended March 31, 2024, as a result of the sustained decrease in the Company's common stock share price and overall market capitalization subsequent to theFebruary 23, 2024, management concluded that a triggering event an interimoccurred, indicating goodwill may be impaired. The Company conducted a quantitative impairment analysis was performedtest of its goodwill as of February 28, 2023 for29, 2024 and as a result of this interim assessment, the Company recorded a goodwill impairment charge totaling $24.0 million during the three months ended March 31, 2024. Subsequent to this write-down, the fair value of the Company's single reporting unit.unit approximated its carrying value. The fair value forof the reporting unit was

The Company amortizes intangible assets over the pattern of economic benefit expected to be generated from the use of the assets, with a total weighted average amortization period of approximately 10nine years as of both March 31, 20232024 and December 31, 2022.2023. During the three months ended March 31, 20232024 and 2022,2023, intangible asset amortization expense was $1.5$1.8 million and $1.6$1.5 million, respectively.

As of March 31, 2023,2024, estimated amortization expense for the remainder of 20232024 and thereafter was as follows (unaudited, in thousands):

net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company, options, warrants, and convertible notes are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

During the quarterthree months ended March 31, 2023,2024, the Company granted 1.40.3 million shares of restricted stock under the Company’s 2015 Omnibus Equity Incentive Plan, as amended ("2015 OEIP"), which was approved by Smith Micro’s stockholders on June 18, 2015 and subsequent amendments to the 2015 OEIP to increase the number of shares reserved thereunder were subsequently approved by its stockholders on June 14, 2018, June 9, 2020, and June 9, 2020.6, 2023. The 2015 OEIP replaced the 2005 Stock Option / Stock Issuance Plan (“2005 Plan”) which was due to expire on July 28, 2015. As of March 31, 2023,2024, there were approximately 0.90.1 million shares available for future grants under the Company’s 2015 Plan.OEIP.

The outstandingCertain options issued under the 2005 Plan remain outstanding currently, but no new grants will behave been made under the 2005 Plan.Plan since the adoption of the 2015 OEIP. The maximum number of shares of the Company’s common stock available for issuance over the term of the 2015 OEIP may not exceed 9,625,0001,203,125 shares.

The 2015 OEIP provides for the issuance of full value awards (restricted stock, performance stock, dividend equivalent right or restricted stock units) and partial value awards (stock options or stock appreciation rights) to employees, non-employee members of the Company's Board of Directors and consultants. Any full value award settled in shares will be

debited as 1.2 shares, and partial value awards settled in shares will be debited as 1.0 shares against the share reserve. The exercise price per share for stock option grants is not to be less than the fair market value per share of the Company’s common stock on the date of grant. The Compensation Committee of the Board of Directors administers the 2015 OEIP and determines the vesting schedule at the time of grant. Stock options may be exercisable immediately or in installments, but generally vest over a four-year period from the date of grant. In the event the holder ceases to be employed by the Company, all unvested stock optionsawards terminate, and all vested stock options may be exercised within a period of 90 days following termination.termination of employment. In general, stock options expire ten years from the date of grant. Restricted stock is valued using the closing stock price on the date of the grant. The total value is expensed over the vesting period, which typically ranges from 12 to 48 months, however in the quarters ended September 30, 2023 and March 31, 2024, there were new grants issued with tranched vesting periods of 2 to 7 months.

The Company has a shareholderstockholder approved employee stock purchase plan (“ESPP”), under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning and end of six-month offering periods. An employee’s payrollPayroll deductions under the ESPP are limited to 10% of the employee’s compensation and employees may not purchase more than the lesser of $25,000 of stock or 25031 shares for any purchase period. Additionally, no more than 250,00031,250 shares in the aggregate may be purchased under the ESPP.

Non-cash stock-based compensation expenses related to stock options, restricted stock grants and the ESPP were recorded in the financial statements as follows (unaudited, in thousands):

As of March 31, 2023,2024, there was approximately $8.3$5.4 million in unrecognized compensation costs related to non-vested stock options and restricted stock granted under the 2015 OEIP and the 2005 Plan.

The Company’s contracts with mobile network operator (“MNO”) customers include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Smith Micro’s cloud-based services include a software solution license integrated with cloud-based services. Since the Company does not allow its customers to take possession of the cloud-based elements of its software solutions, and since the utility of the license comes from the cloud-based services that the Company provides, Smith Micro considers the software license and the cloud services to be a single performance obligation. The Company recognizes revenue associated with its MNO customers based onupon their active subscribers’ access and usage of Smith Micro’s software licenses and cloud-based services on Smith Micro’s platforms.platforms or satisfaction of the performance obligations as indicated in the contracts.

Smith Micro has made accounting policy elections to exclude all taxes by governmental authorities from the measurement of the transaction price, and since the Company’s standard payment terms are less than one year, the Company has elected the practical expedient not to assess whether a contract has a significant financing component.

Revenues on a disaggregated basis are as follows (unaudited, in thousands):

The Company does not separately allocate operating expenses to these product lines, nor does it allocate specific assets. Therefore, product line information reported includes only revenues.

The following table presents the Wireless revenues by product line (unaudited, in thousands):

The Company has certain customers whose revenues individually represented greater than 10% of the Company’s total revenues, or whose accounts receivable balances individually represented greater than 10% of the Company’s total accounts receivable.

For the three months ended March 31, 2024, three customers made up 54%, 18% and 11% of revenues. For the three months ended March 31, 2023, three customers made up 37%, 37% and 14% of revenues. For the three months ended

As of March 31, 2022, three2024, two customers made up 40%accounted for 51% and 21%, 37%, and 10% of revenues.

During the three months ended March 31, 20232024 and 2022,2023, the Company operated in two geographic locations: the Americas and Europe, Middle East and Africa (EMEA)("EMEA"). Revenues attributed to the geographic location of the customers’ bill-to address were as follows (unaudited, in thousands):

The Company does not separately allocate specific assets to these geographic locations.

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows, or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows, or financial position in a particular period.

During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it may be required to make payments in connection with certain transactions. These include: indemnities to the Company’s customers pursuant to contracts for the Company’s products and services, including indemnities with respect to intellectual property, confidentiality and data privacy; indemnities to various lessors in connection with facility leases for certain claims arising from use of such facility or under such lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has made or may make contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments, and guarantees varies, and in certain cases may be indefinite. The majority of these indemnities, commitments, and guarantees may not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets.

The Company leases office space and equipment, and certain office space was subleased.equipment. Management determines if a contract is a lease at the inception of the arrangement and reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised.

Leases with an initial term of greater than twelve months are recorded on the consolidated balance sheet. Lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease contracts generally do not provide a readily determinable implicit rate. For these contracts, the estimated incremental borrowing rate is based on information available at the inception of the lease.

Operating lease cost consistscosts were $0.4 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, the Company recognized a noncash increase for the right-of-use asset obtained in exchange for the new operating lease liability due to a lease renewal in the amount of $1.0 million. There were no such transactions during the following (unaudited, in thousands):

Additional information relating to the Company’s operating leases follows (unaudited):

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor inRealization of deferred tax assets is dependent upon the Company’s assessment isgeneration of future taxable income. As required by ASC 740, Smith Micro has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets and determined that it was more likely than not that the Company was in a three-year historicalwould not realize the deferred tax assets due to the Company's cumulative loss as of the end of fiscal 2022. In addition, the Company was also in a loss for fiscal 2017losses and 2018. These facts, combined with uncertain near-term market and economic conditions, reducedwhich reduce the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of the four sources of taxable income as of DecemberMarch 31, 2022,2024, and after consideration of the Company’s cumulative loss position as of December 31, 2022,2023, the Company will continue to reserve its U.S.-based deferred tax amounts, which total $62.7$58.5 million as of March 31, 2023.2024.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Currently there are no audits in process or pending from federal or state tax authorities. The Company is no longer subject to examination for U.S. federal income tax returns for years before December 31, 20182019 and for state income tax returns, the Company is no longer subject to examination for years before December 31, 2017.2018. As of March 31, 2023,2024, the Company had no outstanding tax audits. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. Smith Micro may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and

in the fourth quarter of 2023 and as a result announced actions lateU.S.-based carrier in the first quarter of 20232024, which are both anticipated to launch in 2024.

As a result of a sustained decrease in our common stock share price and market capitalization that are expected to result inhave occurred since February 23, 2024, we evaluated our goodwill balance during the elimination of approximately 26% of the Company's global workforce. The severance related costs associated with these actions were recognized in the first quarter of 2023. It is our anticipationthree months ended March 31, 2024, and we determined that the culminationcarrying value of allour single reporting unit exceeded its fair value which resulted in a non-cash pretax impairment charge of these efforts will result in an anticipated $4$24.0 million of quarterly cost savings as comparedfor the quarter.

The table below sets forth certain statements of operations and comprehensive loss data expressed as a percentage of revenues for the three months ended March 31, 20232024 and 2022.2023. Our historical results are not necessarily indicative of the operating results that may be expected in the future.