10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTER ENDED SEPTEMBER 30, 2007

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

COMMISSION FILE NUMBER 0-26536

SMITH MICRO SOFTWARE, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OR OTHER JURISDICTION OF
ORGANIZATION) 33-0029027
(I.R.S. EMPLOYER INCORPORATION OR
IDENTIFICATION NUMBER)

51 COLUMBIA, SUITE 200, ALISO VIEJO, CA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 92656
(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 362-5800

     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 þ     NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

YES o     NO þ

     As of October 31, 2007 there were 30,220,474 shares of Common Stock outstanding.

1

SMITH MICRO SOFTWARE, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006	3
	Consolidated Statements of Operations For The Three and Nine Months Ended September 30, 2007 and September 30, 2006	4
	Consolidated Statement of Stockholders’ Equity For The Nine Months Ended September 30, 2007	5
	Consolidated Statements of Cash Flows For The Nine Months Ended September 30, 2007 and September 30, 2006	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Submission of Matters To A Vote Of Security Holders	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
Signatures		30
INDEX TO EXHIBITS		31
EXHIBIT 3.3
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SMITH MICRO SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)

	September 30,			December 31,
	2007			2006 (A)
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	83,057		$	92,564
Accounts receivable, net of allowances for doubtful accounts and other adjustments of $550 (2007) and $500 (2006)		16,893			9,828
Income tax receivable		122			122
Deferred tax asset		90			90
Inventories, net of reserves for obsolete inventory of $84 (2007) and $82 (2006)		1,179			857
Prepaid expenses and other current assets		758			308
Total current assets		102,099			103,769
Equipment and improvements, net		698			417
Goodwill		31,877			15,266
Intangible assets, net		15,683			3,788
Deferred tax asset		7,868			7,786
Total assets	$	158,225		$	131,026
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,284		$	2,941
Deferred revenue		710			78
Accrued liabilities		3,696			1,950
Total current liabilities		7,690			4,969
COMMITMENTS AND CONTINGENCIES		—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; none issued or outstanding		—			—
Common stock, par value $0.001 per share; 50,000,000 shares authorized; 30,220,000 and 28,444,000 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		31			28
Additional paid-in capital		150,985			129,018
Accumulated deficit		(481	)		(2,989	)
Stockholders’ equity		150,535			126,057
Total liabilities and stockholders’ equity	$	158,225		$	131,026

(A) DERIVED FROM THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2006

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

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SMITH MICRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
NET REVENUES	$	20,393	$	14,801	$	53,406	$	37,241
COST OF REVENUES		6,385		6,090		16,045		14,695
GROSS PROFIT		14,008		8,711		37,361		22,546
OPERATING EXPENSES:
Selling and marketing		4,947		2,374		12,843		6,540
Research and development		4,062		1,871		10,268		5,625
General and administrative		3,729		2,329		11,026		5,766
Total operating expenses		12,738		6,574		34,137		17,931
OPERATING INCOME		1,270		2,137		3,224		4,615
INTEREST INCOME		987		381		3,255		871
INCOME BEFORE INCOME TAXES		2,257		2,518		6,479		5,486
INCOME TAX EXPENSE		1,785		68		3,971		140
NET INCOME	$	472	$	2,450	$	2,508	$	5,346
NET INCOME PER SHARE, basic	$	0.02	$	0.10	$	0.08	$	0.23
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, basic		30,031		24,123		29,611		23,360
NET INCOME PER SHARE, diluted	$	0.02	$	0.09	$	0.08	$	0.21
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, diluted		31,429		25,794		30,959		25,184

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

4

SMITH MICRO SOFTWARE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In Thousands)

					Additional
	Common stock				paid-in		Accumulated
	Shares		Amount		capital		deficit			Total
BALANCE, December 31, 2006		28,444	$	28	$	129,018	$	(2,989	)	$	126,057
Exercise of common stock options (unaudited)		889		1		3,762		—			3,763
Issuance of common stock in secondary offering, net of offering costs (unaudited)		387		1		5,341		—			5,342
Non cash compensation recognized on stock options (unaudited)		—		—		4,820		—			4,820
Non cash compensation recognized on restricted stock (unaudited)		500		1		4,011		—			4,012
Tax benefit related to the exercise of stock options (unaudited)		—		—		4,033		—			4,033
Net income (unaudited)		—		—		—		2,508			2,508
BALANCE, September 30, 2007 (unaudited)		30,220	$	31	$	150,985	$	(481	)	$	150,535

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

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SMITH MICRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

	Nine Months
	Ended September 30,
	2007			2006
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,508		$	5,346
Adjustments to reconcile net income to net cash provided by operating activities, net of the effect of acquisitions:
Depreciation and amortization		2,147			1,302
Provision for doubtful accounts and other adjustments to accounts receivable		318			221
Tax benefit related to the exercise of stock options		(4,033	)		—
Non cash compensation related to stock options & restricted stock		8,832			3,434
Change in operating accounts, net of effect from acquisitions:
Accounts receivable		(8,599	)		(375	)
Deferred income taxes		3,951			—
Inventories		(297	)		(843	)
Prepaid expenses and other assets		(399	)		239
Accounts payable and accrued liabilities		1,450			3,007
Other assets		7			7
Net cash provided by operating activities		5,885			12,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Ecutel Systems, Inc., net of cash received		(8,064	)		—
Acquisition of Insignia Solutions, net of cash received		(15,339	)		—
Acquisition of PhoTags, Inc., net of cash received		(3,500	)		(2,224	)
Other intangibles		(1,227	)		—
Capital expenditures		(400	)		(228	)
Net cash used in investing activities		(28,530	)		(2,452	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from issuance of common stock, net of offering costs		5,342			—
Tax benefit related to exercise of stock options		4,033			—
Cash received from exercise of stock options		3,763			3,797
Net cash provided by financing activities		13,138			3,797
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(9,507	)		13,683
CASH AND CASH EQUIVALENTS, beginning of period		92,564			21,215
CASH AND CASH EQUIVALENTS, end of period	$	83,057		$	34,898

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

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SMITH MICRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

	For the Nine Months Ended
	September 30,
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	2007		2006
	(Unaudited)		(Unaudited)
Cash paid for income taxes	$	43	$	203

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

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SMITH MICRO SOFTWARE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of Business — Smith Micro Software, Inc. and subsidiaries (“Smith Micro” or the “Company”) is a developer and marketer of wireless multimedia and communications solutions, mobile device management products, image and data compression solutions and utilities software products. Our business model is based primarily upon developing and marketing innovative software solutions for the wireless industry. We sell our products and services to some of the world’s leading wireless companies and device manufacturers as well as to consumers. Our communications products are primarily directed to wireless data connectivity, security and messaging over CDMA/GSM networks, Wi-Fi networks. We also provide software to manage multimedia content, including music, photos and video on mobile devices. We are also heavily involved in data compression, primarily focusing on a patented-pending advance compression mythology for data and device resources for the wireless market. The Company’s device management suite provides a comprehensive, network-wide server platform and client to manage a diverse population of mobile devices, including the most advanced next-generation phones and PDAs. In addition to our wireless products the Company also maintains a robust number of consumer software titles targeted for the PC and Smartphone markets. Our software products and solutions target the original equipment manufacturers (“OEM”) market, particularly wireless service providers and mobile device manufacturers, and through sales channels to the enterprise and government customers, as well as direct to the consumer. Smith Micro’s fundamental product design philosophy is to enhance, simplify, and streamline applications to ensure the best possible consumer experience. We are the technology behind many of the leading brands of software for major wireless service providers and device manufacturers around the world. Our customers rely on us not only for software solutions, but research and product direction to understand emerging technologies and markets. Our unique ability to simplify the consumer’s wireless experience helps our customers build brand loyalty while reaching new markets faster. Since our inception in 1983, our two leading brands, QuickLink and StuffIt, have shipped over 140 million copies.

     On July 16, 2007, the Company acquired the assets of Active Application Development, PTY, LTD. (dba busineSMS (“busineSMS”), a privately held Melbourne, Australia Company (see Note 2). The acquisition will allow us to leverage and develop busineSMS’s existing messaging applications and expertise into software that will allow users to share multimedia content, automatically, from PC to mobile phone, and between mobile phones. busineSMS is a provider of software solutions for mobile messaging applications and web services. Its flagship product, the MercuryXMS Extreme Messaging Suite, accelerates mobile messaging development and deployment with a set of powerful and highly flexible solutions for mobile media.

     On April 4, 2007, the Company acquired substantially all of the net assets of Insignia Solutions, plc (“Insignia”), including its mobile device management business (see Note 3). Insignia has combined intelligent device and service provisioning capabilities, along with diagnostics, client device software management, and content and firmware provisioning to form the comprehensive Device Management Suite. The Suite also features ICE, which provides intelligent, targeted provisioning and automated device management to further improve the end-user’s experience and to drive new revenue-generating services for carriers. The platform has been licensed to more than 25 leading mobile operators around the world.

     On February 7, 2007, the Company acquired Ecutel Systems, Inc. (“Ecutel”), a Delaware Corporation with offices in Herndon, Virginia (see Note 4). Ecutel is a leading developer of standards-based, secure enterprise mobility software solutions. The acquisition is part of Smith Micro’s strategy to broaden the company’s product footprint and allow expansion into other high growth wireless security sectors. The integration of IPRoam from Ecutel with Smith Micro’s QuickLink Mobile connection manager will result in a new class of mobility product designed to reach the mobile market by providing customers with seamless network roaming in the most secure fashion.

     Basis of Presentation — The accompanying unaudited interim consolidated financial statements reflect adjustments (consisting of normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company at September 30, 2007, the consolidated results of its operations for the three and nine months ended September 30, 2007 and 2006 and its consolidated cash flows for the nine month periods ended September 30, 2007 and 2006. Certain information and footnote disclosures normally included in the consolidated financial statements have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”), although the Company believes that the disclosures in the unaudited consolidated financial statements are adequate to ensure the information presented is not misleading. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report

8

on Form 10-K for the fiscal year ended December 31, 2006. The results of operations of interim periods are not necessarily indicative of future operating results. All intercompany amounts have been eliminated in consolidation.

     Cash and Cash Equivalents — Cash and cash equivalents generally consist of cash, government securities and money market funds. These securities are all held in one financial institution and are uninsured except for minimum FDIC coverage. As of September 30, 2007 and December 31, 2006, balances totaling approximately $83.2 million (unaudited) and $93.1 million, respectively, were uninsured. All have original maturity dates of three months or less.

     Accounts Receivable — The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and those losses have been within management’s estimates. Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and have also been within management’s estimates.

     Inventories — Inventories consist principally of cables, CDs, boxes and manuals and are stated at the lower of cost (determined by the first-in, first-out method) or market. The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s forecast of product demand and production requirements. At September 30, 2007 our inventory balance consisted of approximately $133,000 in assembled products and $1,046,000 of components.

     Equipment and Improvements — Equipment and improvements are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

     Long Lived Assets — The Company accounts for the impairment and disposition of long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment of long-lived assets and for the disposal of long-lived assets. In accordance with SFAS No. 144, long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. The Company periodically reviews the carrying value of long-lived assets to determine whether or not an impairment to such value has occurred. The Company has determined that there was no impairment at September 30, 2007.

     Goodwill — In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s annual impairment testing date is December 31. Recoverability of goodwill is determined by comparing the fair value of the Company’s reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities. At December 31, 2006, we elected to write off all goodwill allocated to the services sector, or $335,000. The consulting portion of our services sector has been de-emphasized and is no longer considered a strategic element of our go forward plan. We determined that we did not have any impairment of goodwill associated with the products sector at December 31, 2006.

     The carrying amount of the Company’s goodwill was approximately $31.9 million (unaudited) and $15.3 million as of September 30, 2007 and December 31, 2006, respectively.

9

     Intangible Assets — The following table sets forth the acquired intangible assets by major asset class (in thousands):

	Useful		September 30, 2007 (unaudited)							December 31, 2006
	Life				Accumulated			Net Book				Accumulated			Net Book
	(Years)		Gross		Amortization			Value		Gross		Amortization			Value
Amortizing:
Licensed Technology		7	$	2,260	$	(2,260	)	$	—	$	2,260	$	(2,260	)	$	—
Purchased Technology		1		1,226		(307	)		919		—		—			—
Capitalized Software		4-5		9,869		(2,762	)		7,107		3,849		(1,621	)		2,228
Distribution Rights		5		482		(286	)		196		482		(208	)		274
Customer Lists		5		923		(414	)		509		923		(276	)		647
Trademarks		10		809		(282	)		527		809		(196	)		613
Trade Names		7		949		(44	)		905		—		—			—
Customer Agreements		1.5		65		(58	)		7		65		(39	)		26
Customer Relationships		7		5,630		(117	)		5,513		—		—			—
Totals			$	22,213	$	(6,530	)	$	15,683	$	8,388	$	(4,600	)	$	3,788

     Aggregate amortization expense on intangible assets was approximately $859,000 and $1.9 million for the three and nine months ended September 30, 2007, respectively. Expected future amortization expense is as follows: $862,000 for the remainder of 2007, $3.7 million for 2008, $3.3 million for 2009, $2.7 million for 2010, $2.4 million for 2011, $1.6 million for 2012 and $1.2 million thereafter. Amortization expense related to intangibles acquired in the Allume acquisition is calculated on a discounted cash flow basis over five years for Capitalized Software, Distribution Rights and Customer Lists and ten years for Trademarks. Amortization is calculated on a straight line basis over five years for Customer Lists. Amortization expense related to intangibles acquired in the PhoTags acquisition is calculated on a discounted cash flow basis over four years for Capitalized Software and 18 months for Customer Agreements. Amortization is calculated on a straight line basis on intangible assets acquired in the Ecutel acquisition, five years for Capitalized Software and seven years for Customer Relationships and Trade Names. Amortization expense related to all intangibles acquired in the Insignia acquisition is calculated on a discounted cash flow basis over seven years.

     Revenue Recognition — The Company currently reports its net revenues under the following operating groups: Multimedia, Connectivity & Security, Compression & Consumer, Mobile Device Management and Other. Within each of these groups software revenue is recognized based on the customer and contract type. The Company recognizes revenue in accordance with the Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is probable. The Company recognizes revenues from sales of its software to Retail and OEM customers or end users as completed products are shipped and title passes, or from royalties generated as authorized customers duplicate the Company’s software, if the other requirements of SOP 97-2 are met. If the requirements of SOP 97-2 are not met at the date of shipment, revenue is not recognized until these elements are known or resolved. Returns from Retail and OEM customers are limited to defective goods or goods shipped in error. Historically, OEM customer returns have not been significant. The Company reviews available retail channel information and makes a determination of a return provision for sales made to distributors and retailers based on current channel inventory levels and historical return patterns. Certain sales to distributors or retailers are made on a consignment basis. Revenue for consignment sales are not recognized until sell through to the final customer is established. The Company has a few multiple elements agreements for which it has contracted to provide a perpetual license for use of proprietary software, to provide non-recurring engineering, and in some cases to provide software maintenance (post contract support). For multiple element agreements, vendor specific objective evidence of fair value for all contract elements is reviewed and the timing of the individual element revenue streams is determined and recognized consistent with SOP 97-2. Sales directly to end-users are recognized upon delivery. End users have a thirty day right of return, but such returns are reasonably estimable and have historically been immaterial. The Company also provides technical support to its customers. Such costs have historically been insignificant.

     Sales Incentives — Pursuant to the consensus of EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Product), effective January 1, 2002, the cost of sales incentives the Company offers without charge to customers that can be used in, or that are exercisable by a customer as a result of, a single exchange transaction is accounted for as a reduction of revenue. We track incentives by program and use historical redemption rates to estimate the cost of customer incentives. Total rebates were $355,000 and $158,000 for the nine months ended September 30, 2007 and 2006, respectively.

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     Software Development Costs — Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding and testing has been completed according to design specifications. After technological feasibility is established, any additional costs are capitalized. Through September 30, 2007, software has been substantially completed concurrently with the establishment of technological feasibility; and, accordingly, no costs have been capitalized to date.

     Income Taxes — The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes. This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and the tax bases of the Company’s assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company reversed all of its valuation allowance on its deferred tax assets during the year ended 2006 as a result of the Company’s improving financial performance and projected income in future years. In addition, effective January 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. (See Note 6).

     Net Income per Share — Pursuant to SFAS No. 128, Earnings per Share, the Company is required to provide dual presentation of “basic” and “diluted” earnings per share (EPS). Basic EPS amounts are based upon the weighted average number of common shares outstanding. Diluted EPS amounts are based upon the weighted average number of common and potential common shares outstanding. Potential common shares for diluted EPS include stock options, using the treasury stock method, of 1,398,000 and 1,671,000 for the three months ended September 30, 2007 and September 30, 2006, respectively. Potential common shares for diluted EPS include stock options, using the treasury stock method, of 1,348,000 and 1,824,000 for the nine months ended September 30, 2007 and September 30, 2006, respectively. Certain potential common shares from exercise of options have been excluded from the computation of diluted earnings per share due to their exercise price being greater than the Company’s weighted-average stock price for the period. For the three months ended September 30, 2007 and 2006, the number of shares excluded were 748,500 and 68,000, respectively. For the nine months ended September 30, 2007 and 2006, the number of shares excluded were 803,500 and 210,000, respectively.

     Fulfillment Services — The Company currently holds consigned inventory for a customer, which is used to fulfill internet orders. As the Company does not hold title to the inventory, it is not recorded in the accompanying unaudited condensed consolidated balance sheet. In addition, the Company receives cash for internet fulfillment orders which is paid out to the fulfillment customer on a monthly basis. Such cash and the related payable are recorded on a net basis as the amounts are held for the benefit of this fulfillment customer. Revenue is recognized for fulfillment services as services are performed.

     Segment Information — In early 2007, we completed two acquisitions. The acquisition of Ecutel Systems, Inc. in February, and the asset purchase of Insignia Solutions in April. Based on the new acquisitions and the broadening of our OEM product offering, we are now breaking out our revenues consistent with our new internal operating perspective. We currently sell products in the following product categories: Multimedia, which includes music, photo and video library management; Connectivity and Security, which includes our connection manager solutions for both the OEM and Enterprise channels; Compression and Consumer, which includes OEM and retail sales of our compression and broad consumer-based software; Mobile Device Management, which includes our firmware over the air upgrade software branded under the Insignia name, and finally, ‘other revenue’, which includes the consulting portion of our services sector which has been de-emphasized and is no longer considered a strategic element of our go forward plan.

     The Company does not separately allocate operating expenses to these business units, nor does it allocate specific assets. Therefore, business unit information reported includes only revenues.

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     The following table shows the net revenues generated by each business unit:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
	(in thousands)				(in thousands)
Multimedia	$	7,951	$	8,047	$	22,248	$	19,444
Connectivity & Security		8,038		3,839		20,051		9,607
Consumer & Compression		3,727		2,588		8,758		7,410
Mobile Device Management		381		—		1,428		—
Corporate/Other		296		327		921		780
Total Revenues		20,393		14,801		53,406		37,241
Cost of Revenues		6,385		6,090		16,045		14,695
Gross Profit	$	14,008	$	8,711	$	37,361	$	22,546

     Sales to individual customers and their affiliates which amounted to more than 10% of the Company’s net revenues for the three months ended September 30, 2007 and 2006, respectively, included one OEM customer at 68.5% in 2007 and one OEM customer at 76.9% in 2006. Sales to individual customers and their affiliates which amounted to more than 10% of the Company’s net revenues for the nine months ended September 30, 2007 and 2006, respectively, included one OEM customer at 67.7% in 2007 and one OEM customer at 74.3% in 2006.

     Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

     Comprehensive Income — Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. For each of the periods ended September 30, 2007 and 2006, there was no difference between net income, as reported, and comprehensive income.

     Significant Concentrations — For the nine months ending September 30, 2007, one customer made up more than 10% of revenues and 67% of accounts receivable, and three suppliers, each with more than 10% of inventory purchases, totaled 28% of accounts payable.

     New Accounting Pronouncements — In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Issues (SFAS) No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. SFAS 155 amends SFAS No. 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principle cash flows. SFAS 155 also amends SFAS No. 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is a derivative instrument. This new Standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.

     In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets (SFAS 156), which provides an approach to simplify efforts to obtain hedge-like (offset) accounting. This Statement amends FASB Statement 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. The Statement (1) requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations; (2) requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable; (3) permits an entity to choose either the amortization method or the fair value method for subsequent measurement for each class of separately recognized servicing assets or servicing liabilities; (4) permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by an entity with recognized servicing rights, provided the securities reclassified offset the entity’s exposure to changes in the fair value of the servicing assets or liabilities; and (5) requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the balance sheet and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS 156 is effective for all separately recognized servicing assets and liabilities as of the beginning of an entity’s fiscal year that begins after September 15, 2006, with earlier adoption permitted in certain circumstances. The Statement also describes the manner in which it should be initially applied. The adoption of SFAS 156 did not have a material

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impact on the Company’s financial position, results of operations or cash flows.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which defines the fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Early adoption is encouraged, provided that we have not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. The Company is currently in the process of evaluating the impact SFAS 157 may have on its results of operations and financial position.

     In September 2006, the FASB issued SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Post Retirement Plans. SFAS No. 158 requires employers to recognize in its statement of financial position an asset or liability based on the retirement plan’s over or under funded status. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The adoption of SFAS 158 did not have a material impact on the Company’s results of operations and financial position.

     In September 2006, the United States Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company’s balance sheets and statement of operations and the related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The adoption of SAB 108 did not have a material impact on the Company’s results of operations and financial position.

     In October 2006, the Emerging Issues Task Force (EITF) issued EITF 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation) to clarify diversity in practice on the presentation of different types of taxes in the financial statements. The Task Force concluded that, for taxes within the scope of the issue, a company may adopt a policy of presenting taxes either gross within revenue or net. That is, it may include charges to customers for taxes within revenues and the charge for the taxes from the taxing authority within cost of sales, or, alternatively, it may net the charge to the customer and the charge from the taxing authority. If taxes subject to EITF 06-3 are significant, a company is required to disclose its accounting policy for presenting taxes and the amounts of such taxes that are recognized on a gross basis. The guidance in this consensus is effective for the first interim reporting period beginning after December 15, 2006 (the first quarter of our fiscal year 2007). The adoption of EITF 06-3 did not have a material impact on the Company’s results of operations, financial position or cash flow.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items will be required to be reported in earnings in the current period. SFAS No. 159 also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the effect of implementing this guidance, which directly depends on the nature and extent of eligible items elected to be measured at fair value, upon initial application of the standard on January 1, 2008.

2. ACQUISITION OF ACTIVE APPLICATION DEVELOPMENT, PTY, LTD.

     On July 16, 2007, the Company acquired the assets of Active Application Development, PTY, LTD dba busineSMS (“busineSMS”), a privately held Melbourne, Australia Company, with $1.0 million paid at closing and $400,000 to be paid at the end of the one year escrow period The acquisition will allow us to leverage and develop busineSMS’s existing messaging applications and expertise into software that will allow users to share multimedia content, automatically from PC to mobile phone, and between mobile phones. busineSMS is a provider of software solutions for mobile messaging applications and web services. Its flagship product, the MercuryXMS Extreme Messaging Suite, accelerates mobile messaging development and deployment with a set of powerful and highly flexible solutions for mobile media.

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     The Company estimates that $27,000 in direct costs (legal and professional services) were incurred to close the transaction. The Company has accounted for this acquisition as an acquisition of technology and all costs will be amortized over a period of one year.

3. ACQUISITION OF INSIGNIA SOLUTIONS, plc.

     On April 4, 2007, the Company, IS Acquisition Sub, Inc., a wholly-owned subsidiary of the Company, and Insignia Solutions plc and its subsidiaries Insignia Solutions Inc., Insignia Solutions AB and Insignia Asia Corporation (collectively “Insignia”) entered into an Amendment (the “Amendment”) to the Asset Purchase Agreement dated February 11, 2007 by and among Company, Acquisition Sub and Insignia (the “Asset Purchase Agreement”).

     Pursuant to the Asset Purchase Agreement, as amended by the Amendment, the Company, Acquisition Sub and Insignia agreed that, among other things, the aggregate consideration to be paid by the Company under the Asset Purchase Agreement will be an estimated $18.8 million, consisting of: $12.5 million in cash; forgiveness of all indebtedness payable by Insignia under the Promissory Note initially delivered to the Company on December 22, 2006 (the principal amount of the note was $2.0 million at the closing of the Acquisition), and a cash sum equal to the product of $2.575 million less the dollar amount of the Employee Liabilities (as defined in the Amendment) assumed by the Company at closing.

     The Company has held back $1.5 million in cash from the consideration for twelve months as security for satisfaction of Insignia’s indemnification obligations under the Asset Purchase Agreement, as amended.

     The Company estimates that $371,000 in direct costs (legal and professional services) were incurred to close the transaction.

     The total purchase price at this date is summarized as follows (in thousands):

Cash consideration	$	12,500
Insignia liabilities paid at closing		2,477
Loan forgiveness		2,000
Acquisition related costs		371
Total purchase price	$	17,348

     If all conditions as per the contract are met at the close of the escrow period, the estimated purchase price will be $18,848,000.

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     The Company’s allocation of the purchase price is summarized as follows (in thousands):

Assets:
Cash	$	9
Accounts Receivable, net		549
Computers and Equipment		97
Prepaids and Other Assets		51
Intangible Assets		9,800
Goodwill		7,282
Total Assets		17,788
Liabilities:
Accrued Liabilities		440
Total Liabilities		440
Total purchase price	$	17,348

     Pro forma disclosure of the Company’s results of operations for the nine months ended September 30, 2007 as though the acquisition had occurred as of the beginning of the period are not presented since the results of Insignia’s operations for the first quarter of 2007 were not material and the second and third quarters have already been included in our financial results.

     Pro forma disclosure of the Company’s results of operations for the nine months ended September 30, 2006 as though the acquisition had occurred as of the beginning of the period, after deducting $1,239 for nonrecurring expenses, is as follows (in thousands, except per share amounts):

	Smith					Pro-forma
	Micro		Insignia			combined
	(unaudited)		(unaudited)			(unaudited)
Revenue	$	37,241	$	2,129		$	39,370
Net Income (Loss)	$	5,346	$	(4,304	)	$	1,043
Basic Earnings per share	$	0.23				$	0.04
Diluted Earnings per share	$	0.21				$	0.04

4. ACQUISITION OF ECUTEL SYSTEMS, INC.

     On February 9, 2007, the Company, TEL Acquisition Corp., a wholly-owned subsidiary of the Company, Ecutel Systems, Inc., John J. McDonnell, Jr. and the Principal Stockholders of Ecutel consummated the merger of Ecutel with and into TEL Acquisition Co. pursuant to the terms of that certain Agreement and Plan of Merger dated as of January 31, 2007.

     In connection with the Merger, all outstanding shares of capital stock of Ecutel were converted into the right to receive a portion of the merger consideration. The aggregate merger consideration paid by the Company in connection with the Merger was $8,000,000 in cash, of which $1,000,000 is being withheld as security for satisfaction of certain indemnification obligations pursuant to the terms of the Merger Agreement. The consideration for and the other terms and conditions of the Merger were determined by arms-length negotiations between the Company, Ecutel and the Principal Stockholders of Ecutel.

     The Company estimates that $127,000 in direct costs (legal and professional services) were incurred to close the transaction.

     A copy of the Merger Agreement has been filed under Form 8-K with the Securities and Exchange Commission.

     The results of operations of the business acquired have been included in the Company’s consolidated financial statements from the date of acquisition. Amortization related to the acquisition was calculated based on an independent valuation for certain identifiable intangibles acquired which will be amortized over periods ranging from five to seven years.

     The total purchase price is summarized as follows (in thousands):

Cash consideration	$	8,000
Acquisition related costs		127
Total purchase price	$	8,127

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     The Company’s allocation of the purchase price is summarized as follows (in thousands):

Assets:
Cash	$	63
Accounts Receivable, net		246
Inventory		25
Intangible Assets		2,799
Goodwill		5,828
Total Assets		8,961
Liabilities:
Accrued Liabilities		834
Total Liabilities		834
Total purchase price	$	8,127

     Pro forma disclosure of the Company’s results of operations for the nine months ended September 30, 2007 as though the acquisition had occurred as of the beginning of the period, and pro forma disclosure of the Company’s results of operations for the comparable prior period as though the acquisition had occurred as of the beginning of that period, are not presented since the results of operations of Ecutel Systems, Inc. for each of these periods was not material.

5. ACQUISITION OF PHOTAGS INC.

     On April 3, 2006, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Tag Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), Tag Acquisition Corporation II, a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub II”), PhoTags, Inc., a Delaware corporation (“PhoTags”), Harry Fox, as Stockholders’ Agent, and certain stockholders of PhoTags, that provides for, among other things, the merger of Merger Sub with and into PhoTags and, immediately upon the completion thereof, the merger of PhoTags with and into Merger Sub II pursuant to which PhoTags became a wholly owned subsidiary of the Company (the “Merger”). The transaction closed on April 5, 2006.

     In connection with the Merger, the Company paid an earn-out of $3,500,000 in March 2007, based on the achievement of certain milestones which was recorded as an addition to Goodwill.

6. INCOME TAXES.

     We adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

     Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years ended December 31, 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2007.

     We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the financial statements as general and administrative expense.

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7. STOCK BASED COMPENSATION.

     In July 2005, the Shareholders approved the 2005 Stock Option/Stock Issuance Plan (“2005 Plan”), which replaced the 1995 Stock Incentive Plan (“1995 Plan”). All outstanding options under the 1995 Plan remained outstanding, but no further grants were made under that Plan. The 2005 Plan provides for the issuance of non-qualified or incentive stock options to employees, non-employee members of the board and consultants. The exercise price per share is not to be less than the fair market value per share of the Company’s common stock on the date of grant. The Board of Directors has the discretion to determine the vesting schedule. Options may be either immediately exercisable or in installments, but generally vest over a four-year period from the date of grant. In the event the holder ceases to be employed by the Company, all unvested options terminate and all vested installment options may be exercised within an installment period following termination. In general, options expire ten years from the date of grant.

     Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment (SFAS 123(R)), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including stock options based on their fair values. SFAS 123(R) supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), which the Company previously followed in accounting for stock-based awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) to provide guidance on SFAS 123(R). The Company has applied SAB 107 in its adoption of SFAS 123(R).

     The Company adopted SFAS 123(R) using the modified prospective transition method as of January 1, 2006. In accordance with the modified prospective transition method, the Company’s financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. Share-based compensation expense recognized in the Company’s Condensed Consolidated Statement of Operations during the three and nine months ended September 30, 2007 and September 30, 2006 includes compensation expense for share-based payment awards granted prior to, but not yet vested as of, December 31, 2005 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123.

     In conjunction with the adoption of SFAS 123(R), the Company elected to attribute the value of share-based compensation to expense using the straight-line method, which was previously used for its pro forma information required under SFAS 123. Share-based compensation expenses related to stock options and restricted stock grants were $3.9 million and $1.5 million for the three months ended September 30, 2007 and September 30, 2006, respectively. Share-based compensation expenses include stock options, restricted stock grants and taxes paid by the company on behalf of the recipient. Share-based compensation expense was $10.6 million and $3.9 million for the nine months ended September 30, 2007 and September 30, 2006, respectively and was recorded in the financial statements as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	(unaudited)				(unaudited)
	2007		2006		2007		2006
Cost of Goods Sold	$	91	$	8	$	195	$	23
Selling and Marketing		1,579		605		4,160		1,509
Research and Development		683		141		1,829		793
General and Administrative		1,568		741		4,404		1,583
Total Stock Compensation Expense	$	3,921	$	1,495	$	10,588	$	3,908

     In the nine months ended September 30, 2007 a total of 50,000 shares of Restricted Stock, with a total value of $627,500, were granted to the Board of Directors. This cost will be amortized over 12 months. In addition, a total of 450,000 shares of Restricted Stock, with a total value $5.8 million were granted to officers and key employees of the Company. This cost will be amortized over 24 months.

     In the nine months ended September 30, 2006 a total of 50,000 shares of Restricted Stock, with a total value of $440,000, were granted to the Board of Directors. This cost will be amortized over 12 months. In addition, 400,000 shares of Restricted Stock, with a total value $4.3 million, were granted to officers and key employees of the Company. This cost will be amortized over 24 months.

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     The Company’s calculations were made using the Black-Scholes option pricing model with the following assumptions: expected life, 12 to 48 months following the grant date; average stock volatility, 61% for grants issued in 2007 and 84% for grants issued in 2006; weighted average risk-free interest rates of 4.64% and 4.86% in the nine months ended September 30, 2007 and 2006, respectively; and no dividends during the expected term. As stock-based compensation expense recognized in the consolidated statement of operations pursuant to SFAS No. 123(R) is based on awards ultimately expected to vest, expense for grants beginning upon adoption of SFAS No. 123(R) on January 1, 2006 will be reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.

     A summary of the Company’s stock option activity is as follows:

				Weighted Ave.		Aggregate
	# of Shares			Exercise Price		Intrinsic Value
Outstanding as of December 31, 2006		2,518,000		$	4.80
Granted (unaudited)		3,045,000		$	14.78
Exercised (unaudited)		(889,000	)	$	4.23
Cancelled (unaudited)		(83,000	)	$	13.96
Outstanding as of September 30, 2007 (unaudited)		4,591,000		$	11.37	$	21,541,000
Exercisable as of September 30, 2007 (unaudited)		788,000		$	5.11	$	8,625,000

     Additional information regarding options outstanding as of September 30, 2007 is as follows :

			Options outstanding				Options exercisable
			Weighted average		Weighted				Weighted
Range of			remaining		average				average
exercise	Number		contractual		exercise		Number		exercise
prices	outstanding		life (years)		price		exercisable		price
$ 0.24 —  $ 2.00		370,000		6.4	$	1.69		196,000	$	1.50
$ 2.01 —  $ 5.00		993,000		7.8	$	4.94		465,000	$	4.93
$  5.01 —  $12.50		197,000		8.3	$	9.59		67,000	$	7.85
$12.51 — $14.00		1,418,000		9.4	$	12.68		22,000	$	13.93
$14.01 — $16.00		890,000		9.4	$	15.19		31,000	$	15.47
$16.01 — $20.00		723,000		9.6	$	18.35		7,000	$	18.92
		4,591,000		8.8	$	11.37		788,000	$	5.11

     During the nine months ended September 30, 2007 889,000 options were exercised with an intrinsic value of $10.5 million, resulting in cash proceeds to the Company of $3.7 million. The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2007 was $7.77. At September 30, 2007 there was $20.4 million of total unrecognized compensation costs related to non-vested stock options granted under the Plan, which will be recognized over a period not to exceed four years. At September 30, 2007, no shares were available for future grants under the Stock Issuance / Stock Option Plan.

     Effective January 1, 2006, in accordance with SFAS 123(R), the Company presents excess tax benefits from the exercise of stock options as a financing activity rather than an operating activity in the Consolidated Statement of Cash Flows.

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8. EQUITY TRANSACTIONS

     On December 14, 2006, the Company completed a secondary public offering, issuing 4,000,000 shares of common stock, $0.001 par value, at a price of $14.75 per share, resulting in aggregate gross cash proceeds to the Company of $59,000,000 before deducting commissions and other expenses. Offering costs related to the transaction totaled $4,002,000, comprised of $3,304,000 in underwriting discounts and commissions and $698,000 cash payments for legal and investment services, resulting in net proceeds to the Company of $54,998,000 as of December 31, 2006.

     On January 18, 2007 the underwriters exercised their overallotment option for 387,000 shares that were sold as part of a fully marketed secondary, resulting in additional gross proceeds of $5,708,000 before deducting commissions and other expenses. Offering costs incurred in 2007 include underwriting discounts and commissions of $320,000 and $47,000 cash payments for legal and accounting services, resulting in additional net proceeds to the Company of $5,341,000 in the nine months ended September 30, 2007.

9. SHARES SUBJECT TO RESCISSION

     Under our 1995 Stock Option / Stock Issuance Plan and 2005 Stock Option / Stock Issuance Plan (the “Plans”), the Company granted options to purchase shares of common stock to certain of our employees, directors and consultants. The issuances of common stock upon exercise of options that were granted under these Plans between March 2005 and August 2006 may not have been exempt from qualification under certain state securities laws and, as a result, the Company may have potential liability to the individuals who exercised these options.

     The Company accounts for shares which have been issued that may be subject to rescission claims as a put liability based on the price to be paid for equity to be repurchased. Since equity instruments subject to rescission are redeemable at the holder’s option or upon the occurrence of an uncertain event not solely within the Company’s control, such equity instruments are outside the scope of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and its related interpretations. Under the SEC’s interpretation of generally accepted accounting principles, reporting such claims outside of stockholders’ equity is required, regardless of how remote the redemption event may be. However, during the relevant period for which the Plans were not in compliance with certain state securities laws, all of the individuals who exercised options sold all of the shares underlying the options exercised. As such, the Company does not feel that there is a material exposure for rescission of issued shares to those who exercised stock options as they had subsequently sold their shares and at a value greater than the option strike price and no longer hold the shares.

     In addition to shares of common stock which were issued upon option exercises, certain option grants made under the Plans between March 2005 and August 2006 which have not yet been exercised may not have been exempt from qualification under certain state securities laws. As a result, we may have potential liability to the individuals who received those option grants but who have not yet exercised those options. We may in the future choose to make a rescission offer to the holders of these outstanding options to give them the opportunity to rescind the grant of their options in exchange for a cash payment.

     Prior to the implementation of SFAS 123(R) in January 2006, the Company accounted for share options under APB 25. Since all of the options under the Plans were granted at fair market value at the time of grant, no expense is recorded in our financial statements related to options that were vested prior to January 1, 2006. Under SFAS 123 (R), the first quarter results of 2006 included expense related to options that were granted prior to January 1, 2006 but had not vested at that date. Accordingly, no provision is made in our financial statements for options that were vested as of January 1, 2006, that were granted under the Plans which are not yet exercised, but may be subject to a rescission offer, if and when made. Should any optionees accept the rescission offer and put their options back to the Company, the Company will reflect such offer in our financial statements at that time.

     As of October 31, 2007, assuming every eligible holder of unexercised options granted under the Plans during the period in question were to accept a rescission offer, we estimate the total cost to the Company to complete the rescission for the unexercised options would not be material to the Company’s financial position. Management feels that acceptance of a rescission offer, if made, would be remote, since the weighted average exercise price of these options which were outstanding at October 31, 2007 was $11.75 per share and the market price of the Company’s stock was trading at a higher price.

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10. SUBSEQUENT EVENTS

     A Special Meeting of the Stockholders of the Company was held on September 28, 2007. This meeting was adjourned, and reconvened on October 11, 2007. At the reconvened Special Meeting, the stockholders of the Company approved an amendment to the 2005 Stock Option / Stock Issuance Plan to increase the maximum number of shares of common stock which may be issued under the Plan from 5,000,000 shares (plus the automatic annual increase) to 7,000,000 shares (plus the automatic annual increase).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This report contains forward-looking statements regarding Smith Micro which include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income, the competitive factors affecting our business, market acceptance of products, customer concentration, the success and timing of new product introductions, the protection of our intellectual property, and the need for additional capital. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “estimates,” “should,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such factors include, but are not limited to the following:

• our ability to predict consumer needs, introduce new products, gain broad market acceptance for such products and ramp up manufacturing in a timely manner;

• the continued growth in sales to our large customers;

• market acceptance of mobile applications, including consumer adoption of mobile and media services;

• the intensity of the competition and our ability to successfully compete;

• the pace at which the market for new products develop;

• the response of competitors, many of whom are bigger and better financed than us;

• our ability to successfully execute our business plan and control costs and expenses;

• our ability to protect our intellectual property and our ability to not infringe on the rights of others;

• our ability to integrate acquisitions; and

• those additional factors which are listed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006.

All forward looking statements included in this document are based on information available to us on the date hereof. We do not undertake any obligation to revise or update publicly any forward-looking statements for any reason.

OVERVIEW

     Our business model is driven by building the next mobile experience for our diverse customer base that targets the wireless industry. Our communications products are utilized in major wireless networks throughout the world that support data communications through the use of mobile devices or other wireless communication devices such as PC cards, USB modems, and embedded modems. Our music and media products provide a suite of mobile media management tools that give wireless carriers and device manufactures the power to deliver a full spectrum of premium multimedia content. Wireless network providers generally incorporate our products into their accessory products sold directly to individual consumers or on servers in the network environment to facilitate firmware over-the-air updating for mobile devices. We focus on making even the newest and most complex services work intuitively and the result is a richly enhanced customer experience and more satisfied customers with greater loyalty and less turnover.

     Our business is primarily dependent upon the demand for wireless communications and content management solutions and the corresponding requirements for software solutions to support this demand. During the last three years, demand for these types of products has fluctuated dramatically as wireless providers race to introduce higher network speeds, and launch new services that utilize these improving wireless broadband networks.

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     We continue to invest in research and development for one of the industry’s leading wireless product lines and we are uniquely positioned to truly capitalize on market opportunity as we leverage the strength of our technology capability with our growing global capabilities and the value our customers place on our expanding product lines. . We believe that our ability to acquire and develop the next leading technologies further differentiates our company from competitors in the market.

     During 2007, we have maintained a sharp focus on our operating cost structure while ensuring that we maintain our operating flexibility to support future growth in the industry. We measure success by monitoring our net sales and gross margins and operating cash flow. We believe that there continues to be excellent growth opportunities within the wireless communications software marketplace as well as the consumer marketplace and we continue to focus on positioning Smith Micro to benefit from these opportunities.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net revenues.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Net Revenues:		100.0	%		100.0	%		100.0	%		100.0	%
Cost of Revenues		31.3	%		41.2	%		30.0	%		39.5	%
Gross profit		68.7	%		58.8	%		70.0	%		60.5	%
Operating expenses:
Selling and marketing		24.3	%		16.0	%		24.1	%		17.6	%
Research and development		19.9	%		12.6	%		19.2	%		15.1	%
General and administrative		18.3	%		15.8	%		20.6	%		15.5	%
Total operating expenses		62.5	%		44.4	%		63.9	%		48.2	%
Operating (loss) income		6.2	%		14.4	%		6.1	%		12.3	%
Interest income		4.9	%		2.6	%		6.1	%		2.3	%
Income before income taxes		11.1	%		17.0	%		12.2	%		14.6	%
Income tax expense		8.8	%		0.5	%		7.5	%		0.2	%
Net income		2.3	%		16.5	%		4.7	%		14.4	%

Three and Nine Months Ended September 30, 2007 and 2006

Revenues

     In early 2007, we completed two acquisitions: Ecutel Systems, Inc. in February, and Insignia Solutions in April. Based on the new acquisitions and the broadening of our OEM product offering, we are now breaking out our revenues consistent with our new internal operating perspective. We currently sell products in the following product categories: Multimedia, which includes music, photo and video library management; Connectivity and Security, which includes our connection manager solutions for both the OEM and Enterprise channels; Compression and Consumer, which includes OEM and retail sales of our compression and broad consumer-based software; Mobile Device Management, which includes our firmware over the air upgrade software branded under the Insignia name, and finally, ‘other revenue’, which includes the consulting portion of our services sector which has been de-emphasized and is no longer considered a strategic element of our go forward plan.

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     The following table shows the net revenues generated by each business unit (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Multimedia	$	7,951	$	8,047	$	22,248	$	19,444
Connectivity & Security		8,038		3,839		20,051		9,607
Consumer & Compression		3,727		2,588		8,758		7,410
Mobile Device Management		381		—		1,428		—
Other		296		327		921		780
Total Net Revenues		20,393		14,801		53,406		37,241
Cost of Revenues		6,385		6,090		16,045		14,695
Gross Profit	$	14,008	$	8,711	$	37,361	$	22,546

     Net Revenues. Net revenues were $20.4 million and $14.8 million in the three months ended September 30, 2007 and September 30, 2006, respectively, representing an increase of $5.6 million, or 37.8%, from 2006 to 2007. Connectivity & Security sales increased $4.2 million, or 109.4%, as a result of the continued success of the EVDO (a wireless Internet standard) rollout by our carrier customers and the introduction of Rev A- EVDO hardware in late 2006 which is currently being rolled out by our customers. Consumer sales increased $1.1 million, or 44.0%, primarily due to sales of VMware Fusion. Multimedia sales remained consistent at $8.0 million during both three month periods.

     Net revenues were $53.4 million and $37.2 million in the nine months ended September 30, 2007 and September 30, 2006, respectively, representing an increase of $16.2 million, or 43.4%, from 2006 to 2007. Multimedia sales increased $2.8 million, or 14.4%, as a result of increased sales of our Music Essentials Kit product, which was launched in the fourth quarter of 2005, and sales of our QuickLink Music Manager product, which was launched in the fourth quarter of 2006. Connectivity & Security sales increased $10.4 million, or 108.7%, as a result of the continued success of the EVDO (a wireless Internet standard) rollout by our carrier customers and the introduction of Rev A- EVDO hardware in late 2006 which is currently being rolled out by our customers. Consumer sales increased approximately $1.3 million, or 18.2%, primarily as the result of agreement reached with VMware.

Cost of Revenues and Gross Margin

     Cost of Revenues. Cost of revenues were $6.4 million and $6.1 million in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $295,000, or 4.8%, from 2006 to 2007. The increase from the year earlier period is attributed to product mix, specifically the reduction of Music Kit sales in the current year. Cost of revenues include $391,000 and $251,000, respectively, of amortization of intangibles associated with acquisitions. In addition, cost of revenues also includes $91,000 and $8,000, respectively, of stock compensation expense. Factoring out amortization of intangibles and stock compensation expense, Non-GAAP gross margin for the three month period ended September 30 was 71.1% for 2007 and 60.6% for 2006.

     Cost of revenues were $16.0 million and $14.7 million in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $1.4 million, or 9.2%, from 2006 to 2007. The increase from the year earlier period is attributed primarily to the increase in sales offset by favorable shift in product mix. Cost of revenues include $1.1 million and $836,000, respectively, of amortization of intangibles associated with acquisitions. In addition, cost of revenues also includes $195,000 and $23,000, respectively, of stock compensation expense. Factoring out amortization of intangibles and stock compensation expense, Non-GAAP gross margin for the nine month period ended September 30 was 72.5% for 2007 and 62.9% for 2006.

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Operating Expenses

     The following table presents a breakdown of our operating expenses by functional category and as a percentage of total net revenues (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2007				2006				2007				2006
Operating expenses:
Selling and marketing	$	4,947	24.3	%	$	2,374	16.0	%	$	12,843	24.1	%	$	6,540	17.6	%
Research and development		4,062	19.9	%		1,871	12.6	%		10,268	19.2	%		5,625	15.1	%
General and administrative		3,729	18.3	%		2,329	15.8	%		11,026	20.6	%		5,766	15.5	%
Total operating expenses	$	12,738	62.5	%	$	6,574	44.4	%	$	34,137	63.9	%	$	17,931	48.2	%

     Selling and Marketing. Selling and marketing expenses were $4.9 million and $2.4 million in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $2.6 million, or 108.4%, from 2006 to 2007. Our selling and marketing expenses consist primarily of personnel costs, advertising costs, sales commissions and trade show expenses. These expenses vary significantly from quarter to quarter based on the timing of trade shows and product introductions. Selling and marketing expenses for the current period include $1.6 million of stock based compensation expense compared to $605,000 in 2006. Amortization of intangibles associated with acquisitions was $161,000 for the 2007 period and $117,000 for the 2006 period. Factoring out stock based compensation expense and amortization expense in both periods, selling and marketing expenses increased $1.6 million, or 94.3% from the prior year quarter. This increase is due to the acquisitions of Insignia Solutions and Ecutel Systems, increases in headcount and increases in costs related to trade shows and to product collateral concept and design. As a percentage of revenues, Non-GAAP selling and marketing expenses increased to 15.7% for the three months ended September 30, 2007 from 11.2% in the three months ended September 30, 2006, as a result of the increase in costs.

     Selling and marketing expenses were $12.8 million and $6.5 million in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $6.3 million, or 96.4%, from 2006 to 2007. Selling and marketing expenses for the current period include $4.2 million of stock based compensation expense compared to $1.5 million in 2006. Amortization of intangibles associated with acquisitions was $482,000 for the 2007 period and $366,000 for the 2006 period. Factoring out stock based compensation expense and amortization expense in both periods, selling and marketing expenses increased $3.5 million, or 75.8% from the prior year. This increase is due to the acquisitions of Insignia Solutions, Ecutel Systems and PhoTags, increases in headcount and increases in costs related to trade shows and to product collateral concept and design. As a percentage of revenues, Non-GAAP selling and marketing expenses increased to 15.4% for the nine months ended September 30, 2007 from 12.5% in the nine months ended September 30, 2006, as a result of the increase in costs.

     Research and Development. Research and development expenses were $4.1 million and $1.9 million in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $2.2 million, or 117.1%, from 2006 to 2007. Our research and development expenses consist primarily of personnel and equipment costs required to conduct our software development efforts. We remain focused on the development and expansion of our technology, particularly our wireless, compression and multimedia software technologies. Research and development expenses for the current period include $683,000 of stock based compensation expense compared to $141,000 in 2006. Amortization of intangibles associated with acquisitions was $306,000 for the 2007 period and $0 for the 2006 period. Factoring out stock based compensation expense and amortization expense in both periods, research and development expenses increased $1.3 million, or 77.6% from the prior year quarter. The increase in our research and development expenses was due to the addition of acquired operations, increases to headcount and a refocus of our consulting services to internal product development. As a percentage of revenues, Non-GAAP research and development expenses increased to 15.1% for the three months ended September 30, 2007 from 11.7% in the three months ended September 30, 2006, as a result of the increase in costs.

     Research and development expenses were $10.3 million and $5.6 million in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $4.6 million, or 82.5%, from 2006 to 2007. Research and development expenses for the current period include $1.8 million of stock based compensation expense compared to $793,000 in 2006. Amortization of intangibles associated with acquisitions was $327,000 for the 2007 period and $0 for the 2006 period. Factoring out stock based compensation expense and amortization expense in both periods, research and development expenses increased $3.3 million, or 67.9% from the prior year. The increase in our research and development expenses was due to the addition of acquired operations, increases to headcount and a refocus of our consulting services to internal product development. As a percentage of revenues, Non-GAAP research and development expenses increased to 15.2% for the nine months ended September 30, 2007 from 13.0% in the nine months ended September 30, 2006, as a result of the increase in costs.

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     General and Administrative. General and administrative expenses were $3.7 million and $2.3 million in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $1.4 million, or 60.1%, from 2006 to 2007. General and administrative expenses for the current period include $1.6 million of stock based compensation expense compared to $741,000 in 2006. Factoring out such compensation expense, general and administrative expenses increased $573,000, or 36.1%, from the prior year quarter. The increase in our general and administrative expenses is due to increases in headcount and professional services, including current year Sarbanes-Oxley Act compliance costs. As a percentage of revenues, Non-GAAP general and administrative expenses decreased to 10.6% for the three months ended September 30, 2007 from 10.7% in the three months ended September 30, 2006.

     General and administrative expenses were $11.0 million and $5.8 million in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $5.2 million, or 91.2%, from 2006 to 2007. General and administrative expenses for the current period include $4.4 million of stock based compensation expense compared to $1.6 million in 2006. Factoring out such compensation expense, general and administrative expenses increased $2.4 million, or 58.3%, from the prior year quarter. The increase in our general and administrative expenses is due to increases in headcount and current year Sarbanes-Oxley Act compliance costs. As a percentage of revenues, Non-GAAP general and administrative expenses increased to 12.4% for the nine months ended September 30, 2007 from 11.2% in the nine months ended September 30, 2006.

     Interest Income. Interest income was $987,000 and $381,000 in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $606,000 or 159.1% from 2006 to 2007. Interest income was $3.3 million and $871,000 in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $2.4 million or 273.7% from 2006 to 2007. Interest income is directly related to our average cash balance during the period and varies among periods. On December 14, 2006, we closed a fully marketed secondary offering, resulting in the issuance of 4 million shares with net cash proceeds to the company of $55.0 million in 2006. On January 18, 2007 an additional 387,000 shares were sold under the same agreement, resulting in additional net proceeds of $5.3 million. We have not changed our investment strategy during the periods being reported on, with our excess cash consistently being invested in short term marketable debt securities classified as cash equivalents.

     Provision for Income Taxes. The provision for income taxes was $1.8 million and $68,000 in the three months ended September 30, 2007 and 2006, respectively, representing an increase of $1.7 million from 2006 to 2007. The provision for income taxes was $4.0 million and $140,000 in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of $3.8 million from 2006 to 2007. In the 2006 period, our tax provision was fully reserved and the resultant tax expense was the provision for income taxes related to an accrual for alternative minimum taxes which were expected to be owed on income as well as certain state minimum tax payments. In the fourth quarter of 2006, we released our reserve on our tax provision and our 2007 tax expense reflects our tax provision. We began 2007 with NOLs of approximately $15 million Federal and $12 million State, as such, the $2.2 million tax provision for 2007 is primarily non-cash based tax expense.

Liquidity and Capital Resources

     On December 14, 2006, we completed an underwritten public equity offering, issuing 4,000,000 shares of our common stock, $0.001 par value, at a price of $14.75 per share, resulting in aggregate gross cash proceeds to the Company of $59,000,000 before deducting commissions and other expenses. Offering costs related to the transaction totaled $4,002,000, comprised of $3,304,000 in underwriting discounts and commissions and $698,000 cash payments for legal and investment services, resulting in net proceeds to the Company of $54,998,000.

     On January 18, 2007 an additional 387,000 shares were sold in the overallotment option granted to the underwriters, resulting in additional gross proceeds of $5,708,000 before deducting commissions and other expenses. Offering costs incurred in 2007 include underwriting discounts and commissions of $320,000 and $48,000 cash payments for legal and accounting services, resulting in additional net proceeds to the Company of $5,341,000 in the nine months ended September 30, 2007.

     Net cash provided by operating activities was $5.9 million and $12.3 million in the nine months ended September 30, 2007 and 2006, respectively. The primary source of operating cash in both years was net income, non-cash stock based compensation expense and in 2007, the increase in deferred income tax assets. In 2007 this was partially offset by an increase in our accounts receivable and the excess tax benefit related to stock option exercises.

     During the nine months ended September 30, 2007, we used $28.5 million in investing activities, consisting of the acquisitions of Insignia Solutions for $15.3 million, of Ecutel Systems, Inc. for $8.1 million, the payment of the PhoTags earn-out of $3.5 million and the acquisitions of other intangibles, including the technology assets of busineSMS. We also purchased office equipment in the amount of $400,000 in 2007 and $228,000 in 2006, respectively.

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     We received $3.8 million in cash from the exercise of employee stock options during each of the nine months ended September 30, 2007 and 2006, respectively. Effective January 1, 2006, in accordance with SFAS 123(R), the Company presents excess tax benefits from the exercise of stock options as a financing activity rather than an operating activity in the Consolidated Statement of Cash Flows. In the nine months ended 2007, we recognized $4.0 million in excess tax benefits from the exercise of stock options.

     At September 30, 2007, we had $83.0 million in cash and cash equivalents and $94.4 million of working capital. Our accounts receivable balance, net of allowance for doubtful accounts and other adjustments, was $16.9 million at September 30, 2007. We have no significant capital commitments, and currently anticipate that capital expenditures will not vary significantly from recent periods. We believe that our existing cash, cash equivalents and cash flow from operations will be sufficient to finance our working capital and capital expenditure requirements through at least the next 12 months. We may require additional funds to support our working capital requirements or for other purposes and may seek to raise additional funds through public or private equity or debt financing or from other sources. If additional financing is needed, we cannot assure you that such financing will be available to us at commercially reasonable terms or at all.

     Our corporate headquarters, which includes our principal administrative, sales and marketing, customer support and research and development facilities, is located in Aliso Viejo, California. We have leased this space through May 2016. We lease approximately 13,300 square feet in Watsonville, California under a lease that expires September 30, 2013. We lease approximately 3,700 square feet in Herndon, Virginia under a lease that expires August 31, 2009. We lease approximately 3,400 square feet in Campbell, California under a lease that expires January 31, 2009. We currently lease space for our facility in Lee’s Summit, Missouri on a month to month basis. In addition, we now lease space in Stockholm, Sweden and Seoul, South Korea. Each of these leases is for a one year term.

     As of September 30, 2007, we had no debt and no long term liabilities. The following table summarizes our contractual obligations as of September 30, 2007 (in thousands):

	Payments due by period
			1 year						More than
Contractual obligations:	Total		or less		1 - 3 Years		3-5 Years		5 Years
Operating lease obligation	$	6,833	$	1,160	$	1,711	$	1,576	$	2,386
Employment agreements		150		150		0		0		0
Purchase obligations		787		787		0		0		0
Total	$	7,770	$	2,097	$	1,711	$	1,576	$	2,386

     During our normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These include: intellectual property indemnities to our customers and licensees in connection with the use, sale and/or license of our products; indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. We may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees may not provide for any limitation of the maximum potential for future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.

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CRITICAL ACCOUNTING POLICIES

     Our discussion and analysis of results of operations, financial condition and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an on-going basis, we review our estimates to ensure that the estimates appropriately reflect changes in our business or new information as it becomes available.

     We believe the following critical accounting policies affect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

     Revenue Recognition — We currently report our net revenues under the following operating groups: Multimedia, Connectivity & Security, Compression & Consumer, Mobile Device Management and Other. Within each of these groups software revenue is recognized based on the customer and contract type. We recognize revenue in accordance with the Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is probable. We recognize revenues from sales of our software to OEM customers or end users as completed products are shipped and title passes; or from royalties generated as authorized customers duplicate our software, if the other requirements of SOP 97-2 are met. If the requirements of SOP 97-2 are not met at the date of shipment, revenue is not recognized until these elements are known or resolved. Returns from OEM customers are limited to defective goods or goods shipped in error. Historically, OEM customer returns have not exceeded the very nominal estimates and reserves. Management reviews available retail channel information and makes a determination of a return provision for sales made to distributors and retailers based on current channel inventory levels and historical return patterns. Certain sales to distributors or retailers are made on a consignment basis. Revenue for consignment sales are not recognized until sell through to the final customer is established. We have a few multiple elements agreement for which we have contracted to provide a perpetual license for use of proprietary software, to provide non-recurring engineering, and in some cases to provide software maintenance (post contract support). For multiple element agreements, vendor specific objective evidence of fair value for all contract elements is reviewed and the timing of the individual element revenue streams is determined and recognized consistent with SOP 97-2. Sales directly to end-users are recognized upon delivery. End users have a thirty day right of return, but such returns are reasonably estimable and have historically been immaterial. We also provide technical support to our customers. Such costs have historically been insignificant.

     Accounts Receivable — We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history, the customer’s current credit worthiness and various other factors, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers. We estimate credit losses and maintain a bad debt reserve based upon these estimates. While such credit losses have historically been within our estimated reserves, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. If not, this could have an adverse effect on our consolidated financial statements.

     Goodwill — We have adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002 and no impairment was identified. As a result of the adoption, we are no longer required to amortize goodwill. Prior to the adoption of SFAS 142, goodwill was amortized over 7 years. In accordance with SFAS No. 142, we review the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. Our annual impairment testing date is December 31. Recoverability of goodwill is determined by comparing the estimated fair value of our reporting units to the carrying value of the underlying net assets in the reporting units. If the estimated fair value of a reporting unit is determined to be less than the fair value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the estimated fair value of the reporting unit and the fair value of its other assets and liabilities. At December 31, 2006, we elected to write off all goodwill associated with our services sector, or $335,000. The consulting portion of our services sector has been de-emphasized and is no longer considered a strategic element of our go forward plan. We determined that we did not have any impairment of goodwill as related to the products sector at December 31, 2006. Estimates of reporting unit fair value are based upon market capitalization and therefore are volatile being sensitive to market fluctuations. To the extent that our market capitalization decreases significantly or the allocation of value to our reporting units change, we could be required to write off some or all of our goodwill.

     Deferred Income Taxes — We account for income taxes under SFAS No. 109, Accounting for Income Taxes. This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in our financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and the tax bases of our assets and liabilities result in a deferred tax

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asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In addition, effective January 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements.

     Stock-Based Compensation — We currently account for the issuance of stock options to employees using the fair market value method according to SFAS No. 123R, Share-Based Payment.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Smith Micro’s financial instruments include cash and cash equivalents. At September 30, 2007, the carrying values of our financial instruments approximated fair values based on current market prices and rates.

     It is our policy not to enter into derivative financial instruments. While we now have branches in South Korea, Sweden, and Norway, as a company most of our business is conducted in U.S. Dollars. As such, we do not have any significant translation or transaction currency exposures at September 30, 2007.

ITEM 4. CONTROLS AND PROCEDURES

a)	Evaluation of disclosure controls and procedures. We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of September 30, 2007. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have determined that as of September 30, 2007 our disclosure controls and procedures were effective to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
b)	Management’s responsibility for financial statements. Our management is responsible for the integrity and objectivity of all information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations for the periods and as of the dates stated therein.
	The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with our independent registered public accounting firm, Singer Lewak Greenbaum & Goldstein LLP, and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors have free access to the Audit Committee.
c)	Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None.

ITEM 1A. RISK FACTORS

     For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     A Special Meeting of the Stockholders of the Company was held on September 28, 2007. This meeting was adjourned, and reconvened on October 11, 2007. At the Special Meeting, the Stockholders voted as follows:

     The Stockholders approved an amendment to the 2005 Stock Option / Stock Issuance plan (with 8,826,033 shares voted for the proposal, 8,580,388 shares against and 139,595 abstained from voting).

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS

Exhibit No.	Exhibit Description
3.3	Bylaws, as amended effective October 29, 2007
10.1	2005 Stock Option / Stock Issuance Plan, as amended effective October 11, 2007 (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed on August 21, 2007)
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.
November 9, 2007	By /s/ William W. Smith, Jr.
	William W. Smith, Jr.
	President and Chief Executive Officer (Principal Executive Officer)
November 9, 2007	By /s/ Andrew C. Schmidt
	Andrew C. Schmidt
	Vice President and Chief Financial Officer (Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit No.	Exhibit Description
3.3	Bylaws, as amended effective October 29, 2007
10.1	2005 Stock Option / Stock Issuance Plan, as amended effective October 11, 2007 (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed on August 21, 2007)
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-3.3

Exhibit 3.3

AMENDED AND RESTATED
BYLAWS
OF
SMITH MICRO SOFTWARE, INC.
(a Delaware corporation)

ARTICLE I
OFFICES

     Section 1. Registered Office. The registered office shall be at the office of The Prentice-Hall Corporation System, Inc.

     Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may on an annual basis determine or the business of the corporation may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

     Section 1. Annual Meeting. An annual meeting of the stockholders for the election of directors shall be held at such place either within or without the State of Delaware as shall be designated on an annual basis by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

     Section 2. Notice of Annual Meeting. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.

     Section 3. Voting List. The officer who has charge of the stock ledger of the corporation shall prepare and make, or cause a third party to prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

     Section 4. Special Meetings. Special meetings of the stockholders of this corporation, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, shall be called by the President or Secretary at the request in writing of the President, a majority of the members of the Board of Directors or holders of at least 50 % of the total voting power of all outstanding shares of stock of this corporation then entitled to vote, and may not be called absent such a request. Such request shall state the purpose or purposes of the proposed meeting.

     Section 5. Notice of Special Meetings. As soon as reasonably practicable after receipt of a request as provided in Section 4 of this Article II, written notice of a special meeting, stating the place, date (which shall be not less than ten (10) nor more than sixty (60) days from the date of the notice) and hour of the special meeting and the purpose or purposes for which the special meeting is called, shall be given to each stockholder entitled to vote at such special meeting.

     Section 6. Scope of Business at Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

     Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chairman of the meeting or the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting as provided in Section 5 of this Article II.

     Section 8. Qualifications to Vote. The stockholders of record on the books of the corporation at the close of business on the record date as determined by the Board of Directors and only such stockholders shall be entitled to vote at any meeting of stockholders or any adjournment thereof.

     Section 9. Record Date. The Board of Directors may fix a record date for the determination of the stockholders entitled to notice of or to vote at any stockholders’ meeting and at any adjournment thereof, and to fix a record date for any other purpose. The record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of

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stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

     Section 10. Action at Meetings. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of applicable law or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.

     Section 11. Voting and Proxies. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one (1) vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless it is coupled with an interest sufficient in law to support an irrevocable power.

     Section 12. Nominations for Board of Directors. Nominations for election to the Board of Directors must be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Nominations, other than those made by the Board of Directors of the corporation, must be preceded by notification in writing in fact received by the Secretary of the corporation not less than sixty (60) days prior to any meeting of stockholders called for the election of directors. Such notification shall contain the written consent of each proposed nominee to serve as a director if so elected and the following information as to each proposed nominee and as to each person, acting alone or in conjunction with one or more other persons as a partnership, limited partnership, syndicate or other group, who participates or is expected to participate in making such nomination or in organizing, directing or financing such nomination or solicitation of proxies to vote for the nominee:

     (a) the name, age, residence, address, and business address of each proposed nominee and of each such person;

     (b) the principal occupation or employment, the name, type of business and address of the corporation or other organization in which such employment is carried on of each proposed nominee and of each such person;

     (c) the amount of stock of the corporation owned beneficially, either directly or indirectly, by each proposed nominee and each such person; and

     (d) a description of any arrangement or understanding of each proposed nominee and of each such person with each other or any other person regarding future employment or any future transaction to which the corporation will or may be a party.

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     The presiding officer of the meeting shall have the authority to determine and declare to the meeting that a nomination not preceded by notification made in accordance with the foregoing procedure shall be disregarded.

     Section 13. Stockholder Proposals_for_Meetings. At any meeting of the stockholders, only such business shall be conducted as shall be properly before the meeting. To be properly before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal place of business of the corporation not less than thirty (30) days nor more than sixty (60) days prior to the meeting; provided, however, that in the event that less than forty (40) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder’s written notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address as they appear on the corporation’s books of the stockholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by such stockholder, and (d) any material interest of such stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting unless properly brought before such meeting in accordance with the procedures set forth in this Section 13 of Article II. The chairman of the meeting shall, if the facts warrant determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 13 of Article II and if it shall be so determined, the chairman, of the meeting shall so declare this to the meeting and such business not properly brought before the meeting shall not be transacted.

ARTICLE III
DIRECTORS

     Section 1. Powers. The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by applicable law or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

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     Section 2. Number; Election; Tenure and Qualification. The number of directors which shall constitute the whole of the Board of Directors shall be fixed from time to time by resolution of the Board of Directors or by the stockholders provided that the number of directors shall not be less than five (5) nor more than seven (7). The directors shall be elected as hereinbelow provided, except as provided in the corporation’s Certificate of Incorporation or in Section 3 of this Article III. The directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible. One class shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1998, another class shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1997, and another class shall be originally elected for a term expiring at the annual meeting of stockholders to be held in 1996, with each member of each class to hold office until a successor is elected and qualified unless such member shall resign, become disqualified, disabled, or otherwise removed. At each annual meeting of stockholders of the corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term of three years by a plurality vote of the shares represented in person or by proxy and entitled to vote in the election of directors. Directors need not be stockholders.

     Section 3. Vacancies and Newly Created Directorships. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly-created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors are duly elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute.

     Section 4. Location of Meetings. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

     Section 5. Meeting of_Newly Elected Board of Directors. The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held at such time, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

     Section 6. Regular Meetings. Regular meetings of the Board of Directors may be held upon at least seven (7) days prior written notice at such time and at such place as shall from time to time be determined by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of such location. Notice may be waived in accordance with Section 229 of the Delaware General Corporation Law.

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     Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the President on seven (7) days’ notice to each director by mail or two (2) days’ notice to each director by overnight courier service or facsimile; special meetings shall be called by the President or Secretary in a like manner and on like notice on the written request of two (2) directors unless the Board of Directors consists of only one (1) director, in which case special meetings shall be called by the President or Secretary in a like manner and on like notice on the written request of the sole director. Notice may be waived in accordance with Section 229 of the Delaware General Corporation Law.

     Section 8. Quorum and Action at Meetings. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

     Section 9. Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

     Section 10. Telephonic Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, upon proper notice duly given, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

     Section 11. Committees. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one (1) or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence of disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

     Section 12. Committee Authority. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and

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may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, amending the Bylaws of the corporation, or any action requiring unanimous consent of the Board of Directors pursuant to the terms of the Certificate of Incorporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.

     Section 13. Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

     Section 14. Directors Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

     Section 15. Resignation. Any director or officer of the corporation may resign at any time. Each such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time is specified, at the time of its receipt by either the Board of Directors, the President or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless expressly so provided in the resignation.

ARTICLE IV
NOTICES

     Section 1. Notice to Directors and Stockholders. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the corporation that the notice has been given shall in the absence of fraud, be prima facie evidence of the facts stated therein. Notice to directors may also be given by telephone, facsimile or telegram.

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     Section 2. Waiver. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. The written waiver need not specify the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

ARTICLE V
OFFICERS

     Section 1. Enumeration. The officers of the corporation shall be chosen by the Board of Directors and shall be a President, a Secretary, a Treasurer or Chief Financial Officer and such other officers with such other titles as the Board of Directors shall determine. The Board of Directors may elect from among its members a Chairman or Chairmen of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one (1) or more Vice-Presidents and Assistant Secretaries. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide.

      Section 2. Election. The Board of Directors at its first meeting after each annual meeting of stockholders shall elect a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine.

     Section 3. Appointment of Other Agents. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

     Section 4. Compensation. The salaries of all officers of the corporation shall be fixed by the Board of Directors or a committee thereof. The salaries of agents of the corporation shall, unless fixed by the Board of Directors, be fixed by the President or the Executive Vice-President of the corporation.

     Section 5. Tenure. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the directors of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

     Section 6. Chairman of the Board and Vice-Chairman of the Board. The Chairman or Chairmen of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or they shall be present. He or they shall have and may exercise such

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powers as are, from time to time, assigned to him or them by the Board and as may be provided by law. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned to him by the Board of Directors and as may be provided by law.

      Section 7. President. The President shall be the Chief Executive Officer of the corporation unless such title is assigned to a Chairman of the Board; and in the absence of a Chairman and Vice Chairman of the Board he shall preside as the chairman of meetings of the stockholders and the Board of Directors; he shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President or the Executive Vice-President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.

     Section 8. Executive Vice-President. In the absence of the President or in the event of his inability or refusal to act, the Executive Vice-President, if any, shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Executive Vice-President shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

     Section 9. Vice-President. In the event of the President’s and the Executive-Vice President’s inability to act, the Vice-President, if any (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President and the Executive Vice-President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President and the Executive Vice-President. The Vice-President shall perform, such other duties and have such other powers as the Board of Directors may from time to time prescribe.

      Section 10. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be subject. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.

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     Section 11. Assistant Secretary. The Assistant Secretary, or if there be more than one (1), the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

     Section 12. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, President or Chief Operating Officer, taking proper vouchers for such disbursements, and shall render to the President, Chief Operating Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, the Treasurer shall give the corporation a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE VI
CAPITAL STOCK

     Section 1. Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice-President and the Treasurer or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be specified.

     Section 2. Class or Series. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

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     Section 3. Signature. Any of or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

     Section 4. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

     Section 5. Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

     Section 6. Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

     Section 7. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

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ARTICLE VII
GENERAL PROVISIONS

     Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the Board of Directors shall think conducive to the interest of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in, which it was created.

     Section 2. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

     Sections 3. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

     Section 4. Seal. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

     Section 5. Loans. The Board of Directors of this corporation may, without stockholder approval, authorize loans to, or guaranty obligations of, or otherwise assist, including, without limitation, the adoption of employee benefit plans under which loans and guarantees may be made, any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation.

ARTICLE VIII
INDEMNIFICATION

     Section 1. Scope. The corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as that Section may be amended and supplemented from time to time, indemnify any director, officer, employee or agent of the corporation, against expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement and/or other

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matters referred to in or covered by that Section, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

     Section 2. Advancing Expenses. Expenses incurred by a director of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation (or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized by relevant provisions of the Delaware General Corporation Law; provided, however, the corporation shall not be required to advance such expenses to a director (i) who commences any action, suit or proceeding as a plaintiff unless such advance is specifically approved by a majority of the Board of Directors, or (ii) who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors which alleges willful misappropriation of corporate assets by such director, disclosure of confidential information in violation of such director’s fiduciary or contractual obligations to the corporation, or any other willful and deliberate breach in bad faith of such director’s duty to the corporation or its stockholders.

     Section 3. Liability Offset. The corporation’s obligation to provide indemnification under this Article VIII shall be offset to the extent the indemnified party is indemnified by any other source including, but not limited to, any applicable insurance coverage under a policy maintained by the corporation, the indemnified party or any other person.

     Section 4. Continuing Obligation. The provisions of this Article VIII shall be deemed to be a contract between the corporation and each director of the corporation who serves in such capacity at any time while this Bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

     Section 5. Nonexclusive. The indemnification and advancement of expenses provided for in this Article VIII shall (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director and (iii) inure to the benefit of the heirs, executors and administrators of such a person.

     Section 6. Other Persons. In addition to the indemnification rights of directors, officers, employees, or agents of the corporation, the Board of Directors in its discretion shall have the power on behalf of the corporation to indemnify any other person made a party to any action, suit or proceeding who the corporation may indemnify under Section 145 of the Delaware General Corporation Law.

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     Section 7. Definitions. The phrases and terms set forth in this Article VIII shall be given the same meaning as the identical terms and phrases are given in Section 145 of the Delaware General Corporation Law, as that Section may be amended and supplemented from time to time.

ARTICLE IX
AMENDMENTS

     Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, by the holders of a majority of the outstanding voting shares or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws.

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CERTIFICATE OF SECRETARY

The undersigned certifies:

     (1) That the undersigned is the duly elected and acting Secretary of Smith Micro Software, Inc., a Delaware corporation (the “Corporation”); and

     (2) That the foregoing Amended and Restated Bylaws constitute the Bylaws of the Corporation as duly adopted by the Action by Unanimous Written Consent of the Board of Directors of Smith Micro Software, Inc., dated the 26th day of July, 1995.

     IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation as of this 26th day of July, 1995.

/s/ Rhonda L. Smith  

Rhonda L. Smith, Secretary  

[SEAL]

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CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED BYLAWS OF
SMITH MICRO SOFTWARE, INC.
a Delaware Corporation

The undersigned does hereby certify that:

     1. He is the duly qualified Secretary of Smith Micro Software, Inc., a duly organized and existing Delaware corporation (the “Corporation”).

     2. Effective October 29, 2007, Article VI, section 1 of the Corporation’s Amended and Restated Bylaws (the “Bylaws”) was amended to read in its entirety as follows:

“Section 1. Certificates. The shares of the corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by, the Chairman of the Board (if there be such an officer appointed), or by the President or any Vice-President and by the Treasurer or assistant treasurer or the Secretary or assistant secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefore and the amount paid thereon shall be specified.”

     3. The foregoing amendment of the Corporation’s Bylaws was duly approved and adopted by the Corporation’s Board of Directors and filed with the undersigned on the date set forth below.

Dated: October 29, 2007

/s/ Andrew C. Schmidt  

Andrew C. Schmidt, Secretary 

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

I, William J. Smith, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Smith Micro Software, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007	/s/ William W. Smith, Jr.
	William W. Smith Jr.
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

I, Andrew C. Schmidt, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Smith Micro Software, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007	/s/ Andrew C. Schmidt
	Andrew C. Schmidt
	Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Smith Micro Software, Inc., that, to his knowledge, the Quarterly Report of Smith Micro Software, Inc. on Form 10-Q for the period ended September 30, 2007, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the company.

November 9, 2007	By /s/	William W. Smith, Jr.
	William W. Smith, Jr.
	President and
	Chief Executive Officer
	(Principal Executive Officer)
November 9, 2007	By /s/	Andrew C. Schmidt
	Andrew C. Schmidt
	Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to Smith Micro Software, Inc. and will be retained by Smith Micro Software, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.