8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2018

Smith Micro Software, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware	001-35525	33-0029027
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

51 Columbia Aliso Viejo, CA	92656
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (949) 362-5800

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.Results of Operations and Financial Condition

On October 24, 2018, Smith Micro Software, Inc. issued a press release announcing its financial results for the three and nine months ended September 30, 2018. A copy of the press release is hereby furnished to the Securities and Exchange Commission as Exhibit 99.1 and incorporated by reference herein.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits

Exhibit	Description
99.1	Press Release issued on October 24, 2018

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Smith Micro Software, Inc.
Date:  October 24, 2018	By:	/s/ Timothy C. Huffmyer
		Timothy C. Huffmyer
		Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

IR INQUIRIES:

Charles Messman

Investor Relations

949-362-5800

IR@smithmicro.com

Smith Micro Reports Third Quarter 2018 Financial Results

Company Achieves Non-GAAP Profitability During the Quarter

ALISO VIEJO, CA, October 24, 2018– Smith Micro Software, Inc. (NASDAQ: SMSI), today reported financial results for its third quarter ended September 30, 2018.

“I am overall pleased with the quarter that came in line with our expectations,” said William W. Smith Jr., President and CEO of Smith Micro Software. “Revenues increased over the prior year, and we again achieved operating profitability during the quarter.”

“During the first nine months of this fiscal year, we have made tremendous strides throughout the organization, particularly with the product enhancements that we plan to launch in the fourth quarter. We remain focused on optimizing performance and driving revenue on our core product platforms, SafePath® and CommSuite®, so that we can finish the year strong and maximize 2019 opportunities.”

Fiscal Third Quarter 2018 Financial Results:

Smith Micro Software reported revenue of $6.5 million for the third quarter ended September 30, 2018, compared to $5.8 million reported in the third quarter ended September 30, 2017.

Third quarter 2018 gross profit was $5.5 million, compared to $4.6 million reported in the third quarter of 2017.

Gross profit as a percentage of revenue was 85 percent for the third quarter of 2018, compared to 80 percent for the third quarter of 2017.

Smith Micro Software Third Quarter 2018 Financial Results Page 2 of 7

Generally accepted accounting principles in the United States (“GAAP”) net loss available to common stockholdersfor the third quarter of 2018 was $1.0 million, or $0.04 loss per share, compared to a GAAP net loss available to common stockholdersof $1.7 million, or $0.12 loss per share, for the third quarter of 2017.

Non-GAAP net income (which excludes non-cash stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, loss on debt extinguishment, preferred stock dividends, and a normalized tax expense) for the third quarter of 2018 was $0.2 million, or $0.01 per share, compared to a non-GAAP net loss of $0.6 million, or $0.04 loss per share, for the third quarter of 2017.

Fiscal September Year-to-Date 2018 Financial Results:

Smith Micro Software reported revenue of $18.9 million for the nine months ended September 30, 2018, compared to $17.2 million reported for the nine months ended September 30, 2017.

Gross profit for the nine months ended September 30, 2018 was $15.5 million, compared to $13.5 million reported for the same period in 2017.

Gross profit as a percentage of revenue was 82 percent for the nine months ended September 30, 2018, compared to 78 percent for the nine months ended September 30, 2017.

GAAP net loss available to common stockholders for the nine months ended September 30, 2018 was $5.9 million, or $0.28 loss per share, compared to a GAAP net loss available to common stockholders of $6.5 million, or $0.49 loss per share, for the same period in 2017.

Non-GAAP net loss (which excludes non-cash stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, loss on debt extinguishment, preferred stock dividends, and a normalized tax benefit) for the nine months ended September 30, 2018 was $1.0 million, or $0.05 loss per share, compared to a non-GAAP net loss of $2.8 million, or $0.21 loss per share, for the nine months ended September 30, 2017.

Total cash and cash equivalents at September 30, 2018 were $8.4 million.

To supplement our financial information presented in accordance with GAAP, the Company considers and has included in this press release certain non-GAAP financial measures, including a non-GAAP

Smith Micro Software Third Quarter 2018 Financial Results Page 3 of 7

reconciliation of gross profit, income (loss) before taxes, net income (loss) available to common stockholders, and earnings (loss) per share in the presentation of financial results in this press release. Management believes this non-GAAP presentation may be more meaningful in analyzing our income generation and therefore has excluded the following non-cash items from GAAP earnings calculations: stock-based compensation, amortization of intangible assets, debt issuance and discount costs, fair value adjustments, and preferred stock dividends. Additionally, since we are in a cumulative loss position, a non-GAAP income taxexpense (benefit) was computed using a 24 percent and 38 percent tax rate for 2018 and 2017, respectively, using the Company’s normalized combined U.S. federal, state, and foreign statutory tax rates less various tax adjustments. This presentation may be considered more indicative of our ongoing operational performance. The table below presents the differences between non-GAAP net income (loss) and net loss on an absolute and per-share basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and the non-financial measures as reported by Smith Micro Software may not be comparable to similarly titled amounts reported by other companies.

Investor Conference Call:

Smith Micro Software will hold an investor conference call today, October 24, 2018 at 4:30 p.m. EDT, to discuss the Company’s third quarter 2018 financial results. To access the call, dial 1-877-270-2148; international participants can call 1-412-902-6510. A passcode is not required to join the call; ask the operator to be placed into the Smith Micro conference. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, the conference call will be available on the Smith Micro website in the Investor Relations section.

About Smith Micro Software, Inc.:

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers and Cable MSOs around the world.  From enabling the family digital lifestyle to providing powerful voice messaging capabilities, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. Our portfolio also includes a wide range of products for creating, sharing and monetizing rich content, such as visual messaging, and 2D/3D graphics applications. For more information, visit www.smithmicro.com.

Smith Micro Software Third Quarter 2018 Financial Results Page 4 of 7

Forward-Looking Statements:

Certain statements in this press release are, and certain statements on the related teleconference call may be, forward-looking statements regarding future events or results, including without limitation, statements relating to our financial prospects and other projections of our performance and our future business plans, and other statements using such words as “expect,” “anticipate,” “believe,” “plan,” “intend,” “could,” “will,” and other similar expressions.  Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements.  Among the important factors that could cause or contribute to such differences are our ability to continue as a going concern, our ability to raise more funds to meet our capital needs, changes in demand for our products from our customers and their end-users, customer concentration, given that the majority of our sales depend on a few large customer relationships, new and changing technologies, customer acceptance and timing of deployment of those technologies, and our ability to compete effectively with other software and technology companies. These and other factors discussed in our filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. The forward-looking statements contained in this release and on the related teleconference call are made on the basis of the views and assumptions of management regarding future events and business performance as of the date of this release, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

Smith Micro and the Smith Micro logo are registered trademarks or trademarks of Smith Micro Software, Inc. Third-party trademarks mentioned are the property of their respective owners.

Smith Micro Software Third Quarter 2018 Financial Results Page 5 of 7

Smith Micro Software, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except per share amounts) – unaudited

	GAAP			Stock Compensation		Intangibles Amortization		Note Issue/ Discount		Fair Value Adjustments		Loss on Debt Extinguishment		Preferred Stock Dividends		Taxes			Non- GAAP
Three Months Ended 9/30/18:
Gross profit	$	5,546		$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	5,546
Income (loss) before provision for     income taxes		(976	)		264		61		66		902		-		-		-			317
Net income (loss) available to      common stockholders		(1,026	)		264		61		66		902		-		43		(69	)		241
Income (loss) per share: basic and      diluted		(0.04	)		0.01		0.00		0.00		0.04		-		0.00		(0.00	)		0.01
Three Months Ended 9/30/17:
Gross profit	$	4,645		$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	4,645
Loss before provision for     income taxes		(1,664	)		167		65		133		-		405		-		-			(894	)
Net loss available to common      stockholders		(1,670	)		167		65		133		-		405		-		346			(554	)
Loss per share: basic and      diluted		(0.12	)		0.01		0.00		0.01		-		0.03		-		0.02			(0.04	)
Nine Months Ended 9/30/18:
Gross profit	$	15,529		$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	15,529
Loss before provision for     income taxes		(5,511	)		674		189		197		3,126		-		-		-			(1,325	)
Net loss available to common      stockholders		(5,911	)		674		189		197		3,126		-		370		348			(1,007	)
Loss per share: basic and      diluted		(0.28	)		0.03		0.01		0.01		0.15		-		0.02		0.02			(0.05	)
Nine Months Ended 9/30/17:
Gross profit	$	13,515		$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	13,515
Loss before provision for     income taxes		(6,482	)		1,001		195		394		-		405		-		-			(4,487	)
Net loss available to common      stockholders		(6,501	)		1,001		195		394		-		405		-		1,724			(2,782	)
Loss per share: basic and      diluted		(0.49	)		0.08		0.01		0.03		-		0.03		-		0.13			(0.21	)
Note: Loss per share: basic and diluted - may be impacted by rounding to allow rows to calculate.

Smith Micro Software Third Quarter 2018 Financial Results Page 6 of 7

Smith Micro Software, Inc.

Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts) - unaudited

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2018			2017			2018			2017
Revenues	$	6,525		$	5,804		$	18,933		$	17,242
Cost of revenues		979			1,159			3,404			3,727
Gross profit		5,546			4,645			15,529			13,515
Operating expenses:
Selling and marketing		1,311			1,413			4,488			4,667
Research and development		2,049			2,100			6,499			6,771
General and administrative		2,048			2,220			6,299			6,648
Restructuring expense		83			(146	)		135			568
Total operating expenses		5,491			5,587			17,421			18,654
Operating income (loss)		55			(942	)		(1,892	)		(5,139	)
Non-operating expenses:
Interest expense, net		(128	)		(315	)		(445	)		(928	)
Change in fair value of warrant liability		(902	)		-			(3,126	)		-
Loss on debt extinguishment		-			(405	)		-			(405	)
Other expense, net		(1	)		(2	)		(48	)		(10	)
Loss before provision for income taxes		(976	)		(1,664	)		(5,511	)		(6,482	)
Provision for income tax expense		7			6			30			19
Net loss		(983	)		(1,670	)		(5,541	)		(6,501	)
Less preferred stock dividends		(43	)		-			(370	)		-
Net loss available to common stockholders	$	(1,026	)	$	(1,670	)	$	(5,911	)	$	(6,501	)
Loss per share:
Basic and diluted	$	(0.04	)	$	(0.12	)	$	(0.28	)	$	(0.49	)
Weighted average shares outstanding:
Basic and diluted		25,020			14,297			20,771			13,221

Smith Micro Software Third Quarter 2018 Financial Results Page 7 of 7

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

	September 30,			December 31,
	2018			2017
ASSETS
Current Assets:
Cash & cash equivalents	$	8,387		$	2,205
Accounts receivable, net		6,328			5,145
Prepaid and other assets		745			576
Total current assets		15,460			7,926
Equipment & improvements, net		940			1,229
Deferred tax asset, net		404			404
Other assets		140			146
Intangible assets, net		297			487
Goodwill		3,685			3,685
TOTAL ASSETS	$	20,926		$	13,877
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,139		$	1,333
Accrued payroll and benefits		1,843			1,994
Related-party notes payable		-			1,000
Other accrued liabilities		438			416
Deferred revenue		120			73
Total current liabilities		3,540			4,816
Related-party notes payable, net		1,200			1,200
Notes payable, net		1,755			1,558
Warrant liability		9,918			-
Deferred rent		784			970
Other long-term liabilities		591			766
Total non-current liabilities		14,248			4,494
Stockholders' Equity:
Preferred stock		-			-
Common stock		25			14
Additional paid in capital		241,970			237,486
Accumulated comprehensive deficit		(238,857	)		(232,933	)
Total stockholders' equity		3,138			4,567
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	20,926		$	13,877