8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

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

Date of Report (Date of earliest event reported): April 30, 2020 (February 12, 2020)

Smith Micro Software, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware	01-35525	33-0029027
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5800 Corporate Drive Pittsburgh, PA	15237
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (412) 837-5300

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SMSI	NASDAQ

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. ☐

Explanatory Note

This Current Report on Form 8-K/A (this “8-K/A”) amends the Current Report on Form 8-K filed by Smith Micro Software, Inc. (the “Company”) on February 19, 2020 in order to include the historical financial statements of substantially all the assets, and certain specified liabilities, of the operator business of Circle Media Labs Inc., a Delaware corporation, that the Company acquired on February 12, 2020 (the “Circle Operator Business”), and the pro forma financial information required by Item 9.01 of Form 8-K. The pro forma financial information included in this 8-K/A has been presented for informational purposes only, as required by Form 8-K. It does not purport to represent the actual results of operations that the Company and the Circle Operator Business would have achieved had the businesses been combined during the periods presented in the pro forma financial information and is not intended to project the future results of operations that the Company may achieve after its acquisition of the Circle Operator Business. Except as described above, all other information in the Company’s Current Report on Form 8-K filed on February 19, 2020 remains unchanged.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited abbreviated financial information of the Circle Operator Business as of and for the year ended December 31, 2019, and related notes thereto and the related report of Moss Adams LLP, are filed herewith as Exhibit 99.1 and incorporated herein by reference.

(b) Pro Forma Financial Statements.

The unaudited pro forma combined financial information of the Company and the Circle Operator Business as of and for the year ended December 31, 2019 are filed herewith as Exhibit 99.2 and incorporated herein by reference.

(d) Exhibits.

Exhibit	Description
23.1	Consent of Moss Adams LLP, independent registered public accounting firm.
99.1	The audited abbreviated financial information of the Circle Operator Business as of and for the year ended December 31, 2019, and related notes thereto and the related report of Moss Adams LLP.
99.2	Unaudited pro forma combined financial information of the Company and the Circle Operator Business as of and for the year ended December 31, 2019.

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:  April 30, 2020	By:	/s/  Timothy C. Huffmyer
		Timothy C. Huffmyer
		Vice President and Chief Financial Officer

EX-23.1

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-134611, 333-198728, 333-213194, 333-213778, 333-224143, 333-225389, 333-226918, 333-228519 and 333-230154) and Form S-8 (Nos. 333-129132, 333-149222, 333-169671, 333-179764, 333-202964, 333-205924 and 333-226914) of Smith Micro Software, Inc., of our report dated April 20, 2020, relating to the abbreviated financial statements of the Operator Business of Circle Media Labs Inc., appearing in this Current Report on Form 8-K/A (Amendment No. 1) of Smith Micro Software, Inc.

/s/ Moss Adams LLP

Portland, Oregon

April 30, 2020

EX-99.1

Table of Contents

		PAGE
Report of Independent Auditors		1–2
Abbreviated Financial Statements
	Abbreviated statement of liabilities assumed	3
	Abbreviated statement of revenue and direct expenses	4
	Notes to abbreviated financial statements	5–7

Report of Independent Auditors

To the Board of Directors

Circle Media Labs Inc.

Report on the Financial Statements

We have audited the accompanying abbreviated financial statements of the Operator Business of Circle Media Labs Inc. (see Note 1) (the “Operator Business”), which comprise the abbreviated statement of liabilities assumed as of December 31, 2019, and abbreviated statement of revenue and direct expenses for the year then ended, and the related notes to the abbreviated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these abbreviated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of abbreviated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these abbreviated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the abbreviated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the abbreviated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the abbreviated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the abbreviated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the abbreviated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

In our opinion, the abbreviated financial statements referred to above present fairly, in all material respects, the liabilities assumed of the Operator Business of Circle Media Labs Inc. as of December 31, 2019 and its revenue and direct expenses for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As described in Note 1, the accompanying abbreviated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission, for inclusion in a Form 8-K/A to be filed by Smith Micro Software, Inc. and Subsidiaries, and are not intended to be a complete presentation of the Operator Business of Circle Media Labs Inc.’s assets, liabilities, revenues or expenses. Our opinion is not modified with respect to this matter.

/s/Moss Adams LLP

Portland, Oregon

April 20, 2020

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Operator Business of Circle Media Labs Inc.

Abbreviated Statement of Liabilities Assumed

December 31, 2019

LIABILITIES ASSUMED
	Deferred revenue		$	1,629,914
		Net liabilities assumed	$	1,629,914

See accompanying notes. 3

Circle Media Labs Inc.

Abbreviated Statement of Revenue and Direct Expenses

Year Ended December 31, 2019

REVENUE			$	3,906,082
COST OF REVENUE				611,616
		Gross profit		3,294,466
DIRECT EXPENSES
	Research and development			1,321,400
	Customer support			103,425
REVENUE IN EXCESS OF COST OF REVENUE AND DIRECT EXPENSES			$	1,869,641

4See accompanying notes.

Operator Business of Circle Media Labs Inc.

Notes to Abbreviated Financial Statements

Note 1 – Business Overview and Basis of Presentation

Circle Media Labs Inc. (the “Company”), a Delaware corporation, provides families with the easiest way to manage screen time on families’ Wi-Fi and mobile devices through a parental control device and app that allows users to set limits and filter content across devices.

On February 12, 2020, Smith Micro Software, Inc. (“Smith Micro”) entered into an Asset Purchase Agreement to acquire the Operator Business of Circle Media Labs Inc. (“Operator Business” or “Acquired Business”) which consisted of two contracts and the related deferred revenue. On February 12, 2020, the acquisition of Operator Business was completed for a purchase price of $13.5 million, consisting of a payment in cash of 90% of the purchase price at close, and the remainder of the purchase price payable six months following close. The Operator Business platform enables mobile operators to provide licensing software and related hardware parental control solutions to end users. Operator Business will be a substantial augmentation to Smith Micro’s business and a logical addition to Smith Micro’s product lines. This acquisition will deliver a new revenue stream and an expanded customer base.

The accompanying abbreviated financial statements, which are comprised of the abbreviated statement liabilities assumed as of December 31, 2019, and the abbreviated statement of revenue and direct expenses for the year ended December 31, 2019, are presented on a historical cost basis. The abbreviated statement of revenue and direct expenses includes revenue and expenses directly attributable to the specific Operator Business acquired. Direct expenses include both research and development and other administrative costs.

These abbreviated financial statements have been prepared in order for Smith Micro to comply with Rule 8-04 of the U.S. Securities and Exchange Commission’s (SEC) Regulation S-X (Rule 8-04). Smith Micro received a waiver from the SEC permitting the substitution of abbreviated financial statements in lieu of the full financial statements of the Operator Business.

Smith Micro believes it is impractical to prepare full stand-alone or carve-out financial statements for Operator Business due to the following reasons:

• The Acquired Business is not comprised of separate legal entities and has not been accounted for as a separate entity, subsidiary or division of the Company’s overall business.

• The Company did not manage the Acquired Business as a stand-alone business.

• Stand-alone or carve-out financial statements of the Acquired Business have not previously been prepared.

• The Acquired Business was a small, non-strategic product line of the Company’s overall business.

• The Company has never allocated corporate expenses to the Acquired Business, including interest expense, corporate overhead expenses and income taxes. This information is not readily available and any allocation would be subjective and may not be relevant due to differences in corporate structures between the Company and Smith Micro.

• The Company did not separately distinguish cash flow requirements or operating, investing or financing activities of the Acquired Business.

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Operator Business of Circle Media Labs Inc.

Notes to Abbreviated Financial Statements

Note 1 – Business Overview and Basis of Presentation (continued)

As a result of the foregoing, it is impracticable to prepare full financial statements as required by Regulation S-X. These abbreviated financial statements may not be indicative of what they would have been had Operator Business been an independent stand-alone entity, nor are they necessarily indicative of future results of the operation going forward due to the omission of various operating expenses.

Note 2 – Significant Accounting Policies

Use of estimates – The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts in the abbreviated financial statements and accompanying notes. Actual amounts could differ from those estimated amounts. Significant estimates inherent in the preparation of these financial statements include, but are not limited to, the estimation of direct costs paid by Operator Business.

Revenue recognition and deferred revenue – On January 1, 2019, the Operator Business adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. This standard was issued to provide a common revenue recognition model for entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services.

To determine revenue recognition for contracts with customers, the Operator Business performs the following five steps:

• Identify the contract with the customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to the performance obligations in the contract

• Recognize revenue when the Company satisfies a performance obligation

The Operator Business’ revenues related to: (i) software sales on term license basis; and (ii) professional services to implement and maintain the software. Software and services contracts are contracted in bundled arrangements that include not only the software license and related implementation services, but they also include maintenance, managed services and/or additional professional services.

The initial sale of the Operator Business’ software products requires significant production, modification or customization, such that the delivery of the software license and the related professional services required to implement and maintain the software over the term of the license represent one combined performance obligation that is satisfied over time. The software and services fees are fixed fees billed to clients on a milestone or date basis.

Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. At December 31, 2019, there were no accounts receivable related to the Operator Business.

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Operator Business of Circle Media Labs Inc.

Notes to Abbreviated Financial Statements

Note 2 – Significant Accounting Policies (continued)

Cost of revenue – Cost of revenue consists primarily of direct costs associated with the Operator Business’ hosting services and implementation expenses.

Research and development – Research and development expenses consist primarily of costs associated with the development and execution of the Operator Business’ software platform, including wages and benefits for personnel, outside services, systems and tools, travel and entertainment expenses.

Customer support – Customer support consists primarily of wages and benefits for personnel, outside services and general miscellaneous expense related to customer support costs.

Income taxes – The statement of revenue and direct expenses does not include a provision for income taxes.

Customer concentrations – 100% of current year revenue from the Operator Business was generated from arrangements with two leading mobile and broadband operators.

Related party transactions – All Operator Business revenues recognized in the current year were recognized from customers who are also investors in the Company.

Commitments and contingencies – The Acquired Business may be subject to legal proceedings and claims that arise in the ordinary course of business. Management is not aware of any asserted or pending litigation or claims against the Operator Business that it expects to have a material adverse effect on its financial condition or results from operations.

Subsequent events – Subsequent events have been evaluated through April 20, 2020, the date these abbreviated financial statements were available to be issued. Other than the transaction discussed in Note 1, there were no material subsequent events which would warrant inclusion in the abbreviated financial statements.

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EX-99.2

EXHIBIT 99.2

SMITH MICRO SOFTWARE, INC.

Unaudited Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information is based on the historical consolidated financial statements of Smith Micro Software, Inc. and subsidiaries (“Smith Micro” or “the Company”) and the operator business of Circle Media Labs Inc. (“Circle”), after giving effect to the business combination transaction between Smith Micro and Circle on February 12, 2020 and reflecting the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma combined financial information.

The following unaudited pro forma combined financial information has been derived by the application of pro forma adjustments to the historical consolidated financial statements of Smith Micro and abbreviated financial statements of Circle. The unaudited pro forma combined financial information gives effect to the acquisition of Circle’s operator business by Smith Micro as if the transaction had occurred on January 1, 2019 with respect to the unaudited pro forma income statement for the year ended December 31, 2019 and as of December 31, 2019 with respect to the unaudited pro forma combined balance sheet.

A full and detailed valuation of the acquired assets and assumed liabilities of Circle is being completed and certain information and analyses are preliminary at this time. The final purchase price allocation is subject to the final determination of the fair values of acquired assets and assumed liabilities and, therefore, that allocation and the resulting effect on income from operations may differ materially from the unaudited pro forma amounts included herein.

The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are directly attributable to the acquisition, factually supportable and, with respect to the unaudited pro forma combined income statement, expected to have a continuing impact on the consolidated results of operations. Additionally, the unaudited pro forma combined financial information does not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from any integration activities. Therefore, the unaudited pro forma combined financial information should not be considered indicative of actual results that would have been achieved had the acquisition occurred on the date indicated and do not purport to indicate results of operations for any future period.

In preparing the unaudited pro forma combined financial information, the following historical information was used:

• the audited consolidated financial statements of Smith Micro Software, Inc. and subsidiaries as of and for the year ended December 31, 2019; and

• the audited abbreviated financial statements of Circle as of and for the year ended December 31, 2019.

The unaudited pro forma combined financial information for the year ended December 31, 2019 should be read in conjunction with the historical financial statements, including the notes thereto, of Smith Micro (included in Smith Micro’s annual reports on Form 10-K and quarterly reports on Form 10-Q) and of Circle (see Exhibit 99.1 included with this Current Report on Form 8-K/A).

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SMITH MICRO SOFTWARE, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2019

(In thousands)

											Pro Forma
	Smith Micro			Circle			Pro Forma				Combined
	12/31/2019			12/31/2019			Adjustments			Notes	12/31/2019
Assets
Current assets:
Cash and cash equivalents	$	28,268		$	—		$	(12,150	)	A	$	16,118
Accounts receivable, net		10,894			—			—				10,894
Prepaid expenses and other current    assets		802			—			14		B		816
Total current assets		39,964			—			(12,136	)			27,828
Equipment and improvements, net		2,109			—			—				2,109
Right-of-use assets		6,464			—			—				6,464
Deferred tax asset, net		94			—			—				94
Other assets		234			—			—				234
Intangible assets, net		4,535			—			11,256		B		15,791
Goodwill		7,797			—			3,696		B		11,493
Total assets	$	61,197		$	—		$	2,816			$	64,013
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,050		$	—		$	918		C	$	2,968
Accrued payroll and benefits		2,107			—			—				2,107
Current operating lease liabilities		1,221			—			—				1,221
Other accrued liabilities		244			—			1,526		A/D		1,770
Deferred revenue		98			1,630			(340	)	B		1,388
Total current liabilities		5,720			1,630			2,104				9,454
Non-current liabilities:
Operating lease liabilities		5,774			—			—				5,774
Deferred rent		885			—			—				885
Other long term liabilities		134			—			—				134
Total non-current liabilities		6,793			—			—				6,793
Stockholders' equity:
Common stock		38			—			—				38
Additional paid-in capital		274,041			—			—				274,041
Accumulated comprehensive deficit		(225,395	)		—			(918	)	C		(226,313	)
Net liabilities assumed		—			(1,630	)		1,630				—
Total  stockholders’ equity		48,684			(1,630	)		712				47,766
Total liabilities and stockholders' equity	$	61,197		$	—		$	2,816			$	64,013

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SMITH MICRO SOFTWARE, INC.

UNAUDITED PRO FORMA COMBINED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 2019

(In thousands, except per share data)

										Pro Forma
	Smith Micro			Circle		Pro Forma				Combined
	2019			2019		Adjustments			Notes	2019
Revenues	$	43,346		$	3,906	$	—		E	$	47,252
Cost of revenues		3,927			612		—				4,539
Gross profit		39,419			3,294		—				42,713
Operating expenses:
Selling and marketing		7,517			—		1,576		F		9,093
Research and development		11,682			1,322		768		F		13,772
General and administrative		9,921			102		(74	)	G		9,949
Restructuring expenses		194			—		—				194
Total operating expenses		29,314			1,424		2,270				33,008
Operating income		10,105			1,870		(2,270	)			9,705
Non-operating expense:
Gain on sale of software product		483			—		—				483
Interest expense, net		228			—		—		H		228
Other expense, net		(14	)		—		—				(14	)
Income before provision for income taxes		10,802			1,870		(2,270	)			10,402
Provision for income tax expense		80			—		—		I		80
Net income available to common    stockholders		10,722			1,870		(2,270	)			10,322
Preferred stock dividends		(119	)		—		—				(119	)
Net income available to common    stockholders	$	10,603		$	1,870	$	(2,270	)		$	10,203
Earnings per share:
Basic	$	0.31								$	0.30
Diluted	$	0.29								$	0.28
Weighted average shares outstanding:
Basic		34,513									34,513
Diluted		36,991									36,991

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Smith MicroSoftware, Inc.

NOTES TO THE Unaudited Pro Forma

Combined Financial Information

Note 1: Basis of Presentation

The unaudited pro forma combined financial information has been prepared in connection with the acquisition of certain assets of Circle by Smith Micro related to Circle’s operator business. The purchase price for the Circle operator business totaled $13,500,000 in cash.

The acquisition of Circle’s operator business by Smith Micro has been accounted for using the acquisition method of accounting. The preliminary purchase price has been allocated on a preliminary basis to the acquired assets and assumed liabilities in connection with the acquisition based on their estimated fair values as of the closing date of the acquisition. The unaudited pro forma combined income statement reflects the effects of applying certain preliminary purchase accounting adjustments to the historical consolidated results, including items expected to have a continuing impact on the consolidated results, such as amortization on acquired intangible assets. The unaudited pro forma combined income statement does not include non-recurring items such as transaction costs related to the acquisition. The final purchase price allocation is subject to the final determination of the fair values of acquired assets and assumed liabilities and, therefore, that allocation and the resulting effect on income from operations may differ from the unaudited pro forma amounts included herein.

Assumptions underlying the pro forma adjustments necessary to reasonably present this unaudited pro forma information are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma combined financial information. The pro forma adjustments described in the accompanying notes have been made based on available information and, in the opinion of management, are reasonable. The unaudited pro forma combined financial information should not be considered indicative of actual results that would have been achieved had the acquisition occurred on the date indicated and do not purport to indicate results of operations for any future period.

Note 2: Acquisition of Circle

On February 12, 2020, the Company completed the acquisition of certain assets of Circle for $13,500,000.

The following represents the preliminary purchase price allocation. The acquired assets and assumed liabilities of Circle have been measured on a preliminary basis using assumptions that Smith Micro management believes are reasonable based on information currently available. A full and detailed valuation of the acquired assets and assumed liabilities of Circle is being completed and certain information and analysis remains pending at this time. Therefore, it is possible that the fair values of acquired assets and assumed liabilities could materially differ from those presented herein upon additional analysis.

4

The following table summarizes the preliminary purchase price allocation based on estimated fair values as of the acquisition date (in thousands):

Inventory, net	$	14
Identifiable intangible assets		11,256
Total assets acquired		11,270
Deferred revenue		1,290
Cash due to seller for purchased contracts		176
Total liabilities assumed		1,466
Net assets acquired		9,804
Purchase price		13,500
Goodwill	$	3,696

Note 3: Description of Pro Forma Adjustments

Adjustments to the unaudited pro forma combined balance sheet

A. This adjustment represents the $12,150,000 reduction of cash and $1,350,000 increase in accrued liabilities (cash holdback) as a result of the consideration paid to Circle.

B. The following adjustments were made to reflect the preliminary estimate of the fair value of net assets acquired and liabilities assumed (in thousands) in the unaudited pro forma combined balance sheet:

Inventory, net	$	14
Identifiable intangible assets		11,256
Goodwill		3,696
Deferred revenue		(340	)

C. Estimated transaction costs related to the Circle acquisition total approximately $992,000. Of this amount, $74,000 was incurred during the year ended December 31, 2019, and $918,000 has been included in accounts payable in the unaudited pro forma combined balance sheet.

D. This adjustment includes an increase in accrued liabilities for approximately $176,000 due to Circle related to purchased contracts.

Adjustments to the unaudited pro forma combined income statement

E. During 2018, Smith Micro adopted FASB ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”), and those results are reflected within. Smith Micro evaluated the Circle operator business and related customer contracts under ASC 606. It was determined that no financial statement adjustment would be required, and therefore, a pro forma adjustment was not necessary.

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F. This adjustment represents the increase in amortization expense related to recording Circle’s intangible assets at their preliminary estimated fair value, including customer contracts, software, a support agreement, and a non-compete agreement, resulting in an adjustment of $2,344,000 for the year ended December 31, 2019.

Identifiable intangible assets include the following (in thousands):

Customer contracts	$	7,501
Software		3,136
Support agreement		376
Non-compete agreement		243
	$	11,256

The customer contracts will be amortized over a period of 6 years, the software over 8 years; the support agreement over 1 year; and the non-compete agreement over 3 years.

G. This adjustment eliminates the transaction costs incurred for the year ended December 31, 2019.

H. If the Circle acquisition had occurred on January 1, 2019, Smith Micro would have entered into an asset-based loan facility in the amount of $5,700,000 and a short-term related party note payable for $2,000,000 to fund the transaction, and would have incurred approximately $400,000 in additional interest expense during 2019. Since the debt would have been repaid in full within twelve months and the associated interest would not be a recurring expense, it has not been reflected as a pro forma adjustment. The Company has held several note payable transactions with related parties and these same related parties would have had the capacity to support the Company with additional lending if needed.

I. Smith Micro has federal and state net operating loss carryforwards of approximately $158 million and $146 million, respectively, at December 31, 2019, and the current provision for income tax expense consists of state income tax minimums, foreign tax withholdings, and foreign income taxes. Therefore, no income tax impact of the pro forma adjustments has been reflected.

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