(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-35525 SMITH MICRO SOFTWARE, INC. (Exact name of registrant as specified in its charter) Delaware 33-0029027 (State or other jurisdiction of incor ...

Smith Micro Software (SMSI) Q2 2025 Earnings Call August 06, 2025 04:30 PM ET Speaker0Good day, and welcome to the Smith Micro Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President, Marketing.Please go ahead.Speaker1Thank you, operator, and good afternoon to ever ...

Exhibit 99.1 IR INQUIRIES: Charles Messman Investor Relations 949-362-5800 IR@smithmicro.com Smith Micro Reports Second Quarter 2025 Financial Results Company expects sequential quarterly revenue growth for the second half of 2025 PITTSBURGH, PA, August 6, 2025 – Smith Micro Software, Inc. (Nasdaq: SMSI) ("Smith Micro" or the "Company") today reported financial results for its second quarter ended June 30, 2025. "We made significant progress in the second quarter, culminating in the upcoming launch of SafeP ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q1 2025 financials show decreased revenue, a net loss, and declining assets, raising going concern doubts [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $43.4 million by March 31, 2025, from $48.0 million, with stockholders' equity declining to $36.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 (audited) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,288 | $2,808 | | Total current assets | $6,961 | $9,996 | | Goodwill | $11,052 | $11,052 | | Total assets | $43,364 | $48,046 | | Total current liabilities | $5,671 | $5,651 | | Total liabilities | $6,802 | $7,290 | | Total stockholders' equity | $36,562 | $40,756 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 revenues decreased 20.3% to $4.6 million, resulting in a $5.2 million net loss, significantly improved from Q1 2024's $31.0 million loss Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 (unaudited) | Q1 2024 (unaudited) | Change | | :--- | :--- | :--- | :--- | | Revenues | $4,621 | $5,798 | -20.3% | | Gross Profit | $3,363 | $3,810 | -11.7% | | Operating Loss | ($5,210) | ($31,446) | 83.4% improvement | | Goodwill Impairment | $0 | $23,989 | N/A | | Net Loss | ($5,178) | ($31,007) | 83.3% improvement | | Basic and Diluted Loss per Share | ($0.28) | ($3.28) | 91.5% improvement | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to $0.6 million in Q1 2025, with cash and equivalents ending at $2.3 million Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Q1 2025 (unaudited) | Q1 2024 (unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | ($602) | ($1,345) | | Net cash (used in) provided by investing activities | ($4) | $194 | | Net cash provided by financing activities | $86 | $181 | | **Net decrease in cash and cash equivalents** | **($520)** | **($970)** | | **Cash and cash equivalents, end of period** | **$2,288** | **$6,155** | [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail a 1-for-8 reverse stock split, substantial doubt about going concern, goodwill impairment, and extreme customer concentration - The company executed a **1-for-8 reverse stock split** effective April 10, 2024, to regain compliance with Nasdaq's minimum bid price requirement, with all share and per-share data retroactively adjusted[21](index=21&type=chunk)[35](index=35&type=chunk) - Management has concluded there is **substantial doubt about the Company's ability to continue as a going concern** due to recurring operating losses and negative cash flows, with future viability dependent on uncertain revenue growth or additional capital[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - A **$24.0 million goodwill impairment charge** was recorded in Q1 2024 due to a decline in the company's market capitalization and revised internal projections[57](index=57&type=chunk) Revenue by Product Line (in thousands) | Product Line | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Family Safety | $3,788 | $4,464 | | CommSuite | $734 | $665 | | ViewSpot | $99 | $669 | | **Total Wireless revenues** | **$4,621** | **$5,798** | - The company has **extreme customer concentration**, with three customers accounting for **62%, 20%, and 16% of total revenues** in Q1 2025, and two customers accounting for **47% and 33% of accounts receivable** as of March 31, 2025[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 revenue decline, lower expenses, and liquidity issues raising substantial doubt about going concern [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2025 revenues decreased 20% to $4.6 million due to product declines, with improved gross profit margin and reduced operating expenses from cost cuts - Revenue decreased by **20% YoY**, primarily due to a **$0.7 million decline in Family Safety revenue** (from Sprint subscriber migration) and a **$0.6 million decline in ViewSpot revenue** from a contract that ended in 2024[113](index=113&type=chunk) - Selling, marketing, and research and development expenses **decreased by $1.0 million and $1.1 million**, respectively, due to cost reduction activities undertaken in 2024[116](index=116&type=chunk)[117](index=117&type=chunk) - The **significant decrease in operating loss** compared to Q1 2024 is mainly because a **$24.0 million goodwill impairment charge** from the prior-year period did not recur in Q1 2025[120](index=120&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Precarious liquidity, with $2.3 million cash, raises substantial doubt about the company's ability to continue as a going concern without additional funding - The company's principal source of liquidity is its existing cash of approximately **$2.3 million** as of March 31, 2025[124](index=124&type=chunk) - Management acknowledges that cash and cash equivalents may be **insufficient to fund operations** at current levels over the next twelve months[125](index=125&type=chunk) - Due to uncertainties regarding future funding and operational cash generation, the company has been unable to alleviate **substantial doubt about its ability to continue as a going concern**[126](index=126&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2025, CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, determined that as of March 31, 2025, the company's disclosure controls and procedures were **effective**[134](index=134&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[137](index=137&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company does not expect current legal proceedings to have a material adverse impact on its financial condition or results of operations - While the company may be involved in legal proceedings, management does **not expect them to have a material adverse impact** on its consolidated financial results[139](index=139&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K have been reported - **No material changes** to the risk factors included in the 2024 Form 10-K have been reported[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased 84,925 shares at an average price of $1.23 per share to cover withholding taxes for restricted stock awards Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 20,410 | $1.23 | | February 2025 | 49,545 | $1.39 | | March 2025 | 14,970 | $0.72 | | **Total** | **84,925** | **$1.23** | - The repurchased shares were acquired by the company **to cover withholding taxes** for employees upon the vesting of restricted stock awards[141](index=141&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL financial data files

Financial Performance - Smith Micro Software, Inc. reported a quarterly loss of $0.16 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.11, representing an earnings surprise of -45.45% [1] - The company posted revenues of $4.62 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 3.73%, and down from $5.8 million year-over-year [2] - Over the last four quarters, the company has only surpassed consensus EPS estimates once and has not beaten consensus revenue estimates [2] Stock Performance - Smith Micro Software shares have declined approximately 29.5% since the beginning of the year, compared to a decline of -4.7% for the S&P 500 [3] - The current status of estimate revisions is mixed, leading to a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.08 on revenues of $5.5 million, and for the current fiscal year, it is -$0.22 on revenues of $24.9 million [7] - The outlook for the industry, specifically the Computer - Software sector, is currently in the top 30% of Zacks industries, which may positively influence stock performance [8]

Financial Data and Key Metrics Changes - For Q1 2025, the company recognized revenue of $4.6 million, a decrease of approximately 20% compared to $5.8 million in Q1 2024 [9] - Family Safety revenues were $3.8 million, down approximately 15% year-over-year, primarily due to the decline in legacy Sprint safe and found revenue [9] - Gross profit for Q1 2025 was approximately $3.4 million, down from $3.8 million in the same period of the prior year, with a gross margin of 73% compared to 66% in Q1 2024 [11] - GAAP net loss for Q1 2025 was $5.2 million or $0.28 loss per share, significantly improved from a GAAP net loss of $31 million or $3.28 loss per share in Q1 2024 [12][13] Business Line Data and Key Metrics Changes - CommSuite revenue was approximately $700,000, an increase of $100,000 compared to Q1 2024, but decreased by $400,000 compared to Q4 2024 [10] - ViewSpot revenue was approximately $100,000, down $600,000 year-over-year, primarily due to the end of a contract [10] Market Data and Key Metrics Changes - The company expects consolidated revenues for Q2 2025 to be in the range of approximately $4.4 million to $4.8 million [11] - The company reported $2.3 million in cash and cash equivalents as of March 31, 2025, and filed a new shelf registration with $75 million capacity [15] Company Strategy and Development Direction - The company is focusing on SafePath OS for kids and senior phones, aiming to align with mobile operators' core business strengths [5] - SafePath eight, the next generation of the SafePath platform, will introduce AI-centric features to enhance family safety solutions [8][16] - The company is optimistic about closing new customer deals and expanding agreements with current customers [5][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong global demand for digital family safety solutions, viewing it as an immense opportunity for growth [7] - The company is seeing positive shifts in conversations with current and prospective customers regarding their latest solutions [24] - Management remains optimistic about the company's prospects for a return to growth and profitability [28] Other Important Information - The company has engaged in extensive discussions with mobile operator partners regarding new initiatives [5] - The new SafePath eight platform will include features such as social media intelligence and a family AI assistant [18][21] Q&A Session Summary Question: Metrics on SafePath 2.0 performance - Management indicated that SafePath 2.0 is off to a strong start with good adoption expected to improve during the summer and back-to-school period [31] Question: Engagements and pilots for SafePath Kids - Management confirmed expectations for meaningful launches in Q3, aligning with back-to-school opportunities [34] Question: Visibility on SafePath Seniors pilots and pricing thoughts on SafePath eight - Management noted that the first trial for SafePath Seniors has already occurred, with a potential launch in Q4 [38] Question: Relevance of tablets and potential impacts from global disruptions - Management stated that the SafePath OS solution will run on tablets and is compatible with existing carrier offerings [51]

Financial Data and Key Metrics Changes - The company recognized revenue of $4.6 million for Q1 2025, a decrease of approximately 20% compared to $5.8 million in Q1 2024 [8] - Family Safety revenues were $3.8 million, down 15% year-over-year, primarily due to the decline in legacy Sprint safe and found revenue [9] - Gross profit for Q1 2025 was approximately $3.4 million, a decrease of $400,000 from the same period last year, with a gross margin of 73% compared to 66% in Q1 2024 [10] - GAAP net loss for Q1 2025 was $5.2 million, or $0.28 loss per share, compared to a GAAP net loss of $31 million, or $3.28 loss per share in Q1 2024 [11] Business Line Data and Key Metrics Changes - CommSuite revenue was approximately $700,000, an increase of $100,000 compared to Q1 2024, but decreased by $400,000 from Q4 2024 [9] - ViewSpot revenue was approximately $100,000, down $600,000 year-over-year, primarily due to the end of a contract last year [9] Market Data and Key Metrics Changes - The company expects consolidated revenues for Q2 2025 to be in the range of approximately $4.4 million to $4.8 million [10] Company Strategy and Development Direction - The company is focusing on SafePath OS for kids and senior phones, and SafePath Kids rate plan solutions, which align with mobile operators' core business strengths [5] - The upcoming release of SafePath eight will introduce AI-centric features aimed at enhancing family safety solutions [7][15] - The company is optimistic about closing new customer deals and expanding agreements with current customers [5][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong global demand for digital family safety solutions, viewing it as an immense opportunity for growth [6] - The company is optimistic about returning to growth and profitability, particularly with the upcoming product innovations [26] Other Important Information - The company filed a new shelf registration to replace the expiring one, maintaining a capacity of $75 million [13][14] Q&A Session Summary Question: Metrics on SafePath 2.0 performance - Management indicated that SafePath 2.0 is off to a strong start with good adoption expected to improve during the summer and back-to-school period [28][30] Question: Engagements and pilots for SafePath Kids - Management confirmed expectations for meaningful launches in Q3, aligning with back-to-school opportunities [31][32] Question: Visibility on SafePath Seniors pilots and pricing thoughts on SafePath eight - Management stated that the first trial for SafePath Seniors has already occurred, with a potential launch in Q4 [34][36] Question: Relevance of tablets and competitive landscape - Management noted that their OS solution is compatible with existing devices, including tablets, and emphasized the importance of family safety features in attracting loyal customers [42][48]

[Business and Operational Highlights](index=1&type=section&id=Business%20and%20Operational%20Highlights) Smith Micro focused on advancing product development in Q1 2025, expanding mobile operator engagement and preparing for the launch of its next-generation family safety platform - The company is executing initiatives with a sharpened focus on its latest product developments: SafePath OS™ for kids and senior phones, and SafePath Kids™ for child-friendly rate plans[2](index=2&type=chunk) - Extensive discussions with current and prospective mobile operators, combined with product innovations, have expanded the company's reach and opened new sales opportunities[2](index=2&type=chunk) - The upcoming launch of SafePath 8 is expected to deliver the next generation of features and functionality for digital family safety[3](index=3&type=chunk) [First Quarter 2025 Financial Performance](index=1&type=section&id=First%20Quarter%202025%20Financial%20Performance) Q1 2025 revenue decreased to **$4.6 million** from **$5.8 million** year-over-year, while GAAP net loss significantly narrowed to **$5.2 million** due to the absence of a goodwill impairment charge Q1 2025 vs Q1 2024 Key Financial Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $4,621 | $5,798 | | Gross Profit | $3,363 | $3,810 | | Gross Margin | 72.8% | 65.7% | | GAAP Net Loss | $(5,178) | $(31,007) | | GAAP Loss per Share | $(0.28) | $(3.28) | | Non-GAAP Net Loss | $(2,863) | $(4,200) | | Non-GAAP Loss per Share | $(0.16) | $(0.45) | - All share and per-share amounts have been retroactively adjusted to reflect a one-for-eight reverse stock split, effective April 10, 2024[5](index=5&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) The consolidated financial statements for Q1 2025 show total assets of **$43.4 million**, a net loss of **$5.2 million**, and an ending cash balance of **$2.3 million** [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to **$43.4 million** from **$48.0 million**, driven by lower cash and accounts receivable, with total stockholders' equity declining to **$36.6 million** Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,288 | $2,808 | | Accounts receivable, net | $3,238 | $5,721 | | Total Assets | $43,364 | $48,046 | | Total Liabilities | $6,802 | $7,290 | | Total Stockholders' Equity | $36,562 | $40,756 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 revenues were **$4.6 million**, with significantly lower operating expenses of **$8.6 million** due to the absence of a goodwill impairment charge, resulting in a net loss of **$5.2 million** Q1 Statement of Operations Highlights (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $4,621 | $5,798 | | Gross Profit | $3,363 | $3,810 | | Total operating expenses | $8,573 | $35,256 | | Goodwill impairment | $0 | $23,989 | | Operating loss | $(5,210) | $(31,446) | | Net loss | $(5,178) | $(31,007) | | Loss per share | $(0.28) | $(3.28) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to **$0.6 million** in Q1 2025, resulting in a **$0.5 million** decrease in cash and cash equivalents, ending the period at **$2.3 million** Q1 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(602) | $(1,345) | | Net cash (used in) provided by investing activities | $(4) | $194 | | Net cash provided by financing activities | $86 | $181 | | **Net decrease in cash and cash equivalents** | **$(520)** | **$(970)** | | **Cash and cash equivalents, end of period** | **$2,288** | **$6,155** | [Reconciliation of GAAP to Non-GAAP Measures](index=2&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Smith Micro provides non-GAAP measures, excluding items like stock compensation and amortization, to offer a more meaningful analysis of ongoing operations, transforming a GAAP net loss of **$5.2 million** into a non-GAAP net loss of **$2.9 million** in Q1 2025 - Management believes non-GAAP measures are more indicative of ongoing operational performance by excluding items such as stock compensation, intangibles amortization, depreciation, fair value adjustments, and goodwill impairment[6](index=6&type=chunk) Q1 2025 GAAP to Non-GAAP Net Loss Reconciliation (in thousands) | Item | Amount | | :--- | :--- | | GAAP Net Loss | $(5,178) | | Stock Compensation | $1,088 | | Intangibles Amortization | $1,276 | | Depreciation | $74 | | Fair Value Adjustments | $(123) | | **Non-GAAP Net Loss** | **$(2,863)** | - The Q1 2024 non-GAAP calculation notably excluded a **$23.989 million** goodwill impairment charge[15](index=15&type=chunk) [Other Information](index=2&type=section&id=Other%20Information) This section provides logistical details for investors, including conference call information, a company business overview, and standard legal disclaimers regarding forward-looking statements and risks [Investor Conference Call](index=2&type=section&id=Investor%20Conference%20Call) An investor conference call was scheduled for May 7, 2025, at 4:30 p.m. ET to discuss the Q1 2025 financial results - An investor conference call was scheduled for May 7, 2025, at 4:30 p.m. ET to discuss the Q1 2025 financial results[7](index=7&type=chunk) [About Smith Micro Software, Inc.](index=3&type=section&id=About%20Smith%20Micro%20Software,%20Inc.) Smith Micro develops software to simplify and enhance the mobile experience for wireless service providers, focusing on family digital lifestyle, voice messaging, and content monetization - The company's business is to develop software for wireless service providers that simplifies the mobile experience, focusing on the family digital lifestyle and voice messaging capabilities[8](index=8&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The press release contains forward-looking statements subject to risks and uncertainties, including customer concentration, deployment delays, and reliance on third-party technology - The company identifies significant risks that could affect future results, including dependency on a few large customers, delays in product deployment, and reliance on third-party operating systems and application stores[10](index=10&type=chunk)

Part I [Business Overview](index=7&type=section&id=Item%201.%20BUSINESS) Smith Micro provides software solutions to wireless service providers, focusing on Digital Family Lifestyle, visual voice messaging, and retail display management - The company's core product portfolio includes SafePath® for family safety, ViewSpot® for retail display management, and CommSuite® for premium messaging[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - A major U.S. Tier 1 carrier contract, which represented approximately **36% of total revenues for 2023**, was terminated effective June 30, 2023, with no revenue generated from this contract in 2024[32](index=32&type=chunk) - The company's business is concentrated with a limited number of large MNOs and MSOs, though it plans to expand its reach to smaller operators with SafePath Global™[31](index=31&type=chunk) - As of December 31, 2024, the company had **164 employees**, with the majority (**117**) in engineering and operations[41](index=41&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20RISK%20FACTORS) The company faces substantial risks, primarily from high customer concentration and significant doubt about its ability to continue as a going concern - The company's financial situation raises substantial doubt about its ability to continue as a going concern without securing additional capital[58](index=58&type=chunk)[59](index=59&type=chunk) - Significant customer concentration risk exists, as sales to the three largest customers comprised **58%**, **20%**, and **14% of revenues for the year ended December 31, 2024**[43](index=43&type=chunk) - The company has a history of net losses, partially driven by the loss of a U.S. Tier 1 customer in 2023, and may incur substantial net losses in the future[64](index=64&type=chunk) - As of March 10, 2025, outstanding warrants to purchase up to **8,382,048 shares of common stock** could dilute the ownership interest of existing stockholders upon exercise[68](index=68&type=chunk) - The company faces risks from intense competition, rapid technological change, and dependence on third-party technologies and distribution channels like mobile application stores[53](index=53&type=chunk)[55](index=55&type=chunk)[71](index=71&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[103](index=103&type=chunk) [Cybersecurity](index=20&type=section&id=Item%201C.%20CYBERSECURITY) The company manages cybersecurity risk using the NIST Cybersecurity Framework, with Board oversight and no material incidents to date - The company's cybersecurity strategy is guided by the **NIST Cybersecurity Framework (NIST CSF)**[104](index=104&type=chunk) - Governance is handled by the audit committee of the Board of Directors, which oversees management's risk assessment and mitigation processes[109](index=109&type=chunk) - To date, there have been no cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, the Company[108](index=108&type=chunk) [Properties](index=21&type=section&id=Item%202.%20PROPERTIES) The company leases all its office spaces, with headquarters in Pittsburgh and international locations supporting its Wireless segment - The company's corporate headquarters is a leased space of approximately **35,621 square feet** in Pittsburgh, Pennsylvania[111](index=111&type=chunk) - International leased properties are located in Belgrade, Serbia; Stockholm, Sweden; and Braga, Portugal[111](index=111&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS) The company may be involved in various legal proceedings, but management does not expect a material adverse impact - Management does not currently believe that the disposition of any ongoing legal matters will have a material adverse impact on the Company's consolidated financial position[112](index=112&type=chunk) [Mine Safety Disclosures](index=22&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's business - Not Applicable[113](index=113&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq, has approximately 70 holders, and has never paid cash dividends - The company's common stock trades on the Nasdaq Capital Market under the symbol "**SMSI**"[115](index=115&type=chunk) - The company has never declared or paid cash dividends and does not expect to in the foreseeable future[117](index=117&type=chunk) Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 1 - 31, 2024 | 17,514 | $1.02 | | November 1 - 30, 2024 | 54,315 | $0.90 | | December 1 - 31, 2024 | 2,659 | $0.77 | | **Total** | **74,488** | **$0.92** | [Reserved](index=23&type=section&id=Item%206.%20RESERVED) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2024, revenues declined 50% to $20.6 million, leading to a $48.7 million net loss and significant restructuring efforts [Introduction and Overview](index=24&type=section&id=7.1%20Introduction%20and%20Overview) In 2024, revenues fell 50% to $20.6 million due to a lost Tier 1 contract, resulting in a $48.7 million net loss and significant workforce reductions Financial Overview | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $20.6 million | $40.9 million | | Gross Profit | $14.4 million | $30.3 million | | Net Loss | ($48.7 million) | ($24.4 million) | | Goodwill Impairment | $24.0 million | $0 | - The primary driver of the revenue decline was the loss of a Tier 1 Family Safety contract, which concluded in November 2023 and accounted for **36% of 2023 total revenues**[124](index=124&type=chunk) - The company undertook multiple restructuring efforts, resulting in the elimination of approximately **48% of its global workforce** to reduce operating costs[124](index=124&type=chunk) [Results of Operations](index=25&type=section&id=7.2%20Results%20of%20Operations) Revenues decreased by $20.3 million (50%) in 2024 due to contract losses, leading to a widened net loss of $48.7 million Operating Performance | Line Item | 2024 (in millions) | 2023 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $20.6 | $40.9 | -50% | | Gross Profit | $14.4 | $30.3 | -52% | | Selling and marketing | $8.9 | $11.1 | -20% | | Research and development | $14.1 | $17.1 | -18% | | General and administrative | $10.6 | $12.8 | -17% | | Goodwill impairment | $24.0 | $0.0 | N/A | | Operating loss | $(49.4) | $(18.1) | -173% | - The decrease in core operating expenses was primarily due to reductions in personnel-related costs resulting from workforce reduction efforts[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - A goodwill impairment charge of **$24.0 million** was recorded in the first quarter of 2024, significantly impacting the operating loss[142](index=142&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=7.3%20Liquidity%20and%20Capital%20Resources) The company's liquidity is severely constrained, raising substantial doubt about its going concern ability, with cash dropping to $2.8 million - The company's financial condition raises substantial doubt about its ability to continue as a going concern within one year[149](index=149&type=chunk)[271](index=271&type=chunk) Cash Flow Summary | Cash Flow Metric (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,295) | $(6,973) | | Net cash provided by investing activities | $178 | $132 | | Net cash provided by (used in) financing activities | $9,800 | $(60) | - As of December 31, 2024, cash and cash equivalents were **$2.8 million**, and the company had no outstanding debt[147](index=147&type=chunk) - A delay in cash receipts from the largest customer was a primary driver of the increase in accounts receivable to **$5.7 million** as of December 31, 2024[147](index=147&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=7.5%20Critical%20Accounting%20Policies%20and%20Estimates) Management identifies several critical accounting policies requiring significant estimates, including Revenue Recognition, Goodwill Impairment, and Going Concern evaluation - Key critical accounting policies include Revenue Recognition, Goodwill and Intangible Assets, Fair Value of Financial Instruments, Business Combinations, and Going Concern evaluation[161](index=161&type=chunk) - Goodwill is tested for impairment at least annually or when triggering events occur, with an impairment loss recorded if the carrying amount of the reporting unit exceeds its fair value[169](index=169&type=chunk) - Revenue is recognized based on a five-step analysis under ASC 606, with significant judgment applied to usage-based revenue and contracts with multiple performance obligations[172](index=172&type=chunk)[173](index=173&type=chunk) [Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section refers to the full consolidated financial statements, which begin on page F-1, and the independent auditor's report - The company's consolidated financial statements and related notes begin on page F-1 of the report[177](index=177&type=chunk)[201](index=201&type=chunk) [Report of Independent Registered Public Accounting Firm](index=39&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor's report expresses substantial doubt about the company's going concern ability and identifies Revenue Recognition and Goodwill Impairment as Critical Audit Matters - The auditor's report includes a paragraph expressing "**substantial doubt about the Company's ability to continue as a going concern**" due to recurring losses and future cash needs[215](index=215&type=chunk) - Revenue Recognition was identified as a Critical Audit Matter because of significant judgments required by management regarding performance obligations, pricing, and timing[221](index=221&type=chunk) - Goodwill Impairment Analysis was identified as a Critical Audit Matter due to significant assumptions used in valuation models, including forecasts for revenue, expenses, and the discount rate[223](index=223&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=31&type=section&id=Item%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on any accounting or financial disclosure matters - None[178](index=178&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that disclosure controls and procedures were effective as of December 31, 2024[179](index=179&type=chunk) - Management determined that the company maintained effective internal control over financial reporting as of December 31, 2024[184](index=184&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[182](index=182&type=chunk) [Other Information](index=31&type=section&id=Item%209B.%20OTHER%20INFORMATION) This section discloses the company's insider trading policy and confirms no Rule 10b5-1 trading arrangement changes in Q4 2024 - The company's insider trading policy prohibits directors, officers, and employees from engaging in short sales, hedging transactions, and holding company stock in margin accounts[188](index=188&type=chunk) - During the fiscal quarter ended December 31, 2024, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement[190](index=190&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=32&type=section&id=Item%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company - None[190](index=190&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=33&type=section&id=Item%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Company's 2025 Proxy Statement[193](index=193&type=chunk) [Executive Compensation](index=33&type=section&id=Item%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive and director compensation is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Company's 2025 Proxy Statement[194](index=194&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=33&type=section&id=Item%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership is incorporated by reference from the 2025 Proxy Statement, with 2.606 million shares available for future issuance - Information regarding security ownership is incorporated by reference from the Company's 2025 Proxy Statement[195](index=195&type=chunk) Shares Available for Future Issuance | Plan Name | Shares Remaining Available for Future Issuance (in thousands) | | :--- | :--- | | Amended and Restated Omnibus Equity Incentive Plan | 2,606 | [Certain Relationships and Related Transactions, and Director Independence](index=33&type=section&id=Item%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Company's 2025 Proxy Statement[197](index=197&type=chunk) [Principal Accountant Fees and Services](index=33&type=section&id=Item%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Company's 2025 Proxy Statement[198](index=198&type=chunk) Part IV [Exhibits](index=34&type=section&id=Item%2015.%20EXHIBITS) This section lists all exhibits filed with the Annual Report, including financial statements, governance documents, and material contracts - This section provides a comprehensive list of all exhibits filed with the Annual Report, including financial statements, governance documents, material contracts, and required certifications[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) [Form 10-K Summary](index=37&type=section&id=Item%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable, and no summary is provided - None[207](index=207&type=chunk)

Financial Data and Key Metrics Changes - In Q4 2024, revenue was $5 million, a decrease of approximately 42% compared to $8.6 million in Q4 2023, but an increase of about $300,000 or 7% from Q3 2024 [17] - For the full year 2024, revenue was $20.6 million, down 50% from $40.9 million in 2023, primarily due to the conclusion of the Verizon Family Safety Contract and a decline in Safe and Found Family Safety revenue [18] - Gross profit for Q4 2024 was approximately $3.8 million, down from $6.4 million in Q4 2023, while gross margin improved to 76% from 75% year-over-year [21] - GAAP net loss for Q4 2024 was $4.4 million or $0.25 loss per share, compared to a net loss of $6.7 million or $0.74 loss per share in Q4 2023 [25] Business Line Data and Key Metrics Changes - Family Safety revenues in Q4 2024 were $3.8 million, a decrease of approximately 49% compared to Q4 2023, primarily due to the end of the Verizon contract [18] - CommSuite revenues increased to $1.1 million in Q4 2024, up approximately $600,000 from Q4 2023, driven by subscriber growth [19] - ViewSpot revenue was nominal in Q4 2024, declining by approximately $500,000 compared to Q4 2023 due to the end of a contract [19] Market Data and Key Metrics Changes - The company is experiencing strong interest in its SafePath offerings, particularly SafePath Kids, which has shown significant appeal to parents seeking safer mobile experiences for their children [14][38] - The senior safety market is identified as a rapidly growing segment, with the population aged 65 and older growing at a rate up to four times faster than younger demographics [33] Company Strategy and Development Direction - The company is shifting focus towards three family safety offerings: SafePath Kids, SafePath OS for kids' phones, and SafePath OS for seniors, aiming to capture new market opportunities [31][32] - The strategy includes leveraging existing phone inventory from popular manufacturers to deliver SafePath OS products quickly without extensive backend integration [40] - The company aims to align its innovations with the core business objectives of mobile operators, focusing on adding new subscribers and selling more devices [41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to growth in the second half of 2025, driven by new customer offerings and a focus on profitability [73] - The company anticipates significant interest from carriers for its new offerings, indicating a positive market response and potential for growth [38][41] - Management highlighted the importance of aligning with carrier goals to enhance growth prospects, emphasizing the pivot towards mainstream offerings rather than just value-added services [82] Other Important Information - The company recognized a one-time benefit to occupancy costs of approximately $100,000 in Q4 2024, contributing to exceeding cost reduction goals [25] - Cash and cash equivalents as of December 31, 2024, were reported at $2.8 million [28] - The company faced payment delays from its largest customer due to a change in the payment platform, which has since been resolved [29] Q&A Session Summary Question: How will success be framed for the TuYo service? - Management noted that Orange Spain's sign-ups are approaching half from competitors, indicating strong market demand and potential for further growth [60] Question: What is the timeline for bringing up new carriers? - Management indicated that there is strong interest among carriers for a summer launch, with ongoing demos and trials to ensure readiness [64] Question: How far along is the product for the aging in place opportunity? - Management stated that the core SafePath OS product is ready, with strong interest from carriers focused on the senior market [70] Question: What is the outlook for sequential growth? - Management expects to see growth in the back half of the year based on new customer offerings and product launches [73]