SMSI 10-K & 10-Q changes, risk factors and insider trading
Smith Micro Software, Inc. · Nasdaq · Services-Prepackaged Software · CIK 948708 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to Our Convertible Notes”
New heading “The terms of our Convertible Notes, and our debt repayment obligations thereunder, may restrict our ability to obtain additional financing, and adversely affect our financial condition and cash flows from operations in the future.”
New heading “Conversion of the Convertible Notes and exercise of the warrants issued in connection with the Convertible Notes will dilute the ownership interest of our existing stockholders or may otherwise depress the price of our common stock.”
New heading “Our obligations to the holders of our Convertible Notes are secured by a security interest certain of our assets, including our accounts receivable, and if we default on those obligations, the note holders could foreclose on those assets.”
New heading “The holders of our Convertible Notes have certain additional rights upon an event of default under the Convertible Notes which could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.”
Largest changes
“The holders of our Convertible Notes have certain additional rights upon an event of default under the Convertible Notes which could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.”see in full comparison
“Our obligations to the holders of our Convertible Notes are secured by a security interest certain of our assets, including our accounts receivable, and if we default on those obligations, the note holders could foreclose on those assets.”see in full comparison
“Under our Convertible Notes, the holders have various rights upon an event of default. Such rights include (i) an increase in the interest rate; and (ii) the holders having the right to demand redemption of all or a portion of the Convertible Notes. At any time after certain notice requirements for an event of default are triggered, a holder of the Convertible Notes may require us to redeem all or any portion by delivering written notice. …”see in full comparison
“We currently serve our customers from data center hosting facilities or virtual cloud infrastructures. Any damage to, or failure of, or degradation of performance from such facilities or virtual cloud infrastructures generally could result in interruptions in our service. Our platform depends, in part, on the virtual cloud infrastructure hosted by AWS. …”see in full comparison
“We are obligated to issue senior secured notes convertible into our common stock pursuant to that certain Securities Purchase Agreement dated as of March 4, 2026 (the “Convertible Notes”). Our indebtedness under the Convertible Notes, and certain restrictions included within the terms of the Convertible Notes, may restrict, and otherwise impair our ability to obtain additional financing in the future for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions. …”see in full comparison
“The Company intends to continue monitoring the closing bid price of its common stock and assess its available options in order to regain compliance with the Minimum Bid Price Requirement. …”see in full comparison
Full comparison: every changed paragraph (71)
•cause our customers to lose confidence in our solutions;
•cause our mobile device manufacturer partners to cease doing business with us;
•harm our reputation;
•expose us to material liability; and
•increase our expense from potential remediation costs.
Interruptions or delays in service from data center hosting facilities or virtual cloud infrastructures could impair the delivery of our service and harm our business.
We currently serve our customers from data center hosting facilities or virtual cloud infrastructures. Any damage to, or failure of, or degradation of performance from such facilities or virtual cloud infrastructures generally could result in interruptions in our service. Our platform depends, in part, on the virtual cloud infrastructure hosted by AWS. Although we have disaster recovery plans that utilize multiple AWS locations, any incident affecting their infrastructure that may be caused by fire, flood, severe storm, earthquake or other natural disasters, power loss, telecommunications failures, cyber-attacks, terrorist or other attacks, and other similar events beyond our control, could adversely affect our cloud-native platform. Additionally, AWS may experience threats or attacks from computer malware, ransomware, viruses, social engineering (including phishing attacks), denial of service or other attacks, employee theft or misuse and general hacking have become more prevalent, particularly against cloud-native services and vendors of security solutions. Any of these security incidents could result in unauthorized access to, damage to, disablement or encryption of, use or misuse of, disclosure of, modification of, loss or destruction of, or other unauthorized processing of our data or Consumers’ data or disrupt our ability to provide our platform or service. A prolonged AWS service disruption affecting our cloud-native platform for any of the foregoing reasons could interrupt or degrade the performance of our platform and adversely impact our ability to serve Consumers and could damage our reputation with current and potential customers, expose us to liability, result in substantial costs for remediation, may reduce our revenue, cause us to issue credits or pay penalties, cause us to lose customers, or otherwise harm our business, financial condition, or results of operations. We may also incur significant costs for using alternative hosting sources or taking other actions in preparation for, or in reaction to, events that damage the AWS services we use.
In the event that our AWS contract is terminated, or there is a lapse of service, elimination of AWS services or features that we utilize, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging for or creating new facilities or re-architecting our platform for deployment on a different cloud infrastructure service provider, which would adversely affect our business, financial condition, and results of operations.
We currently serve our customers from data center hosting facilities. Any damage to, or failure of, such facilities generally could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their on-demand services, and adversely affect our renewal rates and our ability to attract new customers.
The success of ourOur products dependsdepend upon effective operation with operating systems, devices, networks, standards, and other third party technology that we do not control and on our continued relationships with mobile operating system providers, device manufacturers, and other third-party technology providers. Changes in our products or to those operating systems, devices, networks, standards, or third-party technology, or interference with those relationships may seriously harm our customers’ ability to retain or attract new users and may harm our revenue and growth.
•Implement additional restructuring and cost reductions,
•Secure a revolving line of credit,
•Dispose of one or more product lines, and/or
•Sell or license intellectual property.
ItAdditional isfinancing will likely thatbe we may need or choose to obtain additional financingrequired to fund our future activities. We could raise these funds by selling more stock to the public or to selected investors, or by entering into borrowing arrangements.arrangements; provided that the terms of our outstanding warrants and Convertible Notes (as defined below) do not hinder our ability to access the capital markets (See “Risks Related to Our Convertible Notes”). We may not be able to obtain additional funds on favorable terms, or at all. If adequate funds are not available, we may be required to curtail our operations or other business activities significantly or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets. Our inability in the future to obtain additional equity or debt capital on acceptable terms, or at all, could adversely impact also our ability to execute our business strategy, which could adversely affect our growth prospects and future stockholder returns.
Additionally, the securities purchase agreements we have entered into in the past, and may enter into in the future, may include certain restrictions restricts or otherwise impair our ability to obtain additional financing using certain types of transactions.
•the launch and market acceptance of our products;
•the levels of promotion and advertising that will be required to launch our products and achieve and maintain a competitive position in the marketplace;
•our business, product, capital expenditure, and research and development plans and product and technology roadmaps;
•the levels of working capital that we maintain;
•any acquisitions that we would choose to undertake;
•capital improvements to new and existing facilities;
•technological advances;
•our competitors’ response to our products; and
•our relationships with suppliers and customers.
During 2024 and 2023, weWe have been in a net loss position,position partiallyfor drivenall byperiods presented, in part due to the loss of one of our U.S. Tier 1 customers in 2023. InBeginning Februaryin 2023, following receipt of notice of termination of this U.S. Tier 1 customer contract, we announced we would accelerate ouraccelerated efforts designed to reduce operating costs to advance our ongoing commitment to profitable growth.growth, Asresulting ain result, we havesignificantly reduced operating expenditures significantly since that date, and we may need to continue such efforts. We may encounter challenges in the execution of these efforts, and these challenges could impact our financial results. Moreover, although we believe that these efforts have reduced operating costs and improved operating margins, we cannot guarantee that we will sustain the targeted benefits, or that the benefits will be adequate to meet our long-term profitability and operational expectations. Concurrently, we are focusing our efforts on growing our customers’ subscribers on the SafePath platform and offering expanded offerings to our existing and prospective customers that we believe are more closely aligned with their core business objectives, which we expect will increase our revenues, however we cannot guarantee that our efforts will be successful or will result in an increase in our revenues in the manner that we expect or at all. If we do not achieve certain revenue targets subsequent to these efforts, we may need to undertake further cost reduction actions, which may include further restructurings.
The Company's actions to reduce operating costs as a result of the receipt of the notice of termination of one of our U.S. Tier 1 customer contractshave caused the Company to incur additional charges related to severance and reorganization activities in 20232025 and 2024, which included charges related to employee transition, severance payments, employee benefits, and stock-based compensation. Similar events and/or operating cost reduction efforts in the future could cause the Company to take similar remedial actions, which could cause the Company to incur additional charges in the short-term period following such events or actions. Additional continuing risks associated with the impact of these efforts include employee attrition beyond our intended reduction in force and adverse effects on employee morale, diversion of management attention, adverse effects to our reputation as an employer (which could make it more difficult for us to hire new employees in the future), and potential failure or delays to meet operational and growth targets due to the loss of qualified employees. If we do not realize the expected benefits of our cost reduction efforts on a timely basis or at all, our business, results of operations and financial condition could be adversely affected.
Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.
As of December 31, 2024,2025, we had total goodwill and net intangible assets of $34.6$18.5 million. We assess goodwill and definite lived assets for impairment annually, and we conduct an interim evaluation of definite lived and indefinite lived assets whenever events or changes in circumstances indicate that these assets may be impaired. Our ability to realize the value of goodwill and net intangible assets will depend on the future cash flows of the businesses to which they relate. If we are not able to realize the value of the goodwill and net intangible assets, this could adversely affect our results of operations and financial condition,condition and also result in an impairment of those assets.
As of MarchFebruary 10,28, 2025,2026, there were warrants outstanding to purchase up to 8,382,04818,348,471 shares of our common stock at exercises prices ranging from $1.04$0.67 to $21.20. The exercise of some or all of these warrants will dilute the ownership interests of existing stockholders. Any sales in the public market of shares of our common stock that we issued upon exercise of these warrants could adversely affect prevailing market prices of our common stock. In addition, the existence of these warrants may encourage short selling by market participants because the exercise of the warrants could be used to satisfy short positions.
Risks Related to Our Convertible Notes
The terms of our Convertible Notes, and our debt repayment obligations thereunder, may restrict our ability to obtain additional financing, and adversely affect our financial condition and cash flows from operations in the future.
We are obligated to issue senior secured notes convertible into our common stock pursuant to that certain Securities Purchase Agreement dated as of March 4, 2026 (the “Convertible Notes”). Our indebtedness under the Convertible Notes, and certain restrictions included within the terms of the Convertible Notes, may restrict, and otherwise impair our ability to obtain additional financing in the future for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions. Further, a portion of our cash flows from operations may have to be dedicated to repaying the principal and interest of the Convertible Notes while the Convertible Notes are outstanding. Our ability to meet our debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors, many of which are outside of our control. Our future operations may not generate sufficient cash to enable us to repay our debt, including the Convertible Notes. If we fail to make a payment on our debt, we could be in default on such debt.
Conversion of the Convertible Notes and exercise of the warrants issued in connection with the Convertible Notes will dilute the ownership interest of our existing stockholders or may otherwise depress the price of our common stock.
The conversion of some or all of the Convertible Notes or exercise of some or all of the warrants issued along with the Convertible Notes will dilute the ownership interests of existing stockholders. Any sales in the public market of our common stock issuable upon such conversion of the Convertible Notes or exercise of the warrants could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes or exercise of the warrants could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into, or exercise of warrants for, shares of our common stock could depress the price of our common stock.
Our obligations to the holders of our Convertible Notes are secured by a security interest certain of our assets, including our accounts receivable, and if we default on those obligations, the note holders could foreclose on those assets.
Our obligations under the Convertible Notes and the transaction documents relating to those notes are secured by a security interest in certain of our assets. As a result, if we default under our obligations under the Convertible Notes or the transaction documents, the holders of the Convertible Notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which would harm our business, financial condition and results of operations and could require us to curtail or cease operations.
The holders of our Convertible Notes have certain additional rights upon an event of default under the Convertible Notes which could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.
Under our Convertible Notes, the holders have various rights upon an event of default. Such rights include (i) an increase in the interest rate; and (ii) the holders having the right to demand redemption of all or a portion of the Convertible Notes. At any time after certain notice requirements for an event of default are triggered, a holder of the Convertible Notes may require us to redeem all or any portion by delivering written notice. Each portion of the Convertible Notes subject to redemption would be redeemed by us in cash by wire transfer of immediately available funds at a price equal to the outstanding principal and interest under the Convertible Note. We may not have sufficient funds to settle the redemption price and, as described above, this could trigger rights under the security interest granted to the holders and result in the foreclosure of their security interests and liquidation of some of our assets.
•general political, social and economic instability;
•trade restrictions;
•the imposition of governmental controls;
•exposure to different legal standards, particularly with respect to intellectual property;
•burdens of complying with a variety of foreign laws, including without limitation data privacy laws, such as the General Data Protection Regulation (“GDPR”) in Europe;
•import and export license requirements and restrictions of the United States and any other country in which we operate;
•unexpected changes in regulatory requirements;
•foreign technical standards;
•changes in tariffs;
•difficulties in staffing and managing international operations;
•difficulties in securing and servicing international customers;
•difficulties in collecting receivables from foreign entities;
•fluctuations in currency exchange rates and any imposition of currency exchange controls; and
•potentially adverse tax consequences.
Our common stock is currently listed for quotation on the Nasdaq StockCapital Market. We are required to meet specified financial requirements in order to maintain our listing on Nasdaq. We could lose our listing on Nasdaq if in the future we become non-compliant with any of the Nasdaq continued listing requirements and, if applicable, we would not remedy such failure within the time allotted by Nasdaq, including for example if the closing bid price of our common stock were to fall and remain below $1.00 per share for more than 30 consecutive business days and we weredoes not able to remedy that failure in the allotted time,increase or if in the futurefuture, we would fail to comply withmeet any of the other Nasdaq listing requirements. The loss of our Nasdaq listing would in all likelihood make our common stock significantly less liquid and adversely affect its value.
As initially disclosed on our Current Report on Form 8-K filed with the SEC, on June 23, 2025, Smith Micro Software, Inc. (the “Company”) received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market (“Nasdaq”) advising that the Company was not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) as a result of the closing bid price of the Company’s common stock (“Common Stock”) having been below $1.00 for thirty consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was granted a period of 180 calendar days from the notification date, or until December 22, 2025, to regain compliance with the Minimum Bid Price Requirement.
On December 23, 2025, the Company received a written notice from Nasdaq (the “December Notice”) granting an additional 180 days, or until June 22, 2026, to regain compliance with the Minimum Bid Price Requirement. If at any time before June 22, 2026, the closing bid price of the Company’s Common Stock is at least $1.00 per share for a minimum of ten consecutive business days, unless Nasdaq exercises its discretion to extend this ten-day period, Nasdaq will provide written confirmation stating that the Company has achieved compliance with the Minimum Bid Price Requirement.
The December Notice has no immediate effect on the continued listing status of the Company’s Common Stock on The Nasdaq Capital Market, and the Company’s listing remains fully effective.
The Company intends to continue monitoring the closing bid price of its common stock and assess its available options in order to regain compliance with the Minimum Bid Price Requirement. If among such options the Company elects to pursue a reverse stock split to regain compliance with the Minimum Bid Price requirement, there can be no assurance that it would accomplish this objective for any meaningful period of time, or at all, or that it would result in any permanent or sustained increase in the market price of our Common Stock; and if such an event would be viewed unfavorably by the market, it could have the effect of reducing our market capitalization. Furthermore, pursuant to a recent modification to Nasdaq’s listing standards, if a company effects a reverse stock split and within one year thereafter becomes non-compliant with the Minimum Bid Price Requirement, it would immediately receive a notification letter from the Nasdaq Listing Qualifications Department commencing delisting proceedings, with no opportunity for a compliance period.
There can be no assurance that the Company will regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with the other Nasdaq listing requirements. In the event of a delisting from the Nasdaq Capital Market, our common stock would likely be traded in the over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions in securities traded on the securities exchanges, such as the Nasdaq Capital Market, or, together, Exchange-listed stocks. Many OTC stocks trade less frequently and in smaller volumes than Exchange-listed stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the prices of OTC stocks are often more volatile than Exchange-listed stocks. Additionally, institutional investors are usually prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.
•the gain or loss of a key customer;
Management's Discussion & Analysis (MD&A)
Largest changes
“The Company's short term notes payable agreements do not contain financial covenants, and the Company is continuing operations and generating revenues in the normal course; however the Company is dependent, to an extent, on the timing of subscriber and revenue growth for its products and the related cash generation from that growth and/or the ability to obtain the necessary capital to meet its obligations and fund its working capital requirements to maintain normal business operations. …”see in full comparison
“In 2024, our revenues declined by 50% to $20.6 million, primarily driven by an $18.1 million decline in revenues in our Family Safety product line, coupled with a $2.3 million decline in ViewSpot revenues. The revenue decline was primarily associated with the impact of the loss of a Tier 1 Family Safety contract, which concluded in November 2023. The revenues associated with that customer accounted for approximately 36% of our total revenues for 2023 and we recognized no revenues related to that contract in 2024. …”see in full comparison
“The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In connection with preparing consolidated financial statements for the year ended December 31, 2025, certain conditions in the Company's evaluation, considered in the aggregate, have raised substantial doubt about the Company's ability to continue as a going concern within one year from the date that the financial statements are issued, which has not been alleviated. …”see in full comparison
“In connection with the preparation of its quarterly financial statements for the second quarter of 2025, the Company assessed changes in circumstances to determine whether it was more likely than not that the fair value of its single reporting unit was below its carrying amount. …”see in full comparison
“In 2025, our revenues declined by 16% to $17.4 million, primarily driven by an $2.3 million decline in revenues in our Family Safety product line, which primarily resulted from decreases associated with legacy Sprint Safe & Found revenue as subscribers migrate to the T-Mobile network and a one-time event with one of our existing deployments that resulted in reduced revenue, coupled with a $1.0 million decline in ViewSpot revenues, partially offset by an increase of $0.1 million in CommSuite revenues. …”see in full comparison
“Our operating expenses decreased in 2025 compared to 2024 by $21.9 million, primarily due to the non-cash goodwill impairment charge of $11.1 million in 2025 compared to a non-cash impairment charge of $24.0 million in 2024 and a continued focus on further cost reduction activities throughout the course of 2024 and 2025. We realized year-over-year reductions in Research and Development, Sales and Marketing and General and Administrative expenses of $3.4 million, $2.9 million and $0.6 million, respectively, as a result of the cost reduction efforts undertaken. …”see in full comparison
Full comparison: every changed paragraph (51)
Smith Micro provides software solutions that simplify and enhance the mobile experience to some of the leading wireless service providers around the globe. From enabling the Digital Family Lifestyle™ to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. Our portfolio includes family safety software solutions to support families in the digital age and a wide rangeInternet of productsThings for("IoT") creating, sharing, and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set.devices.
We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in growing and evolving markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace.marketplace, and by leveraging advanced technologies like artificial intelligence to enhance the features and capabilities of our solutions. The key to our longevity, however, is not simply technological innovation, but our focus on understanding our customers’ needs and delivering value.
In 2025, our revenues declined by 16% to $17.4 million, primarily driven by an $2.3 million decline in revenues in our Family Safety product line, which primarily resulted from decreases associated with legacy Sprint Safe & Found revenue as subscribers migrate to the T-Mobile network and a one-time event with one of our existing deployments that resulted in reduced revenue, coupled with a $1.0 million decline in ViewSpot revenues, partially offset by an increase of $0.1 million in CommSuite revenues. As a result of the decrease in revenue, gross profit declined to $12.9 million in 2025, a decrease of $1.6 million compared to the prior year. In connection with the preparation of our second quarter 2025 financial statements, we evaluated our goodwill and determined that the carrying value of our single reporting unit exceeded its fair value which resulted in a non-cash pretax impairment charge of $11.1 million for the quarter. On June 3, 2025, we divested our ViewSpot product for total consideration of $1.3 million, of which $1.0 million was paid on the closing date, with the remaining amounts collected on July 1, 2025 and October 1, 2025.
Our operating expenses decreased in 2025 compared to 2024 by $21.9 million, primarily due to the non-cash goodwill impairment charge of $11.1 million in 2025 compared to a non-cash impairment charge of $24.0 million in 2024 and a continued focus on further cost reduction activities throughout the course of 2024 and 2025. We realized year-over-year reductions in Research and Development, Sales and Marketing and General and Administrative expenses of $3.4 million, $2.9 million and $0.6 million, respectively, as a result of the cost reduction efforts undertaken. These decreases resulted in a 20% reduction in operating expenses in 2025, excluding goodwill impairment, the ViewSpot sale, and depreciation and amortization, as compared to 2024. The net loss attributable to common stockholders for 2025 was $30.1 million, resulting in a net loss attributable to common stockholders of $1.46 per basic and diluted share.
In 2025, we received approximately $1.5 million in gross proceeds from a registered direct offering of Common Stock and a concurrent private placement of warrants, approximately $1.2 million in exchange for short-term notes and warrants and subsequently approximately $2.7 million from concurrent registered direct and private placement offerings of Common Stock and in each case a concurrent private placement of warrants. Additionally, in October 2025, we announced strategic cost reductions (in addition to those noted in the paragraph above) in our organization, primarily comprised of workforce reorganization, which we expect to result in cost savings of approximately $7.2 million reduction in costs for 2026. These efforts are part of our broader initiative to realign the Company's cost structure with long-term business goals, strengthen the financial foundation, and accelerate our path to profitability.
In 2024, our revenues declined by 50% to $20.6 million, primarily driven by an $18.1 million decline in revenues in our Family Safety product line, coupled with a $2.3 million decline in ViewSpot revenues. The revenue decline was primarily associated with the impact of the loss of a Tier 1 Family Safety contract, which concluded in November 2023. The revenues associated with that customer accounted for approximately 36% of our total revenues for 2023 and we recognized no revenues related to that contract in 2024. Other factors impacting the decline in revenues were the losses of two ViewSpot contracts, coupled with T-Mobile's efforts to migrate legacy Sprint subscribers to the T-Mobile network, which has impacted our revenues associated with legacy Sprint subscribers. As a result of the decrease in revenue, gross profit declined to $14.4 million in 2024, a decrease of $15.9 million compared to the prior year. To address the impact of that Tier 1 Family Safety contract termination, starting in the first quarter of 2023 and continuing in 2024, we undertook multiple restructuring efforts that have resulted in the elimination of approximately 48% of the Company's global workforce. While operating expenses increased in 2024 by approximately $15.5 million, the increase was primarily due to a non-cash goodwill impairment charge of $24.0 million. We realized year-over-year reductions in Research and Development, Sales and Marketing and General and Administrative expenses of $3.1 million, $2.2 million and $2.2 million, respectively, as a result of the cost reduction efforts undertaken. These decreases resulted in an 18% reduction in operating expenses, excluding goodwill impairment, in 2024 as compared to 2023, which follows a 26% reduction in operating expenses in 2023 as compared to 2022. The net loss for 2024 was $48.7 million, resulting in a net loss of $3.94 per basic and diluted share.
We believe that we remain strategically positioned to offer our market-leading family safety platform to the majority of U.S. mobile subscribers as we provide white-label Family Safety applications to two Tier 1 wireless carriers operating in the United States. Further, a Tier 1 carrier in Europe launched a new SafePath-based family safety solution in the fourth quarter of 2024 and began conducting robust marketing activities related to that solution during the first quarter of 2025. We believe that we have an opportunity to increase the respective subscriber bases, and in turn, grow the revenues associated with these Tier 1 carriers. In addition, with the recent expansion of our SafePath product line, most notably with SafePath Kids and SafePath OS, we believe that we are well-positioned to grow our Family Safety revenues more broadly with these Tier 1 carriers as well as with other operators in our industry.
Refer to section titled "Liquidity and Capital Resources" for discussion of significant material changes in cash and Note 76 of our Notes to the Consolidated Financial Statements for discussion regarding the changes related to the notes payable, derivative liabilities,payable and warrant liabilities.
On April 3, 2024, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a one-for-eight (1:8) reverse stock split of the shares of the Company's Common Stock, par value $0.001 per share, with an effective time of 11:59 p.m., Eastern Time on April 10, 2024 (the "Reverse Stock Split"). At the effective time, every eight shares of our Common Stock, whether issued and outstanding or held by the Company as treasury stock were automatically combined and converted (without any further act) into one share of fully paid and nonassessable Common Stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole share. See further information in Note 1. All shares and per share amounts in this Report have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.
Revenues. Revenues are net of allowances. Our operations are organized into one business segment, Wireless, which includes all of our existing core products, including the Family Safety (including SafePath), CommSuite, and ViewSpotCommSuite portfolio of products.
Change in fair value of warrant and derivative liabilities. Change in fair value of warrant and derivative liabilities results from valuation related impacts to the warrant and derivative liabilities.
Interest (expense) income, net. Interest expense is primarily related to interest associated financing arrangements, amortization of debt issuance costs and discount, and interest incurred on short-term obligations. Interest income is primarily related to interest earned on cash equivalents.
Loss on derecognition of debt. Adjustments to fair value at each period end as the result of installment payments extinguishing principal associated with the convertible notes, including derivatives.
Interest income (expense), net. Interest income is primarily related to interest earned on cash equivalents. Interest expense is primarily related to interest associated with our convertible notes and financing arrangements and the amortization of debt issuance costs and discount.
Other income (expense), income, net. Other income (expense), net is primarily related to fixed asset disposals and other non-operating gains or losses.
Provision (Benefitbenefit) provision for income tax expense. Income tax (benefit) expense is primarily related to the provision for federal, state, and foreign taxes imposed upon our results of operations.
Revenues. Revenues were $20.6$17.4 million and $40.9$20.6 million for the years ended December 31, 20242025 and 2023,2024, respectively, representing a decrease of $20.3$3.2 million, or 50%.16%. This decrease was driven by declines in Family Safety and ViewSpot revenues of approximately $18.1$2.3 million and $2.3$1.0 million, respectively.respectively, partially offset by an increase in CommSuite revenues of $0.1 million. This decline in Family Safety revenues was primarily asdue a result of the losses of a Family Safety contract with a Tier 1 carrier and two ViewSpot contracts, coupled withto the migration of legacy Sprint customers onto the T-Mobile network, which has impacted our revenues associated with legacy Sprint subscribers for Family Safety.Safety, combined with a one-time event with one of our existing deployments that resulted in reduced revenue. The decline in ViewSpot revenue was due to a contract concluding during 2024 and the sale of that product in June 2025.
Cost of revenues. Cost of revenues were $6.1$4.5 million and $10.6$6.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. This decrease of approximately $4.4$1.6 million was primarily due to cost reduction efforts in 2024 and 2025 and the year-over-year decline in revenue.
Selling and marketing. Selling and marketing expenses were $8.9$6.0 million and $11.1$8.9 million for the years ended December 31, 20242025 and 2023,2024, respectively. This decrease of $2.2$2.9 million was primarily due to decreases in personnel related costs of $1.7$2.6 million coupled with a period-over-period decline in marketing costs of $0.6$0.1 million and a decrease in travel costs of $0.1 million, partially offset by an increase in stock-based compensation of approximately $0.3 million.
Research and development. Research and development expenses were $14.1$10.7 million and $17.1$14.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. This decrease of approximately $3.1$3.4 million was primarily due to the decline in personnel-related costs of approximately $2.9$3.0 million associated with the workforce reduction efforts coupled with reductions in contractorsupply costs of $0.2$0.1 million dueand toa thedecrease substantialin completionstock-based compensation of SafePathapproximately migration$0.3 efforts during 2023.million.
General and administrative. General and administrative expenses were $10.6$10.0 million and $12.8$10.6 million for the years ended December 31, 20242025 and 2023,2024, respectively. This decrease of $2.2$0.6 million was primarily related to a decrease in professional fees of approximately $0.4 million, a decline in stock-based compensation of approximately $0.3 million, declines in personnel-related costs of approximately $1.0$0.1 million associated with the workforce reduction efforts undertaken, aand decreasewas inpartially professionaloffset feesby bad debt write-offs of approximately $0.2 million, a reduction in occupancy costs of approximately $0.4 million, and a decline in stock-based compensation of approximately $0.6 million.
Gain on Sale of ViewSpot, net. On June 3, 2025, we divested our ViewSpot product for total consideration of $1.3 million, of which $1.0 million was paid on the closing date, with the remaining amounts paid in two installments, the first of which was collected on July 1, 2025, and the final balance was collected on October 1, 2025. There were no such amounts for the year ended December 31, 2024 Goodwill impairment. A goodwill impairment charge of $11.1 million was recorded for the year ended December 31, 2025 due to an analysis whereby we concluded that the carrying value of our single reporting unit exceeded its fair value. A goodwill impairment charge was recorded in the amount of $24.0 million for the year ended December 31, 2024.
Goodwill impairment. An impairment charge was recorded during the first quarter of 2024 as a result of an interim triggering event leading to an analysis, whereby we concluded that the carrying value of our single reporting unit exceed its fair value by $24.0 million. We did not have a similar charge in the prior year.
Change in fair value of warrant and derivative liabilities. The change in fair value of warrant and derivative liabilities of $0.4$0.2 million and $4.2$0.4 million for the years ended December 31, 20242025 and 2023,2024, respectively, resulted from valuation related impacts to warrant and derivative liabilities including changes in stock price, risk-free interest rate, expected term, and expected volatility.
Loss on derecognition of debt. The loss recognized on derecognition of debt for the year ended December 31, 2023 was $4.0 million. This resulted from installment payments made on the convertible notes issued under the Note and Stock offering in August 2022 (the "Notes") in the form of shares, and the required derecognition of the net debt position related to that principal balance, including the derivative, and discounts. There was no commensurate loss in the year ended December 31, 2024 as the convertible notes were retired at maturity as of December 31, 2023.
Interest income (expense), income, net. Interest expense, net was $0.4 million for the year ended December 31, 2025 and interest income, net was $0.1 million for the year ended December 31, 2024 and interest expense, net was $6.4 million for the year ended December 31, 2023.2024. The period-over-period change in interest income (expense), net of $6.5$0.5 million was primarily related to theinterest expense associated financing arrangements, amortization of the discount and debt issuance costs and stateddiscount, and interest expenseincurred relatedon toshort-term the Notes, which were fully retired effective December 31, 2023.obligations.
(Benefit) provision for income tax expense. Because of our cumulative loss position, the current provision for income tax expensebenefit consists of state income taxes, foreign tax withholdings, and foreign income taxes. After consideration of the Company’s cumulative loss position as of December 31, 2024,2025, the Company retained a full valuation allowance related to its U.S.-based deferred tax assets of $70.2$75.0 million at December 31, 2024.2025.
The Company’s principal sources of liquidity are its existing cash and cash equivalents, and cash generated by operations. As of December 31, 2025, the Company's cash and cash equivalents were approximately $1.5 million. Since December 31, 2024, we have utilized cash collections, including the proceeds from the sale of our ViewSpot product, cash proceeds from our various equity and debt offerings, and cash on hand to cover routine working capital requirements. On July 18, 2025, we closed on a registered direct offering of Common Stock and a concurrent placement of warrants, which provided gross proceeds to the Company of approximately $1.5 million. Additionally, on September 11, 2025 and September 29, 2025, we entered into Notes Purchase Agreements, which provided gross cash proceeds of approximately $1.2 million by September 30, 2025, and on November 5, 2025 the Company entered into registered direct offering and private placement transactions of common stock and warrants to purchase common stock, which provided gross cash proceeds of $2.7 million, as more fully described in Note 6 of our Notes to the Consolidated Financial Statements .
The timing of our anticipated revenue growth relative to the costs of operating, maintaining, innovating and evolving our business to respond to industry trends and maximize growth opportunities may result in cash and cash equivalents being insufficient to fund operations at current levels over the next twelve months and beyond.
Our principal sources of liquidity are our existing cash and cash equivalents, and cash generated by operations. We have in the past also generated cash from equity and debt financings. Our primary needs for liquidity relate to working capital requirements for operations. Our working capital requirements will depend on many factors, including the ability to obtain sufficient subscribers, and therefore revenue, from our customers to cover the current level of operating expenses to achieve a level of profitability. As of December 31, 2024, our cash and cash equivalents were approximately $2.8 million and we had no outstanding debt. Our cash flow used in operations was $14.3 million for the year ended December 31, 2024. Our cash balance as of December 31, 2024 was impacted by our transition to a new payment platform with our largest customer, which delayed the receipt of cash from this customer for certain invoices. We were subsequently able to collect $2.5 million of these aged receivables from that customer in January 2025. This delay in cash receipts was the primary driver of the increase in our accounts receivable balance to $5.7 million as of December 31, 2024 compared to $3.4 million as of September 30, 2024.
Our liquidity is being adversely impacted by the effect of the aforementioned loss during 2023 of our Family Safety contract with a Tier 1 carrier on our results of operations, since we recognized no revenue from that contract during 2024. While we have adjusted our cost structure and we expect to generate additional revenues from our recent launch with a Tier 1 carrier in Europe, the timing of that anticipated revenue growth versus the current impact of that contract loss could cause the cash and cash equivalents on hand and expected to be generated in the next twelve months and beyond to be insufficient to fund operations at the current levels.
This adverse impact on liquidity does not trigger a violation of any covenants in our material agreements, particularly as allthe ofSeptember our11, outstanding2025 debtand wasSeptember retired29, as2025 ofNotes DecemberPurchase 31,Agreements 2023.do not contain any material financial covenants. The availability of sufficient funds will depend to an extent on the existence and timing of subscriber growth and the related cash generation thereof, and/or the ability to obtain the necessary capital to meet our obligations and fund our working capital requirements to maintain normal business operations. However, toTo meet future cash needs, the Company may determine to take additional actions, as noted in ourthe Risk Factor appearing in our 2025 Risk Factor, "If we are unable to meet our obligations as they become due over the next twelve months, the Company may not be able to continue as a going concern." There can be no assurance that any such potential actions will be available or will be available on satisfactory terms. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. As a result of these uncertainties, and notwithstanding management's plans and efforts to date, we have been unable to alleviate substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued.
Net cash used in operating activities was $7.0$14.3 million for the year ended December 31, 2023.2024. The primary uses of operating cash were a net loss of $24.4$48.7 million less non-cash expenses totaling $17.8$34.1 million, andincluding a decreasegoodwill inimpairment accountscharge payableof $24.0 million, depreciation and accrued liabilitiesamortization of $2.8$6.3 million,million partiallyand offsetstock bycompensation a decrease in accounts receivableexpense of $2.6$4.5 million.
Net cash provided by investing activities of $1.2 million for the year ended December 31, 2025 was primarily due to the net proceeds from the sale of ViewSpot in June 2025, offset by capital expenditures. Net cash used in investing activities was $0.2 million for the year ended December 31, 2024 was primarily attributable to the net proceeds from licensing several of our patents. Net cash used in investing activities was $0.1 million for the year ended December 31, 2023.
Net cash provided by financing activities of $4.7 million for the year ended December 31, 2025 was attributable to the net cash proceeds to the Company of (i) $1.0 million from the July 2025 registered direct and private placement offering, (ii) $1.2 million in September 2025 from the issuance of notes and warrants, and (iii) net proceeds of $2.4 million from the November 2025 registered direct and private placement transactions, and the timing of borrowings of $0.9 million less repayments of $0.9 million from short-term insurance premium financing arrangements.
Net cash used by financing activities of $0.1 million for the year ended December 31, 2023 was primarily attributable to the timing of borrowings and repayments from short-term insurance premium financing arrangements.
Our corporate headquarters is located in Pittsburgh, Pennsylvania, where we currently lease approximately 35,621 square feet of space under a lease that expires on April 30, 2026. In JanuaryFebruary 2024,2026, we executed a renewal on athe lease wherewhereby beginning May 1, 2026 we will lease approximately 9,571 square feet through April 30, 2031. We occupy approximately 8,513 square feet of space in Aliso Viejo, California in a lease that now expires on February 29, 2028. Internationally, we lease approximately 12,728 square feet in Belgrade, Serbia under a lease that expires July 31, 2026, approximately 1,500 square feet in Stockholm, Sweden under a lease that expires September 30, 2026, and approximately 2,659 square feet in Braga, Portugal under a lease that expires May 31, 2027. Each of the above properties is used by our sole reportable operating segment: Wireless.
•Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
•Level 3 - Unobservable inputs which are supported by little or no market activity.
For warrant liabilities and derivatives,liabilities, we may utilize fair value measurements which are categorized within Level 3 of the fair value hierarchy, and subsequent changes in fair value for designated items are required to be reported in earnings in the current period.
In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, Smith Micro reviews the recoverability of the carrying value of the Company's single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. The annual impairment testing date is December 31 of each year. Recoverability of goodwill is determined by comparing the estimated fair value of the reporting unit to the carrying value of the underlying net assets in the reporting unit. If the estimated fair value of a reporting unit is determined to be less than the carrying value, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the fair value.
During the three months ended March 31, 2024, the Company performed an interim quantitative impairment test on its goodwill as of February 29, 2024 and as a result of this interim assessment, the Company recorded a goodwill impairment charge totaling $24 million. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates.
In connection with the preparation of its quarterly financial statements for the second quarter of 2025, the Company assessed changes in circumstances to determine whether it was more likely than not that the fair value of its single reporting unit was below its carrying amount. While there was no single determinative event or factor, considerations including recent financial performance compared to expected forecasts, trends in stock valuation, pricing of the most recent equity raise, and the receipt of the Nasdaq minimum bid price requirement notice on June 24, 2025 led the Company to conclude that when considering the events and factors in totality it was necessary to perform an interim quantitative valuation assessment. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates. Based on the results of the assessment, a full goodwill impairment charge of $11.1 million was recorded.
Goodwill represents purchase consideration from a business combination that exceeds the value assigned to the net assets of the acquired businesses. As per Topic No. ASC 350, Intangibles- Goodwill and Other, we are required to periodically assess the recoverability of the carrying value of our goodwill at least annually during the fourth quarter of the fiscal year or whenever events or circumstances indicate a potential impairment. If the carrying amount of our single reporting unit exceeds its fair value, an impairment loss equal to the excess of carrying value over fair value is recorded.
We have no indefinite-lived intangible assets. Amortization expense related to our definite-lived intangible assets resulting from acquisitions is calculated based on the pattern of economic benefit expected to be generated from the use of that asset. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired in accordance with ASC Topic No. 350, Intangibles- Goodwill and Other and ASC 360, Property, Plant and Equipment.
The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In connection with preparing consolidated financial statements for the year ended December 31, 2025, certain conditions in the Company's evaluation, considered in the aggregate, have raised substantial doubt about the Company's ability to continue as a going concern within one year from the date that the financial statements are issued, which has not been alleviated. The evaluation considered the Company's financial condition, including its liquidity sources, funds necessary to maintain the Company's operations considering the current financial condition, obligations, and other expected cash flows, and negative financial trends of recurring operating losses and negative cash flows.
The Company's short term notes payable agreements do not contain financial covenants, and the Company is continuing operations and generating revenues in the normal course; however the Company is dependent, to an extent, on the timing of subscriber and revenue growth for its products and the related cash generation from that growth and/or the ability to obtain the necessary capital to meet its obligations and fund its working capital requirements to maintain normal business operations. Management believes that the Company's strategic plans, including cost reductions announced in October, which primarily consisted of a workforce reorganization and are aimed at enhancing operational efficiencies and reducing costs in line with the Company's priorities and vision for the future and the broader initiative to realign the Company's cost structure with long-term business goals, strengthen its financial foundation, and accelerate the Company's path to profitability, combined with plans to expand subscriber growth, to acquire new customers, and to expand its offerings to existing customers to generate increased revenues, and, as necessary, to raise additional capital will be sufficient to support the Company's operations; as such the financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern. The Company believes, based on its history of being able to complete debt and equity financings, that it would be able to raise additional funds as necessary, through public or private equity offerings, including by filing one or more registration statements, through debt financings, or from a combination of these funding sources. However, it may not be able to secure such incremental capital in a timely manner or on favorable terms, if at all. To preserve liquidity, the Company may also take one or more of the following additional actions:
While management believes that the Company’s plans for growing revenue and the other potential actions available to it would alleviate the conditions that raise substantial doubt, these strategies are not entirely within the Company's control and cannot be assessed as being probable of occurring.
In connection with preparing our consolidated financial statements, management evaluates whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year from the date that the financial statements are issued.
We have received upfront payments from customers from services to be provided under our ViewSpot contracts. The advance receipts were deferred and subsequently recognized ratably over the contract period. We also provideprovided consulting services to configure new devices or ad hoc targeted promotional content for our customers utilizing the ViewSpot platform upon request.request from our customers. These requests arewere driven by our customers’ marketing initiatives and tend to be short term “bursts” of activity. We recognizerecognized these revenues upon delivery of the configured promotional content to the cloud platform or upon certification of the new device. We divested our ViewSpot product line on June 3, 2025.
What changed in the latest 10-Q
Risk Factors
In addition to the other information included in this Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K, and the factors identified at the beginning of Part I, Item 2 of this Report, under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which could materially affect our business, financial condition, cash flows, or results of operations. The risks described in the 2025 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently considers immaterial also may materially adversely affect its business, financial condition, and/or operating results. Other than as set forth below in this Item 1A, there have been no material changes to the risk factors included in our 2025 Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025”
Largest changes
In thesee in full comparisonfirstsecond quarter of 2026, our revenues decreased by9%2% to$4.2$4.3 million compared to thefirstsecond quarter of 2025, primarily driven by a$0.4$0.1 million decrease in our Family Safety productline, coupled with a $0.1 million decrease in ViewSpot revenues,line partially offsetbywith an increaseof $0.1 millionin CommSuiterevenues.revenuesTheofrevenue$26decline primarily resulted from decreases associated with legacy Sprint Safe & Found revenue as subscribers migrate to the T-Mobile network.thousand. As a result of thedeclinedecrease in cost of revenues, our gross profit during thefirstsecond quarter of 2026 was$3.3$3.5 million, representingaandecreaseincrease of$0.1$0.3 million as compared to thefirstsecond quarter of the prior year. Our operating expenses decreased during thefirstsecond quarter of 2026 compared to thefirstsecond quarter of 2025 by approximately$1.9$12.3 million. Excluding the second quarter 2025 write-off of goodwill impairment of $11.1 million and the gain on sale of ViewSpot of $1.3 million, second quarter 2026 operating expenses quarter over quarter decreased by $2.5 million. This reduction wasprimarilyadueresulttoofquarter-over-quartercostreductionsoptimization activities in 2026 and 2025, in sales and marketing, research and development, and general and administrativeexpensesexpenses,dueinclusivetoofsignificantpersonnel and organizational cost reductioninitiativesactivitiesundertakenasduringwell2025asandlower2026.stock compensation costs. The net loss attributable to common stockholders for thefirstsecond quarter of 2026 was$3.9$2.7 million, resulting in a net loss of$0.15$0.52 per basic and diluted share.
Net cash used in operating activities wassee in full comparison$0.6$2.9 million for thethreesix months endedMarchJune31,30, 2025. The primary uses of operating cash were a net loss of$5.2$20.2 million less non-cash expenses totaling$2.5$16.0 million,drivenincludingbya goodwill impairment charge of $11.1 million, and depreciation and amortization of$1.4$2.7 million and stock compensation expense of$1.1$2.2 million,andcoupled with a decrease in accounts payable and accrued liabilities of $0.3 million, partially offset by a decrease in accounts receivable of$2.4$3.1 million.
“Goodwill impairment. A goodwill impairment charge of $11.1 million was recorded for the six months ended June 30, 2025 due to an analysis whereby we concluded that the carrying value of our single reporting unit exceeded its fair value.”see in full comparison
“Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025”see in full comparison
“In 2025, we received approximately $1.5 million in gross proceeds from a registered direct offering of Common Stock and a concurrent private placement of warrants, approximately $1.2 million for short-term notes and warrants and subsequently approximately $2.7 million from concurrent registered direct and private placement offerings of Common Stock and in each case a concurrent private placement of warrants. …”see in full comparison
“On June 4, 2026, we effected a one-for-five (1:5) reverse stock split of the shares of the Company's Common Stock, par value $0.001 per share. At the effective time, every five shares of our Common Stock were automatically combined and converted (without any further act) into one share of fully paid and nonassessable Common Stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole shares. See further information in Note 1. …”see in full comparison
Full comparison: every changed paragraph (40)
In the firstsecond quarter of 2026, our revenues decreased by 9%2% to $4.2$4.3 million compared to the firstsecond quarter of 2025, primarily driven by a $0.4$0.1 million decrease in our Family Safety product line, coupled with a $0.1 million decrease in ViewSpot revenues,line partially offset bywith an increase of $0.1 million in CommSuite revenues.revenues Theof revenue$26 decline primarily resulted from decreases associated with legacy Sprint Safe & Found revenue as subscribers migrate to the T-Mobile network.thousand. As a result of the declinedecrease in cost of revenues, our gross profit during the firstsecond quarter of 2026 was $3.3$3.5 million, representing aan decreaseincrease of $0.1$0.3 million as compared to the firstsecond quarter of the prior year. Our operating expenses decreased during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 by approximately $1.9$12.3 million. Excluding the second quarter 2025 write-off of goodwill impairment of $11.1 million and the gain on sale of ViewSpot of $1.3 million, second quarter 2026 operating expenses quarter over quarter decreased by $2.5 million. This reduction was primarilya dueresult toof quarter-over-quartercost reductionsoptimization activities in 2026 and 2025, in sales and marketing, research and development, and general and administrative expensesexpenses, dueinclusive toof significantpersonnel and organizational cost reduction initiativesactivities undertakenas duringwell 2025as andlower 2026.stock compensation costs. The net loss attributable to common stockholders for the firstsecond quarter of 2026 was $3.9$2.7 million, resulting in a net loss of $0.15$0.52 per basic and diluted share.
We believe we are strategically positioned to offer our market-leading family safety platform to the majority of U.S. mobile subscribers, as we currently provide white-label Family Safety applications to two Tier 1 wireless carriers operating in the United States. Further, we have a SafePath-based Kidskids Planplan solution launched with a Tier 1 carrier in Europe. In addition, with the recent expansion of our SafePath product line, most notablythrough SafePath OS with SafePath OS for Kids Phone and SafePath OS for Senior Phone, SafePath Connect, a partner-supported direct to consumer family safety offering, and our SafePath SDKs and APIs as new deployment options, we believe that we are well-positioned to grow our Family Safety revenues more broadly with these Tier 1 carriers as well as with other operators in our industry. Further, our development of SafePath 8 is completed, and we have delivered certain of the new features that it enables to some of our customers, with more expected throughout this year.partners. We believe that we have an opportunity to increase the respective subscriber bases, and in turn, grow the revenues associated with these Tier 1 carriers.revenues.
In 2025, we received approximately $1.5 million in gross proceeds from a registered direct offering of Common Stock and a concurrent private placement of warrants, approximately $1.2 million for short-term notes and warrants and subsequently approximately $2.7 million from concurrent registered direct and private placement offerings of Common Stock and in each case a concurrent private placement of warrants. Additionally, in October 2025, we announced strategic cost reductions (in addition to those noted in the paragraph above) in our organization, primarily comprised of workforce reorganization, which we expect to result in cost savings of approximately $7.2 million reduction in costs for 2026. These efforts are part of our broader initiative to realign the Company's cost structure with long-term business goals, strengthen the financial foundation, and accelerate our path to profitability.
In the first quarter endedof March2026 31, 2026, the Companywe received approximately $1.0 million in gross cash proceeds from the sale of a secured notesnote and accompanying unregistered common stock purchase warrants, and additional gross proceeds of $4.9 million from the sale of secured convertible notes and warrants to acquire up to an aggregate amount of approximately 9.41.9 million additional shares of the Company'sour common stock, of which $1.9 million was used to retire outstanding notes issued pursuant to September 2025 note purchase agreements. In the second quarter ended June 30, 2026, we entered into Inducement Letter Agreements for the exercise of certain October 2024 Warrants to purchase a total of approximately 0.5 million shares of common stock at $3.35 share with proceeds to the company of approximately $1.6 million, and approximately 0.5 million new warrants were issued in connection with this transaction.
On June 4, 2026, we effected a one-for-five (1:5) reverse stock split of the shares of the Company's Common Stock, par value $0.001 per share. At the effective time, every five shares of our Common Stock were automatically combined and converted (without any further act) into one share of fully paid and nonassessable Common Stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole shares. See further information in Note 1. All shares and per share amounts herein have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.
The table below sets forth certain statements of operations and comprehensive loss data expressed as a percentage of revenues for the three and six months ended MarchJune 31,30, 2026 and 2025. Our historical results are not necessarily indicative of the operating results that may be expected in the future.
Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025
Revenues. Revenues were $4.2$4.3 million and $4.6$4.4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, representing aan decrease of $0.4$0.1 million, or 9%.2%. This decrease of $0.1 million was primarily related to declines associated with our Family Safety product line of $0.4 million, which was mostly driven by Sprint Safe & Found revenue declining as legacy Sprint subscribers migrated to the T-Mobile network, coupled with a nominal decline in ViewSpot revenue that was primarily due to a contract that concluded during 2024 and the sale of that product in June 2025,line, partially offset by an increase in CommSuite revenues of approximately $0.1$26 million.thousand.
Cost of revenues. Cost of revenues were $0.9$0.8 million and $1.3$1.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. This decrease of approximately $0.4 million was primarily due to the period-over-period decline in revenue coupled with the impact of cost reduction efforts undertaken.
Gross profit. Gross profit was $3.3$3.5 million, or 78.4%81.3% of revenues, for the three months ended MarchJune 31,30, 2026, compared to $3.4$3.2 million, or 72.8%73.5% of revenues, for the three months ended MarchJune 31,30, 2025. The decreaseincrease of $0.1$0.3 million in gross profit was driven by the period-over-period declineincrease in revenue volume.coupled with cost reduction efforts.
Selling and marketing. Selling and marketing expenses were $1.5$1.2 million and $1.6$1.7 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. This decrease of approximately $0.1$0.4 million was primarily due to decreases in personnel relatedpersonnel-related costs dueof to$0.2 costmillion reductionand activitiesstock-based undertaken.compensation of $0.2 million.
Research and development. Research and development expenses were $1.8$1.4 million and $2.9$2.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. This decrease of approximately $1.1$1.4 million was primarily due to decreases in personnel relatedpersonnel-related costs dueof to$0.8 million, a one-time cost reduction activitiesof undertaken.approximately $0.3 million, stock-based compensation of $0.2 million, and other costs of $0.1 million.
General and administrative. General and administrative expenses were $2.1$2.0 million and $2.7 million for each of the three months ended MarchJune 31,30, 2026 and 2025, respectively. This decrease of approximately $0.6$0.7 million was primarily due to decreases in personnel relatedpersonnel-related costs dueof to$0.2 costmillion reductionand activitiesstock-based undertaken.compensation of $0.5 million.
Depreciation and amortization. Depreciation expense was $0.1 million for both the three months ended MarchJune 31,30, 2026 and 2025. Amortization expense was $1.2 million and $1.3 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Amortization expense is recognized based on the pattern of economic benefit expected to be generated from the use of the intangible assets.
Change in fair value of warrant liabilities. Change in fair value of warrant liabilities was nominal and $0.1 million the three months ended MarchJune 31,30, 2026 and 2025, respectively. The total decrease in income of $0.1 million resulted from valuation related impacts to the warrant liabilities in the respective periods.
Interest expense, net. Interest expense was $0.5$0.2 million and nominal for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in interest expense of $0.5$0.2 million was primarily related to the amortization of the debt discount and issuance costs and stated interest expense related to the financing transactionstransaction entered into in the three months ended March 31, 2026 ,2026, which is discussed in further detail in Notes 5.
Other expense, net. Other expense, net was nominal for the three months ended MarchJune 31,30, 2026 and 2025.
Provision for income tax expense. Because of our cumulative loss position, the provision for income tax expense consists of state income taxes, foreign tax withholdings, and foreign income taxes for the three months ended MarchJune 31,30, 2026 and 2025. There were no material changes in the period-to-period comparison.
Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025
Revenues. Revenues were $8.6 million and $9.0 million for the six months ended June 30, 2026 and 2025, respectively, representing a decrease of $0.5 million, or 5%. This decrease of $0.5 million was related to our Family Safety product line coupled with $0.1 million in ViewSpot revenue recorded in the six months ended June 30, 2025 which was primarily due to the sale of that product in June 2025, partially offset by an increase in CommSuite revenues of approximately $0.1 million.
Cost of revenues. Cost of revenues were $1.7 million and $2.4 million for the six months ended June 30, 2026 and 2025, respectively. This decrease of approximately $0.7 million was primarily due to the period-over-period impact of cost reduction efforts undertaken.
Gross profit. Gross profit was $6.8 million, or 79.9% of revenues, for the six months ended June 30, 2026, compared to $6.6 million, or 73.1% of revenues, for the six months ended June 30, 2025. The increase of $0.3 million in gross profit in gross profit was driven by the cost reduction efforts in cost of revenues.
Selling and marketing. Selling and marketing expenses were $2.7 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively. This decrease of approximately $0.6 million was primarily due to decreases in personnel-related costs of $0.3 million and stock-based compensation of $0.2 million.
Research and development. Research and development expenses were $3.2 million and $5.6 million for the six months ended June 30, 2026 and 2025, respectively. This decrease of approximately $2.4 million was primarily due to decreases in personnel-related costs of $1.7 million, a one-time cost reduction of $0.3 million, stock-based compensation of $0.3 million, and other costs of $0.1 million.
General and administrative. General and administrative expenses were $4.1 million and $5.4 million for each of the six months ended June 30, 2026 and 2025, respectively. This decrease of approximately $1.3 million was primarily due to decreases in personnel-related costs of $0.3 million, stock-based compensation of $0.9 million, and lower rent costs of $0.2 million, partially offset by higher costs associated with corporate transactions.
Depreciation and amortization. Depreciation expense was $0.2 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively. Amortization expense was $2.4 million and $2.6 million for the six months ended June 30, 2026 and 2025, respectively. Amortization expense is recognized based on the pattern of economic benefit expected to be generated from the use of the intangible assets.
Gain on Sale of ViewSpot. On June 3, 2025, we sold our ViewSpot product for total consideration of $1.3 million, of which $1.0 million was paid on the closing date, with the remaining amounts paid in two installments, the first of which was collected on July 1, 2025, and the final balance was collected October 1, 2025.
Goodwill impairment. A goodwill impairment charge of $11.1 million was recorded for the six months ended June 30, 2025 due to an analysis whereby we concluded that the carrying value of our single reporting unit exceeded its fair value.
Change in fair value of warrant liabilities. Change in fair value of warrant liabilities was nominal and $0.1 million for the six months ended June 30, 2026 and 2025, respectively. The total decrease in income of $0.1 million resulted from valuation related impacts to the warrant liabilities in the respective periods.
Interest expense, net. Interest expense was $0.7 million and nominal for the six months ended June 30, 2026 and 2025, respectively. The increase in interest expense of $0.7 million was primarily related to the amortization of the debt discount and issuance costs and stated interest expense related to the financing transactions in the six months ended June 30, 2026, which is discussed in further detail in Notes 5.
Other expense, net. Other expense, net was nominal and $0.1 million for the six months ended June 30, 2026 and 2025, respectively.
Provision for income tax expense. Because of our cumulative loss position, the provision for income tax expense consists of state income taxes, foreign tax withholdings, and foreign income taxes for the six months ended June 30, 2026 and 2025. There were no material changes in the period-to-period comparison.
The Company’s principal sources of liquidity are its existing cash and cash equivalents, and cash generated by operations. As of MarchJune 31,30, 2026, the Company's cash and cash equivalents were approximately $1.7$2.8 million. Since the beginning of 2025, we have utilized cash collections, including the proceeds from the sale of our ViewSpot product and cash on hand to cover routine working capital requirements. On July 18, 2025, we closed on a registered direct offering of common stock and a concurrent placement of warrants, which provided gross proceeds to the Company of approximately $1.5 million, prior to offering fees and transaction expenses. Additionally, on each of September 11 and September 29, 2025, we entered into loan arrangements, as more fully described in Note 5, which provided aggregated gross cash proceeds of approximately $1.2 million as of September 30, 2025. On February 3, 2026, the Company received approximately $1.0 million in gross proceeds via a loan transaction and accompanying issuance of unregistered common stock purchase warrants, and subsequently on March 4, 2026 the Company received gross cash proceeds of $4.9 million from the sale of secured convertible notes with $1.9 million of that amount being used to pay off loans incurred in September 2025, and warrants to acquire up to an aggregate amount of approximately 9.41.9 million additional shares of the Company's common stock. In the second quarter ended June 30, 2026, the Company entered into Inducement Letter Agreements for the exercise of certain October 2024 Warrants to purchase a total of 0.5 million shares of common stock at $3.35 share with proceeds to the company of approximately $1.6 million.
This adverse impact on liquidity does not trigger a violation of any covenants in our material agreements, particularly as all of the agreements for the transactions discussed herein this “Liquidity and Capital Resources” section do not contain any material financial covenants. The availability of sufficient funds will depend to an extent on the existence and timing of revenue and subscriber growth and the related cash generation thereof, and/or the ability to obtain the necessary capital to meet our obligations and fund our working capital requirements to maintain normal business operations. To meet future cash needs, the Company may determine to take additional actions, as noted in the Risk Factor appearing in our 2025 Form 10-K under the heading, "If we are unable to meet our obligations as they become due over the next twelve months, the Company may not be able to continue as a going concern." There can be no assurance that any such potential actions will be available or will be available on satisfactory terms. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. As a result of these uncertainties, and notwithstanding management's plans and efforts to date, we have been unable to alleviate substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued.
Net cash used in operating activities was $3.8$4.6 million for the threesix months ended MarchJune 31,30, 2026. The primary uses of operating cash were a net loss of $3.9$6.5 million less non-cash expenses totaling $2.2$3.8 million, including depreciation and amortization of $1.2$2.5 million, amortization of debt discount and financing issuance costs of $0.4$0.5 million, and stock compensation expense of $0.6$0.8 million, offset by an increase in accounts receivable of $1.1$0.8 million and a decrease in accounts payable and accrued liabilities of $0.8$0.9 million.
Net cash used in operating activities was $0.6$2.9 million for the threesix months ended MarchJune 31,30, 2025. The primary uses of operating cash were a net loss of $5.2$20.2 million less non-cash expenses totaling $2.5$16.0 million, drivenincluding bya goodwill impairment charge of $11.1 million, and depreciation and amortization of $1.4$2.7 million and stock compensation expense of $1.1$2.2 million, andcoupled with a decrease in accounts payable and accrued liabilities of $0.3 million, partially offset by a decrease in accounts receivable of $2.4$3.1 million.
Net cash used in investing activities was nominal for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.2026.
Net cash provided by investing activities of $1.0 million for six months ended June 30, 2025 was primarily due to the net proceeds from the sale of ViewSpot in June 2025, offset by capital expenditures.
Net cash provided by financing activities of $4.0$6.0 million for the threesix months ended MarchJune 31,30, 2026 was attributable to the cash proceeds to the Company of $1.0 million from the February 2026 loan transaction, and the March 2026 gross cash proceeds of $3.0 million from sale of secured convertible notes, the June 2026 gross proceeds of approximately $1.6 million from the exercise of October 2024 Warrants, and the timing of borrowings of $0.3$0.8 million less repayments of $0.3$0.4 million from short-term insurance premium financing arrangements.
Net cash provided by financing activities of $0.1$0.5 million for the threesix months ended MarchJune 31,30, 2025 was primarily attributable to the borrowings of $0.4$0.9 million less repayments of $0.3$0.4 million from short-term insurance premium financing arrangements.
SMSI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-15 | Huffmyer Timothy C. |
Shares withheld for tax | 100 | $2.90 | $290 |
| 2026-09-15 | Smith William W Jr |
Shares withheld for tax | 456 | $2.90 | $1.3K |
| 2026-08-19 | Braund Bethany M |
Shares withheld for tax | 2 | $2.86 | $6 |
| 2026-08-19 | Huffmyer Timothy C. |
Shares withheld for tax | 300 | $2.87 | $861 |
| 2026-08-19 | Smith William W Jr |
Shares withheld for tax | 963 | $2.87 | $2.8K |
| 2026-05-14 | Smith William W Jr |
Shares withheld for tax | 1,618 | $0.87 | $1.4K |
| 2026-05-14 | Huffmyer Timothy C. |
Shares withheld for tax | 588 | $0.87 | $512 |
| 2026-05-14 | Braund Bethany M |
Shares withheld for tax | 1,850 | $0.87 | $1.6K |
| 2026-04-27 | Smith William W Jr |
Shares withheld for tax | 1,618 | $0.70 | $1.1K |
| 2026-04-27 | Braund Bethany M |
Shares withheld for tax | 6,761 | $0.72 | $4.9K |
| 2026-04-27 | Huffmyer Timothy C. |
Shares withheld for tax | 588 | $0.70 | $412 |
Well-known investors holding SMSI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 116,645 | $83.9K | — | Sold out |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 24,733 | $66.3K | 0.0% | New position |
| Renaissance Technologies | 2026-06-30 | 23,625 | $63.3K | 0.0% | New position |