UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10‑Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001‑35525

 

SMITH MICRO SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

33‑0029027

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

5800 CORPORATE DRIVE

PITTSBURGH, PA 15237

(Address of principal executive offices, including zip code)

(412) 837-5300

(Registrant’s telephone number, including area code)

 

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: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No  

 

As of July 31, 2019, there were 36,951,259 shares of common stock outstanding.

 

 


 

SMITH MICRO SOFTWARE, INC.

QUARTERLY REPORT ON FORM 10-Q

JUNE 30, 2019

TABLE OF CONTENTS

 

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

2

 

 

Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

2

 

 

Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018

 

3

 

 

Consolidated Statement of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018

 

4

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

 

6

 

 

Notes to the Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 4.

 

Controls and Procedures

 

21

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

22

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

22

Item 6.

 

Exhibits

 

23

 

 

 

 

 

SIGNATURES

 

24

 

1


 

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

(audited)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,611

 

 

$

12,159

 

Accounts receivable, net of allowances for doubtful accounts and other adjustments of

   $143 (2019) and $135 (2018)

 

 

13,017

 

 

 

7,130

 

Prepaid expenses and other current assets

 

 

938

 

 

 

795

 

Total current assets

 

 

20,566

 

 

 

20,084

 

Equipment and improvements, net

 

 

930

 

 

 

865

 

Right-of-use assets

 

 

6,708

 

 

 

 

Deferred tax assets, net

 

 

191

 

 

 

191

 

Other assets

 

 

267

 

 

 

140

 

Intangible assets, net

 

 

5,002

 

 

 

238

 

Goodwill

 

 

7,797

 

 

 

3,685

 

Total assets

 

$

41,461

 

 

$

25,203

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,227

 

 

$

1,160

 

Accrued payroll and benefits

 

 

2,232

 

 

 

1,745

 

Current operating lease liabilities

 

 

1,057

 

 

 

 

Other accrued liabilities

 

 

246

 

 

 

450

 

Deferred revenue

 

 

183

 

 

 

28

 

Total current liabilities

 

 

4,945

 

 

 

3,383

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

6,135

 

 

 

 

Deferred rent

 

 

547

 

 

 

723

 

Other long term liabilities

 

 

168

 

 

 

534

 

Total non-current liabilities

 

 

6,850

 

 

 

1,257

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; 5,500

   shares issued (2019 and 2018); 1,335 and 1,345 shares outstanding (2019 and

   2018, respectively)

 

 

 

 

 

 

Common stock, par value $0.001 per share; 100,000,000 shares authorized;

   32,041,685 and 28,241,129 shares issued and outstanding (2019 and

   2018, respectively)

 

 

32

 

 

 

28

 

Additional paid-in capital

 

 

262,215

 

 

 

256,626

 

Accumulated comprehensive deficit

 

 

(232,581

)

 

 

(236,091

)

Total stockholders’ equity

 

 

29,666

 

 

 

20,563

 

Total liabilities and stockholders' equity

 

$

41,461

 

 

$

25,203

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

2


 

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues

 

$

10,854

 

 

$

6,945

 

 

$

19,286

 

 

$

12,408

 

Cost of revenues

 

 

974

 

 

 

1,116

 

 

 

1,891

 

 

 

2,425

 

Gross profit

 

 

9,880

 

 

 

5,829

 

 

 

17,395

 

 

 

9,983

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

1,768

 

 

 

1,447

 

 

 

3,735

 

 

 

3,177

 

Research and development

 

 

2,743

 

 

 

2,195

 

 

 

5,425

 

 

 

4,450

 

General and administrative

 

 

2,426

 

 

 

2,061

 

 

 

5,126

 

 

 

4,251

 

Restructuring expense

 

 

11

 

 

 

52

 

 

 

115

 

 

 

52

 

Total operating expenses

 

 

6,948

 

 

 

5,755

 

 

 

14,401

 

 

 

11,930

 

Operating income (loss)

 

 

2,932

 

 

 

74

 

 

 

2,994

 

 

 

(1,947

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

31

 

 

 

(143

)

 

 

30

 

 

 

(314

)

Change in fair value of warrant liability

 

 

 

 

 

(2,085

)

 

 

 

 

 

(2,224

)

Gain on sale of software product

 

 

483

 

 

 

 

 

 

483

 

 

 

 

Other expense

 

 

(6

)

 

 

(10

)

 

 

(15

)

 

 

(50

)

Income (loss) before provision for income taxes

 

 

3,440

 

 

 

(2,164

)

 

 

3,492

 

 

 

(4,535

)

Provision for income tax expense

 

 

4

 

 

 

13

 

 

 

8

 

 

 

23

 

Net income (loss)

 

$

3,436

 

 

$

(2,177

)

 

$

3,484

 

 

$

(4,558

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

(0.11

)

 

$

0.11

 

 

$

(0.26

)

Diluted

 

$

0.10

 

 

$

(0.11

)

 

$

0.10

 

 

$

(0.26

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

32,068

 

 

 

21,888

 

 

 

31,685

 

 

 

18,612

 

Diluted

 

 

35,308

 

 

 

21,888

 

 

 

33,365

 

 

 

18,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred dividends per share

 

$

25.01

 

 

$

50.38

 

 

$

50.01

 

 

$

71.16

 

 

See accompanying notes to the consolidated financial statements.


3


 

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

BALANCE, March 31, 2019 (unaudited)

 

 

1

 

 

$

 

 

 

32,065

 

 

$

32

 

 

$

261,990

 

 

$

(235,984

)

 

$

26,038

 

Non-cash compensation recognized on

   stock options and ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Restricted stock grants, net of cancellations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

323

 

 

 

 

 

 

323

 

Cancellation of shares for payment of

   withholding tax

 

 

 

 

 

 

 

 

(35

)

 

 

 

 

 

(108

)

 

 

 

 

 

(108

)

Exercise of warrants

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock to common

   stock

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

(34

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,436

 

 

 

3,436

 

BALANCE, June 30, 2019 (unaudited)

 

 

1

 

 

$

 

 

 

32,042

 

 

$

32

 

 

$

262,215

 

 

$

(232,581

)

 

$

29,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

BALANCE, December 31, 2018 (audited)

 

 

1

 

 

$

 

 

 

28,242

 

 

$

28

 

 

$

256,626

 

 

$

(236,091

)

 

$

20,563

 

Non-cash compensation recognized on

   stock options and ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Restricted stock grants, net of cancellations

 

 

 

 

 

 

 

 

1,225

 

 

 

1

 

 

 

769

 

 

 

 

 

 

770

 

Cancellation of shares for payment of

   withholding tax

 

 

 

 

 

 

 

 

(138

)

 

 

 

 

 

(315

)

 

 

 

 

 

(315

)

Employee stock purchase plan

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Common shares issued in stock offering,

   net of offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Common shares issued in connection

   with Smart Retail acquisition, net

 

 

 

 

 

 

 

 

2,699

 

 

 

3

 

 

 

5,126

 

 

 

 

 

 

5,129

 

Exercise of warrants

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock to common

   stock

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(67

)

 

 

(67

)

Cumulative effect of adoption of ASC 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

93

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,484

 

 

 

3,484

 

BALANCE, June 30, 2019 (unaudited)

 

 

1

 

 

$

 

 

 

32,042

 

 

$

32

 

 

$

262,215

 

 

$

(232,581

)

 

$

29,666

 

 

See accompanying notes to the consolidated financial statements.


4


 

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

BALANCE, March 31, 2018 (unaudited)

 

 

5

 

 

$

 

 

 

18,237

 

 

$

18

 

 

$

239,179

 

 

$

(235,467

)

 

$

3,730

 

Non-cash compensation recognized on

   stock options and ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Restricted stock grants, net of cancellations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

236

 

 

 

 

 

 

236

 

Cancellation of shares for payment of

   withholding tax

 

 

 

 

 

 

 

 

(26

)

 

 

 

 

 

(53

)

 

 

 

 

 

(53

)

Employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued in stock offering,

   net of offering costs

 

 

 

 

 

 

 

 

3,170

 

 

 

3

 

 

 

6,294

 

 

 

 

 

 

6,297

 

Issuance of warrants in stock offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,872

)

 

 

 

 

 

(3,872

)

Conversion of preferred stock to common

   stock

 

 

(4

)

 

 

 

 

 

3,623

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(185

)

 

 

(185

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,177

)

 

 

(2,177

)

BALANCE, June 30, 2018 (unaudited)

 

 

1

 

 

$

 

 

 

25,004

 

 

$

25

 

 

$

241,790

 

 

$

(237,831

)

 

$

3,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

BALANCE, December 31, 2017 (audited)

 

 

5

 

 

$

 

 

 

14,269

 

 

$

14

 

 

$

237,486

 

 

$

(232,933

)

 

$

4,567

 

Non-cash compensation recognized on

   stock options and ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

Restricted stock grants, net of cancellations

 

 

 

 

 

 

 

 

1,124

 

 

 

1

 

 

 

388

 

 

 

 

 

 

389

 

Cancellation of shares for payment of

   withholding tax

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(88

)

 

 

 

 

 

(88

)

Employee stock purchase plan

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Common shares issued in stock offering,

   net of offering costs

 

 

 

 

 

 

 

 

6,027

 

 

 

6

 

 

 

10,753

 

 

 

 

 

 

10,759

 

Issuance of warrants in stock offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,780

)

 

 

 

 

 

(6,780

)

Conversion of preferred stock to common

   stock

 

 

(4

)

 

 

 

 

 

3,623

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(326

)

 

 

(326

)

Other