Smith Micro Software(US:SMSI)2025-05-08 20:06PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2025 financials show decreased revenue, a net loss, and declining assets, raising going concern doubts Consolidated Balance Sheets 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 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 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 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 adjusted2135 - 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 capital323334 - 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 projections57 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, 202587 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 revenue decline, lower expenses, and liquidity issues raising substantial doubt about going concern Results of Operations 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 2024113 - Selling, marketing, and research and development expenses decreased by $1.0 million and $1.1 million, respectively, due to cost reduction activities undertaken in 2024116117 - 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 2025120 Liquidity and Capital Resources 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, 2025124 - Management acknowledges that cash and cash equivalents may be insufficient to fund operations at current levels over the next twelve months125 - 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 concern126 Item 4. Controls and Procedures 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 effective134 - 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 controls137 PART II. OTHER INFORMATION Item 1. Legal Proceedings 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 results139 Item 1A. Risk Factors 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 reported140 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 awards141 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL financial data files