10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2019

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

For the transition period from __________ to __________

Commission File Number 01‑35525

SMITH MICRO SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0029027
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
5800 Corporate Drive, Pittsburgh, PA	15237
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (412) 837-5300

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☐    NO  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    YES  ☐    NO  ☒

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

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

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ☐    NO  ☒

As of June 30, 2019, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the common stock of the registrant held by non-affiliates was $80,684,962 based upon the closing sale price of such stock as reported on the Nasdaq Capital Market on that date. For purposes of such calculation, only executive officers, board members, and beneficial owners of more than 10% of the registrant’s outstanding common stock are deemed to be affiliates.

As of March 9, 2020, there were 39,484,420 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed under the Securities Exchange Act of 1934 are incorporated by reference in Part III of this report.

SMITH MICRO SOFTWARE, INC.

2019 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

	PART I
Item 1.	BUSINESS	5
Item 1A.	RISK FACTORS	9
Item 1B.	UNRESOLVED STAFF COMMENTS	17
Item 2.	PROPERTIES	17
Item 3.	LEGAL PROCEEDINGS	18
Item 4.	MINE SAFETY DISCLOSURES	18
	PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	19
Item 6.	SELECTED CONSOLIDATED FINANCIAL DATA	21
Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	29
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	29
Item 9A.	CONTROLS AND PROCEDURES	29
Item 9B.	OTHER INFORMATION	30
	PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	31
Item 11.	EXECUTIVE COMPENSATION	31
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	31
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	31
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	31
	PART IV
Item 15.	EXHIBITS	32
Item 16.	FORM 10-K SUMMARY	37
	SIGNATURES	38

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In this document, the terms “Smith Micro,” “Company,” “we,” “us,” and “our” refer to Smith Micro Software, Inc. and, where appropriate, its subsidiaries.

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements regarding Smith Micro which include, but are not limited to, statements concerning customer concentration, projected revenues, market acceptance of products, the success and timing of new product introductions, the competitive factors affecting our business, our ability to raise additional capital, gross profit and income, our expenses, the protection of our intellectual property, and our ability to remain a going concern. 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 from those expressed or implied in any forward-looking statements as a result of various factors. Such factors include, but are not limited to, the following:

• our customer concentration given that the majority of our sales currently depend on a few large client relationships, including Sprint;

• our ability to establish and maintain strategic relationships with our customers and mobile device manufacturers;

• intense competition in our industry and the core vertical markets in which we operate, and our ability to successfully compete;

• rapid technological evolution and resulting changes in demand for our products from our key customers and their end users;

• our ability to hire and retain key personnel;

• our ability to assimilate acquisitions without diverting management attention and impacting current operations;

• the possibility of security and privacy breaches in our systems damaging client relations and inhibiting our ability to grow;

• interruptions or delays in the services we provide from our data center hosting facilities that could harm our business;

• our ability to raise additional capital and the risk of such capital not being available to us at commercially reasonable terms or at all;

• our ability to become and remain profitable;

• the impact of evolving information security and data privacy laws on our business and industry;

• the impact of U.S. regulations on our business and industry;

• our ability to protect our intellectual property and our ability to operate our business without infringing on the rights of others;

• our ability to remain a going concern;

• the risks inherent with international operations;

• the risk of being delisted from NASDAQ if we fail to meet any of its applicable listing requirements;

• the existence of undetected software defects in our products;

• the availability of third-party intellectual property and licenses needed for our operations on commercially reasonable terms, or at all;

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• changes in our operating income or loss due to shifts in our sales mix and variability in our operating expenses;

• the difficulty of predicting our quarterly revenues and operating results and the chance of such revenues and results falling below analyst or investor expectations, which could cause the price of our common stock to fall;

• potential tax liabilities and other factors that may impact our effective tax rates; and

• those additional factors which are listed under Item 1A of Part I of this Report under the caption “RISK FACTORS.”

The forward-looking statements contained in this Report are made on the basis of the views and assumptions of management regarding future events and business performance as of the date this Report is filed with the Securities and Exchange Commission (the “SEC”). In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. We do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date this Report is filed.

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PART I

Item 1. BUSINESS

General

Providing software solutions that simplify and enhance the mobile experience to some of the leading wireless and cable service providers around the globe is a mission that Smith Micro pursues with passion.  From enabling the family digital lifestyle to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer Internet of Things (“IoT”) devices. The Smith Micro portfolio includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set. In general, we offer our customers:

• Valuable digital services that connect today’s digital lifestyle, including leading edge family location and parental controls, as well as enable connected family and consumer IoT devices to mobile consumers worldwide;

• Easy visual access to wirelessly delivered voicemail messages, while also providing easy conversion of voice messages to text and email messages that can be delivered through a variety of devices;

• Immediate, consistent and measurable retail content that educates consumers, creates awareness of products and services and drives in-store sales; and

• Engaging retail content displayed on wireless devices in retail locations that also gather valuable actionable analytics.

We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in emerging markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace. The key to our longevity, however, is not simply technological innovation, but our never-ending focus on understanding our customers’ needs and delivering value.

During fiscal year 2019, we built on the momentum from 2018 and achieved better than expected revenue growth, profitability and cash flow generation, while improving overall operations and execution of our business to deliver solid financial results. We further strengthened our balance sheet during the year, as exercised warrants from previous private placements added capital, allowing us to accelerate hiring and other strategic initiatives.

The Company was incorporated in California in November 1983, and reincorporated in Delaware in June 1995. Our principal executive offices are located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237 and our telephone number is (412) 837-5300. Our website address is www.smithmicro.com, and we make our filings with the U.S. Securities and Exchange Commission (the “SEC”) available on the Investor Relations page of our website. Information contained on our website does not constitute a part of this Report. Our common stock is traded on the NASDAQ under the symbol “SMSI.”

Business Segments

Our business is focused on one industry segment: Wireless. During fiscal 2019, we divested or phased down non-core product lines including Graphics, NetWise and Quicklink. Our revenues still include an immaterial amount generated from our Graphics products. We do not separately allocate operating expenses, nor do we allocate specific assets to these segments. Therefore, segment information reported includes only revenues. See Note 14 of the Notes to Consolidated Financial Statements for financial information related to our business segment and geographical information.

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Wireless Segment

The wireless industry continues to undergo rapid change on all fronts as connected devices, mobile applications, and digital content are consumed by users who want information, high-speed wireless connectivity, and entertainment anytime, anywhere. While most of us think about being “connected” in terms of computers, tablets and smartphones, the consumer IoT market is creating a world where almost anything can be connected to the wireless internet. Wearable devices such as smartwatches, smart home devices, fitness trackers, pet trackers and GPS locators are now commonplace, enabling people, pets and things to be connected to the “Internet of Everything.” These devices have created an entire ecosystem of over-the-top (“OTT”) apps, while expanding how communication service providers can provide value to mobile consumers.

Although there are numerous business opportunities associated with pervasive connectivity, there are also numerous challenges, including:

• The average age by which most children use smartphones and other connected devices continues to decrease. As such, parents and guardians must be proactive in managing and combating digital lifestyle issues such as excess screen time, cyberbullying, and online safety;

• Complexity, congestion, and spectrum scarcity plague wireless networks, making it difficult and expensive to satisfy the demand for mobile services by consumers and businesses;

• As IoT use cases continue to proliferate and scale, management complexity, security and interoperability must be addressed efficiently and correctly;

• Mobile network operators (“MNOs”) are being marginalized by messaging applications and face growing competitive pressure from cable multiple system operators (“MSOs”) and others deploying Wi-Fi networks to attract mobile users;

• Enterprises face increasing pressure to mobilize workforces, operations, and customer engagement, but lack the expertise and technologies needed to leverage mobile technology securely and cost-effectively; and

• Consumers seek simpler network access and more personalized mobile experiences, while simultaneously demanding faster, cheaper, and more secure wireless services.

To address these challenges, Smith Micro offers multi-platform, modular solutions such as:

SafePath® – The SafePath platform delivers a connected life experience for families and the connected devices that are part of their daily digital lifestyle inside and outside the home. The SafePath platform includes: SafePath Family – which enables mobile service providers to meet the needs of their customers for family real time location, protection and parental controls services; SafePath IoT – that allows service providers to deliver a connected digital life experience to their customers by bringing all of their connected devices like child and elderly wearable locators, pet trackers, car trackers, and other Consumer IOT devices under a single pane of glass on the SafePath platform; and SafePath Home – which provides an expansion of our platform through a cloud-based router agent that integrates with all 5G modems and broadband routers to enable the same parental controls and remote monitoring controls for all connected devices in the home.

CommSuite® – The CommSuite premium messaging platform helps mobile service providers deliver a next-generation voicemail experience to mobile subscribers, while monetizing a legacy cost-center. CommSuite Visual Voicemail (“VVM”) quickly and easily allows users to manage voice messages just like email or SMS with reply, forwarding and social sharing options. CommSuite also enables multi-language Voice-to-Text (“VTT”) transcription messaging, which facilitates convenient message consumption for users by reading versus listening. In 2019, the CommSuite product was installed on more than 18 million mobile handsets and is available to both postpaid premium subscribers as well as prepaid subscribers.

ViewSpot® – Our retail display management platform provides wireless carriers and retailers with a way to bring powerful on-screen, interactive demos to life. These engaging demos deliver consistent, secure and targeted content that showcases the features of the devices about which consumers most want to learn more and to see. The ViewSpot platform also offers powerful analytics capabilities so carriers can gain valuable insights into their consumer base and its buying behavior as well as their overall retail operations.

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Products

Our primary products consist of the following:

Business Segment	Products	Description
Wireless	SafePath Family	A platform that enables mobile service providers to provide customers with family real time location, protection and parental controls services.
	SafePath IoT	A platform that enables mobile service providers to deliver a connected digital life experience to their customers by bringing all of their connected devices, like child and elderly wearable locators, pet trackers, car trackers, and connected home security devices, under a single pane of glass.
	SafePath Home	A cloud managed platform that extends to connected devices in the home through a router agent that integrates with 5G modems and broadband routers to enable parental controls and remote monitoring under a single pane of glass.
	CommSuite VVM	Visual Voicemail delivered directly to a mobile phone app and managed like email and available to both postpaid and prepaid subscribers.
	CommSuite VTT	Voice-to-Text transcription of voicemail and voice SMS messages.
	ViewSpot	An innovative retail display management platform that provides wireless carriers and retailers with a way to bring powerful on-screen, interactive demos to life, delivering consistent, secure and targeted content that showcases the features of the devices about which consumers want to learn more and to see.  It also offers analytics capabilities for carriers to gain valuable insights into their consumer base and its buying behavior as well as their overall retail operations.

Marketing and Sales Strategy

Because of our broad product portfolio, deep integration experience, and flexible business models, we can quickly bring to market innovative solutions that support our customers’ needs to create new revenue opportunities and differentiate their products and services among their competitors.

Our marketing and sales strategy is as follows:

Leverage Operator Relationships. We continue to capitalize on our strong relationships with the world’s leading MNOs and MSOs. These customers serve as our primary distribution channel, providing access to hundreds of millions of end users around the world.

Focus on High-Growth Markets. We continue to focus on providing digital lifestyle solutions, analytics/Big Data solutions, premium messaging services, and visual retail content management solutions.  

Expand our Customer Base. In addition to growing our business with current customers, we look to expand our MNO and MSO customers worldwide, as well as to expand into new partnerships as we extend the reach of our product platforms within the connected lifestyle ecosystem.

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Key Revenue Contributors

Revenues attributable to Sprint and their respective affiliates in the Wireless business segment accounted for 84% and 81% of the Company’s total revenues for fiscal years 2019 and 2018, respectively. The loss of Sprint or decisions by Sprint to substantially reduce purchases from us for any reason could have a material adverse effect on our business.

Customer Service and Technical Support

We provide technical support and customer service through our online knowledge base, email, and live chat. OEM customers generally provide their own primary customer support functions and rely on us for support to their technical support personnel.

Product Development

The software industry, particularly the wireless market, is characterized by rapid and frequent changes in technology and user needs. We work closely with industry groups and customers, both current and potential, to help us anticipate changes in technology and determine future customer needs. Software functionality depends upon the capabilities of the related hardware. Accordingly, we maintain engineering relationships with various hardware manufacturers and we develop our software in tandem with their product development. Our engineering relationships with manufacturers, as well as with our major customers, are central to our product development efforts. We remain focused on the development and expansion of our technology, particularly in the wireless space. Research and development expenditures amounted to $11.7 million and $8.6 million for the years ended December 31, 2019 and 2018, respectively.

Competition

The markets in which we operate are highly competitive and subject to rapid changes in technology. These conditions create new opportunities for Smith Micro, as well as for our competitors, and we expect new competitors to continue to enter the market. We not only compete with other software vendors for new customer contracts, we also compete to acquire technology and qualified personnel.

We believe that the principal competitive factors affecting the mobile software market include domain expertise, product features, usability, quality, price, customer service, speed to market and effective sales and marketing efforts. Although we believe that our products currently compete favorably with respect to these factors, there can be no assurance that we can maintain our competitive position against current and potential competitors. We also believe that the market for our software products has been and will continue to be characterized by significant price competition. A material reduction in the price we obtain for our products would negatively affect our profitability.

Many of our existing and potential customers have the resources to develop products that compete directly with our products. As such, these customers may opt to discontinue the purchase of our products in the future. With this as background, our future performance is substantially dependent upon the extent to which existing customers elect to purchase software from us rather than designing and developing their own software.

Proprietary Rights and Licenses

We protect our intellectual property through a combination of patents, copyrights, trademarks, trade secrets, foreign intellectual property laws, confidentiality procedures and contractual provisions. We have United States and foreign patents and pending patent applications that relate to various aspects of our products and technology. We have also registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names, and copyrights. We will continue to apply for such protections in the future as we deem necessary to protect our intellectual property. We seek to avoid unauthorized use and disclosure of our proprietary intellectual property by requiring employees and third parties with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code.

Our MNO/MSO customers license our products through software license agreements or access our offerings through software as a service (“SaaS”) agreements. Our license agreements contain restrictions on reverse engineering, duplication, disclosure, and transfer, and our SaaS agreements contain restrictions on access and use.

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Despite our efforts to protect our proprietary technology and our intellectual property rights, unauthorized parties may attempt to copy or obtain and use our technology to develop applications with the same functionality as our applications. Policing unauthorized use of our technology and intellectual property rights is difficult, and we may not be able to detect unauthorized use of our intellectual property rights or take effective steps to enforce our intellectual property rights.

Employees

As of December 31, 2019, we had a total of 198 employees within the following departments: 137 in engineering and operations, 39 in sales and marketing, and 22 in management and administration. We are not subject to any collective bargaining agreement and we believe that our relationships with our employees are good.

Item 1A. RISK FACTORS

Our future operating results are highly uncertain. Before deciding to invest in our common stock or to maintain or change your investment, you should carefully consider the risks described below, in addition to the other information contained in this Report and in our other filings with the SEC, including our other Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. If any of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.

We derive a significant portion of our revenues from sales to a concentrated number of clients, and a reduction in sales to any of them may adversely impact our revenues and operating results.

In our Wireless business segment, we sell primarily to large wireless carriers, cable operators, and OEMs, so there are a limited number of actual and potential customers for our products, resulting in significant customer concentration. For the year ended December 31, 2019, sales to Sprint and its affiliates comprised 84% of our total revenues.

Because of our relatively high customer concentration, a small number of significant customers possess a relative level of pricing and negotiating power over us, enabling them to achieve advantageous pricing and other contractual terms, including the ability to terminate their agreements with us with a limited amount of notice. Any material decrease in our sales to any of these customers would materially affect our revenue and profitability. 

Sprint Corporation and T-Mobile (US), Inc. (“T-Mobile”) have announced that they have entered into a business combination agreement and have more recently announced that they expect the transaction will be completed as early as April 1, 2020, with the combined company continuing to operate as T-Mobile. In the event that the combined company does not elect to continue using the solutions that we currently deliver to Sprint, or that our sales to the combined company materially decrease as compared with our sales to Sprint, our revenues and profitability would be materially and adversely affected.

If there are delays in the distribution of our products or if customer negotiations for our new products cannot occur on a timely basis, we may not be able to generate revenues sufficient to meet the needs of the business in the foreseeable future or at all.

Our growth depends in part on our customers’ ability and willingness to promote our services and attract and retain new end user customers or achieve other goals outside of our control.

We sell our wireless products for use on handheld devices primarily to our carrier, cable/MSO, and enterprise customers, who deploy our products for use by their end user customers. The success of our carrier, cable/MSO and enterprise customers, and their ability and willingness to market services to their end users that are supported by our products, is critical to our future success.  Our ability to generate revenues from sales of our software is also constrained by our carrier customers’ ability to attract and retain customers. We have no input into or influence upon their marketing efforts and sales and customer retention activities. If our large carrier customers fail to maintain or

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grow demand for their services, revenues or revenue growth from our products designed for use on mobile devices will decline and our results of operations will suffer.

We derive a significant portion of our revenues from only a few core vertical markets, and changes within these vertical markets, or failure to penetrate new markets, could adversely impact our revenues and operating results.  

We derive a significant portion of our revenue from a few vertical markets, such as wireless carriers, cable operators, and handset manufacturers.  In order to sustain and grow our business, we must continue to sell our software products in these vertical markets. Shifts in the dynamics of these vertical markets, such as new product introductions by our competitors, could materially harm our results of operations, financial condition and prospects. Increasing our sales outside our core vertical markets to markets in which we do not have significant experience, for example to large enterprises, would require us to devote time and resources to hire and train sales employees familiar with those industries. Even if we are successful in hiring and training sales teams, customers in other vertical markets may not need or sufficiently value our current products or new product introductions.

Technology and customer needs change rapidly in our market, which could render our products obsolete and negatively affect our business, financial condition, and results of operations.

Our success depends on our ability to anticipate and adapt to changes in technology and industry standards. We will also need to continue to develop and introduce new and enhanced products to meet our target markets’ changing demands and keep up with evolving industry standards, including changes in the Microsoft, Google, and Apple operating systems with which our products are designed to be compatible, and to promote those products successfully. The communications software markets in which we operate are characterized by rapid technological change, changing customer needs, frequent new product introductions, evolving industry standards, and short product life cycles. In addition, some of the technology we market, which has been sold as software in the past, can be integrated at the chipset level by the leading mobile chipset manufacturers.  In addition, new products and product enhancements can require long development and testing periods as a result of the complexities inherent in today’s computing environments and the performance demanded by customers and called for by evolving wireless networking technologies. Any of these factors could render our existing products obsolete and unmarketable. If our target markets do not develop as we anticipate, our products do not gain widespread acceptance in these markets, or we are unable to develop new versions of our software products that can operate on future wireless networks and PC and mobile device operating systems and interoperate with other popular applications, our business, financial condition and results of operations could be materially and adversely affected.

If we are unable to retain key personnel, the loss of their services could materially and adversely affect our business, financial condition and results of operations.

Our future performance depends in significant part upon the continued service of our senior management and other key technical personnel. We do not have employment agreements with our key employees. The loss of the services of our key employees would materially and adversely affect our business, financial condition and results of operations. Our future success also depends on our ability to continue to attract, retain, and motivate qualified personnel, particularly highly skilled engineers involved in the ongoing research and development required to develop and enhance our products. Competition for these employees remains high and employee retention is a common problem in our industry. Our inability to attract and retain the highly trained technical personnel that are essential to our product development, marketing, service, and support teams may limit the rate at which we can generate revenue, develop new products or product enhancements and generally would have an adverse effect on our business, financial condition and results of operations.

Competition within our target markets is intense and includes numerous established competitors and new entrants, which could negatively affect our revenues and results of operations.

We operate in markets that are extremely competitive and subject to rapid changes in technology.  Because there are low barriers to entry into the software markets in which we participate and may participate in the future, we expect significant competition to continue from both established and emerging software companies, domestic and international.  In fact, our growth opportunities in new product markets could be limited to the extent established and emerging software companies enter or have entered those markets.

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Many of our other current and prospective competitors have significantly greater financial, marketing, service, support, technical, and other resources than we do. As a result, they may be able to adapt more quickly than we can to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products. Announcements of competing products by competitors could result in the cancellation of orders by customers in anticipation of the introduction of such new products.  In addition, some of our competitors are currently making complementary products that are sold separately. Such competitors could decide to enhance their competitive position by bundling their products to attract customers seeking integrated, cost-effective software applications. Some competitors have a retail emphasis and offer OEM products with a reduced set of features. The opportunity for retail upgrade sales may induce these and other competitors to make OEM products available at their own cost or even at a loss.  We also expect competition to increase as a result of software industry consolidations, which may lead to the creation of additional large and well-financed competitors.  Increased competition is likely to result in price reductions, fewer customer orders, reduced margins, and loss of market share.

Our acquisitions of companies or technologies may disrupt our business and divert management attention and cause our other operations to suffer.

We have historically made targeted acquisitions of smaller companies or product lines with technology important to our business strategy and expect to continue to do so in the future. Most recently, we acquired the operator business from Circle Media Labs Inc. and prior to that our smart retail business, known as ViewSpot. As part of any acquisition, we will be required to assimilate the operations, products, and, where applicable, personnel of the acquired businesses and train, retain, and motivate key personnel needed for the successful integration of the acquired business. We may not be able to maintain uniform standards, controls, procedures and policies if we fail in these efforts. Additionally, as we integrate any newly acquired business into our existing operations, process changes may result in unanticipated or unintended delays in sales of acquired products or services, which could adversely affect our relationships with customers of the acquired business and result in lower revenues from the acquired business than anticipated. Acquisitions may cause disruptions in our operations and divert management’s attention from our Company’s day-to-day operations, which could impair our relationships with our existing employees, customers, and strategic partners. Acquisitions may also subject us to liabilities and risks that are not known or identifiable at the time of the acquisition.

We may also have to incur debt or issue equity securities in order to finance future acquisitions. Our financial condition could be harmed to the extent we incur substantial debt or use significant amounts of our cash resources in acquisitions. The issuance of equity securities for any acquisition could be substantially dilutive to our existing stockholders. In addition, we expect our profitability could be adversely affected because of acquisition-related accounting costs, write offs, amortization expenses, and charges related to acquired intangible assets. In consummating acquisitions, we are also subject to risks of entering geographic and business markets in which we have had limited or no prior experience. If we are unable to fully integrate acquired businesses, products, or technologies within existing operations, we may not receive the intended benefits of such acquisitions.

Security and privacy breaches may harm our business.

The uninterrupted operation of our hosted solutions and the confidentiality and security of third-party information and materials is critical to our business. Any failures in our security and privacy measures, such as “hacking” of our systems by outsiders or the inadequate protection of pre-release mobile devices in our custody, could have a material adverse effect on our financial position and results of operations. If we are unable to protect, or our customers and mobile device manufacturer partners perceive that we are unable to protect, the security and privacy of information and materials in our care, our growth could be materially adversely affected and we could be subject to material liability. A security or privacy breach may:

• cause our customers to lose confidence in our solutions;

• cause our mobile device manufacturer partners to cease doing business with us;

• harm our reputation;

• expose us to material liability; and

• increase our expense from potential remediation costs.

While we believe we use proven applications and have established adequate safeguards designed for facility security, data security and integrity to process electronic transactions, there can be no assurance that these applications and safeguards will be adequate to prevent a security breach or to address changing market conditions or the security and

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privacy concerns of existing and potential customers and device manufacturer partners. In addition, our customers and end users may use our products and services in a manner which violates security or data privacy laws in one or more jurisdictions. Any significant or high profile security breach, data privacy breach or violation of data privacy laws could result in the loss of business and reputation, litigation against us, liquidated and other damages, and regulatory investigations and penalties that could adversely affect our operating results and financial condition.

Interruptions or delays in service from data center hosting facilities could impair the delivery of our service and harm our business.

We currently serve our customers from data center hosting facilities. Any damage to, or failure of, such facilities generally could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their on-demand services, and adversely affect our renewal rates and our ability to attract new customers.

We may raise additional capital through the issuance of equity or convertible debt securities or by borrowing money in order to meet our capital needs. Additional funds to allow us to meet our capital needs may not be available on terms acceptable to us or at all.

We believe that our cash and the cash we expect to generate from operations will be sufficient to meet our capital needs for the next twelve months. However, it is possible that we may need or choose to obtain additional financing to fund our future activities. We could raise these funds by selling more stock to the public or to selected investors, or by borrowing money. We may not be able to obtain additional funds on favorable terms, or at all. If adequate funds are not available, we may be required to curtail our operations or other business activities significantly or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets.

It is possible that our future capital requirements may vary materially from those currently anticipated. The amount of capital that we will need in the future will depend on many factors, including but not limited to:

• the market acceptance of our products;

• the levels of promotion and advertising that will be required to launch our products and achieve and maintain a competitive position in the marketplace;

• our business, product, capital expenditure, and research and development plans and product and technology roadmaps;

• the levels of working capital that we maintain;

• capital improvements to new and existing facilities;

• technological advances;

• our competitors’ response to our products; and

• our relationships with suppliers and customers.

In addition, we may raise additional capital to accommodate planned growth, hiring, and infrastructure needs or to consummate acquisitions of other businesses, products or technologies.

The Company has a history of net losses, may incur substantial net losses in the future, and may not achieve profitability.

We have undertaken recent restructurings to reduce our expenses to be more in line with our current and projected revenue. However, if our revenues do not continue to increase in the future, we may need to undertake further restructurings, we may incur additional operating losses, and we may not be able to achieve profitability.

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The success of our products depends upon effective operation with operating systems, devices, networks and standards that we do not control and on our continued relationships with mobile operating system providers and device manufacturers.

We are dependent on the interoperability of our products with popular operating systems, networks, and standards that we do not control.  For example, we depend upon the interoperability of our mobile products with the Android and iOS mobile operating systems. Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, or mobile carriers, or in their terms of service or policies that degrade our products’ functionality, reduce or eliminate our ability to distribute our products, or give preferential treatment to competitive products could adversely affect the usage of our products.

We maintain relationships with mobile device manufacturers which provide us with insights into product development and emerging technologies. These insights allow us to keep abreast of, or to anticipate, market trends and help us to serve our current and prospective customers. Mobile device manufacturers are under no obligation to continue providing us with these valuable insights. If we are unable to maintain our existing relationships with mobile device manufacturers, if we fail to enter into relationships with additional mobile device manufacturers, or if mobile device manufacturers favor one of our competitors, our ability to provide products that meet our current and prospective customers’ needs could be compromised and our reputation and future revenue prospects could suffer. For example, if our software does not function well with a popular mobile device because we have not maintained a relationship with its manufacturer, carriers seeking to provide that device to their respective customers may choose an alternative solution. Even if we succeed in establishing and maintaining these relationships, they may not result in additional customers or revenues.

Evolving information security and data privacy laws and regulations may result in increased compliance costs, impediments to the development or performance of our offerings, and monetary or other penalties.

Because our solutions process customer data that may contain personally identifying information, we are subject to federal, state and foreign laws and regulations regarding the privacy and protection of such data. These laws and regulations address a range of issues, including data privacy, cybersecurity and restrictions or technological requirements regarding the collection, use, storage, protection, retention or transfer of data. The regulatory framework for data privacy and cybersecurity issues worldwide can vary substantially from jurisdiction to jurisdiction. Foreign privacy and data protection laws and regulations can be more restrictive than those in the United States. In the European Union (“EU”), the General Data Protection Regulation (“GDPR”), came into force in May 2018. GDPR replaced the former EU Data Protection Directive and related country-specific legislation. GDPR includes operational and governance requirements for companies that collect or process personal data of residents of the European Union, and provides for significant penalties for non-compliance. The costs of compliance with, and other burdens imposed by, these laws and regulations may become substantial and may limit the use and adoption of our offerings, require us to change our business practices, impede the performance and development of our solutions, or lead to significant fines, penalties or liabilities for noncompliance with such laws or regulations.

Regulations affecting our customers and us and future regulations, to which they or we may become subject to, may harm our business.

Certain of our customers in the communications industry are subject to regulation by the Federal Communications Commission, which could have an indirect effect on our business. In addition, the U.S. telecommunications industry has been subject to continuing deregulation since 1984. We cannot predict when, or upon what terms and conditions, further regulation or deregulation might occur or the effect regulation or deregulation may have on demand for our products from customers in the communications industry. Demand for our products may be indirectly affected by regulations imposed upon potential users of those products, which may increase our costs and expenses.

We may be unable to adequately protect our intellectual property and other proprietary rights, and we may be subject to claims for intellectual property infringement, which could negatively impact our business and financial results.

Our success is dependent upon our software code base, our programming methodologies and other intellectual properties and proprietary rights. In order to protect our proprietary technology, we rely on a combination of trade secrets, nondisclosure agreements, patents, and copyright and trademark law. We currently own U.S. trademark registrations for certain of our trademarks and U.S. patents for certain of our technologies.  However, these measures

13

afford us only limited protection. Furthermore, we rely primarily on “shrink wrap” licenses that are not signed by the end user and, therefore, may be unenforceable under the laws of certain jurisdictions. Accordingly, it is possible that third parties may copy or otherwise obtain our rights without our authorization. It is also possible that third parties may independently develop technologies similar to ours. It may be difficult for us to detect unauthorized use of our intellectual property and proprietary rights.  In addition, we sometimes include open source software in our products. As a result of our use of open source in our products, we may license or be required to license or disclose code and/or innovations that turn out to be material to our business and may also be exposed to increased litigation risk. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to more effectively mimic our products, services, and methods of operations. Any of these events could have an adverse effect on our business and financial results.

We may be subject to claims of intellectual property infringement as the number of trademarks, patents, copyrights, and other intellectual property rights asserted by companies in our industry grows and the coverage of these patents and other rights and the functionality of software products increasingly overlap. From time to time, we have received communications from third parties asserting that our trade name or features, content, or trademarks of certain of our products infringe upon intellectual property rights held by such third parties. We have also received correspondence from third parties separately asserting that our products may infringe on certain patents held by each of the parties. Although we are not aware that any of our products infringe on the proprietary rights of others, third parties may claim infringement by us with respect to our current or future products. Additionally, our customer agreements require that we indemnify our customers for infringement claims made by third parties involving our intellectual property embedded in their products. Infringement claims, whether with or without merit, could result in time-consuming and costly litigation, divert the attention of our management, cause product shipment delays, or require us to enter into royalty or licensing agreements with third parties. If we are required to enter into royalty or licensing agreements, they may not be on terms that are acceptable to us. Unfavorable royalty or licensing agreements could seriously impair our ability to market our products and have an adverse effect on our business and financial results.

If we are unable to meet our obligations as they become due over the next twelve months, the Company may not be able to continue as a going concern.

We believe that we will be able to meet our financial obligations as they become due over the next twelve months, primarily based on our current working capital levels, our current financial projections, and our ability to secure short-term loans and raise capital when necessary.  

Our ability to continue as a going concern is substantially dependent upon multiple factors, which primarily include those factors set forth above. If our financial and cash flow position the Company unfavorably compared to our internal plans and projections, we may need to consider additional actions to mitigate conditions or events that would raise substantial doubt about our ability to continue as a going concern, including the following:

• Raising additional capital through short-term loans.

• Implementing additional restructuring and cost reductions.

• Raising additional capital through a private placement or other transaction.

• Disposing of or discontinuing one or more product lines.

• Selling or licensing intellectual property.

Should our going concern assumption not be appropriate or should we become unable to continue in the normal course of operations, adjustments would be required to the amounts and classifications of assets and liabilities within our consolidated financial statements, and these adjustments could be significant. Our consolidated financial statements do

14

not reflect the adjustments or reclassifications of assets and liabilities that would be necessary if we were to become unable to continue as a going concern.

Our business, financial condition and operating results could be adversely affected as a result of legal, business, and economic risks specific to international operations.

In recent years, our revenues derived from sales to customers outside the U.S. have not been material. Our revenues derived from such sales can vary from quarter to quarter and from year to year. We also frequently ship products to our domestic customers’ international manufacturing divisions and subcontractors. In the future, we may expand these international business activities. International operations are subject to many inherent risks, including:

• general political, social and economic instability;

• trade restrictions;

• the imposition of governmental controls;

• exposure to different legal standards, particularly with respect to intellectual property;

• burdens of complying with a variety of foreign laws, including without limitation data privacy laws, such as the GDPR in Europe;

• import and export license requirements and restrictions of the United States and any other country in which we operate;

• unexpected changes in regulatory requirements;

• foreign technical standards;

• changes in tariffs;

• difficulties in staffing and managing international operations;

• difficulties in securing and servicing international customers;

• difficulties in collecting receivables from foreign entities;

• fluctuations in currency exchange rates and any imposition of currency exchange controls; and

• potentially adverse tax consequences.

These conditions may increase our cost of doing business. Moreover, as our customers are adversely affected by these conditions, our business with them may be disrupted and our results of operations could be adversely affected.

If we fail to meet the requirements for continued listing on the NASDAQ Stock Market, our common stock would likely be delisted from trading on NASDAQ, which would likely reduce the liquidity of our common stock and could cause our trading price to decline.

Our common stock is currently listed for quotation on the NASDAQ Stock Market. We are required to meet specified financial requirements in order to maintain our listing on NASDAQ. If we fail to satisfy NASDAQ’s continued listing requirements, our common stock could be delisted from NASDAQ and our common stock would instead trade on the OTC Market.  Any potential delisting of our common stock from NASDAQ would likely result in decreased liquidity and increased volatility of our common stock, and would likely cause our trading price to decline.

Our products may contain undetected software defects, which could negatively affect our revenues.

Our software products are complex and may contain undetected defects. If we discover software defects in our products we may experience delayed or lost revenues during the period it takes to correct these problems.  Defects, whether actual or perceived, could result in adverse publicity, loss of revenues, product returns, a delay in market acceptance of our products, loss of competitive position, or claims against us by customers. Any such problems could be costly to remedy and could cause interruptions, delays, or cessation of our product sales, which could cause us to lose existing or prospective customers and could negatively affect our results of operations.

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We rely directly and indirectly on third-party intellectual property and licenses, which may not be available on commercially reasonable terms or at all.

Many of the Company’s products and services, including our wireless suite of products, as well as our graphics products, include third-party intellectual property, which require licenses directly to us or to unrelated companies that provide us with sublicenses and/or execution of services for the operation of our business.  The Company has historically been able to obtain such licenses or sublicenses on reasonable terms.  There is, however, no assurance that the necessary licenses could be obtained on acceptable terms, or at all, in the future. If the Company or our third-party service providers are unable to obtain or renew critical licenses on reasonable terms, we may be forced to terminate or curtail our products and services which rely on such intellectual property, and our financial condition and operating results may be materially adversely affected.

Our operating income or loss may continue to change due to shifts in our sales mix and variability in our operating expenses.

Our operating income or loss can change quarter to quarter and year to year due to a change in our sales mix and the timing of our continued investments in research and development and infrastructure. We continue to invest in research and development, which is the lifeline of our technology portfolio.  The timing of these additional expenses can vary significantly quarter to quarter and even from year to year.

Our quarterly revenues and operating results are difficult to predict and could fall below analyst or investor expectations, which could cause the price of our common stock to fall.

Our quarterly revenues and operating results have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. If our operating results do not meet the expectations of securities analysts or investors, our stock price may decline. Fluctuations in our operating results may be due to a number of factors, including the following:

• the gain or loss of a key customer;

• the size and timing of orders from and shipments to our major customers;

• our ability to maintain or increase gross margins;

• variations in our sales channels or the mix of our product sales;

• our ability to anticipate market needs and to identify, develop, complete, introduce, market and produce new products and technologies in a timely manner to address those needs;

• the availability and pricing of competing products and technologies and the resulting effect on sales and pricing of our products;

• acquisitions;

• the effect of new and emerging technologies;

• the timing of acceptance of new mobile services by users of our customers’ services;

• deferrals of orders by our customers in anticipation of new products, applications, product enhancements or operating systems; and

• general economic and market conditions.

We have difficulty predicting the volume and timing of orders. In any given quarter, our sales may involve large financial commitments from a relatively small number of customers. As a result, the cancellation or deferral of even a small number of orders could materially impact our revenues, which would adversely affect our quarterly financial performance. Also, we have often recorded a large amount of our sales in the last month of the quarter and often in the last week of that month. Accordingly, delays in the closing of sales near the end of a quarter could cause quarterly revenues to fall substantially short of anticipated levels. Significant sales may also occur earlier than expected, which could cause operating results for later quarters to compare unfavorably with operating results from earlier quarters.

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Future orders may come from new customers or from existing customers for new products.  The sales cycles may be greater than what we have experienced in the past, increasing the difficulty to predict quarterly revenues.

Because we sell primarily to large carriers, cable/MSOs and OEM customers, we have no direct relationship with most end users of our products.  This indirect relationship delays feedback and blurs signals of change in the quick-to-evolve wireless ecosystem, and is one of the reasons we have difficulty predicting demand.

A large portion of our operating expenses, including rent, depreciation and amortization, is fixed and difficult to reduce or change. Accordingly, if our total revenue does not meet our expectations, we may not be able to adjust our expenses quickly enough to compensate for the shortfall in revenue. In that event, our business, financial condition, and results of operations would be materially and adversely affected.

Due to all of the foregoing factors, and the other risks discussed in this Report, you should not rely on quarter-to-quarter comparisons of our operating results as an indication of future performance.

We may have exposure to additional tax liabilities.

As a multinational corporation, we are subject to income taxes as well as sales, use, and other non-income based taxes, in both the U.S. and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes, sales and use taxes, and other tax liabilities. Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate.

We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property, and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income based taxes and may have exposure to additional non-income based tax liabilities. An increasing number of states have considered or have adopted laws that attempt to impose obligations on out-of-state retailers to collect sales and use taxes on their behalf.  A successful assertion by one or more states or foreign countries requiring us to collect sales and use taxes where we do not do so could result in substantial tax liabilities, including for past sales, as well as penalties and interest.

Although we believe that our income and non-income based tax estimates are reasonable, there is no assurance that our provisions for taxes are correct, or that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.  If we are required to pay substantially more taxes in the future or for prior periods, our operating results and financial condition could be adversely affected.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

Our corporate headquarters is located in Pittsburgh, Pennsylvania, where we currently lease approximately 55,600 square feet of space under a lease that expires on April 30, 2026. We sublease 19,965 square feet of our leased space in Pittsburgh under an agreement which commenced on February 1, 2015 and continues through December 31, 2021. We lease and occupy approximately 8,513 square feet of space in Aliso Viejo, California under a lease that expires on October 31, 2024. Internationally, we lease approximately 7,900 square feet in Belgrade, Serbia under a lease that expires December 31, 2023, we lease approximately 700 square feet in Stockholm, Sweden under a month-to-month lease arrangement, and we lease approximately 3,200 square feet in Braga, Portugal under a lease that expires July 31, 2021.

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Item 3. LEGAL PROCEEDINGS

The Company may become involved in various legal proceedings arising from its business activities. While management does not currently believe that the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows, or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the NASDAQ Stock Market under the symbol “SMSI.” The high and low sale prices for our common stock as reported by NASDAQ are set forth below for the periods indicated.

	High		Low
YEAR ENDED DECEMBER 31, 2019:
First Quarter	$	2.93	$	1.69
Second Quarter		3.48		2.75
Third Quarter		6.90		2.95
Fourth Quarter		6.53		3.64
YEAR ENDED DECEMBER 31, 2018:
First Quarter	$	2.96	$	1.45
Second Quarter		2.73		1.56
Third Quarter		2.85		2.20
Fourth Quarter		2.85		1.62

On March 9, 2020, the closing sale price for our common stock as reported by NASDAQ was $5.23.

For information regarding Securities Authorized for Issuance under Equity Compensation Plans, please refer to Item 12 in Part III of this Annual Report on Form 10-K.

Holders

As of March 9, 2020, there were approximately 93 holders of record of our common stock based on information provided by our transfer agent.

Dividends

We have never declared or paid any cash dividends on our common stock. We do not expect to pay any cash dividends on our common stock for the foreseeable future. Any determination to pay dividends on our common stock in the future will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.

During the third quarter of 2019, the Company forced conversion of all outstanding shares of our Series B 10% Convertible Preferred Stock (the “Series B Preferred Stock”). The holders of our Series B Preferred Stock were entitled to receive, out of funds legally available therefor, cumulative cash dividends on such shares at a rate per share of ten percent (10%) per annum, payable (i) when and as declared by our Board of Directors, in quarterly installments on March 1, June 1, September 1 and December 1, (ii) upon conversion of such shares into common stock, and (iii) upon our optional redemption of such shares in accordance with the terms set forth in the Certificate of Designation for our Series B Preferred Stock. As of March 9, 2020, no shares of Series B Preferred Stock are outstanding.

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Purchases of Equity Securities by the Company

The table set forth below shows all purchases of securities by us during the fourth quarter of fiscal year 2019:

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares (or Units) Purchased			Average Price Paid per Share (or Unit)		Total Number of Shares (orUnits) Purchased as Part of Publicly AnnouncedPlans or Programs		MaximumNumber (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 - 31, 2019		12,783		$	5.86		—		—
November 1 - 30, 2019		12,788		$	4.75		—		—
December 1 - 31, 2019		12,784		$	4.57		—		—
Total		38,355	(a)	$	5.06		—		—

The above table includes:

(a) Acquisition of stock by the Company as payment of withholding taxes in connection with the vesting of restricted stock awards in an aggregate amount of 38,355 shares during the periods set forth in the table. All of the shares were cancelled when they were acquired.

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Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto appearing elsewhere in this Report. The following selected consolidated statements of operations and comprehensive loss data and the consolidated balance sheet data as of and for the years ended December 31, 2019 and 2018 have been derived from audited consolidated financial statements included elsewhere in this Report. The consolidated statements of operations and comprehensive loss data and the consolidated balance sheet data presented below as of and for the years ended December 31, 2017, 2016 and 2015 are derived from audited consolidated financial statements that are not included in this Report.

	Year Ended December 31,
	2019			2018			2017			2016			2015
Consolidated Statement of Operations Data (in thousands, except per share data):
Revenues	$	43,346		$	26,285		$	22,974		$	28,235		$	39,507
Cost of revenues		3,927			4,333			5,082			7,564			8,152
Gross profit		39,419			21,952			17,892			20,671			31,355
Operating expenses:
Selling and marketing		7,517			5,784			6,186			9,615			8,902
Research and development		11,682			8,602			8,952			15,906			13,863
General and administrative		9,921			8,607			8,551			10,341			11,128
Restructuring expenses		194			173			(123	)		303			—
Long-lived asset impairment		—			—			—			411			—
Total operating expenses		29,314			23,166			23,566			36,576			33,893
Operating income (loss)		10,105			(1,214	)		(5,674	)		(15,905	)		(2,538	)
Non-operating income (expense):
Change in fair value of warrant    liability		—			(812	)		—			—			—
Change in carrying value of    contingent liability		—			—			—			668			—
Loss on debt extinguishment		—			(203	)		(405	)		—			—
Gain on sale of software product		483			—			—			—			—
Interest income (expense), net		228			(472	)		(1,120	)		(313	)		1
Other income (expense), net		(14	)		(26	)		(8	)		(22	)		3
Income (loss) before provision for    income taxes		10,802			(2,727	)		(7,207	)		(15,572	)		(2,534	)
Provision for income tax expense    (benefit)		80			13			(546	)		(229	)		68
Net income (loss)	$	10,722		$	(2,740	)	$	(6,661	)	$	(15,343	)	$	(2,602	)
Earnings (loss) per share:
Basic	$	0.31		$	(0.14	)	$	(0.49	)	$	(1.28	)	$	(0.23	)
Diluted	$	0.29		$	(0.14	)	$	(0.49	)	$	(1.28	)	$	(0.23	)
Weighted average shares:
Basic		34,513			22,322			13,489			11,951			11,486
Diluted		36,991			22,322			13,489			11,951			11,486

	As of December 31,
	2019			2018			2017			2016			2015
Consolidated Balance Sheet Data (in thousands):
Total assets	$	61,197		$	25,203		$	13,877		$	14,308		$	24,473
Total liabilities		12,513			4,640			9,310			11,249			10,447
Accumulated comprehensive deficit		(225,395	)		(236,091	)		(232,933	)		(226,228	)		(210,887	)
Total stockholders' equity	$	48,684		$	20,563		$	4,567		$	3,059		$	14,026

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Report. This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements” and Part I, Item 1A, “Risk Factors.” Readers are also urged to carefully review and consider these and other disclosures made by us which attempt to advise interested parties of the factors which affect our business.

Introduction and Overview

Providing software solutions that simplify and enhance the mobile experience to some of the leading wireless and cable service providers around the globe is a mission that Smith Micro pursues with passion.  From enabling the family digital lifestyle to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. The Smith Micro portfolio includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set.

During 2019, we experienced an increase in our Wireless revenues primarily due to higher customer demand for our CommSuite product and continued SafePath subscriber growth related to a contract signed in 2017. CommSuite has achieved continual subscriber growth since making development updates during the fourth quarter of 2017, which among other enhancements, resulted in a larger addressable market. Our divestiture and exit of non-core product lines that included Graphics, NetWise, and QuickLinkresulted in a revenue decline of $2.6 million. The Company received additional cash proceeds of $11.5 million during 2019 from to the exercise of warrants associated with three private placements of common stock the Company completed in 2018.

Results of Operations

Revenues generated from our sales to Sprint and their respective affiliates in the Wireless business segment accounted for 84% and 81% of the Company’s total revenues for fiscal years 2019 and 2018, respectively. This customer accounted for 92% and 82% of accounts receivable as of December 31, 2019 and 2018, respectively.

The following table sets forth certain consolidated statement of comprehensive income (loss) data as a percentage of total revenues for the periods indicated:

	Year Ended December 31,
	2019			2018
Revenues		100.0	%		100.0		%
Cost of revenues		9.1			16.5
Gross profit		90.9			83.5
Operating expenses:
Selling and marketing		17.3			22.0
Research and development		27.0			32.7
General and administrative		22.9			32.7
Restructuring expenses		0.4			0.7
Total operating expenses		67.6			88.1
Operating income (loss)		23.3			(4.6	)
Change in fair value of warrant liability		—			(3.1	)
Loss on debt extinguishment		—			(0.8	)
Gain on sale of software product		1.1			—
Interest income (expense)		0.5			(1.8	)
Other expense		—			(0.1	)
Income (loss) before provision for income taxes		24.9			(10.4	)
Provision for income tax expense		0.2			0.0
Net income (loss)		24.7	%		(10.4	)	%

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Revenues and Expense Components

The following is a description of the primary components of our revenues and expenses:

Revenues. Revenues are net of sales returns and allowances. Our operations are organized into one business segment: Wireless, which includes all of our existing core products, including SafePath®, CommSuite®, and ViewSpot® family of products. We also generate an immaterial amount of revenue from a few non-core Graphics products.

Cost of revenues. Cost of revenues consists of direct product and assembly, maintenance, data center, royalties, and technical support expenses.

Selling and marketing. Selling and marketing expenses consist primarily of personnel costs, advertising costs, sales commissions, trade show expenses, and the amortization of certain intangible assets. These expenses vary significantly from quarter to quarter based on the timing of trade shows and product introductions.

Research and development. Research and development expenses consist primarily of personnel and equipment costs required to conduct our software development efforts.  It also includes the amortization of certain intangible assets.

General and administrative. General and administrative expenses consist primarily of personnel costs, professional services and fees paid for external service providers, space and occupancy costs, and legal and other public company costs.

Loss on debt extinguishment. Loss resulting from the extinguishment of debt.

Gain on sale of software product. Gain resulting from the sale of the Poser® 3D animation software.

Interest income (expense), net. Interest income is primarily related to interest earned on cash equivalents. Interest expense is primarily related to interest on our debt.

Other income (expense), net. Other income (expense) is primarily related to fixed asset disposals and gains or losses or other non-operating gains or losses.

Provision for income tax expense (benefit). The Company accounts for income taxes as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 740, 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. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company’s assets and liabilities result in a deferred tax asset, we are required to evaluate the probability of being able to realize the future benefits indicated by such asset. The deferred tax assets are reduced by a valuation allowance if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of operations. We must make significant judgments to determine the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits, and any valuation allowance to be recorded against deferred tax assets.

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Revenues. Revenues of $43.3 million in 2019 increased $17.1 million, or 65%, from $26.3 million in 2018. Wireless revenues of $42.6 million increased $18.1 million, or 74%, from $24.5 million in 2018. The increase was primarily due to higher demand in both CommSuite and SafePath subscribers, as well as revenue associated with the ViewSpot acquisition. The growth in Wireless revenues from these products was slightly offset by a reduced strategic focus on the NetWise products. Sales from our discontinued or non-core products decreased $1.1 million, or 59%, from $1.8 million in 2018, primarily related to the conclusion during 2018 of the wind-down sales period following termination of our reseller agreement with Japanese software developer Celsys in October 2017, and also lower demand as a result of reduced strategic focus and marketing efforts of these products.

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Cost of revenues. Cost of revenues of $3.9 million in 2019 decreased $0.4 million, or 9%, from $4.3 million in 2018. This decrease was primarily due to lower internal and external variable costs in conjunction with the revenue mix.

Gross profit. Gross profit of $39.4 million or 91% of revenues in 2019 increased $17.5 million, or 80%, from $22.0 million, or 84% of revenues in 2018. The increase was primarily due to the lower internal and external variable costs attributable to the revenue mix.

Selling and marketing. Selling and marketing expenses of $7.5 million in 2019 increased $1.7 million, or 30%, from $5.8 million in 2018. This increase was primarily due to increases in headcount for ViewSpot and commissions due to increased performance levels. The amortization of intangible assets was $0.4 million and $0.2 million in 2019 and 2018, respectively.

Research and development. Research and development expenses of $11.7 million in 2019 increased $3.1 million, or 36%, from $8.6 million in 2018. This increase was primarily due to additional headcount related expenses for ViewSpot and SafePath development.

General and administrative. General and administrative expenses of $9.9 million in 2019 increased $1.3 million, or 15%, from $8.6 million in 2018. This increase was primarily due to an increase in non-cash stock compensation, variable compensation expense, consulting fees, and acquisition fees.

Restructuring expenses. Restructuring expense of $0.2 million in 2019 related to additional restructuring activities initiated during 2019. Expense of $0.2 million in 2018 was a result of restructuring activities initiated during the year.  

Change in fair value of warrant liability. The change in fair value of warrant liability was $0.8 million in 2018. As discussed in Note 6 of the consolidated financial statements, the existing outstanding warrants were reclassified from liabilities to equity in November 2018.

Loss on debt extinguishment. Loss on debt extinguishment of $0.2 million in 2018 related to the write-off of debt issuance costs and discount as a result of the early payoff of the Unterberg note payable.

Gain on sale of software product. The gain on sale of software product of $0.5 million resulted from the sale of the Company’s Poser 3D animation software in June 2019.

Interest expense, net. Interest income was $0.2 million in 2019 resulting from interest earned on cash equivalents during the year. Interest expense was $0.5 million in 2018 related to interest incurred on outstanding debt.

Provision for income tax expense. Because of our cumulative loss position, the current provision for income tax expense consists of state income tax minimums, foreign tax withholdings, and foreign income taxes. After consideration of the Company’s cumulative loss position as of December 31, 2019, the Company retained a valuation allowance related to its U.S.-based deferred tax assets of $50.4 million at December 31, 2019. During fiscal year 2019, the valuation allowance on deferred tax assets decreased by $2.0 million.

Liquidity and Capital Resources

Going Concern Evaluation

In connection with preparing consolidated financial statements for the year ended December 31, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the historical operating loss and negative cash flow from operating activities trends, including the positive trends occurring in the recent year.  

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued and management believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.

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At December 31, 2019, we had $28.3 million in cash and cash equivalents and $34.2 million of working capital.

Operating Activities

In 2019, net cash provided by operating activities was $10.0 million, primarily due to net income of $10.7 million.

In 2018, net cash used in operating activities was $2.9 million, primarily due to an increase in accounts receivable of $1.9 million and a decrease in accounts payable and accrued liabilities of $1.1 million.

Investing Activities

In 2019, cash used in investing activities was $5.3 million, due to $4.0 million in payments related to the Smart Retail acquisition in January 2019 and $1.7 million in capital expenditures, offset by proceeds of $0.4 million from the sale of the Poser 3D animation software.

In 2018, cash used in investing activities was $0.2 million, related to capital expenditures.

Financing Activities

In 2019, cash provided by financing activities was $11.4 million, primarily due to $11.5 million in proceeds from the exercise of common stock warrants during the second half of the year. This was offset by $0.1 million in preferred stock dividend payments during the year.

In 2018, cash provided by financing activities was $13.0 million due to net proceeds from common stock offerings of $17.6 million, offset by repayments of notes payable of $4.2 million and preferred stock dividend payments of $0.4 million.

Contractual Obligations and Commercial Commitments

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.

Real Property Leases

Our corporate headquarters is located in Pittsburgh, Pennsylvania, where we currently lease approximately 55,600 square feet of space under a lease that expires on April 30, 2026. We sublease 19,965 square feet of our leased space in Pittsburgh under an agreement which commenced on February 1, 2015 and continues through December 31, 2021. We lease and occupy approximately 8,513 square feet of space in Aliso Viejo, California under a lease that expires on October 31, 2024. Internationally, we lease approximately 7,900 square feet in Belgrade, Serbia under a lease that expires December 31, 2023, we lease approximately 700 square feet in Stockholm, Sweden under a month-to-month lease arrangement, and we lease approximately 3,200 square feet in Braga, Portugal under a lease that expires July 31, 2021.

We lease an additional 19,100 square feet in Aliso Viejo, California under a lease that expires January 31, 2022. In August 2014, we signed an addendum to sublease all of this space commencing on September 15, 2014 for a three-year period, with two renewal options. In October 2017, the sublease agreement was renewed through January 2022.

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Off-Balance Sheet Arrangements

As of December 31, 2019, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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 (“U.S. GAAP”). The preparation of these consolidated 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 they 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:

Business Combinations

The Company applies the provisions of FASB ASC Topic No. 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period that exists up to twelve months from the acquisition date, the Company may record adjustments to the tangible and specifically identifiable intangible assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the reporting period in which the adjusted amounts are determined. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations. 

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as a one-time termination and exit cost pursuant to FASB ASC Topic No. 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the Company’s consolidated statement of operations in the period in which the liability is incurred.

Uncertain income tax positions and tax-related valuation allowances that are acquired in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date, with any adjustments to the preliminary estimates being recorded to goodwill if such adjustments occur within the 12-month measurement period. Subsequent to the end of the measurement period or the Company’s final determination of the value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the consolidated statement of operations, and could have a material impact on results of operations and financial position.

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

Fair value is an exit price, representing the amount that would be received upon the sale of an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an

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asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

• Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

• Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs. 

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can 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 are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.

As required by FASB ASC Topic No. 350, for goodwill and other intangibles impairment analysis, we utilize fair value measurements which are categorized within Level 3 of the fair value hierarchy.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment.

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, we review 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.

Intangible Assets and Amortization

Amortization expense related to other intangibles acquired in acquisitions is calculated on a straight line basis over two to ten years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.

Going Concern Evaluation

In connection with preparing its consolidated financial statements, management evaluates whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued. See management’s going concern evaluation for the year ended December 31, 2019 in the “Liquidity and Capital Resources” section above.

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Revenue Recognition

The Company adopted FASB ASC Topic No. 606, Revenue from Contracts with Customers, as of January 1, 2018, and recognizes the sale of goods and services based on the five step analysis of transactions as provided in Topic 606 which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services.

In our Wireless segment, we transfer software licenses to our customers on a royalty free, non-exclusive, non-transferrable, limited use basis during the term of the agreement. In some instances, we perform customization services to ensure the software operates within our customer’s operating platforms as well as the operating platforms of the mobile devices used by their end customers before transferring the license. Revenue related to these services is recognized at a point in time upon acceptance of the software license by the customer. We also earn usage based revenue on our platforms. Usage based revenue is generated based on active licenses used by our customer’s end customers, the provision of hosting services, revenue share based on media placements on our platform, and use of our Cloud Based services. We recognize our usage based revenue when we have completed our performance obligation and have the right to invoice the customer. This revenue is generally recognized monthly or quarterly. Finally, in this segment, we ratably recognize revenue over the contract period when customers pay in advance of our service delivery.

We also provide consulting services to develop customer specified functionality that are generally not on our software development roadmap. We recognize revenue from our consulting services upon delivery and acceptance by the customer of our software enhancements and upgrades. For certain Wireless segment customers we provide maintenance and technology support services for which the customer pays upfront or as we provide the services. When the customer pays upfront, we record the payments as contract liabilities and recognize revenue ratably over the contract period as this is our stand ready performance obligation that is satisfied ratably over the maintenance and technology services period.

For our Graphics products where we sell off-the-self software products with no customization or post sale technology support services, we recognize revenue at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our resellers. We offer a 30 day return option to our customers; a return reserve is established at the time revenue is recorded and the reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The Company adopted ASU 2014-09 as of January 1, 2018 utilizing the modified retrospective approach. This adoption did not have a material impact on our consolidated financial statements. See Note 11 for further details.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The Company adopted the FASB ASC Topic No. 842, Leases, and related amendments, as of January 1, 2019, utilizing the modified retrospective approach through a cumulative-effect adjustment to equity. Management elected the package of practical expedients permitted under the transition guidance within the new standard which allowed for the carry forward of the historical lease classification. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $3.1 million as of January 1, 2019, and an adjustment to retained earnings of $0.1 million. The standard did not materially

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impact the consolidated net income or earnings per share and had no impact on cash flows. See Note 13 for further details.

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements appear in a separate section of this Annual Report on Form 10-K beginning on page F-1.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

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 December 31, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer determined that as of December 31, 2019, 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 SEC’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.

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 consolidated 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, SingerLewak 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.

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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Report of Management on Internal Control Over Financial Reporting

Our management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Our management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework 2013” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management determined that, as of December 31, 2019, we maintained effective internal control over financial reporting.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by SingerLewak, LLP, an independent registered public accounting firm, as stated in their report set forth in the Report of Independent Registered Public Accounting Firm on page F-2 of this Annual Report on Form 10-K.

Item 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is set forth under the headings “Proposal 1: Election of Directors,” “Executive Officers,” “Corporate Governance,” and “Delinquent Section 16(a) Reports” in the Company’s definitive Proxy Statement for the 2020 Annual Meeting of Stockholders (“2020 Proxy Statement”) and is incorporated herein by reference.  

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is set forth under the headings “Executive Compensation” and “Director Compensation” in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

A portion of the information required by this Item is set forth under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Company’s 2020 Proxy Statement and is incorporated herein by reference.  

Securities Authorized for Issuance Under an Equity Compensation Plan

The following table summarizes information as of December 31, 2019 for the equity compensation plans of the Company pursuant to which grants of options, restricted stock, restricted stock units or other rights to acquire shares may be granted from time to time (in thousands, except option price data):

	Number of shares to be issued upon exercise of outstanding options		Weighted average exercise price of outstanding options		Number of shares remaining available for future issuance
2015 Omnibus Equity Incentive Plan (1)		101	$	2.53		1,274
2005 Stock Option / Stock Issuance Plan (2)		96		5.63		—
Total		197	$	4.03		1,274

(1) The 2015 Omnibus Equity Incentive Plan (the “2015 OEIP”) was approved by shareholders effective June 18, 2015.

(2) Upon shareholder approval of the 2015 OEIP, any unissued shares under the 2005 Plan were canceled and no longer available for future issuance.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is set forth under the heading “Proposal 1: Election of Directors” and under the subheadings “Board Member Independence,” “Audit Committee,” “Compensation Committee,” “Governance and Nominating Committee,” and “Certain Relationships and Related Party Transactions” under the heading “Corporate Governance” in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is set forth under the heading “Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

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PART IV

Item 15. EXHIBITS

(a) (1) Financial Statements

Smith Micro’s financial statements appear in a separate section of this Annual Report on Form 10-K beginning on the pages referenced below:

	Page
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED BALANCE SHEETS	F-3
CONSOLIDATED STATEMENTS OF OPERATIONS	F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7

(3) Exhibits

Exhibit No.	Title	Method of Filing
2.1	Asset Purchase Agreement, dated as of December 17, 2018, between the Company and ISM Connect, LLC	Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on December 18, 2018
2.2	Asset Purchase Agreement, dated as of February 12, 2020, between the Company and Circle Media Labs Inc.	Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on February 19, 2020
3.1	Amended and Restated Certificate of Incorporation	Incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement No. 33-95096 (P)
3.1.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated July 11, 2000	Incorporated by reference to Exhibit 3.1.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2000, filed on August 14, 2000
3.1.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation dated August 17, 2005	Incorporated by reference to Exhibit 3.1.2 to the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2005, filed on March 31, 2006
3.1.3	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated June 21, 2012	Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 27, 2012
3.1.4	Certificate of Elimination of Series A Junior Participating Preferred Stock dated October 16, 2015	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 16, 2015
3.1.5	Certificate of Designation of Series A Participating Preferred Stock dated October 16, 2015	Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 16, 2015

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Exhibit No.	Title	Method of Filing
3.1.6	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated August 15, 2016	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 17, 2016
3.1.7	Certificate of Designation of Preferences, Rights and Limitations of Series B 10% Convertible Preferred Stock, dated September 29, 2017	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 4, 2017
3.2	Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement No. 33-95096 (P)
3.2.1	Certificate of Amendment of Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on October 31, 2007
4.1	Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	Filed herewith
4.2	Specimen certificate representing shares of Common Stock	Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-95096 (P)
4.3	Preferred Shares Rights Agreement, dated as of October 16, 2015, between the Registrant and Computershare Trust Company, N.A., as Rights Agent	Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on October 16, 2015
4.4	Form of Common Stock Purchase Warrant, dated May 17, 2017, issued by the Registrant to each of Sutter Securities Incorporated and Chardan Capital Markets, LLC	Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on May 17, 2017
4.5	Form of Registration Rights Agreement dated August 15, 2014	Incorporated by reference to Exhibit 10.2  to the Registrant’s Current Report on Form 8-K filed on August 20, 2014
4.6	Form of Warrant to Purchase Common Stock, dated September 6, 2016, issued by the Registrant to each of the Investors party to the Note and Warrant Purchase Agreement dated September 2, 2016	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on September 7, 2016
4.7	Form of Registration Rights Agreement, dated September 6, 2016 entered into between the Registrant and each of the Investors party thereto	Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on September 7, 2016
4.8	Registration Rights Agreement, dated as of September 29, 2017, between the Registrant and each of the Purchasers party thereto	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 4, 2017
4.9	Registration Rights Agreement, dated as of March 5, 2018, between the Registrant and each of the Purchasers party thereto	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 6, 2018
4.10	Form of Warrant to Purchase Common Stock, issued by the Registrant to each of the Purchasers party to the March SPA (defined below)	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 6, 2018

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Exhibit No.	Title	Method of Filing
4.11	Registration Rights Agreement, dated as of May 3, 2018, between the Registrant and each of the Purchasers party thereto	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 4, 2018
4.12	Form of Warrant to Purchase Common Stock, issued by the Registrant to each of the Purchasers party to the May SPA (defined below)	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on May 4, 2018
4.13	Registration Rights Agreement, dated as of November 7, 2018, between the Registrant and each of the Purchasers party thereto	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 7, 2018
4.14	Form of Warrant to Purchase Common Stock, issued by the Registrant to each of the Purchasers party to the November SPA (defined below)	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 7, 2018
10.1	Form of Indemnification Agreement	Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement No. 33-95096 (P)
10.2*	Amended and Restated 2005 Stock Option / Stock Issuance Plan	Incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-8 (Reg. No. 333-149222) filed on February 13, 2008
10.3	Summary of oral agreement dated June 2005 by and between William W. Smith, Jr. and the Registrant	Incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009
10.4*	Amended & Restated Employee Stock Purchase Plan	Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-8 (No. 333-169671) filed on September 30, 2010
10.5	Form of Common Stock Purchase Agreement dated August 15, 2014	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 20, 2014
10.6*	2015 Omnibus Equity Incentive Plan	Incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 30, 2015
10.6.1*	Form of Restricted Stock Agreement under the 2015 Omnibus Equity Incentive Plan	Incorporated by reference to Exhibit 10.6.1 to the Registrant’s Annual Report on Form 10-K filed on March 30, 2018
10.6.2*	Amendment to Smith Micro Software, Inc. 2015 Omnibus Equity Incentive Plan, adopted June 14, 2018	Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on June 15, 2018
10.71	Note and Warrant Purchase Agreement, dated September 2, 2016, by and among the Company and each of the Investors party thereto	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 7, 2016
10.8	Form of Senior Subordinated Promissory Note, dated September 6, 2016, issued by the Registrant to each of the Investors party to the Note and Warrant Purchase Agreement dated September 2, 2016	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on September 7, 2016

¹  Exhibits may be removed if there are no longer any obligations or performances required after this filing is made.

34

Exhibit No.	Title	Method of Filing
10.9	Amendment to Senior Subordinated Promissory Note, dated December 27, 2016, between the Registrant and Unterberg Koller Capital Fund L.P.	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 28, 2016
10.10	Form of Subscription Agreement, dated May 16, 2017, between the Registrant and each of the investors party thereto	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 17, 2017
10.11*	Offer Letter by and between the Registrant and Timothy C. Huffmyer, dated June 19, 2017	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 20, 2017
10.12	Secured Promissory Note dated June 26, 2017, issued by the Registrant to William W. Smith, Jr. and Dieva L. Smith	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 7, 2017
10.12.1	Amendment to Secured Promissory Note, dated January 30, 2018, between the Registrant and William W. Smith, Jr. and Dieva L. Smith	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 31, 2018
10.12.2	Second Amendment to Secured Promissory Note, dated March 5, 2018, between the Registrant and William W. Smith, Jr. and Dieva L. Smith	Incorporated by reference to Exhibit 10.20.2 to the Registrant’s Annual Report on Form 10-K filed on March 30, 2018
10.13	Secured Promissory Note dated June 23, 2017, issued by the Registrant to Steven L. and Monique P. Elfman	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 7, 2017
10.13.1	Amendment to Secured Promissory Note, dated August 18, 2017, between the Registrant and Steven L. and Monique P. Elfman	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 25, 2017
10.13.2	Second Amendment to Secured Promissory Note, dated January 30, 2018, between the Registrant and Steven L. and Monique P. Elfman	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 31, 2018
10.14*	Resignation Severance and Release Agreement, dated as of July 10, 2017, between the Registrant and Steven Yasbek	Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K/A filed on July 11, 2017
10.15	Secured Promissory Note, dated August 24, 2017, issued by the Registrant to Next Generation TC FBO Andrew Arno IRA 1663	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on August 25, 2017
10.15.1	Amendment to Secured Promissory Note, dated January 30, 2018, between the Registrant and Next Generation TC FBO Andrew Arno IRA 1663	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on January 31, 2018
10.15.2	Second Amendment to Secured Promissory Note, dated March 5, 2018, between the Registrant and Next Generation TC FBO Andrew Arno IRA 1663	Incorporated by reference to Exhibit 10.24.2 to the Registrant’s Annual Report on Form 10-K filed on March 30, 2018
10.16	Secured Promissory Note, dated August 24, 2017, issued by the Registrant to Andrew Arno	Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on August 25, 2017

35

Exhibit No.	Title	Method of Filing
10.16.1	Amendment to Secured Promissory Note, dated January 30, 2018, between the Registrant and Andrew Arno	Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on January 31, 2018
10.16.2	Second Amendment to Secured Promissory Note, dated March 5, 2018, between the Registrant and Andrew Arno	Incorporated by reference to Exhibit 10.25.2 to the Registrant’s Annual Report on Form 10-K filed on March 30, 2018
10.17	Securities Purchase Agreement, dated as of September 29, 2017, between the Registrant and each of the Purchasers party thereto	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 4, 2017
10.18	Securities Purchase Agreement, dated as of March 5, 2018, between the Registrant and each of the Purchasers party thereto (the “March SPA”)	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2018
10.19	Letter Agreement, dated March 5, 2018, between the Company and William W. Smith, Jr. and Dieva L. Smith	Incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.20	Letter Agreement, dated March 5, 2018, between the Company and Andrew Arno	Incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.21	Form of Lock-Up Agreement entered into between the Company and each of its directors and certain executive officers in connection with the March SPA	Incorporated by reference to Exhibit 10.13 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.22	Form of Voting Agreement entered into between the Company and each of its directors and certain executive officers in connection with the March SPA	Incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.23	Securities Purchase Agreement, dated as of May 3, 2018, between the Registrant and each of the Purchasers party thereto (the “May SPA”)	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2018
10.24	Securities Purchase Agreement, dated as of November 7, 2018, between the Registrant and each of the Purchasers party thereto (the “November SPA”)	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 7, 2018
21.1	Subsidiaries	Filed herewith
23.1	Consent of Independent Registered Public Accounting Firm	Filed herewith
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

36

101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

(P) Paper Filing Exhibit

*denotes the management contracts and compensatory arrangements in which any director or named executive officer participates

(b) Exhibits

The exhibits filed as part of this report are listed above in Item 15(a)(3) of this Form 10-K.

Item 16. FORM 10-K SUMMARY

None.

37

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	SMITH MICRO SOFTWARE, INC.
Date: March 13, 2020	By: /s/ William W. Smith, Jr.
	William W. Smith, Jr.
	Chairman of the Board,
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: March 13, 2020	By: /s/ Timothy C. Huffmyer
	Timothy C. Huffmyer
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ William W. Smith, Jr.	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	March 13, 2020
William W. Smith, Jr.
/s/ Timothy C. Huffmyer	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 13, 2020
Timothy C. Huffmyer
/s/ Andrew Arno	Director	March 13, 2020
Andrew Arno
/s/ Thomas G. Campbell	Director	March 13, 2020
Thomas G. Campbell
/s/ Steven L. Elfman	Director	March 13, 2020
Steven L. Elfman
/s/ Samuel Gulko	Director	March 13, 2020
Samuel Gulko
/s/ Gregory J. Szabo	Director	March 13, 2020
Gregory J. Szabo

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors

Smith Micro Software, Inc. and its subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Smith Micro Software, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 13, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ SingerLewak LLP

We have served as the Company’s auditor since 2004.

Denver, Colorado

March 13, 2020

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors

Smith Micro Software, Inc. and its subsidiaries

Opinion on the Internal Control Over Financial Reporting

We have audited Smith Micro Software, Inc. and its Subsidiaries’ (collectively, “the Company”) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years then ended, and our report dated March 13, 2020, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on the Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ SingerLewak LLP

Denver, Colorado

March 13, 2020

F-2

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

	December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	28,268		$	12,159
Accounts receivable, net of allowances for doubtful accounts and    other adjustments of $253 and $135 at December 31, 2019    and 2018, respectively		10,894			7,130
Prepaid expenses and other current assets		802			795
Total current assets		39,964			20,084
Equipment and improvements, net		2,109			865
Right-of-use assets		6,464			—
Deferred tax asset, net		94			191
Other assets		234			140
Intangible assets, net		4,535			238
Goodwill		7,797			3,685
Total assets	$	61,197		$	25,203
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,050		$	1,160
Accrued payroll and benefits		2,107			1,745
Current operating lease liabilities		1,221			—
Other accrued liabilities		244			450
Deferred revenue		98			28
Total current liabilities		5,720			3,383
Non-current liabilities:
Operating lease liabilities		5,774			—
Deferred rent		885			723
Other long term liabilities		134			534
Total non-current liabilities		6,793			1,257
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 5,000,000 shares    authorized; 0 and 1,345 shares issued and outstanding at    December 31, 2019 and 2018, respectively		—			—
Common stock, par value $0.001 per share; 100,000,000 shares    authorized; 38,475,084 and 28,241,129 shares issued and    outstanding at December 31, 2019 and 2018, respectively		38			28
Additional paid-in capital		274,041			256,626
Accumulated comprehensive deficit		(225,395	)		(236,091	)
Total  stockholders’ equity		48,684			20,563
Total liabilities and stockholders' equity	$	61,197		$	25,203

See accompanying notes to the consolidated financial statements.

F-3

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year Ended December 31,
	2019			2018
Revenues	$	43,346		$	26,285
Cost of revenues		3,927			4,333
Gross profit		39,419			21,952
Operating expenses:
Selling and marketing		7,517			5,784
Research and development		11,682			8,602
General and administrative		9,921			8,607
Restructuring expenses		194			173
Total operating expenses		29,314			23,166
Operating income (loss)		10,105			(1,214	)
Non-operating income (expense):
Change in fair value of warrant liability		—			(812	)
Loss on debt extinguishment		—			(203	)
Gain on sale of software product		483			—
Interest income (expense), net		228			(472	)
Other expense, net		(14	)		(26	)
Income (loss) before provision for income taxes		10,802			(2,727	)
Provision for income tax expense		80			13
Net income (loss)		10,722			(2,740	)
Net earnings (loss) per share:
Basic	$	0.31		$	(0.14	)
Diluted	$	0.29		$	(0.14	)
Weighted average shares outstanding:
Basic		34,513			22,322
Diluted		36,991			22,322

See accompanying notes to the consolidated financial statements.

F-4

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

											Additional			Accumulated
	Preferred stock					Common stock					paid-in			comprehensive
	Shares			Amount		Shares			Amount		capital			deficit			Total
BALANCE, December 31, 2017		6		$	—		14,269		$	14	$	237,486		$	(232,933	)	$	4,567
Non-cash compensation recognized on    stock options and ESPP		—			—		—			—		36			—			36
Restricted stock grants, net of cancellations		—			—		1,124			1		898			—			899
Cancellation of shares for payment of    withholding tax		—			—		(94	)		—		(209	)		—			(209	)
Employee stock purchase plan		—			—		5			—		5			—			5
Preferred shares converted to common    shares		(5	)		—		3,645			4		(4	)		—			—
Common shares issued in stock offering,    net of offering costs		—			—		9,267			9		17,591			—			17,600
Issuance of warrants in stock offering		—			—		—			—		(6,792	)		—			(6,792	)
Exercise of warrants		—			—		26			—		—			—			—
Reclassification of warrants previously    classified as liabilities to equity		—			—		—			—		7,604			—			7,604
Warrant repricing		—			—		—			—		11			(11	)		—
Canadian tax adjustments from prior period		—			—		—			—		—			(2	)		(2	)
Preferred stock dividends		—			—		—			—		—			(404	)		(404	)
Comprehensive loss		—			—		—			—		—			(2,741	)		(2,741	)
BALANCE, December 31, 2018		1		$	—		28,242		$	28	$	256,626		$	(236,091	)	$	20,563
Non-cash compensation recognized on    stock options and ESPP		—			—		—			—		43			—			43
Restricted stock grants, net of cancellations		—			—		1,225			1		1,450			—			1,451
Cancellation of shares for payment of    withholding tax		—			—		(214	)		—		(701	)		—			(701	)
Employee stock purchase plan		—			—		4			—		10			—			10
Preferred shares converted to common    shares		(1	)		—		1,180			1		(1	)		—			—
Common shares issued in stock offering,    net of offering costs		—			—		—			—		(14	)		—			(14	)
Common shares issued in connection with    Smart Retail acquisition, net		—			—		2,699			3		5,126			—			5,129
Exercise of common stock warrants		—			—		5,327			5		11,452			—			11,457
Exercise of stock options		—			—		13			—		50			—			50
Preferred stock dividends		—			—		—			—		—			(119	)		(119	)
Cumulative effect of adoption of ASC 842		—			—		—			—		—			93			93
Comprehensive loss		—			—		—			—		—			10,722			10,722
BALANCE, December 31, 2019	$	—		$	—		38,476		$	38	$	274,041		$	(225,395	)	$	48,684

See accompanying notes to the consolidated financial statements.

F-5

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2019			2018
Operating activities:
Net income (loss)	$	10,722		$	(2,740	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)    operating activities:
Depreciation and amortization		1,341			779
Non-cash rent expense		954			—
Amortization of debt discounts and financing issuance costs		—			239
Restructuring costs		194			173
Gain on sale of software product		(483	)		—
Change in fair value of warrant liability		—			812
Loss on debt extinguishment		—			203
Provision for adjustments to accounts receivable and doubtful accounts		143			(82	)
Provision for excess and obsolete inventory		1			(16	)
Loss on disposal of fixed assets		6			7
Non-cash compensation related to stock options and restricted stock		1,494			935
Deferred income taxes		97			213
Change in operating accounts:
Accounts receivable		(3,811	)		(1,903	)
Prepaid expenses and other assets		(32	)		(197	)
Accounts payable and accrued liabilities		(417	)		(1,252	)
Deferred revenue		(221	)		(45	)
Net cash provided by (used in) operating activities		9,988			(2,874	)
Investing activities:
Acquisitions, net		(3,974	)		—
Proceeds from sale of software product		370			—
Capital expenditures		(1,659	)		(173	)
Net cash used in investing activities		(5,263	)		(173	)
Financing activities:
Proceeds from exercise of common stock warrants		11,457			—
Proceeds from (payments related to) issuance of common stock		(14	)		17,600
Repayments of short-term secured promissory notes		—			(1,000	)
Repayments of related-party notes payable		—			(1,200	)
Repayments of notes payable		—			(2,000	)
Proceeds from exercise of stock options		50			—
Proceeds from stock sale for employee stock purchase plan		10			5
Preferred stock dividends		(119	)		(404	)
Net cash provided by financing activities		11,384			13,001
Net increase in cash and cash equivalents		16,109			9,954
Cash and cash equivalents, beginning of period		12,159			2,205
Cash and cash equivalents, end of period	$	28,268		$	12,159
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	104		$	2
Cash paid for interest	$	—		$	386
Non-cash investing and financing activities:
Issuance of common stock in connection with acquisition	$	5,129		$	—
Issuance of common stock warrants in connection with stock offering	$	—		$	10,792
Reclassification of warrants from liabilities to equity	$	—		$	7,604
Conversion of preferred stock to common stock	$	1		$	4

See accompanying notes to the consolidated financial statements.

F-6

SMITH MICRO SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

The Company

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless and cable service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. Our portfolio includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set.

In general, we offer our customers:

• Valuable digital services that connect today’s digital lifestyle, including leading edge family location and parental controls, as well as enabling connected family and consumer IoT devices to mobile consumers worldwide;

• Easy visual access to wirelessly delivered voicemail messages, while also providing easy conversion of voice messages to text and email messages that can be delivered through a variety of devices;

• Immediate, consistent and measurable retail content that educates consumers, creates awareness of products and services and drives in store sales; and

• Engaging retail content displayed on wireless devices in retail locations that also gather valuable actionable analytics.

We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in emerging markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace. The key to our longevity, however, is not simply technological innovation, but our never-ending focus on understanding our customers’ needs and delivering value.

Basis of Presentation

The accompanying consolidated financial statements reflect the operating results and financial position of Smith Micro and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany amounts have been eliminated in consolidation.

Foreign Currency Transactions

The Company has international operations resulting from current and prior year acquisitions. The countries in which the Company has a subsidiary or branch office are Serbia, Sweden, and Portugal. The functional currency for all of these foreign entities is the U.S. dollar in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 830-30, Foreign Currency Matters-Translation of Financial Statements. Foreign currency transactions that increase or decrease expected functional currency cash flows is a foreign currency transaction gain or loss that are included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction is included in determining net income for the period in which the transaction is settled.

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Business Combinations

The Company applies the provisions of FASB ASC Topic No. 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period that exists up to twelve months from the acquisition date, the Company may record adjustments to the tangible and specifically identifiable intangible assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the reporting period in which the adjusted amounts are determined. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations. 

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as a one-time termination and exit cost pursuant to FASB ASC Topic No. 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the Company’s consolidated statement of operations in the period in which the liability is incurred.

Uncertain income tax positions and tax-related valuation allowances that are acquired in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date, with any adjustments to the preliminary estimates being recorded to goodwill if such adjustments occur within the 12-month measurement period. Subsequent to the end of the measurement period or the Company’s final determination of the value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the consolidated statement of operations, and could have a material impact on results of operations and financial position.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

Fair value is an exit price, representing the amount that would be received upon the sale of an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

• Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

• Level 3 - Unobservable inputs which are supported by little or no market activity.

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The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs. 

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can 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 are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.

As required by FASB ASC Topic No. 350, for goodwill and other intangibles impairment analysis, we utilize fair value measurements which are categorized within Level 3 of the fair value hierarchy.

Significant Concentrations

For the year ended December 31, 2019, one customer, accounting for over 10% of revenues, made up 84% of revenues and 92% of accounts receivable, and one service provider with more than 10% of purchases totaled 10% of accounts payable. For the year ended December 31, 2018, one customer, accounting for over 10% of revenues, made up 81% of revenues and 82% of accounts receivable, and one service provider with more than 10% of purchases totaled 21% of accounts payable.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in one financial institution and are uninsured except for the minimum Federal Deposit Insurance Corporation coverage, and have original maturity dates of three months or less. As of December 31, 2019 and 2018, bank balances totaling approximately $28.0 million and $11.8 million, respectively, were uninsured.

Accounts Receivable and Allowance for Doubtful Accounts

We sell our products worldwide. 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 an allowance for doubtful accounts 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. 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.

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.

Internal 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

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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 December 31, 2019, software has been substantially completed concurrently with the establishment of technological feasibility; accordingly, no costs have been capitalized to date.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable.  They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was an impairment of its Customer Relationships intangible asset in the amount of $0.4 million as of December 31, 2016. 

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, we review 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.

Intangible Assets and Amortization

Amortization expense related to other intangibles acquired in acquisitions is calculated on a straight line basis over two to ten years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.

Derivatives

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, Distinguishing Liabilities from Equity and FASB ASC Topic No. 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.

Going Concern Evaluation

In connection with preparing consolidated financial statements for the year ended December 31, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the historical operating loss and negative cash flow from operating activities trends, including the positive trends occurring in the recent year.  

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued and management believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.

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Revenue Recognition

The Company adopted FASB ASC Topic No. 606, Revenue from Contracts with Customers, as of January 1, 2018, and recognizes the sale of goods and services based on the five step analysis of transactions as provided in Topic 606 which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services.

In our Wireless segment, we transfer software licenses to our customers on a royalty free, non-exclusive, non-transferrable, limited use basis during the term of the agreement. In some instances, we perform customization services to ensure the software operates within our customer’s operating platforms as well as the operating platforms of the mobile devices used by their end customers before transferring the license. Revenue related to these services is recognized at a point in time upon acceptance of the software license by the customer. We also earn usage based revenue on our platforms. Usage based revenue is generated based on active licenses used by our customer’s end customers, the provision of hosting services, revenue share based on media placements on our platform, and use of our Cloud Based services. We recognize our usage based revenue when we have completed our performance obligation and have the right to invoice the customer. This revenue is generally recognized monthly or quarterly. Finally, in this segment, we ratably recognize revenue over the contract period when customers pay in advance of our service delivery.

We also provide consulting services to develop customer specified functionality that are generally not on our software development roadmap. We recognize revenue from our consulting services upon delivery and acceptance by the customer of our software enhancements and upgrades. For certain Wireless segment customers we provide maintenance and technology support services for which the customer pays upfront or as we provide the services. When the customer pays upfront, we record the payments as contract liabilities and recognize revenue ratably over the contract period as this is our stand ready performance obligation that is satisfied ratably over the maintenance and technology services period.

For our Graphics products where we sell off-the-self software products with no customization or post sale technology support services, we recognize revenue at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our resellers. We offer a 30 day return option to our customers; a return reserve is established at the time revenue is recorded and the reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Product and Services Warranties

Warranty related costs are recorded in our operating expenses as incurred as these costs are immaterial for the products and services we sell.  

Shipping and Handling Costs

We incur shipping and handling costs as part of our Graphics software sales. These costs are treated as fulfillment costs and are expensed as incurred.

Principal and Agent Considerations

We own the Intellectual Property and retain ownership when we license our customized software solutions for use by our Wireless segment customers. We are a principal in these transactions and as such we recognize our Wireless segment revenue on a gross basis.

We sell our Graphics software products directly to end consumers as well as through our distributors and re-sellers. We are a principal in these transactions as we bear the inventory risk, customers (or customer’s end users) view us as the primary obligor responsible for supporting the software products, and we have full discretion in establishing the prices for our graphics software products. As a principal we record our Graphics revenues on a gross basis.

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Sales Incentives

For our Graphics sales, 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 as required by FASB ASC Topic No. 605-50, Revenue Recognition-Customer Payments and Incentives. We use historical redemption rates to estimate the cost of customer incentives. Total sales incentives were $16 thousand and $0.1 million for the years ended December 31, 2019 and 2018, respectively.

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The Company adopted ASU 2014-09 as of January 1, 2018 utilizing the modified retrospective approach. This adoption did not have a material impact on our consolidated financial statements. See Note 11 for further details.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The Company adopted the FASB ASC Topic No. 842, Leases, and related amendments, as of January 1, 2019, utilizing the modified retrospective approach through a cumulative-effect adjustment to equity. Management elected the package of practical expedients permitted under the transition guidance within the new standard which allowed for the carry forward of the historical lease classification. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $3.1 million as of January 1, 2019, and an adjustment to retained earnings of $0.1 million. The standard did not materially impact the consolidated net income or earnings per share and had no impact on cash flows. See Note 13 for further details.

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

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2. Acquisitions

In December 2018, the Company entered into a definitive agreement to acquire the net assets of ISM Connect, LLC’s Smart Retail product Suite (“Smart Retail”). The transaction closed on January 9, 2019.  

The following table summarizes the consideration paid for the Smart Retail acquisition in 2019 (in thousands):

Fair value of assets acquired	$	9,394
Fair value of liabilities assumed		291
Total purchase price	$	9,103
Components of purchase price:
Cash	$	3,974
Common stock		5,129
Total purchase price	$	9,103

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

Assets:
Costs incurred on projects not complete	$	53
Intangible assets		5,229
Goodwill		4,112
Total assets	$	9,394
Liabilities:
Deferred revenue	$	291
Total liabilities		291
Total purchase price	$	9,103

The purpose of the Smart Retail acquisition was to acquire a new growing and profitable revenue stream while deepening the relationships with our customers. The Smart Retail platform, which the Company now calls ViewSpot, enables wireless carriers and retailers to offer powerful on-screen, interactive device demos that deliver consistent, secure and targeted content that showcase the features of the devices that consumers what to see and learn more about. ViewSpot provides analytics capabilities, which allows customers to gain valuable insights and buying behaviors. The platform was a logical addition to the Company’s existing product line that reaches wireless carriers and provides them with services that can attract and retain customers.

Unaudited pro forma results of operations for the years ended December 31, 2019 and 2018 are included below as if the acquisition occurred on January 1, 2018. This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had Smart Retail been acquired at the beginning of 2018, nor does it purport to represent results of operations for any future periods.

	Year Ended December 31,
	2019		2018
	(in thousands, except per share amounts)
Revenues	$	43,346	$	30,086
Net income (loss)		10,722		(1,421	)
Earnings (loss) per share:
Basic	$	0.31	$	(0.08	)
Diluted	$	0.29	$	(0.08	)

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3. Equipment and Improvements

Equipment and improvements consist of the following (in thousands):

	December 31,
	2019			2018
Computer hardware, software, and equipment	$	9,079		$	14,658
Leasehold improvements		2,808			5,316
Office furniture and fixtures		1,017			962
Construction in progress		494			25
		13,398			20,961
Less accumulated depreciation and amortization		(11,289	)		(20,096	)
Equipment and improvements, net	$	2,109		$	865

Depreciation and amortization expense on equipment and improvements was $0.4 million and $0.5 million for the years ended December 31, 2019 and 2018, respectively.

4. Goodwill and Intangible Assets

The following table sets forth our acquired intangible assets by major asset class as of December 31, 2019 and December 31, 2018 (in thousands, except for useful life data):

		December 31, 2019
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	2,253	$	(687	)	$	1,831	$	—		$	1,831
Customer relationships	3-10		999		2,976		(860	)		3,115		(411	)		2,704
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(51	)		—		—			—
Total		$	1,353	$	5,229	$	(1,636	)	$	4,946	$	(411	)	$	4,535
		December 31, 2018
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	—	$	(125	)	$	140	$	—		$	140
Customer relationships	3-6		999		—		(499	)		500		(411	)		89
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(42	)		9		—			9
Total		$	1,353		—	$	(704	)	$	649	$	(411	)	$	238

Intangible assets amortization expense was $0.9 million and $0.2 million for the years ended December 31, 2019 and 2018, respectively.

F-14

Future amortization expense related to intangible assets as of December 31, 2019 are as follows (in thousands):

Year Ending December 31,
2020	$	907
2021		901
2022		869
2023		345
2024		1,513
Total	$	4,535

Valuation of Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets as required by FASB ASC Topic No. 350, Intangibles-Goodwill and Other.  This statement requires us to periodically assess the impairment of our goodwill and intangible assets, which requires us to make assumptions and judgments regarding the carrying value of these assets. These assets are considered to be impaired if we determine that their carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances:

• a determination that the carrying value of such assets cannot be recovered through undiscounted cash flows;

• loss of legal ownership or title to the assets;

• significant changes in our strategic business objectives and utilization of the assets; or

• the impact of significant negative industry or economic trends.

If the intangible assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the intangible assets exceeds the fair value of the intangible assets. In addition, we base the useful lives and the related amortization expense on our estimate of the useful life of the intangible assets. Due to the numerous variables associated with our judgments and assumptions relating to the carrying value of our intangible assets and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates are subject to uncertainty, and as additional information becomes known, we may change our estimate, in which case, the likelihood of a material change in our reported results would increase. The Company recognized an impairment loss of $0.4 million in the three and twelve months ended December 31, 2016 related to a previously acquired intangible asset.

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. We determined that we did not have any impairment of goodwill at December 31, 2019 and 2018.

5. Debt and Related Party Transactions

Short-term Debt

On February 7, 2017, the Company entered into a short-term secured borrowing arrangement with William W. and Dieva L. Smith (“Smith”) and on February 8, 2017 entered into a short-term secured borrowing arrangement with Steven L. and Monique P. Elfman (“Elfman”) pursuant to which Smith and Elfman each loaned to the Company $1.0 million and the Company issued to each of them a Secured Promissory Note (the “Original Notes”) bearing interest at the rate of 18% per annum. The Original Notes were due on March 24, 2017 and were secured by the Company’s accounts receivable and certain other assets. William W. Smith, Jr. is the Company’s Chairman of the Board, President and Chief Executive Officer, and Steven L. Elfman is a director of the Company. On March 25, 2017, the Company entered into an Amendment to the Original Note issued to Smith that extended the Maturity Date of the Note to June 26, 2017. On March 31, 2017, the Company entered

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into a new short-term secured borrowing arrangement with Elfman for $1.0 million which matured on June 23, 2017.

On June 30, 2017, the Company entered into a new short-term secured borrowing arrangement with each of Smith and Elfman to refinance the prior arrangement with each of them, which matured on June 26, 2017 and June 23, 2017, respectively. Under the new borrowing arrangements, the Company issued to each of Smith and Elfman a new Secured Promissory Note (“Replacement Notes”) with a principal balance of $1.0 million, bearing interest at the rate of 12% per annum, and maturing on September 25, 2017. The maturity date of the Replacement Note entered into with Smith may be extended by up to 180 days upon the mutual consent of the Company and Smith.  Each of the Replacement Notes were secured by the Company’s accounts receivable and certain other assets.

On August 18, 2017, the Company entered into Amendments to the Replacement Notes issued to each of Smith and Elfman, which extended the Maturity Date of the Replacement Notes from September 25, 2017 to January 25, 2018. The amendments did not change any other terms of the Replacement Notes.

On August 23, 2017, the Company entered into a borrowing arrangement with Smith, under which the Company borrowed $0.8 million and issued to Smith a Secured Promissory Note, bearing interest at the rate of 12% per annum, and maturing on January 25, 2018.

On August 24, 2017, the Company entered into a new borrowing arrangement with Andrew Arno (“Arno”), under which the Company borrowed $0.3 million and issued to Arno new Secured Promissory Notes with an aggregate principal balance of $0.3 million, bearing interest at the rate of 12% per annum, and maturing on January 31, 2018. Andrew Arno is a director of the Company.

On January 30, 2018, the Company amended certain of its existing Secured Promissory Notes (the “Notes”) for the sole purpose of extending the relevant maturity dates. The Note dated August 18, 2017 issued to Steven L. Elfman and Monique P. Elfman was amended to extend its maturity date to February 11, 2018 and was subsequently paid in full. The Note dated June 26, 2017 issued to William W. Smith, Jr. and Dieva L. Smith was amended to extend its maturity date to July 25, 2018. The Notes dated August 24, 2017 issued to Next Generation TC FBO Andrew Arno IRA 1663 and Andrew Arno were amended to extend the maturity date of each to July 25, 2018.

As a condition to closing of the private placement offering in March 2018 discussed in Note 6, the following Notes were further amended for the sole purpose of extending the maturity dates of each to March 25, 2020: (i) Secured Promissory Note dated June 26, 2017, issued to William W. Smith and Dieva L. Smith, as amended; (ii) Secured Promissory Note dated August 24, 2017, issued to Next Generation TC FBO Andrew Arno IRA 1663, as amended; and (iii) Secured Promissory Note, dated August 24, 2017 issued to Andrew Arno, as amended.

On September 29, 2017, the Company exchanged shares of the Company’s newly designated Series B 10% Convertible Preferred Stock (“Series B Preferred Stock”) for outstanding short-term indebtedness with a principal amount of $0.8 million owed to Smith and $0.1 million to Arno for 750 and 50 shares, respectively. See Note 6, Equity Transactions, for further details on the Series B Preferred Stock Offering.

Long-term Debt

On September 2, 2016, we entered into a Note and Warrant Purchase Agreement with Unterberg Koller Capital Fund L.P. and William W. and Dieva L. Smith (collectively, the “Investors”), pursuant to which the Company issued and sold to the Investors in a private placement senior subordinated promissory notes in the aggregate principal amount of $4.0 million (the “Notes”). The Company completed the transactions contemplated by the Note and Warrant Purchase Agreement and issued the Notes on September 6, 2016.  The Notes were to mature three years following the issuance date, or September 6, 2019, and bear interest at the rate of 10% of the outstanding principal balance of the Notes, payable quarterly in cash or shares of the Company’s common stock.

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On September 29, 2017, the Company exchanged shares of the Company’s newly designated Series B 10% Convertible Preferred Stock for outstanding long-term indebtedness with a principal amount of $2.0 million owed to Smith for 2,000 of the Series B Preferred Stock. See Note 6, Equity Transactions, for further details on the Series B Preferred Stock Offering.

In November 2018, the $2.0 million Unterberg Koller Note was paid in full, and an extinguishment loss consisting of the unamortized debt discount and issuance costs totaling $0.2 million was recognized.

6.  Equity Transactions

Preferred Stock Offering

On September 29, 2017, the Company entered into a Securities Purchase Agreement with several investors for the issuance and sale (the “Offering”) of 5,500 shares of the Company’s newly designated Series B 10% Convertible Preferred Stock (the “Series B Preferred Stock”) at a stated value of $1,000 per share, for a total purchase price of $5.5 million.  The Series B Preferred Stock is convertible into the Company’s Common Stock at a conversion price of $1.14 per share, which was the closing bid price of the Common Stock on September 28, 2017, or 4,824,562 shares of Common Stock in the aggregate. The holders of Series B Preferred Stock were entitled to receive cumulative dividends out of funds legally available thereof at a rate of ten percent (10%) per annum, payable (i) when and as declared by the Board of Directors, in quarterly installments on March 1, June 1, September 1 and December 1, (ii) upon conversion into Common Stock with respect the Series B Preferred Stock being converted, and (iii) upon redemption of the Series B Preferred Stock by the Company.

In the event that the trading price of the Company’s Common Stock for 20 consecutive trading days (as determined in the Certificate of Designation) exceeds 400% of the then effective Conversion Price of the Series B Preferred Stock (initially set at $1.14), the Company may force conversion of the Series B Preferred Stock into shares of Common Stock or elect to redeem the Series B Preferred Stock for cash. In addition, upon the occurrence of certain triggering events, each holder of Series B Preferred Stock will have the right to require the Company to redeem such holder’s shares for cash equal to the stated value plus accrued and unpaid dividends and liquidated damages, costs, expenses and other amounts due in respect of the Series B Preferred Stock, and with respect to certain other triggering events, each holder will have the right to increase the dividend rate on such holder’s Series B Preferred Stock to twelve percent (12%) while such triggering event is continuing.

In the Offering, the Company raised gross cash proceeds of $2.7 million, and exchanged outstanding indebtedness with a principal amount of $2.8 million owed to Smith (both long and short-term debt) and $0.1 million owed to Arno for 2,750 and 50 shares, respectively. The Offering raised net cash proceeds of $2.5 million (after deducting the placement agent fee and expenses of the Offering).

In connection with the Offering, the Company entered into a Registration Rights Agreement with investors (the “Series B Registration Rights Agreement”) under which the Company agreed to prepare and file a registration statement with the SEC within 30 days after closing of the Series B Transaction for the purpose of registering the resale of shares of common stock issuable upon conversion of the Series B Preferred Stock (the “Conversion Shares”). The Company agreed to use its reasonable best efforts to cause such resale registration statement to be declared effective by the SEC within 90 days after the closing of the Series B Transaction (120 days in the event the registration statement is reviewed by the SEC) and agreed to pay liquidated damages to the Series B Stockholders if such resale registration statement were not to become effective within the applicable time period. The Conversion Shares were included in the registration statement filed in connection with the March Offering, and such registration statement became effective on April 19, 2018, which was later than the deadline specified in the Series B Registration Rights Agreement, resulting in liquidated damage payments of $48 thousand to Series B Stockholders. Certain Series B Stockholders, including without limitation, Smith and Arno, waived their rights to receive such liquidated damage payments.

During the third quarter of 2019, the Company forced conversion of all outstanding Series B Preferred Stock in accordance with its terms.

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Common Stock Offerings

March 2018 Offering

On March 6, 2018, the Company completed the March Offering, wherein a total of 2,857,144 shares of the Company’s common stock were issued at a purchase price of $1.75 per share, for a total purchase price of $5.0 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the offering at an exercise price of $2.17 per share. The March Offering raised net cash proceeds of approximately $4.5 million (after deducting the placement agent fee and expenses of the March Offering). The Company used the net cash proceeds from the March Offering for working capital purposes, to fund required dividend payments, payment of principal and interest payments under short-term borrowing obligations, and payment of interest (but not principal) under long-term borrowing obligations.

The Company engaged Chardan as placement agent for the March Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 8.0% of the gross proceeds of the March Offering, and issued to Chardan a warrant to purchase shares of common stock equal to 3.0% of the number of shares sold in the March Offering (the “Chardan Warrant”). The Chardan Warrant has an exercise price of $2.365 per share, a term of 5.5 years from the closing date of the March Offering, and otherwise has identical terms to the warrants issued to the investors in the March Offering.

Pursuant to the purchase agreement entered in connection with the March Offering (the “March Purchase Agreement”), the Company used its best efforts to cause the conversion of all shares of the Company’s Series B 10% Convertible Preferred Stock (the “Series B Preferred Stock”) into shares of common stock pursuant to the terms of the Company’s Certificate of Designation (the “Certificate of Designation”) with respect to the Series B Preferred Stock. In connection therewith, the Company entered into letter agreements with each of William W. Smith, Jr. (“Smith”) and Andrew Arno (“Arno”), whereby each of Smith and Arno agreed to take certain action to convert the shares of Series B Preferred Stock held by them pursuant to terms outlined in the March Purchase Agreement, and further agreed that the shares of common stock issued upon such conversion shall not be subject to resale registration rights. Each of Smith and Arno completed the conversion of their shares of Series B Preferred Stock in accordance with such letter agreements.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the March Offering, and such registration statement became effective within the time period agreed by the parties to the March Offering.

The Company has outstanding warrants issued pursuant to an agreement entered into on September 6, 2016 with Unterberg Koller Capital Fund L.P. (the “Unterberg Warrant Agreement”). The March Offering caused a Triggering Event as defined in the Unterberg Warrant Agreement, and the warrants were repriced from an exercise price of $2.14 to $2.07. The Triggering Event charges of $11 thousand were recorded to Stockholders’ Equity during the first quarter of 2018.

May 2018 Offering

On May 3, 2018, the Company completed the May Offering, wherein a total of 3,170,000 shares of the Company’s common stock were issued at a purchase price of $2.21 per share, for a total purchase price of approximately $7.0 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the Offering at an exercise price of $2.11 per share. The May Offering raised net cash proceeds of approximately $6.3 million (after deducting the placement agent fee and expenses). The Company used the net cash proceeds from the May Offering for working capital purposes, and to fund required dividend payments, payment of principal and interest payments under short-term borrowing obligations, and payment of interest (but not principal) under long-term borrowing obligations.

The Company engaged Chardan as placement agent for the May Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 7.0% of the gross proceeds of the May Offering. The Company also engaged Roth Capital Partners, LLC (“Roth”) as its financial advisor for

F-18

the May Offering. The Company agreed to pay Roth a cash fee equal to 2.0% of the gross proceeds of the May Offering.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the May Offering, and such registration statement became effective within the time period agreed by the parties to the May Offering.

November 2018 Offering

On November 7, 2018, the Company completed the November Offering, wherein a total of 3,239,785 shares of the Company’s common stock were issued at a purchase price of $2.32 per share, for a total purchase price of approximately $7.5 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the Offering at an exercise price of $2.20 per share.

As part of the November Offering, the previously issued warrant agreements from the March and May 2018 Offerings were amended, which allowed the Company to reclassify them from liability to equity treatment. These warrants were initially accounted for as liabilities under ASC 815-40-25 since the original warrants provided the investors a cash settlement option in the event of a fundamental transaction that was not also provided to the common stockholders. In connection with the November Offering, these warrants were amended to remove the cash settlement option in the event of a fundamental transaction, thereby allowing equity treatment.

The November Offering raised net cash proceeds of approximately $6.9 million (after deducting the placement agent fee and expenses). The Company is using the net cash proceeds for general corporate purposes and repaid certain short and long-term debt obligations of $3.2 million.

The Company engaged Chardan as placement agent for the November Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 6.0% of the gross proceeds of the November Offering. The Company also engaged Roth as its financial advisor for the November Offering. The Company agreed to pay Roth a cash fee equal to 2.0% of the gross proceeds of the November Offering.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the November Offering, and such registration statement became effective within the time period agreed by the parties to the November Offering.

Warrants

The Company issued warrants to purchase shares of Common Stock in connection with a registered direct offering completed in May 2017, March 2018, May 2018 and November 2018. See the prior section under the heading “Common Stock Offering” for additional details regarding the warrants issued in connection with those offerings.

7. Income Taxes

Income (loss) before provision for income taxes was generated from the following sources (in thousands):

	Year Ended December 31,
	2019			2018
Domestic	$	10,833		$	(2,541	)
Foreign		(31	)		(186	)
Total loss before provision for income taxes	$	10,802		$	(2,727	)

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A summary of the income tax expense (benefit) is as follows (in thousands):

	Year Ended December 31,
	2019			2018
Current:
Federal	$	(132	)	$	(265	)
State		7			2
Foreign		108			63
Total current		(17	)		(200	)
Deferred:
Federal		144			265
State		—			—
Foreign		(47	)		(52	)
Total deferred		97			213
Total income tax expense (benefit)	$	80		$	13

A reconciliation of the provision for income taxes to the amount of income tax expense (benefit) that would result from applying the federal statutory rate to the loss before income taxes is as follows:

	Year Ended December 31,
	2019				2018
Federal statutory rate		21.0		%		21.0		%
State tax, net of federal benefit		3.6				3.0
Equity compensation		0.1				(0.7	)
International tax items		0.2				(1.7	)
Foreign taxes		0.6				(0.4	)
State NOL true-up		(6.1	)			(30.4	)
Miscellaneous		0.4				(7.7	)
Effect of change in rate		0.9				(12.6	)
Change in valuation allowance		(19.8	)			29.0
		0.7		%		(0.5	)	%

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The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	Year Ended December 31,
	2019			2018
Deferred income tax assets
Net operating loss carry forwards	$	41,650		$	41,356
Credit carry forwards		3,159			3,292
Fixed assets		373			493
Intangibles		4,679			6,417
Equity-based compensation		308			439
Nondeductible accruals		319			565
Various reserves		209			55
Other		2			107
Valuation allowance		(50,397	)		(52,414	)
Total deferred income taxes - net		302			310
Deferred income tax liabilities
Foreign intangibles		(27	)		(74	)
Unrealized translation gain/loss		(120	)		(4	)
Prepaid expenses		(61	)		(41	)
Total deferred income liabilities		(208	)		(119	)
Net deferred income tax assets	$	94		$	191

The Company has federal and state net operating loss (“NOL”) carryforwards of approximately $158.1 million and $145.9 million, respectively, at December 31, 2019, to reduce future cash payments for income taxes. These federal NOL carryforwards will expire from 2024 through 2037 and state NOL carryforwards will expire 2019 through 2039. The Company also had $0.1 million of alternative minimum tax credit carryforwards with an indefinite life, available to offset regular federal income tax requirements.

The Company has federal and state tax credit carryforwards of approximately $2.5 million and $0.7 million, respectively, at December 31, 2019. These tax credits will begin to expire in 2028.

To the extent that an ownership change has occurred under Internal Revenue Code Sections 382 and 383, the Company’s use of its loss carryforwards and credit carryforwards to offset future taxable income may be limited.

At December 31, 2019 and 2018, the Company had unrecognized tax benefits, including interest and penalties, of approximately $0.4 million.

The Company’s gross unrecognized tax benefits as of December 31, 2019 and 2018 and the changes in those balances are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Beginning balance	$	428	$	428
Increases (decreases) in tax positions for the    current year		—		—
Increases (decreases) in tax positions for the    prior year		—		—
Gross unrecognized tax benefits, ending balance	$	428	$	428

F-21

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements 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. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company was in a five-year historical cumulative loss as of the end of fiscal 2018. These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of the four sources of taxable income as of December 31, 2019 (as described above), and after consideration of the Company’s cumulative loss position as of December 31, 2019, the Company recorded a valuation allowance related to its U.S.-based deferred tax assets of $50.4 million at December 31, 2019. The valuation allowance on deferred tax assets decreased by $2.0 million and $0.5 million in 2019 and 2018, respectively.

We recognized interest and penalties accrued related to unrecognized tax benefits in income tax expense.  During 2019 and 2018, we recognized $0 in interest and penalties. The cumulative interest and penalties at December 31, 2019 and 2018 were $0. We do not anticipate any material changes to unrecognized tax benefits within the next twelve months that will affect the effective tax rate.

The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Currently there are no audits in process or pending from Federal or state tax authorities. State income tax returns are subject to examination for a period of three to four years after filing. As of December 31, 2019, the company had no outstanding tax audits. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. As of December 31, 2019, a current estimate of the range of changes that may occur within the next twelve months cannot be made due to the uncertainty regarding the timing of these events.

For financial reporting purposes, income (loss) before provision for income taxes for our foreign subsidiaries was $(31) thousand and $(186) thousand for the years ended December 31, 2019 and 2018, respectively. We do not provide for U.S. taxes on our unremitted earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S.

As a part of the provisions of the 2017 Act, the corporate alternative minimum tax (“AMT”) has been repealed for tax years beginning after December 31, 2017. Taxpayers with AMT credit carryforwards that have not yet been used may claim a refund in future years for those credit. Since the AMT credit will now be fully refundable regardless of whether there is a future income tax liability before AMT credits, the benefit of the AMT credit will be realized in the future. Accordingly, a valuation allowance established against AMT credit carryforward

F-22

balance is no longer necessary and a benefit has been recognized with respect to a $0.5 million AMT credit carryforward balance that was generated with 2011 net operating loss carrybacks. The Company has opted to reflect the balance as part of deferred tax asset balance. With the filing of the 2019 federal tax return, the Company will receive a refund of $133thousand of the balance and this amount has been classified as a federal income tax receivable.

The 2017 Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. The current income related to the GILTI inclusion in 2019 is less than $59 thousand.

8. Earnings Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share.  Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents, and are only included in the calculation of diluted earnings per share when their effect is dilutive.

	Year Ended December 31,
	2019			2018
	(in thousands, except per share amounts)
Numerator:
Net income (loss)	$	10,722		$	(2,740	)
Dividends paid to preferred stockholders		(119	)		(404	)
Net income (loss) available to common stockholders	$	10,603		$	(3,144	)
Denominator:
Weighted average shares outstanding - basic		34,513			22,322
Potential common shares - options (treasury    stock method)		2,478			—
Weighted average shares outstanding - diluted		36,991			22,322
Shares excluded due to an exercise price greater than    weighted average stock price for the period		88			1,081
Earnings (loss) per common share:
Basic	$	0.31		$	(0.14	)
Diluted	$	0.29		$	(0.14	)

9. Employee Benefit Plans

The Company offers its employees participation in a 401(k) plan, in which the Company matches the employee contributions at a rate of 20%, subject to a vesting schedule. Total employer contributions amounted to $0.2 million and $0.1 million for the years ended December 31, 2019 and 2018, respectively.

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10. Stock-Based Compensation

Stock Plans

On June 18, 2015, our stockholders approved the 2015 Omnibus Equity Incentive Plan (“2015 OEIP”) and a subsequent amendment to the 2015 OEIP to increase the number of shares reserved thereunder was approved by our stockholders on June 14, 2018.  The 2015 OEIP replaced the 2005 Stock Option / Stock Issuance Plan (“2005 Plan”) which was due to expire on July 28, 2015. All outstanding options under the 2005 Plan remain outstanding, but no new grants will be made under the 2005 Plan. The maximum number of shares of the Company’s common stock available for issuance over the term of the 2015 OEIP may not exceed 4,625,000 shares.

The 2015 OEIP provides for the issuance of full value awards (restricted stock, performance stock, dividend equivalent right or restricted stock units) and partial value awards (stock options or stock appreciation rights) to employees, non-employee members of the board and consultants. Any full value award settled in shares will be debited as 1.2 shares, and partial value awards settled in shares will be debited as 1.0 shares against the share reserve. The exercise price per share for stock option grants 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. Stock options may be exercisable immediately 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 stock options terminate and all vested stock options may be exercised within a period of 90 days following termination. In general, stock options expire ten years from the date of grant. Restricted stock is valued using the closing stock price on the date of the grant. The total value is expensed over the vesting period of 12 to 48 months.

Employee Stock Purchase Plan

The Company has a shareholder approved employee stock purchase plan (“ESPP”), under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning and end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s compensation and employees may not purchase more than the lesser of $25,000 of stock, or 250 shares, for any purchase period. Additionally, no more than 250,000 shares in the aggregate may be purchased under the plan.

Stock Compensation Expense

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Valuation of Stock Option and Restricted Stock Awards

The assumptions used to compute the share-based compensation costs for the stock options granted during the years ended December 31, 2019 and 2018, using the Black-Scholes option pricing model, were as follows:

	Year Ended December 31,
	2019			2018
Weighted average grant date fair value of    stock options	$	1.84		$	1.56
Assumptions
Risk-free interest rate (weighted average)		2.36	%		2.90	%
Expected dividend yield		—			—
Weighted average expected life (years)		6.2			6.2
Volatility (weighted average)		78.7	%		73.8	%
Forfeiture rate		26.0	%		26.6	%

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The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The Company assumed no dividend yield because it does not expect to pay dividends for the foreseeable future. The weighted average expected life is the vesting period for those options granted during that period. The average volatility is based on the actual historical volatility of our common stock. The forfeiture rate was based on modified employee turnover.

Valuation of ESPP

The fair values are estimated at the beginning of each offering period using a Black-Scholes valuation model that uses the assumptions noted in the following table. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. Expected volatility was based on the historical volatility on the day of grant. Following is a schedule of the shares purchased, the fair value per share, and the Black-Scholes model assumptions for each offering period:

	September30,			March 31,			September30,			March 31,
Offering Period Ended	2019			2019			2018			2018
Shares purchased for offering    period		2,195			2,112			1,843			3,250
Fair value per share	$	2.28		$	1.07		$	0.96		$	0.75
Assumptions
Risk-free interest rate (average)		1.84	%		2.44	%		2.29	%		1.92	%
Expected dividend yield		—			—			—			—
Weighted average expected life    (years)		0.5			0.5			0.5			0.5
Volatility (average)		86.3	%		51.7	%		54.3	%		81.4	%

Compensation Costs

Non-cash stock-based compensation expenses related to stock options, restricted stock grants and the ESPP were recorded in the financial statements as follows (in thousands):

	Year Ended December 31,
	2019		2018
Selling and marketing	$	247	$	112
Research and development		278		207
General and administrative		969		616
Total non-cash stock compensation expense	$	1,494	$	935

F-25

Stock Options

A summary of the Company’s stock options outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019 and the activity during the years ended herein are as follows (in thousands except per share amounts):

	Shares			Weighted Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
Outstanding as of December 31, 2017		137		$	5.71			$	7
(114 options exercisable at a weighted average    exercise price of $6.18)
Granted		30		$	2.32			$	—
Exercised		—		$	—			$	—
Canceled / expired		(9	)	$	8.96			$	—
Outstanding as of December 31, 2018		158		$	4.88		5.9	$	—
(121 options exercisable at a weighted average    exercise price of $5.64)
Granted		65		$	2.65			$	—
Exercised		(13	)	$	3.81			$	28
Canceled / expired		(13	)	$	7.81			$	22
Outstanding as of December 31, 2019		197		$	4.03		6.3	$	171
Exercisable as of December 31, 2019		112		$	5.16		4.1	$	35
Vested and expected to vest at December 31, 2019		163		$	3.67		6.0	$	133

As of December 31, 2019, there was $2.9 million of unrecognized compensation costs related to non-vested stock options and restricted stock granted under the Plans. At December 31, 2019, there were 1.3 million and 0 shares available for future grants under the 2015 OEIP and 2005 Plan, respectively.

Restricted Stock Awards

A summary of the Company’s restricted stock awards outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019, and the activity during years ended therein, are as follows (in thousands):

				Weightedaverage
	Number			grant date
	of shares			fair value
Unvested at December 31, 2017		167			3.49
Granted		1,125			1.92
Vested		(283	)		2.52
Canceled and forfeited		(2	)		0.83
Unvested at December 31, 2018		1,007			2.01
Granted		1,250			2.00
Vested		(673	)		2.06
Canceled and forfeited		(25	)		1.97
Unvested at December 31, 2019		1,559			1.98

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11. Revenues

Adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

We adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective approach. We have applied the new standard to all open contracts at the date of initial application. The cumulative adjustment to the opening accumulated deficit balance at January 1, 2018 was immaterial.

Revenue Recognition

We recognize sales of goods and services based on the five-step analysis of transactions as provided in Topic 606. For all contracts with customers, we first identify the contract which usually is established when a contract is fully executed by each party and consideration is expected to be received. Next, we identify the performance obligations in the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. We then determine the transaction price in the arrangement and allocate the transaction price, if necessary, to each performance obligation identified in the contract. The allocation of the transaction price to the performance obligations are based on the relative standalone selling prices for the goods and services contained in a particular performance obligation. The transaction price is adjusted for the Company’s estimate of variable consideration which may include certain incentives and discounts, product returns, distributor fees, and storage fees. We evaluate the total amount of variable consideration expected to be earned by using the expected value method, as we believe this method represents the most appropriate estimate for this consideration, based on historical service trends, the individual contract considerations and our best judgment at the time. We include estimates of variable consideration in revenues only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We also generate the majority of our revenue on usage based fees which are variable and depend entirely on our customers use of perpetual licenses, transactions processed on our hosted environment, advertisement placements on our service platform, and activity on our cloud based service platform.

We have made accounting policy elections to exclude all taxes by governmental authorities from the measurement of the transaction price, and since our standard payment terms are less than one year, we have elected the practical expedient not to assess whether a contract has a significant financing component.

Performance Obligations

CommSuite and Netwise Revenue

In our Wireless segment, we sell our software solutions to major wireless network and cable operators. For our Netwise and CommSuite products, we may provide customization services for a fee to ensure our software solution can operate on their operating platforms and the operating platform of the mobile devices of our customer’s end users. In addition, since the mobile device OEMs change their operating systems regularly, we provide maintenance services to ensure utility of the software license is not diminished for our customers. We consider the customization services, the software license, and maintenance services to maintain the utility of the software license for our customers as a single performance obligation. We provide the perpetual license on a royalty free basis. Revenue related to customization services, if charged, is recognized at a point in time upon delivery and acceptance of the customized software license by the customer.

To support the Netwise and CommSuite solutions, we also provide customers with our hosted environment and ASP services for the duration of the license term. We consider the provision of these services to be a separate performance obligation. In these transactions, the total consideration expected is variable. We do not estimate when the variable consideration will be recognized because the License Usage Based Fees, Hosting Service Fees and ASP Advertising Fees relate specifically to our efforts to transfer the services for a specified period (month or quarter) which are distinct from the services provided in other specified periods. Our customer’s or the customer’s end customer’s usage occurs within the defined period, and the variability of our license, hosting and ASP fees is resolved in the specified period, and such fees earned are not subject to adjustment based on the activity in other periods.

F-27

We earn revenue from these services on a fixed fee per perpetual license usage on our hosted environment and advertising revenue share for advertisements placed by our customers on our platform.  The usage fees are not earned until we transfer our software license to our customers. We recognize theusage based fees when we are entitled to the consideration earned for the distinct service period based on our customer’s usage of our licenses, hosting services, and ASP advertising platform (“hosted environment usage fees”).

SafePath Cloud Based Services

Our SafePath solution is a hybrid Software as a Service offering. We consider the provision of the perpetual license and the cloud based platform as a single performance obligation. We provide the perpetual license on a royalty free basis and earn revenue based on a fixed fee usage of our cloud based services. We recognize the usage based fees when we are entitled to the consideration earned for the distinct service period based on our customer’s usage of our cloud based services.

ViewSpot Cloud Based Services

During the first quarter of 2019, we acquired the Smart Retail contract asset from ISM Connect, LLC, later branded as ViewSpot. ViewSpot product is a cloud based platform that its Mobile Network Operator customers use to display its promotional content to mobile devices being sold in its retail outlets. Using this solution, the MNOs have the ability to promote specific mobile devices in targeted geographic retail locations and monitor the efficacy of the promotions and the mobile device user’s behavior to the targeted advertising. We sell a royalty free license, consulting services to configure the advertising content so that it can be displayed on targeted mobile devices, and cloud-based services to serve the advertising content and capture end consumer’s behavior on the mobile device. ViewSpot services depend on a significant level of integration, interdependency, and interrelation between the on-premise applications, consulting services and the cloud services, and are accounted for together as a single performance obligation. The ViewSpot services are sold on a fixed fee basis to our customers based on pre-defined purchase order. We receive upfront payments from customers for services to be provided under our ViewSpot arrangements. Since we are obligated to provide the required services over the contract period, the revenue is recognized over time. The advance receipts are deferred and subsequently recognized ratably over the contract period.

From time to time, we also provide consulting services to configure ad hoc targeted promotional content for our customers upon request. These requests are driven by our customers’ marketing initiatives and tend to be short term “bursts” of activity. We recognize revenues from these ad hoc services at a point in time which is upon delivery of the configured promotional content to the cloud platform.

Consulting Services and Other

In our Wireless segment, we have developed a roadmap for adding new functionality to our products to extend the product lifecycle and expand our customer’s use of the product on their networks. From time to time, we enter into consulting services arrangements with our customers to develop incremental functionality not included on our developmental roadmap. We earn revenue from our consulting services that is recognized at the time of delivery of the software when the services have been completed and control has been transferred to our customers.

We also enter into arrangements with certain customers to provide technology support services beyond the initial warranty period.  Technology support services include e-mail and telephone support and unspecified rights to bug fixes available on a when-and-if available basis. We consider the provision of such technology support services to be a separate performance obligation. We generally bill in advance for a fixed term and recognize revenue from these arrangements ratably over the contractual term as we perform our services.

F-28

Graphics Revenue

We sell our off-the-shelf Graphics software products directly to end users as well as through our distribution and reseller channel partners. These products require no customization and minimal post-sale technology support services. We recognize revenue from Software sales at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our distributor and resellers partners. In some instances, we will consign our software products to a distributor or reseller. In those instances, we recognize revenue when the end consumer takes control of the product.

We offer a 30 day return policy to our customers; a return reserve is established at the time revenue is recorded.  We review available retail channel information and make a determination of a return provision for sales made to distributors and retailers based on current channel inventory levels and historical return patterns. The return reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Unearned Revenue

Unearned revenue represents amounts billed to customers for which revenue has not been recognized. Unearned revenue primarily consists of the unearned portion of monthly, quarterly and annually billed service fees and prepayments made by customers for a future period. We recognize revenue upon transfer of control.

Costs to Obtain a Customer Contract

We generally pay sales commissions to our sales force, which are incremental and recoverable costs of acquiring contracts. In most instances, sales commissions are only paid when we earn usage based fees on the contracts. The commission obligation is established each quarter based on the usage based fees earned. The commission obligation is not adjusted by future usage based fees earned, that is each period is discrete from the other. As a result of the structure of the commission plan, we record the commission expense when the commission obligation is determined, which is generally quarterly.

In the second quarter of 2019, we introduced an amended and restated sales commission plan that incentivizes and recognizes the efforts of eligible participants to earn commissions on future revenue generated on new contracts, sale of a new product to an existing contract, or sale of a product to a different group within an existing customer. The sales commissions are tiered based on the opportunity size. Sales commissions paid under this amended sales commission plan are incremental contract acquisition costs, and accordingly are recorded as a deferred contract asset that is amortized on a straight-line basis over the average contract life of the new, renewed and modified contract.

Costs to Fulfill a Customer Contract

We incur costs to fulfill obligations under a contract. We recognize these costs as we fulfill our performance obligation and recognize revenue. Where we provide services and earn revenue over the contract term based on usage of our platforms, we recognize the associated fulfillment costs as they are incurred and as usage based revenue is recognized.

F-29

Disaggregation of Revenues

We disaggregate revenue by our Wireless and Graphics products.

Revenues on a disaggregated basis are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Wireless:
Hosted environment usage fees	$	19,517	$	18,889
Cloud based usage fees		20,011		3,327
Consulting services and other		3,076		2,258
Total wireless	$	42,604	$	24,474
Graphics:
Software		742		1,811
Total revenues	$	43,346	$	26,285

12. Commitments and Contingencies

Pennsylvania Opportunity Grant Program

On September 26, 2011, we received $1.0 million from the State of Pennsylvania to help fund our agreement to start-up a new facility. The grant carried with it an obligation, or commitment, to employ at least 232 people within a three-year time period that ended on December 31, 2013. We received an extension of time to meet this employment commitment by April 30, 2016.  The grant contained conditions that would require us to return a pro-rata amount of the monies received if we failed to meet these conditions. As such, the monies had been recorded as a liability in the accrued liabilities line item on the balance sheet until we are irrevocably entitled to retain the monies, or until it is determined that we need to return a portion or all of the monies received. On June 27, 2016, we received a letter from the State of Pennsylvania requesting reimbursement of $0.3 million and said we earned the remaining $0.7 million of the original $1.0 million grant. On September 19, 2016, we entered into a Settlement and Release Agreement with the Commonwealth of Pennsylvania, acting by and through the Department of Community and Economic Development to repay $0.3 million of the original $1.0 million grant. Per the agreement, the total amount due of $0.3 million is at 0% interest and is payable in twenty equal quarterly installments commencing on January 31, 2017 and ending on October 31, 2021.

Litigation

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows, or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows, or financial position in a particular period.

F-30

Other Contingent Contractual Obligations

During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it may be required to make payments in connection with certain transactions. These include: intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale, and/or license of Company products; indemnities to various lessors in connection with facility leases for certain claims arising from use of such facility or under such lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; 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. In addition, the Company has made contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company 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 the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets.

13. Leases

The Company leases office space and equipment, and certain office space is subleased. Management determines if a contract is a lease at the inception of the arrangement and reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised.

Leases with an initial term of greater than twelve months are recorded on the consolidated balance sheet. Lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease contracts generally do not provide a readily determinable implicit rate. For these contracts, the estimated incremental borrowing rate is based on information available at the inception of the lease.

During the second quarter of 2019, the Company extended the lease term on its Pittsburgh, PA headquarters, which resulted in a net increase in right-of-use assets and lease liabilities of approximately $3.0 million. Additionally, an office lease in Aliso Viejo, CA commenced during the second quarter, which increased right-of-use assets and lease liabilities by approximately $1.5 million.

During the fourth quarter of 2019, the company extended the lease term on its Belgrade, Serbia office space, which resulted in a net increase in right-to-use assets and lease liabilities of approximately $0.2 million.

Operating lease cost consists of the following (in thousands):

	For the Year Ended December 31, 2019
Lease cost, gross	$	2,076
Sublease income		(603	)
Total lease cost, net	$	1,473

Operating lease assets and liabilities are summarized as follows (in thousands):

	As of December 31, 2019
Right-of-use assets	$	6,464
Current lease liabilities	$	1,221
Long-term lease liabilities		5,774
Total lease liabilities	$	6,995

F-31

The maturity of operating lease liabilities is presented in the following table (in thousands):

	As of December 31, 2019
2020	$	1,656
2021		1,633
2022		1,376
2023		1,388
2024		1,182
Thereafter		1,159
Total lease payments		8,394
Less imputed interest		(1,399	)
Present value of lease liabilities	$	6,995

14. Segment, Customer Concentration and Geographical Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has historically had two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility: Wireless and Graphics. Wireless primarily includes our SafePath®, CommSuite®, and ViewSpot® family of products. Graphics includes our consumer-based products: Moho®, MotionArtist®, Rebelle, PhotoDonut and StuffIt®, Poser® (through June 2019), and Clip Studio® (through April 2018).

With the more recent divestitures of Poser and Clip Studio, the Graphics business has become insignificant in relation to total consolidated revenues and no longer qualifies as a reportable operating segment. Therefore, the Company will disclose only one reportable operating segment, Wireless, and the following disclosures reflect this change.

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.

The following table presents the Wireless revenues by product (in thousands):

	Year Ended December 31,
	2019		2018
CommSuite	$	18,713	$	17,760
SafePath		17,782		3,327
ViewSpot		4,229		—
Netwise		1,642		3,104
Other		238		283
Total wireless revenues	$	42,604	$	24,474

The following table presents the quarterly revenues generated by the Wireless segment (in thousands):

	Year Ended December 31,
	2019		2018
Quarter 1	$	8,172	$	4,816
Quarter 2		10,637		6,506
Quarter 3		11,614		6,283
Quarter 4		12,181		6,869
Total wireless revenues	$	42,604	$	24,474

F-32

Customer Concentration Information

Revenues generated from our sales to Sprint and their respective affiliates in the Wireless business segment accounted for 84% and 81% of the Company’s total revenues for fiscal years 2019 and 2018, respectively. This customer comprised 92% and 82% of our accounts receivable as of December 31, 2019 and 2018, respectively. This major customer could reduce their orders of our products in favor of a competitor's product or for any other reason. The loss of this major customer or decisions by a significant customer to substantially reduce purchases could have a material adverse effect on our business.

Geographical Information

During the years ended December 31, 2019 and 2018, the Company operated in three geographic locations: the Americas, EMEA (Europe, the Middle East, and Africa), and Asia Pacific. Revenues attributed to the geographic location of the customer’s bill-to address were as follows (in thousands):

	Year Ended December 31,
	2019		2018
Americas	$	43,236	$	26,054
EMEA		67		90
Asia Pacific		43		141
Total revenues	$	43,346	$	26,285

15. Restructuring

Restructuring charges in 2019 and 2018 related to one-time employee termination costs.

The activity in our restructuring liability for the year ended December 31, 2019 (in thousands) follows:

	Balance at December 31, 2018		Provision, net			Usage			Transfer			Balance at December 31, 2019
Lease/rental terminations	$	495		(11	)		—			(484	)	$	—
One-time employee termination    benefits		114		194			(308	)		—			—
Total	$	609	$	183		$	(308	)	$	(484	)	$	—

On January 1, 2019, $0.5 million of reserves associated with lease terminations was offset with the right-of-use assets upon the adoption of ASC 842.

16. Gain on Sale of Software Product

In June 2019, pursuant to an Asset Purchase Agreement entered earlier in the same month, the Company sold certain assets of its Poser 3D animation software product to Bondware, Inc. for $500 thousand, of which $350 thousand was paid at closing and the remainder to be paid in quarterly installments over three years. The Company recorded a gain on the transaction in the amount of approximately $483 thousand, which is presented as Other Income in the consolidated statements of operations.

F-33

17. Subsequent Events

The Company evaluates and discloses subsequent events as required by ASC Topic No. 855, Subsequent Events. The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.

On February 12, 2020, the Company acquired the operator business of Circle Media Labs Inc. (“Circle”), a Delaware corporation, pursuant to a certain Asset Purchase Agreement (the “Purchase Agreement”) dated as of the same date by and between the Company and Circle. Pursuant to the terms of the Purchase Agreement, the Company acquired certain assets, including customer contracts and a perpetual source code license, for a purchase price of $13.5 million in cash. The Company has engaged a third party firm to value the acquired assets, and the results of such valuation are not available as of the date of issuance of the financial statements.

During February 2020, certain holders of common stock warrants exercised approximately 1.0 million warrants resulting in cash proceeds of approximately $2.2 million.

18. Quarterly Financial Data (Unaudited)

The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. Summarized quarterly data for fiscal 2019 and 2018 are as follows (in thousands, except per share data):

	Year Ended December 31, 2019
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Selected quarterly financial data:
Revenues	$	8,432	$	10,854	$	11,782	$	12,278
Gross profit	$	7,516	$	9,880	$	10,771	$	11,252
Operating income	$	62	$	2,932	$	3,480	$	3,631
Net income	$	48	$	3,436	$	3,567	$	3,671
Net earnings per share - basic (1)	$	—	$	0.11	$	0.10	$	0.10
Weighted average shares outstanding - basic		31,297		32,068		36,094		38,501
Net earnings per share - diluted (1)	$	—	$	0.10	$	0.09	$	0.09
Weighted average shares outstanding - diluted		31,323		35,308		39,472		41,767

	Year Ended December 31, 2018
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Selected quarterly financial data:
Revenues	$	5,463		$	6,945		$	6,525		$	7,352
Gross profit	$	4,154		$	5,829		$	5,546		$	6,423
Operating income (loss)	$	(2,021	)	$	74		$	55		$	678
Net income (loss)	$	(2,381	)	$	(2,177	)	$	(983	)	$	2,801
Net earnings (loss) per share - basic (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - basic		15,299			21,888			25,020			26,925
Net earnings (loss) per share - diluted (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - diluted		15,299			21,888			25,020			27,395

(1) Basic and diluted net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal the total for the year.

F-34

EX-4.1

EXHIBIT 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

Description of Securities

The following description of our securities is a summary and does not purport to be complete. It issubject to and qualified in its entirety by reference to our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and our Amended and Restated Bylaws (the “Bylaws”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part. We encourage you toread our Certificate of Incorporation and our Bylaws for additional information.

Authorized Capital Stock

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and 5,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), the rights and preferences of which may be established from time to time by our board of directors. As of March 9, 2020, we had 39,484,420 shares of Common Stock outstanding and no shares of Preferred Stock outstanding.

Common Stock

Voting. For all matters submitted to a vote of stockholders, each holder of Common Stock is entitled to one vote for each share registered in his or her name on our books. Our Common Stock does not have cumulative voting rights. As a result, holders of a majority of our outstanding Common Stock can elect all of the directors who are up for election in a particular year.

Dividends. If our board of directors declares a dividend, holders of Common Stock will receive payments from our funds that are legally available to pay dividends. However, this dividend right is subject to any preferential dividend rights we may grant to the persons who hold preferred stock, if any is outstanding.

Liquidation and Dissolution. If we are liquidated or dissolve, the holders of our Common Stock will be entitled to the right to receive ratably, all of the assets and funds that remain after we pay our liabilities and any amounts we may owe to the persons who hold preferred stock, if any is outstanding.

Other Rights and Restrictions. Holders of our Common Stock do not have preemptive or subscription rights, and they have no right to convert their Common Stock into any other securities. Our Common Stock is not subject to redemption by us. The rights, preferences and privileges of common stockholders are subject to the rights of the stockholders of any series of preferred stock which we may designate in the future. Our Certificate of Incorporation and our Bylaws do not restrict the ability of a holder of Common Stock to transfer his or her shares of Common Stock.

Listing. Our Common Stock is listed on the NASDAQ Capital Market under the symbol “SMSI.”

Transfer Agent and Registrar. The transfer agent and registrar for our Common Stock is Computershare Inc.

Delaware Law Affecting Business Combinations. We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware. Subject to certain exceptions, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of the corporation’s voting stock.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

1. Smith Micro Software LLC Belgrade, a Serbia corporation.

2. Smith Micro Software, Asia Limited, a Hong Kong corporation.

3. Core Mobility, Inc., a Delaware corporation.

4. Smith Micro Software, Unipessoal LDA, a Portuguese corporation.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Nos. 333-129132, 333-149222, 333-169671, 333-179764, 333-202964, 333-205924 and 333-226914) on Form S-8 and Registration Statements (Nos. 333-134611, 333-198728, 333-213194, 333-213778, 333-224143, 333-225389, 333-226918, 333-228519 and 333-230154) on Form S-3 of Smith Micro Software, Inc. and its subsidiaries (collectively, the “Company”) of our reports dated March 13, 2020, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Smith Micro Software, Inc. and subsidiaries for the year ended December 31, 2019.

/s/ SingerLewak LLP

Denver, Colorado

March 13, 2020

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 W. Smith, Jr., certify that:

1. I have reviewed this annual report on Form 10-K 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: March 13, 2020	/s/ William W. Smith, Jr.
	William W. Smith, Jr.
	President and Chief Executive Officer
	(Principal 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, Timothy C. Huffmyer, certify that:

1. I have reviewed this annual report on Form 10-K 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: March 13, 2020	/s/ Timothy C. Huffmyer
	Timothy C. Huffmyer
	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 Annual Report of Smith Micro Software, Inc. on Form 10-K for the period ended December 31, 2019, 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.

Date: March 13, 2020	/s/ William W. Smith, Jr.
	William W. Smith, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: March 13, 2020	/s/ Timothy C. Huffmyer
	Timothy C. Huffmyer
	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.

XML

Leases - Summary of Operating Lease Assets and Liabilities (Detail) $ in Thousands	Dec. 31, 2019 USD ($)
Assets And Liabilities Lessee [Abstract]
Right-of-use assets	$ 6,464
Current lease liabilities	1,221
Long-term lease liabilities	5,774
Total lease liabilities	$ 6,995

XML

Stock-Based Compensation - Summary of Outstanding Stock Options and Related Activity (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Outstanding Shares, beginning balance	158	137
Granted Shares	65	30
Exercised Shares	(13)
Canceled / expired Shares	(13)	(9)
Outstanding Shares, ending balance	197	158
Exercisable Shares	112	121	114
Vested and expected to vest Shares	163
Outstanding Weighted Avg. Exercise Price, beginning balance	$ 4.88	$ 5.71
Granted, Weighted Avg. Exercise Price	2.65	2.32
Exercised, Weighted Avg. Exercise Price	3.81
Canceled / expired, Weighted Avg. Exercise Price	7.81	8.96
Outstanding Weighted Avg. Exercise Price, ending balance	4.03	4.88
Exercisable, Weighted Avg. Exercise Price	5.16	$ 5.64	$ 6.18
Vested and expected to vest, Weighted Avg. Exercise Price	$ 3.67
Outstanding Wtd. Avg. Remaining Contractual Life	6 years 3 months 18 days	5 years 10 months 24 days
Exercisable, Wtd. Avg. Remaining Contractual Life	4 years 1 month 6 days
Vested and expected to vest, Wtd. Avg. Remaining Contractual Life	6 years
Aggregate Intrinsic Value, beginning balance		$ 7
Aggregate Intrinsic Value, Exercised	$ 28
Aggregate Intrinsic Value, Canceled / Expired	22
Aggregate Intrinsic Value, ending balance	171
Exercisable, Aggregate Intrinsic Value	35
Vested and expected to vest, Aggregate Intrinsic Value	$ 133

XML

Revenues - Schedule of Revenues on Disaggregated Basis (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disaggregation Of Revenue [Line Items]
Revenues	$ 12,278	$ 11,782	$ 10,854	$ 8,432	$ 7,352	$ 6,525	$ 6,945	$ 5,463	$ 43,346	$ 26,285
Wireless [Member]
Disaggregation Of Revenue [Line Items]
Revenues	$ 12,181	$ 11,614	$ 10,637	$ 8,172	$ 6,869	$ 6,283	$ 6,506	$ 4,816	42,604	24,474
Wireless [Member] | Hosted Environment Usage Fees [Member]
Disaggregation Of Revenue [Line Items]
Revenues									19,517	18,889
Wireless [Member] | Cloud Based Usage Fees [Member]
Disaggregation Of Revenue [Line Items]
Revenues									20,011	3,327
Wireless [Member] | Consulting Services and Other [Member]
Disaggregation Of Revenue [Line Items]
Revenues									3,076	2,258
Graphics [Member] | Software [Member]
Disaggregation Of Revenue [Line Items]
Revenues									$ 742	$ 1,811

XML

Equity Transactions - Additional Information (Detail) - USD ($)							12 Months Ended
	Nov. 07, 2018	May 03, 2018	Apr. 19, 2018	Mar. 06, 2018	Sep. 29, 2017	Sep. 06, 2016	Dec. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Repayment of short and long-term debt obligations	$ 3,200,000
Common Stock [Member]
Class of Stock [Line Items]
Common stock, issued and sold to investors								9,267,000
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, conversion price per share					$ 1.14
Convertible preferred stock, terms of conversion							In the event that the trading price of the Company’s Common Stock for 20 consecutive trading days (as determined in the Certificate of Designation) exceeds 400% of the then effective Conversion Price of the Series B Preferred Stock (initially set at $1.14), the Company may force conversion of the Series B Preferred Stock into shares of Common Stock or elect to redeem the Series B Preferred Stock for cash.
Preferred stock threshold consecutive trading days					20 days
Trading price of common stock exceeds conversion price, percentage					400.00%
Convertible preferred stock, right to increase in dividend percentage upon stock price trigger					12.00%
Series B Preferred Stock [Member] | Smith Warrant [Member]
Class of Stock [Line Items]
Preferred stock, shares converted into common stock					2,750
Series B Preferred Stock [Member] | Andrew Arno [Member]
Class of Stock [Line Items]
Preferred stock, shares converted into common stock					50
Offering [Member]
Class of Stock [Line Items]
Gross proceeds from issuance of preferred stock					$ 2,700,000
Net proceeds from issuance of preferred stock					2,500,000
Preferred stock liquidation damage payments			$ 48,000
Offering [Member] | Smith Warrant [Member]
Class of Stock [Line Items]
Debt instrument, principal amount					2,800,000
Offering [Member] | Andrew Arno [Member]
Class of Stock [Line Items]
Debt instrument, principal amount					$ 100,000
Offering [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, issued and sold to investors					5,500
Preferred stock, dividend rate					10.00%
Preferred stock, price per share					$ 1,000
Preferred stock, issued and sold to investors, purchase price					$ 5,500,000
Preferred stock, conversion price per share					$ 1.14
Preferred stock, shares converted into common stock					4,824,562
Preferred stock, dividend payment terms							The holders of Series B Preferred Stock were entitled to receive cumulative dividends out of funds legally available thereof at a rate of ten percent (10%) per annum, payable (i) when and as declared by the Board of Directors, in quarterly installments on March 1, June 1, September 1 and December 1, (ii) upon conversion into Common Stock with respect the Series B Preferred Stock being converted, and (iii) upon redemption of the Series B Preferred Stock by the Company.
March 2018 Offering [Member]
Class of Stock [Line Items]
Gross proceeds before deducting transaction fees and other expenses				$ 5,000,000
Cash proceeds from issuance of common stock, net of offering costs				$ 4,500,000
March 2018 Offering [Member] | Common Stock [Member]
Class of Stock [Line Items]
Common stock, issued and sold to investors				2,857,144
Common stock, price per share				$ 1.75
Common stock exercise price				2.17
March 2018 Offering [Member] | Warrant [Member]
Class of Stock [Line Items]
Triggering event charges						$ 11,000
March 2018 Offering [Member] | Unterberg Koller Capital Fund L P [Member] | Maximum [Member]
Class of Stock [Line Items]
Common stock exercise price						$ 2.14
March 2018 Offering [Member] | Unterberg Koller Capital Fund L P [Member] | Minimum [Member]
Class of Stock [Line Items]
Common stock exercise price						$ 2.07
Chardan Capital Markets, LLC [Member]
Class of Stock [Line Items]
Common stock exercise price				$ 2.365
Percentage of gross proceeds of offering	6.00%	7.00%		8.00%
Percentage of warrants to purchase shares of common stock on number of shares sold				3.00%
Warrants term				5 years 6 months
May 2018 Offering [Member]
Class of Stock [Line Items]
Gross proceeds before deducting transaction fees and other expenses		$ 7,000,000
Cash proceeds from issuance of common stock, net of offering costs		$ 6,300,000
May 2018 Offering [Member] | Roth Capital Partners, LLC [Member]
Class of Stock [Line Items]
Percentage of gross proceeds of offering		2.00%
May 2018 Offering [Member] | Common Stock [Member]
Class of Stock [Line Items]
Common stock, issued and sold to investors		3,170,000
Common stock, price per share		$ 2.21
Common stock exercise price		$ 2.11
November 2018 Offering [Member]
Class of Stock [Line Items]
Gross proceeds before deducting transaction fees and other expenses	$ 7,500,000
Cash proceeds from issuance of common stock, net of offering costs	$ 6,900,000
November 2018 Offering [Member] | Roth Capital Partners, LLC [Member]
Class of Stock [Line Items]
Percentage of gross proceeds of offering	2.00%
November 2018 Offering [Member] | Common Stock [Member]
Class of Stock [Line Items]
Common stock, issued and sold to investors	3,239,785
Common stock, price per share	$ 2.32
Common stock exercise price	$ 2.20

XML

Goodwill and Intangible Assets - Schedule of Acquired Intangible Assets by Major Asset Class (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross	$ 1,353	$ 1,353
Additions	5,229
Accumulated amortization	(1,636)	(704)
Net book value before impairment	4,946	649
Impairment charge	(411)	(411)
Net book value	4,535	238
Purchased Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	265	265
Additions	2,253
Accumulated amortization	(687)	(125)
Net book value before impairment	1,831	140
Net book value	1,831	140
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	999	999
Additions	2,976
Accumulated amortization	(860)	(499)
Net book value before impairment	3,115	500
Impairment charge	(411)	(411)
Net book value	$ 2,704	$ 89
Trademarks/Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	2 years	2 years
Gross	$ 38	$ 38
Accumulated amortization	$ (38)	$ (38)
Non-Compete [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	3 years	3 years
Gross	$ 51	$ 51
Accumulated amortization	$ (51)	(42)
Net book value before impairment		9
Net book value		$ 9
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	2 years
Minimum [Member] | Purchased Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	4 years	4 years
Minimum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	3 years	3 years
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	10 years
Maximum [Member] | Purchased Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	6 years	6 years
Maximum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life	10 years	6 years

XML

Gain on Sale of Software Product

12 Months Ended

Dec. 31, 2019

Discontinued Operations And Disposal Groups [Abstract]

Gain on Sale of Software Product

16. Gain on Sale of Software Product

In June 2019, pursuant to an Asset Purchase Agreement entered earlier in the same month, the Company sold certain assets of its Poser 3D animation software product to Bondware, Inc. for $500 thousand, of which $350 thousand was paid at closing and the remainder to be paid in quarterly installments over three years. The Company recorded a gain on the transaction in the amount of approximately $483 thousand, which is presented as Other Income in the consolidated statements of operations.

XML

Equipment and Improvements

12 Months Ended

Dec. 31, 2019

Property Plant And Equipment [Abstract]

Equipment and Improvements

3. Equipment and Improvements

Equipment and improvements consist of the following (in thousands):

	December 31,
	2019			2018
Computer hardware, software, and equipment	$	9,079		$	14,658
Leasehold improvements		2,808			5,316
Office furniture and fixtures		1,017			962
Construction in progress		494			25
		13,398			20,961
Less accumulated depreciation and amortization		(11,289	)		(20,096	)
Equipment and improvements, net	$	2,109		$	865

Depreciation and amortization expense on equipment and improvements was $0.4 million and $0.5 million for the years ended December 31, 2019 and 2018, respectively.

XML

Acquisitions (Tables)

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Summary of Consideration Paid for Acquisitions

The following table summarizes the consideration paid for the Smart Retail acquisition in 2019 (in thousands):

Fair value of assets acquired	$	9,394
Fair value of liabilities assumed		291
Total purchase price	$	9,103
Components of purchase price:
Cash	$	3,974
Common stock		5,129
Total purchase price	$	9,103

Summary of Allocation of Purchase Price

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

Assets:
Costs incurred on projects not complete	$	53
Intangible assets		5,229
Goodwill		4,112
Total assets	$	9,394
Liabilities:
Deferred revenue	$	291
Total liabilities		291
Total purchase price	$	9,103

Summary of Unaudited Proforma Results of Operation

Unaudited pro forma results of operations for the years ended December 31, 2019 and 2018 are included below as if the acquisition occurred on January 1, 2018. This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had Smart Retail been acquired at the beginning of 2018, nor does it purport to represent results of operations for any future periods.

	Year Ended December 31,
	2019		2018
	(in thousands, except per share amounts)
Revenues	$	43,346	$	30,086
Net income (loss)		10,722		(1,421	)
Earnings (loss) per share:
Basic	$	0.31	$	(0.08	)
Diluted	$	0.29	$	(0.08	)

XML

Document and Entity Information - USD ($)

12 Months Ended

Dec. 31, 2019

Mar. 09, 2020

Jun. 30, 2019

Cover [Abstract]

Document Type

10-K

Amendment Flag

false

Document Period End Date

Dec. 31, 2019

Document Fiscal Year Focus

2019

Document Fiscal Period Focus

FY

Trading Symbol

SMSI

Entity Registrant Name

SMITH MICRO SOFTWARE, INC.

Entity Central Index Key

0000948708

Current Fiscal Year End Date

--12-31

Entity Well-known Seasoned Issuer

No

Entity Current Reporting Status

Yes

Entity Voluntary Filers

No

Entity Filer Category

Accelerated Filer

Entity Shell Company

false

Entity Small Business

true

Entity Emerging Growth Company

false

Entity Tax Identification Number

33-0029027

Entity File Number

01-35525

Entity Incorporation, State or Country Code

DE

Entity Address, Address Line One

5800 Corporate Drive

Entity Address, City or Town

Pittsburgh

Entity Address, State or Province

PA

Entity Address, Postal Zip Code

15237

City Area Code

412

Local Phone Number

837-5300

Security Exchange Name

NASDAQ

Title of 12(b) Security

Common Stock, par value $0.001 per share

Document Annual Report

true

Document Transition Report

false

Entity Interactive Data Current

Yes

Entity Common Stock, Shares Outstanding

39,484,420

Entity Public Float

$ 80,684,962

Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed under the Securities Exchange Act of 1934 are incorporated by reference in Part III of this report.

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Comprehensive Deficit [Member]
BALANCE at Dec. 31, 2017	$ 4,567		$ 14	$ 237,486	$ (232,933)
BALANCE, Shares at Dec. 31, 2017		6,000
BALANCE, Shares at Dec. 31, 2017			14,269,000
Non-cash compensation recognized on stock options and ESPP	36			36
Restricted stock grants, net of cancellations	899		$ 1	898
Restricted stock grants, net of cancellations, shares			1,124,000
Cancellation of shares for payment of withholding tax	(209)			(209)
Cancellation of shares for payment of withholding tax, shares			(94,000)
Employee stock purchase plan	5			5
Employee stock purchase plan, shares			5,000
Preferred shares converted to common shares			$ 4	(4)
Preferred shares converted to common shares, shares		(5,000)	3,645,000
Common shares issued in stock offering, net of offering costs	17,600		$ 9	17,591
Common shares issued in stock offering, net offering costs, shares			9,267,000
Issuance of warrants in stock offering	(6,792)			(6,792)
Exercise of common stock warrants, shares			26,000
Reclassification of warrants previously classified as liabilities to equity	7,604			7,604
Warrant repricing				11	(11)
Canadian tax adjustments from prior period	(2)				(2)
Preferred stock dividends	(404)				(404)
Comprehensive loss	(2,741)				(2,741)
BALANCE at Dec. 31, 2018	$ 20,563		$ 28	256,626	(236,091)
BALANCE, Shares at Dec. 31, 2018	1,345	1,000
BALANCE, Shares at Dec. 31, 2018	28,241,129		28,242,000
Non-cash compensation recognized on stock options and ESPP	$ 43			43
Restricted stock grants, net of cancellations	1,451		$ 1	1,450
Restricted stock grants, net of cancellations, shares			1,225,000
Cancellation of shares for payment of withholding tax	(701)			(701)
Cancellation of shares for payment of withholding tax, shares			(214,000)
Employee stock purchase plan	10			10
Employee stock purchase plan, shares			4,000
Preferred shares converted to common shares			$ 1	(1)
Preferred shares converted to common shares, shares		(1,000)	1,180,000
Common shares issued in stock offering, net of offering costs	(14)			(14)
Common shares issued in connection with Smart Retail acquisition, net	5,129		$ 3	5,126
Common shares issued in connection, with Smart Retail acquisition, net, shares			2,699,000
Exercise of common stock warrants	11,457		$ 5	11,452
Exercise of common stock warrants, shares			5,327,000
Exercise of stock options	$ 50			50
Exercise of stock options, shares	13,000		13,000
Preferred stock dividends	$ (119)				(119)
Cumulative effect of adoption of ASC 842	93				93
Comprehensive loss	10,722				10,722
BALANCE at Dec. 31, 2019	$ 48,684		$ 38	$ 274,041	$ (225,395)
BALANCE, Shares at Dec. 31, 2019	0
BALANCE, Shares at Dec. 31, 2019	38,475,084		38,476,000

XML

Organization, Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail)		12 Months Ended
	Jan. 01, 2019 USD ($)	Dec. 31, 2019 USD ($) Customer ServiceProvider Institution	Dec. 31, 2018 USD ($) Customer ServiceProvider	Dec. 31, 2016 USD ($)
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of customers concentrated | Customer		1	1
Number of service providers concentrated | ServiceProvider		1	1
Financial institutions to held securities | Institution		1
Cash and cash equivalents original maturity dates		Three months or less
Bank balances		$ 28,000,000	$ 11,800,000
Costs capitalized		$ 0
Substantial doubt about going concern, management's evaluation		In connection with preparing consolidated financial statements for the year ended December 31, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued. The Company considered the historical operating loss and negative cash flow from operating activities trends, including the positive trends occurring in the recent year. The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued and management believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.
Net lease assets		$ 6,464,000
Lease liabilities		6,995,000
Adjustment to retained earnings		93,000
ASC 842 [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Net lease assets	$ 3,100,000
Lease liabilities	3,100,000
Adjustment to retained earnings	$ 100,000
Graphics [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Total sales incentives		$ 16,000	$ 100,000
Customer Relationships Intangible Asset [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Asset impairment charges				$ 400,000
Customer Concentration Risk [Member] | Revenues [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Concentration percentage		84.00%	81.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Concentration percentage		92.00%	82.00%
Supplier concentration risk [Member] | Accounts payable [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Concentration percentage		10.00%	21.00%
Minimum [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets		3 years
Intangible assets and amortization, useful life		2 years
Minimum [Member] | Customer Concentration Risk [Member] | Revenues [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Concentration percentage		10.00%	10.00%
Minimum [Member] | Supplier concentration risk [Member] | Purchase [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Concentration percentage		10.00%	10.00%
Maximum [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of the assets		7 years
Intangible assets and amortization, useful life		10 years

XML

Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Summary of Operating Lease Cost

Operating lease cost consists of the following (in thousands):

	For the Year Ended December 31, 2019
Lease cost, gross	$	2,076
Sublease income		(603	)
Total lease cost, net	$	1,473

Summary of Operating Lease Assets and Liabilities

Operating lease assets and liabilities are summarized as follows (in thousands):

	As of December 31, 2019
Right-of-use assets	$	6,464
Current lease liabilities	$	1,221
Long-term lease liabilities		5,774
Total lease liabilities	$	6,995

Summary of Maturity of Operating Lease Liabilities

The maturity of operating lease liabilities is presented in the following table (in thousands):

	As of December 31, 2019
2020	$	1,656
2021		1,633
2022		1,376
2023		1,388
2024		1,182
Thereafter		1,159
Total lease payments		8,394
Less imputed interest		(1,399	)
Present value of lease liabilities	$	6,995

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Pennsylvania Opportunity Grant Program

On September 26, 2011, we received $1.0 million from the State of Pennsylvania to help fund our agreement to start-up a new facility. The grant carried with it an obligation, or commitment, to employ at least 232 people within a three-year time period that ended on December 31, 2013. We received an extension of time to meet this employment commitment by April 30, 2016.  The grant contained conditions that would require us to return a pro-rata amount of the monies received if we failed to meet these conditions. As such, the monies had been recorded as a liability in the accrued liabilities line item on the balance sheet until we are irrevocably entitled to retain the monies, or until it is determined that we need to return a portion or all of the monies received. On June 27, 2016, we received a letter from the State of Pennsylvania requesting reimbursement of $0.3 million and said we earned the remaining $0.7 million of the original $1.0 million grant. On September 19, 2016, we entered into a Settlement and Release Agreement with the Commonwealth of Pennsylvania, acting by and through the Department of Community and Economic Development to repay $0.3 million of the original $1.0 million grant. Per the agreement, the total amount due of $0.3 million is at 0% interest and is payable in twenty equal quarterly installments commencing on January 31, 2017 and ending on October 31, 2021.

Litigation

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows, or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows, or financial position in a particular period.

Other Contingent Contractual Obligations

During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it may be required to make payments in connection with certain transactions. These include: intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale, and/or license of Company products; indemnities to various lessors in connection with facility leases for certain claims arising from use of such facility or under such lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; 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. In addition, the Company has made contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company 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 the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets.

XML

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

4. Goodwill and Intangible Assets

The following table sets forth our acquired intangible assets by major asset class as of December 31, 2019 and December 31, 2018 (in thousands, except for useful life data):

		December 31, 2019
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	2,253	$	(687	)	$	1,831	$	—		$	1,831
Customer relationships	3-10		999		2,976		(860	)		3,115		(411	)		2,704
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(51	)		—		—			—
Total		$	1,353	$	5,229	$	(1,636	)	$	4,946	$	(411	)	$	4,535
		December 31, 2018
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	—	$	(125	)	$	140	$	—		$	140
Customer relationships	3-6		999		—		(499	)		500		(411	)		89
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(42	)		9		—			9
Total		$	1,353		—	$	(704	)	$	649	$	(411	)	$	238

Intangible assets amortization expense was $0.9 million and $0.2 million for the years ended December 31, 2019 and 2018, respectively.

Future amortization expense related to intangible assets as of December 31, 2019 are as follows (in thousands):

Year Ending December 31,
2020	$	907
2021		901
2022		869
2023		345
2024		1,513
Total	$	4,535

Valuation of Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets as required by FASB ASC Topic No. 350, Intangibles-Goodwill and Other.  This statement requires us to periodically assess the impairment of our goodwill and intangible assets, which requires us to make assumptions and judgments regarding the carrying value of these assets. These assets are considered to be impaired if we determine that their carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances:

• a determination that the carrying value of such assets cannot be recovered through undiscounted cash flows;

• loss of legal ownership or title to the assets;

• significant changes in our strategic business objectives and utilization of the assets; or

• the impact of significant negative industry or economic trends.

If the intangible assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the intangible assets exceeds the fair value of the intangible assets. In addition, we base the useful lives and the related amortization expense on our estimate of the useful life of the intangible assets. Due to the numerous variables associated with our judgments and assumptions relating to the carrying value of our intangible assets and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates are subject to uncertainty, and as additional information becomes known, we may change our estimate, in which case, the likelihood of a material change in our reported results would increase. The Company recognized an impairment loss of $0.4 million in the three and twelve months ended December 31, 2016 related to a previously acquired intangible asset.

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. We determined that we did not have any impairment of goodwill at December 31, 2019 and 2018.

XML

Earnings Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

8. Earnings Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share.  Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents, and are only included in the calculation of diluted earnings per share when their effect is dilutive.

	Year Ended December 31,
	2019			2018
	(in thousands, except per share amounts)
Numerator:
Net income (loss)	$	10,722		$	(2,740	)
Dividends paid to preferred stockholders		(119	)		(404	)
Net income (loss) available to common stockholders	$	10,603		$	(3,144	)
Denominator:
Weighted average shares outstanding - basic		34,513			22,322
Potential common shares - options (treasury    stock method)		2,478			—
Weighted average shares outstanding - diluted		36,991			22,322
Shares excluded due to an exercise price greater than    weighted average stock price for the period		88			1,081
Earnings (loss) per common share:
Basic	$	0.31		$	(0.14	)
Diluted	$	0.29		$	(0.14	)

XML

Restructuring - Additional Information (Detail) - USD ($) $ in Thousands	Jan. 01, 2019	Dec. 31, 2018
Restructuring Cost and Reserve [Line Items]
Reserves associated with lease terminations		$ 609
Lease Terminations [Member]
Restructuring Cost and Reserve [Line Items]
Reserves associated with lease terminations		$ 495
Lease Terminations [Member] | ASC 842 [Member]
Restructuring Cost and Reserve [Line Items]
Reserves associated with lease terminations	$ 500

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Segment, Customer Concentration and Geographical Information - Wireless Revenues by Product (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue from External Customer [Line Items]
Total revenues	$ 12,278	$ 11,782	$ 10,854	$ 8,432	$ 7,352	$ 6,525	$ 6,945	$ 5,463	$ 43,346	$ 26,285
Wireless [Member]
Revenue from External Customer [Line Items]
Total revenues	$ 12,181	$ 11,614	$ 10,637	$ 8,172	$ 6,869	$ 6,283	$ 6,506	$ 4,816	42,604	24,474
Wireless [Member] | CommSuite [Member]
Revenue from External Customer [Line Items]
Total revenues									18,713	17,760
Wireless [Member] | SafePath [Member]
Revenue from External Customer [Line Items]
Total revenues									17,782	3,327
Wireless [Member] | ViewSpot [Member]
Revenue from External Customer [Line Items]
Total revenues									4,229
Wireless [Member] | Netwise [Member]
Revenue from External Customer [Line Items]
Total revenues									1,642	3,104
Wireless [Member] | Other [Member]
Revenue from External Customer [Line Items]
Total revenues									$ 238	$ 283

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Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating Loss Carryforwards [Line Items]
Alternative minimum tax credit carryforwards	$ 100,000
Tax credit carryforwards, Expire year	2028
Unrecognized tax benefits	$ 428,000	$ 428,000	$ 428,000
Cumulative loss period	5 years
Valuation allowance	$ 50,397,000	52,414,000
Increase (decrease) in valuation allowance of deferred tax assets	(2,000,000)	(500,000)
Interest and penalties	0	0
Cumulative interest and penalties	0	0
Outstanding tax audit	0
Income (loss) before provision for income taxes for foreign subsidiaries	(31,000)	$ (186,000)
Alternative minimum tax credit carryforwards	500,000
Amount of income tax refund classified as federal income tax receivable	133,000
Maximum [Member]
Operating Loss Carryforwards [Line Items]
Income related to GILTI	59,000
Federal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	$ 158,100,000
Net operating loss carryforwards, expiry terms	Federal NOL carryforwards will expire from 2024 through 2037
Tax credit carryforwards	$ 2,500,000
State [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	$ 145,900,000
Net operating loss carryforwards, expiry terms	State NOL carryforwards will expire 2019 through 2039
Tax credit carryforwards	$ 700,000
Federal income tax returns subject to examination description	State income tax returns are subject to examination for a period of three to four years after filing

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2019	Jun. 18, 2015
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares available for issuance under plan	250,000
Percentage of market value	85.00%
Percentage of employee's payroll deductions limited to employee's compensation	10.00%
Maximum Stock value of shares purchased by employees if one thousand shares purchased	$ 25,000
Maximum number of shares that employee can purchase each period	250
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs related to non-vested awards granted	$ 2,900,000
2015 Omnibus Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
1995 Stock option expiry date	Jul. 28, 2015
Maximum number of shares available for issuance under plan		4,625,000
Number of shares available for future grants	1,300,000
2015 Omnibus Equity Incentive Plan [Member] | Full Value Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award settled against shares	1.2
2015 Omnibus Equity Incentive Plan [Member] | Partial Value Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award settled against shares	1.0
2015 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock vesting period	4 years
Stock option expiration period	10 years
2015 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock vesting period	48 months
Vested stock options exercised period following termination	90 days
2015 Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock vesting period	12 months
2005 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future grants	0

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Summarized Quarterly Information

Summarized quarterly data for fiscal 2019 and 2018 are as follows (in thousands, except per share data):

	Year Ended December 31, 2019
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Selected quarterly financial data:
Revenues	$	8,432	$	10,854	$	11,782	$	12,278
Gross profit	$	7,516	$	9,880	$	10,771	$	11,252
Operating income	$	62	$	2,932	$	3,480	$	3,631
Net income	$	48	$	3,436	$	3,567	$	3,671
Net earnings per share - basic (1)	$	—	$	0.11	$	0.10	$	0.10
Weighted average shares outstanding - basic		31,297		32,068		36,094		38,501
Net earnings per share - diluted (1)	$	—	$	0.10	$	0.09	$	0.09
Weighted average shares outstanding - diluted		31,323		35,308		39,472		41,767

	Year Ended December 31, 2018
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Selected quarterly financial data:
Revenues	$	5,463		$	6,945		$	6,525		$	7,352
Gross profit	$	4,154		$	5,829		$	5,546		$	6,423
Operating income (loss)	$	(2,021	)	$	74		$	55		$	678
Net income (loss)	$	(2,381	)	$	(2,177	)	$	(983	)	$	2,801
Net earnings (loss) per share - basic (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - basic		15,299			21,888			25,020			26,925
Net earnings (loss) per share - diluted (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - diluted		15,299			21,888			25,020			27,395

(1) Basic and diluted net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal the total for the year.

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Revenues (Tables)

12 Months Ended

Dec. 31, 2019

Revenue From Contract With Customer [Abstract]

Schedule of Revenues on Disaggregated Basis

Revenues on a disaggregated basis are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Wireless:
Hosted environment usage fees	$	19,517	$	18,889
Cloud based usage fees		20,011		3,327
Consulting services and other		3,076		2,258
Total wireless	$	42,604	$	24,474
Graphics:
Software		742		1,811
Total revenues	$	43,346	$	26,285

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Debt and Related Party Transactions

12 Months Ended

Dec. 31, 2019

Debt And Related Party Transactions [Abstract]

Debt and Related Party Transactions

5. Debt and Related Party Transactions

Short-term Debt

On February 7, 2017, the Company entered into a short-term secured borrowing arrangement with William W. and Dieva L. Smith (“Smith”) and on February 8, 2017 entered into a short-term secured borrowing arrangement with Steven L. and Monique P. Elfman (“Elfman”) pursuant to which Smith and Elfman each loaned to the Company $1.0 million and the Company issued to each of them a Secured Promissory Note (the “Original Notes”) bearing interest at the rate of 18% per annum. The Original Notes were due on March 24, 2017 and were secured by the Company’s accounts receivable and certain other assets. William W. Smith, Jr. is the Company’s Chairman of the Board, President and Chief Executive Officer, and Steven L. Elfman is a director of the Company. On March 25, 2017, the Company entered into an Amendment to the Original Note issued to Smith that extended the Maturity Date of the Note to June 26, 2017. On March 31, 2017, the Company entered into a new short-term secured borrowing arrangement with Elfman for $1.0 million which matured on June 23, 2017.    

On June 30, 2017, the Company entered into a new short-term secured borrowing arrangement with each of Smith and Elfman to refinance the prior arrangement with each of them, which matured on June 26, 2017 and June 23, 2017, respectively. Under the new borrowing arrangements, the Company issued to each of Smith and Elfman a new Secured Promissory Note (“Replacement Notes”) with a principal balance of $1.0 million, bearing interest at the rate of 12% per annum, and maturing on September 25, 2017. The maturity date of the Replacement Note entered into with Smith may be extended by up to 180 days upon the mutual consent of the Company and Smith.  Each of the Replacement Notes were secured by the Company’s accounts receivable and certain other assets.

On August 18, 2017, the Company entered into Amendments to the Replacement Notes issued to each of Smith and Elfman, which extended the Maturity Date of the Replacement Notes from September 25, 2017 to January 25, 2018. The amendments did not change any other terms of the Replacement Notes.

On August 23, 2017, the Company entered into a borrowing arrangement with Smith, under which the Company borrowed $0.8 million and issued to Smith a Secured Promissory Note, bearing interest at the rate of 12% per annum, and maturing on January 25, 2018.

On August 24, 2017, the Company entered into a new borrowing arrangement with Andrew Arno (“Arno”), under which the Company borrowed $0.3 million and issued to Arno new Secured Promissory Notes with an aggregate principal balance of $0.3 million, bearing interest at the rate of 12% per annum, and maturing on January 31, 2018. Andrew Arno is a director of the Company.

On January 30, 2018, the Company amended certain of its existing Secured Promissory Notes (the “Notes”) for the sole purpose of extending the relevant maturity dates. The Note dated August 18, 2017 issued to Steven L. Elfman and Monique P. Elfman was amended to extend its maturity date to February 11, 2018 and was subsequently paid in full. The Note dated June 26, 2017 issued to William W. Smith, Jr. and Dieva L. Smith was amended to extend its maturity date to July 25, 2018. The Notes dated August 24, 2017 issued to Next Generation TC FBO Andrew Arno IRA 1663 and Andrew Arno were amended to extend the maturity date of each to July 25, 2018.

As a condition to closing of the private placement offering in March 2018 discussed in Note 6, the following Notes were further amended for the sole purpose of extending the maturity dates of each to March 25, 2020: (i) Secured Promissory Note dated June 26, 2017, issued to William W. Smith and Dieva L. Smith, as amended; (ii) Secured Promissory Note dated August 24, 2017, issued to Next Generation TC FBO Andrew Arno IRA 1663, as amended; and (iii) Secured Promissory Note, dated August 24, 2017 issued to Andrew Arno, as amended.

On September 29, 2017, the Company exchanged shares of the Company’s newly designated Series B 10% Convertible Preferred Stock (“Series B Preferred Stock”) for outstanding short-term indebtedness with a principal amount of $0.8 million owed to Smith and $0.1 million to Arno for 750 and 50 shares, respectively. See Note 6, Equity Transactions, for further details on the Series B Preferred Stock Offering.

Long-term Debt

On September 2, 2016, we entered into a Note and Warrant Purchase Agreement with Unterberg Koller Capital Fund L.P. and William W. and Dieva L. Smith (collectively, the “Investors”), pursuant to which the Company issued and sold to the Investors in a private placement senior subordinated promissory notes in the aggregate principal amount of $4.0 million (the “Notes”). The Company completed the transactions contemplated by the Note and Warrant Purchase Agreement and issued the Notes on September 6, 2016.  The Notes were to mature three years following the issuance date, or September 6, 2019, and bear interest at the rate of 10% of the outstanding principal balance of the Notes, payable quarterly in cash or shares of the Company’s common stock.

On September 29, 2017, the Company exchanged shares of the Company’s newly designated Series B 10% Convertible Preferred Stock for outstanding long-term indebtedness with a principal amount of $2.0 million owed to Smith for 2,000 of the Series B Preferred Stock. See Note 6, Equity Transactions, for further details on the Series B Preferred Stock Offering.

In November 2018, the $2.0 million Unterberg Koller Note was paid in full, and an extinguishment loss consisting of the unamortized debt discount and issuance costs totaling $0.2 million was recognized.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

9. Employee Benefit Plans

The Company offers its employees participation in a 401(k) plan, in which the Company matches the employee contributions at a rate of 20%, subject to a vesting schedule. Total employer contributions amounted to $0.2 million and $0.1 million for the years ended December 31, 2019 and 2018, respectively.

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Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

13. Leases

The Company leases office space and equipment, and certain office space is subleased. Management determines if a contract is a lease at the inception of the arrangement and reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised.

Leases with an initial term of greater than twelve months are recorded on the consolidated balance sheet. Lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease contracts generally do not provide a readily determinable implicit rate. For these contracts, the estimated incremental borrowing rate is based on information available at the inception of the lease.

During the second quarter of 2019, the Company extended the lease term on its Pittsburgh, PA headquarters, which resulted in a net increase in right-of-use assets and lease liabilities of approximately $3.0 million. Additionally, an office lease in Aliso Viejo, CA commenced during the second quarter, which increased right-of-use assets and lease liabilities by approximately $1.5 million.

During the fourth quarter of 2019, the company extended the lease term on its Belgrade, Serbia office space, which resulted in a net increase in right-to-use assets and lease liabilities of approximately $0.2 million.

Operating lease cost consists of the following (in thousands):

	For the Year Ended December 31, 2019
Lease cost, gross	$	2,076
Sublease income		(603	)
Total lease cost, net	$	1,473

Operating lease assets and liabilities are summarized as follows (in thousands):

	As of December 31, 2019
Right-of-use assets	$	6,464
Current lease liabilities	$	1,221
Long-term lease liabilities		5,774
Total lease liabilities	$	6,995

The maturity of operating lease liabilities is presented in the following table (in thousands):

	As of December 31, 2019
2020	$	1,656
2021		1,633
2022		1,376
2023		1,388
2024		1,182
Thereafter		1,159
Total lease payments		8,394
Less imputed interest		(1,399	)
Present value of lease liabilities	$	6,995

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Quarterly Financial Data (Unaudited) - Summarized Quarterly Information (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 12,278	$ 11,782	$ 10,854	$ 8,432	$ 7,352	$ 6,525	$ 6,945	$ 5,463	$ 43,346	$ 26,285
Gross profit	11,252	10,771	9,880	7,516	6,423	5,546	5,829	4,154	39,419	21,952
Operating income (loss)	3,631	3,480	2,932	62	678	55	74	(2,021)	10,105	(1,214)
Net income (loss)	$ 3,671	$ 3,567	$ 3,436	$ 48	$ 2,801	$ (983)	$ (2,177)	$ (2,381)	$ 10,722	$ (2,740)
Net earnings (loss) per share - basic	$ 0.10	$ 0.10	$ 0.11		$ 0.10	$ (0.04)	$ (0.10)	$ (0.16)	$ 0.31	$ (0.14)
Weighted average shares outstanding - basic	38,501	36,094	32,068	31,297	26,925	25,020	21,888	15,299	34,513	22,322
Net earnings (loss) per share - diluted	$ 0.09	$ 0.09	$ 0.10		$ 0.10	$ (0.04)	$ (0.10)	$ (0.16)	$ 0.29	$ (0.14)
Weighted average shares outstanding - diluted	41,767	39,472	35,308	31,323	27,395	25,020	21,888	15,299	36,991	22,322

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Restructuring - Activity in Restructuring Liability Accounts (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Restructuring Cost and Reserve [Line Items]
Beginning Balance	$ 609
Provision, net	183
Usage	(308)
Transfer	(484)
Lease/Rental Terminations [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance	495
Provision, net	(11)
Transfer	(484)
One-Time Employee Termination Benefits [Member]
Restructuring Cost and Reserve [Line Items]
Beginning Balance	114
Provision, net	194
Usage	$ (308)

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Segment, Customer Concentration and Geographical Information - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2019 Business_Unit Location	Dec. 31, 2018 Location
Revenue, Major Customer [Line Items]
Number of primary business units | Business_Unit	1
Number of geographic locations | Location	3	3
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Revenue, Major Customer [Line Items]
Concentration percentage	92.00%	82.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Sprint and Fast Spring [Member]
Revenue, Major Customer [Line Items]
Concentration percentage	92.00%	82.00%
Customer Concentration Risk [Member] | Revenues [Member] | Sprint and Affiliates [Member] | Wireless [Member]
Revenue, Major Customer [Line Items]
Concentration percentage	84.00%	81.00%

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Income Taxes - Gross Unrecognized Tax Benefits Changes in Balances (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Beginning balance	$ 428	$ 428
Increases (decreases) in tax positions for the prior year	0	0
Gross unrecognized tax benefits, ending balance	$ 428	$ 428

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Stock-Based Compensation - Assumptions Used to Compute Share-Based Compensation Costs for Stock Options Granted (Detail) - $ / shares	6 Months Ended				12 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Weighted average grant date fair value of stock options					$ 1.84	$ 1.56
Assumptions
Risk-free interest rate (weighted average)	1.84%	2.44%	2.29%	1.92%	2.36%	2.90%
Weighted average expected life (years)	6 months	6 months	6 months	6 months	6 years 2 months 12 days	6 years 2 months 12 days
Volatility (weighted average)	86.30%	51.70%	54.30%	81.40%	78.70%	73.80%
Forfeiture rate					26.00%	26.60%

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Stock-Based Compensation - Summary of Outstanding Stock Options and Related Activity (Parenthetical) (Detail) - $ / shares shares in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Exercisable, options	112	121	114
Exercisable, weighted average exercise price	$ 5.16	$ 5.64	$ 6.18

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Commitments and Contingencies - Additional Information (Detail) $ in Millions		12 Months Ended
	Sep. 19, 2016 USD ($) Installment	Dec. 31, 2019	Dec. 31, 2013 Number_Of_People	Jun. 27, 2016 USD ($)	Sep. 26, 2011 USD ($)
Leases [Abstract]
Amount received to start-up new facility	$ 1.0				$ 1.0
Minimum number of people to be employed | Number_Of_People			232
Time period to meet employment commitment			3 years
New deadline to meet employment commitment		Apr. 30, 2016
Funds to be repaid under the agreement	$ 0.3
Interest rate of funds under the agreement	0.00%
Number of equal quarterly installments | Installment	20
Grant earned under agreement				$ 0.7

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Leases - Summary of Maturity of Operating Lease Liabilities (Detail) $ in Thousands	Dec. 31, 2019 USD ($)
Operating Lease Liabilities Payments Due [Abstract]
2020	$ 1,656
2021	1,633
2022	1,376
2023	1,388
2024	1,182
Thereafter	1,159
Total lease payments	8,394
Less imputed interest	(1,399)
Present value of lease liabilities	$ 6,995

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Debt and Related Party Transactions - Additional Information (Detail) - USD ($)													12 Months Ended
	Mar. 06, 2018	Jan. 30, 2018	Jan. 29, 2018	Sep. 29, 2017	Aug. 24, 2017	Aug. 23, 2017	Aug. 18, 2017	Aug. 17, 2017	Mar. 31, 2017	Feb. 08, 2017	Feb. 07, 2017	Sep. 06, 2016	Dec. 31, 2019	Dec. 31, 2018	Nov. 30, 2018	Jun. 30, 2017	Sep. 02, 2016
Debt and Related Party Transactions [Line Items]
Gain (loss) on related party debt extinguishment														$ (203,000)
Series B 10% Convertible Preferred Stock [Member]
Debt and Related Party Transactions [Line Items]
Preferred stock, dividend rate				10.00%
William W. and Dieva L. Smith [Member] | Short-term Indebtedness [Member] | Series B 10% Convertible Preferred Stock [Member]
Debt and Related Party Transactions [Line Items]
Aggregate principal amount				$ 800,000
Preferred stock, shares issued upon convertible debt				750
William W. and Dieva L. Smith [Member] | Long-term Indebtedness [Member] | Series B 10% Convertible Preferred Stock [Member]
Debt and Related Party Transactions [Line Items]
Aggregate principal amount				$ 2,000,000
Preferred stock, shares issued upon convertible debt				2,000
William W. and Dieva L. Smith [Member] | Secured Promissory Note [Member]
Debt and Related Party Transactions [Line Items]
Proceeds from short term secured borrowing arrangement											$ 1,000,000
Interest rate per annum											18.00%
Notes due date		Jul. 25, 2018	Jun. 26, 2017										Mar. 24, 2017
Debt instrument extended maturity date	Mar. 25, 2020												Jun. 26, 2017
William W. and Dieva L. Smith [Member] | Secured Promissory Note [Member] | New Short-term Secured Borrowing Arrangement [Member]
Debt and Related Party Transactions [Line Items]
Interest rate per annum						12.00%										12.00%
Notes due date						Jan. 25, 2018	Jan. 25, 2018	Sep. 25, 2017					Sep. 25, 2017
Aggregate principal amount																$ 1,000,000
Notes due date, description													The maturity date of the Replacement Note entered into with Smith may be extended by up to 180 days upon the mutual consent of the Company and Smith. Each of the Replacement Notes were secured by the Company’s accounts receivable and certain other assets.
Proceeds from short term secured borrowing arrangement						$ 800,000
Steven L. and Monique P. Elfman [Member] | Secured Promissory Note [Member]
Debt and Related Party Transactions [Line Items]
Proceeds from short term secured borrowing arrangement										$ 1,000,000
Interest rate per annum											18.00%
Notes due date		Feb. 11, 2018	Aug. 18, 2017										Mar. 24, 2017
Steven L. and Monique P. Elfman [Member] | Secured Promissory Note [Member] | New Short-term Secured Borrowing Arrangement Matured on June 23, 2017 [Member]
Debt and Related Party Transactions [Line Items]
Proceeds from short term secured borrowing arrangement									$ 1,000,000
Notes due date													Jun. 23, 2017
Steven L. and Monique P. Elfman [Member] | Secured Promissory Note [Member] | New Short-term Secured Borrowing Arrangement [Member]
Debt and Related Party Transactions [Line Items]
Interest rate per annum																12.00%
Notes due date							Jan. 25, 2018	Sep. 25, 2017					Sep. 25, 2017
Aggregate principal amount																$ 1,000,000
Andrew Arno [Member] | Short-term Indebtedness [Member] | Series B 10% Convertible Preferred Stock [Member]
Debt and Related Party Transactions [Line Items]
Aggregate principal amount				$ 100,000
Preferred stock, shares issued upon convertible debt				50
Andrew Arno [Member] | Secured Promissory Note [Member]
Debt and Related Party Transactions [Line Items]
Notes due date		Jul. 25, 2018	Aug. 24, 2017
Debt instrument extended maturity date	Mar. 25, 2020
Andrew Arno [Member] | Secured Promissory Note [Member] | New Short-term Secured Borrowing Arrangement [Member]
Debt and Related Party Transactions [Line Items]
Interest rate per annum					12.00%
Notes due date					Jan. 31, 2018
Aggregate principal amount					$ 300,000
Proceeds from short term secured borrowing arrangement					$ 300,000
Next Generation TC FBO Andrew Arno IRA 1663 [Member] | Secured Promissory Note [Member]
Debt and Related Party Transactions [Line Items]
Notes due date		Jul. 25, 2018	Aug. 24, 2017
Debt instrument extended maturity date	Mar. 25, 2020
Unterberg Koller Capital Fund L.P. and William W. and Dieva L. Smith [Member] | Senior Subordinated Notes [Member] | Long Term Related Party Loan Extinguishment
Debt and Related Party Transactions [Line Items]
Repayment of long-term note															$ 2,000,000
Gain (loss) on related party debt extinguishment													$ (200,000)
Unterberg Koller Capital Fund L.P. and William W. and Dieva L. Smith [Member] | Note and Warrant Purchase Agreement [Member] | Senior Subordinated Notes [Member]
Debt and Related Party Transactions [Line Items]
Interest rate per annum												10.00%
Notes due date												Sep. 06, 2019
Aggregate principal amount																	$ 4,000,000
Notes maturity period												3 years

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Equipment and Improvements - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Property Plant And Equipment [Abstract]
Depreciation and amortization expense on equipment and improvements	$ 0.4	$ 0.5

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Revenues	$ 43,346	$ 26,285
Cost of revenues	3,927	4,333
Gross profit	39,419	21,952
Operating expenses:
Selling and marketing	7,517	5,784
Research and development	11,682	8,602
General and administrative	9,921	8,607
Restructuring expenses	194	173
Total operating expenses	29,314	23,166
Operating income (loss)	10,105	(1,214)
Non-operating income (expense):
Change in fair value of warrant liability		(812)
Loss on debt extinguishment		(203)
Gain on sale of software product	483
Interest income (expense), net	228	(472)
Other expense, net	(14)	(26)
Income (loss) before provision for income taxes	10,802	(2,727)
Provision for income tax expense	80	13
Net income (loss)	$ 10,722	$ (2,740)
Net earnings (loss) per share:
Basic	$ 0.31	$ (0.14)
Diluted	$ 0.29	$ (0.14)
Weighted average shares outstanding:
Basic	34,513	22,322
Diluted	36,991	22,322

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Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

17. Subsequent Events

The Company evaluates and discloses subsequent events as required by ASC Topic No. 855, Subsequent Events. The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.

On February 12, 2020, the Company acquired the operator business of Circle Media Labs Inc. (“Circle”), a Delaware corporation, pursuant to a certain Asset Purchase Agreement (the “Purchase Agreement”) dated as of the same date by and between the Company and Circle. Pursuant to the terms of the Purchase Agreement, the Company acquired certain assets, including customer contracts and a perpetual source code license, for a purchase price of $13.5 million in cash. The Company has engaged a third party firm to value the acquired assets, and the results of such valuation are not available as of the date of issuance of the financial statements.

During February 2020, certain holders of common stock warrants exercised approximately 1.0 million warrants resulting in cash proceeds of approximately $2.2 million.

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Acquisitions

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Acquisitions

2. Acquisitions

In December 2018, the Company entered into a definitive agreement to acquire the net assets of ISM Connect, LLC’s Smart Retail product Suite (“Smart Retail”). The transaction closed on January 9, 2019.  

The following table summarizes the consideration paid for the Smart Retail acquisition in 2019 (in thousands):

Fair value of assets acquired	$	9,394
Fair value of liabilities assumed		291
Total purchase price	$	9,103
Components of purchase price:
Cash	$	3,974
Common stock		5,129
Total purchase price	$	9,103

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

Assets:
Costs incurred on projects not complete	$	53
Intangible assets		5,229
Goodwill		4,112
Total assets	$	9,394
Liabilities:
Deferred revenue	$	291
Total liabilities		291
Total purchase price	$	9,103

The purpose of the Smart Retail acquisition was to acquire a new growing and profitable revenue stream while deepening the relationships with our customers. The Smart Retail platform, which the Company now calls ViewSpot, enables wireless carriers and retailers to offer powerful on-screen, interactive device demos that deliver consistent, secure and targeted content that showcase the features of the devices that consumers what to see and learn more about. ViewSpot provides analytics capabilities, which allows customers to gain valuable insights and buying behaviors. The platform was a logical addition to the Company’s existing product line that reaches wireless carriers and provides them with services that can attract and retain customers.

Unaudited pro forma results of operations for the years ended December 31, 2019 and 2018 are included below as if the acquisition occurred on January 1, 2018. This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had Smart Retail been acquired at the beginning of 2018, nor does it purport to represent results of operations for any future periods.

	Year Ended December 31,
	2019		2018
	(in thousands, except per share amounts)
Revenues	$	43,346	$	30,086
Net income (loss)		10,722		(1,421	)
Earnings (loss) per share:
Basic	$	0.31	$	(0.08	)
Diluted	$	0.29	$	(0.08	)

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Equipment and Improvements (Tables)

12 Months Ended

Dec. 31, 2019

Property Plant And Equipment [Abstract]

Summary of Equipment and Improvements

Equipment and improvements consist of the following (in thousands):

	December 31,
	2019			2018
Computer hardware, software, and equipment	$	9,079		$	14,658
Leasehold improvements		2,808			5,316
Office furniture and fixtures		1,017			962
Construction in progress		494			25
		13,398			20,961
Less accumulated depreciation and amortization		(11,289	)		(20,096	)
Equipment and improvements, net	$	2,109		$	865

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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Income (loss) before provision for income taxes was generated from the following sources (in thousands):

	Year Ended December 31,
	2019			2018
Domestic	$	10,833		$	(2,541	)
Foreign		(31	)		(186	)
Total loss before provision for income taxes	$	10,802		$	(2,727	)

A summary of the income tax expense (benefit) is as follows (in thousands):

	Year Ended December 31,
	2019			2018
Current:
Federal	$	(132	)	$	(265	)
State		7			2
Foreign		108			63
Total current		(17	)		(200	)
Deferred:
Federal		144			265
State		—			—
Foreign		(47	)		(52	)
Total deferred		97			213
Total income tax expense (benefit)	$	80		$	13

A reconciliation of the provision for income taxes to the amount of income tax expense (benefit) that would result from applying the federal statutory rate to the loss before income taxes is as follows:

	Year Ended December 31,
	2019				2018
Federal statutory rate		21.0		%		21.0		%
State tax, net of federal benefit		3.6				3.0
Equity compensation		0.1				(0.7	)
International tax items		0.2				(1.7	)
Foreign taxes		0.6				(0.4	)
State NOL true-up		(6.1	)			(30.4	)
Miscellaneous		0.4				(7.7	)
Effect of change in rate		0.9				(12.6	)
Change in valuation allowance		(19.8	)			29.0
		0.7		%		(0.5	)	%

The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	Year Ended December 31,
	2019			2018
Deferred income tax assets
Net operating loss carry forwards	$	41,650		$	41,356
Credit carry forwards		3,159			3,292
Fixed assets		373			493
Intangibles		4,679			6,417
Equity-based compensation		308			439
Nondeductible accruals		319			565
Various reserves		209			55
Other		2			107
Valuation allowance		(50,397	)		(52,414	)
Total deferred income taxes - net		302			310
Deferred income tax liabilities
Foreign intangibles		(27	)		(74	)
Unrealized translation gain/loss		(120	)		(4	)
Prepaid expenses		(61	)		(41	)
Total deferred income liabilities		(208	)		(119	)
Net deferred income tax assets	$	94		$	191

The Company has federal and state net operating loss (“NOL”) carryforwards of approximately $158.1 million and $145.9 million, respectively, at December 31, 2019, to reduce future cash payments for income taxes. These federal NOL carryforwards will expire from 2024 through 2037 and state NOL carryforwards will expire 2019 through 2039. The Company also had $0.1 million of alternative minimum tax credit carryforwards with an indefinite life, available to offset regular federal income tax requirements.

The Company has federal and state tax credit carryforwards of approximately $2.5 million and $0.7 million, respectively, at December 31, 2019. These tax credits will begin to expire in 2028.

To the extent that an ownership change has occurred under Internal Revenue Code Sections 382 and 383, the Company’s use of its loss carryforwards and credit carryforwards to offset future taxable income may be limited.

At December 31, 2019 and 2018, the Company had unrecognized tax benefits, including interest and penalties, of approximately $0.4 million.

The Company’s gross unrecognized tax benefits as of December 31, 2019 and 2018 and the changes in those balances are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Beginning balance	$	428	$	428
Increases (decreases) in tax positions for the    current year		—		—
Increases (decreases) in tax positions for the    prior year		—		—
Gross unrecognized tax benefits, ending balance	$	428	$	428

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements 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. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company was in a five-year historical cumulative loss as of the end of fiscal 2018. These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of the four sources of taxable income as of December 31, 2019 (as described above), and after consideration of the Company’s cumulative loss position as of December 31, 2019, the Company recorded a valuation allowance related to its U.S.-based deferred tax assets of $50.4 million at December 31, 2019. The valuation allowance on deferred tax assets decreased by $2.0 million and $0.5 million in 2019 and 2018, respectively.

We recognized interest and penalties accrued related to unrecognized tax benefits in income tax expense.  During 2019 and 2018, we recognized $0 in interest and penalties. The cumulative interest and penalties at December 31, 2019 and 2018 were $0. We do not anticipate any material changes to unrecognized tax benefits within the next twelve months that will affect the effective tax rate.

The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Currently there are no audits in process or pending from Federal or state tax authorities. State income tax returns are subject to examination for a period of three to four years after filing. As of December 31, 2019, the company had no outstanding tax audits. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. As of December 31, 2019, a current estimate of the range of changes that may occur within the next twelve months cannot be made due to the uncertainty regarding the timing of these events.

For financial reporting purposes, income (loss) before provision for income taxes for our foreign subsidiaries was $(31) thousand and $(186) thousand for the years ended December 31, 2019 and 2018, respectively. We do not provide for U.S. taxes on our unremitted earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S.

As a part of the provisions of the 2017 Act, the corporate alternative minimum tax (“AMT”) has been repealed for tax years beginning after December 31, 2017. Taxpayers with AMT credit carryforwards that have not yet been used may claim a refund in future years for those credit. Since the AMT credit will now be fully refundable regardless of whether there is a future income tax liability before AMT credits, the benefit of the AMT credit will be realized in the future. Accordingly, a valuation allowance established against AMT credit carryforward balance is no longer necessary and a benefit has been recognized with respect to a $0.5 million AMT credit carryforward balance that was generated with 2011 net operating loss carrybacks. The Company has opted to reflect the balance as part of deferred tax asset balance. With the filing of the 2019 federal tax return, the Company will receive a refund of $133 thousand of the balance and this amount has been classified as a federal income tax receivable.

The 2017 Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. The current income related to the GILTI inclusion in 2019 is less than $59 thousand.

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Revenues

12 Months Ended

Dec. 31, 2019

Revenue From Contract With Customer [Abstract]

Revenues

11. Revenues

Adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

We adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective approach. We have applied the new standard to all open contracts at the date of initial application. The cumulative adjustment to the opening accumulated deficit balance at January 1, 2018 was immaterial.

Revenue Recognition

We recognize sales of goods and services based on the five-step analysis of transactions as provided in Topic 606. For all contracts with customers, we first identify the contract which usually is established when a contract is fully executed by each party and consideration is expected to be received. Next, we identify the performance obligations in the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. We then determine the transaction price in the arrangement and allocate the transaction price, if necessary, to each performance obligation identified in the contract. The allocation of the transaction price to the performance obligations are based on the relative standalone selling prices for the goods and services contained in a particular performance obligation. The transaction price is adjusted for the Company’s estimate of variable consideration which may include certain incentives and discounts, product returns, distributor fees, and storage fees. We evaluate the total amount of variable consideration expected to be earned by using the expected value method, as we believe this method represents the most appropriate estimate for this consideration, based on historical service trends, the individual contract considerations and our best judgment at the time. We include estimates of variable consideration in revenues only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We also generate the majority of our revenue on usage based fees which are variable and depend entirely on our customers use of perpetual licenses, transactions processed on our hosted environment, advertisement placements on our service platform, and activity on our cloud based service platform.

We have made accounting policy elections to exclude all taxes by governmental authorities from the measurement of the transaction price, and since our standard payment terms are less than one year, we have elected the practical expedient not to assess whether a contract has a significant financing component.

Performance Obligations

CommSuite and Netwise Revenue

In our Wireless segment, we sell our software solutions to major wireless network and cable operators. For our Netwise and CommSuite products, we may provide customization services for a fee to ensure our software solution can operate on their operating platforms and the operating platform of the mobile devices of our customer’s end users. In addition, since the mobile device OEMs change their operating systems regularly, we provide maintenance services to ensure utility of the software license is not diminished for our customers. We consider the customization services, the software license, and maintenance services to maintain the utility of the software license for our customers as a single performance obligation. We provide the perpetual license on a royalty free basis. Revenue related to customization services, if charged, is recognized at a point in time upon delivery and acceptance of the customized software license by the customer.

To support the Netwise and CommSuite solutions, we also provide customers with our hosted environment and ASP services for the duration of the license term. We consider the provision of these services to be a separate performance obligation. In these transactions, the total consideration expected is variable. We do not estimate when the variable consideration will be recognized because the License Usage Based Fees, Hosting Service Fees and ASP Advertising Fees relate specifically to our efforts to transfer the services for a specified period (month or quarter) which are distinct from the services provided in other specified periods. Our customer’s or the customer’s end customer’s usage occurs within the defined period, and the variability of our license, hosting and ASP fees is resolved in the specified period, and such fees earned are not subject to adjustment based on the activity in other periods.

We earn revenue from these services on a fixed fee per perpetual license usage on our hosted environment and advertising revenue share for advertisements placed by our customers on our platform.  The usage fees are not earned until we transfer our software license to our customers. We recognize the usage based fees when we are entitled to the consideration earned for the distinct service period based on our customer’s usage of our licenses, hosting services, and ASP advertising platform (“hosted environment usage fees”).

SafePath Cloud Based Services

Our SafePath solution is a hybrid Software as a Service offering. We consider the provision of the perpetual license and the cloud based platform as a single performance obligation. We provide the perpetual license on a royalty free basis and earn revenue based on a fixed fee usage of our cloud based services. We recognize the usage based fees when we are entitled to the consideration earned for the distinct service period based on our customer’s usage of our cloud based services.

ViewSpot Cloud Based Services

During the first quarter of 2019, we acquired the Smart Retail contract asset from ISM Connect, LLC, later branded as ViewSpot. ViewSpot product is a cloud based platform that its Mobile Network Operator customers use to display its promotional content to mobile devices being sold in its retail outlets. Using this solution, the MNOs have the ability to promote specific mobile devices in targeted geographic retail locations and monitor the efficacy of the promotions and the mobile device user’s behavior to the targeted advertising. We sell a royalty free license, consulting services to configure the advertising content so that it can be displayed on targeted mobile devices, and cloud-based services to serve the advertising content and capture end consumer’s behavior on the mobile device. ViewSpot services depend on a significant level of integration, interdependency, and interrelation between the on-premise applications, consulting services and the cloud services, and are accounted for together as a single performance obligation. The ViewSpot services are sold on a fixed fee basis to our customers based on pre-defined purchase order. We receive upfront payments from customers for services to be provided under our ViewSpot arrangements. Since we are obligated to provide the required services over the contract period, the revenue is recognized over time. The advance receipts are deferred and subsequently recognized ratably over the contract period.

From time to time, we also provide consulting services to configure ad hoc targeted promotional content for our customers upon request. These requests are driven by our customers’ marketing initiatives and tend to be short term “bursts” of activity. We recognize revenues from these ad hoc services at a point in time which is upon delivery of the configured promotional content to the cloud platform.

Consulting Services and Other

In our Wireless segment, we have developed a roadmap for adding new functionality to our products to extend the product lifecycle and expand our customer’s use of the product on their networks. From time to time, we enter into consulting services arrangements with our customers to develop incremental functionality not included on our developmental roadmap. We earn revenue from our consulting services that is recognized at the time of delivery of the software when the services have been completed and control has been transferred to our customers.

We also enter into arrangements with certain customers to provide technology support services beyond the initial warranty period.  Technology support services include e-mail and telephone support and unspecified rights to bug fixes available on a when-and-if available basis. We consider the provision of such technology support services to be a separate performance obligation. We generally bill in advance for a fixed term and recognize revenue from these arrangements ratably over the contractual term as we perform our services.

Graphics Revenue

We sell our off-the-shelf Graphics software products directly to end users as well as through our distribution and reseller channel partners. These products require no customization and minimal post-sale technology support services. We recognize revenue from Software sales at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our distributor and resellers partners. In some instances, we will consign our software products to a distributor or reseller. In those instances, we recognize revenue when the end consumer takes control of the product.

We offer a 30 day return policy to our customers; a return reserve is established at the time revenue is recorded.  We review available retail channel information and make a determination of a return provision for sales made to distributors and retailers based on current channel inventory levels and historical return patterns. The return reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Unearned Revenue

Unearned revenue represents amounts billed to customers for which revenue has not been recognized. Unearned revenue primarily consists of the unearned portion of monthly, quarterly and annually billed service fees and prepayments made by customers for a future period. We recognize revenue upon transfer of control.

Costs to Obtain a Customer Contract

We generally pay sales commissions to our sales force, which are incremental and recoverable costs of acquiring contracts. In most instances, sales commissions are only paid when we earn usage based fees on the contracts. The commission obligation is established each quarter based on the usage based fees earned. The commission obligation is not adjusted by future usage based fees earned, that is each period is discrete from the other. As a result of the structure of the commission plan, we record the commission expense when the commission obligation is determined, which is generally quarterly.

In the second quarter of 2019, we introduced an amended and restated sales commission plan that incentivizes and recognizes the efforts of eligible participants to earn commissions on future revenue generated on new contracts, sale of a new product to an existing contract, or sale of a product to a different group within an existing customer. The sales commissions are tiered based on the opportunity size. Sales commissions paid under this amended sales commission plan are incremental contract acquisition costs, and accordingly are recorded as a deferred contract asset that is amortized on a straight-line basis over the average contract life of the new, renewed and modified contract.

Costs to Fulfill a Customer Contract

We incur costs to fulfill obligations under a contract. We recognize these costs as we fulfill our performance obligation and recognize revenue. Where we provide services and earn revenue over the contract term based on usage of our platforms, we recognize the associated fulfillment costs as they are incurred and as usage based revenue is recognized.

Disaggregation of Revenues

We disaggregate revenue by our Wireless and Graphics products.

Revenues on a disaggregated basis are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Wireless:
Hosted environment usage fees	$	19,517	$	18,889
Cloud based usage fees		20,011		3,327
Consulting services and other		3,076		2,258
Total wireless	$	42,604	$	24,474
Graphics:
Software		742		1,811
Total revenues	$	43,346	$	26,285

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Segment, Customer Concentration and Geographical Information (Tables)

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Wireless Revenues by Product and Quarterly Revenues Generated by the Wireless Segment

The following table presents the Wireless revenues by product (in thousands):

	Year Ended December 31,
	2019		2018
CommSuite	$	18,713	$	17,760
SafePath		17,782		3,327
ViewSpot		4,229		—
Netwise		1,642		3,104
Other		238		283
Total wireless revenues	$	42,604	$	24,474

The following table presents the quarterly revenues generated by the Wireless segment (in thousands):

	Year Ended December 31,
	2019		2018
Quarter 1	$	8,172	$	4,816
Quarter 2		10,637		6,506
Quarter 3		11,614		6,283
Quarter 4		12,181		6,869
Total wireless revenues	$	42,604	$	24,474

Company Revenue in Different Geographic Locations

Revenues attributed to the geographic location of the customer’s bill-to address were as follows (in thousands):

	Year Ended December 31,
	2019		2018
Americas	$	43,236	$	26,054
EMEA		67		90
Asia Pacific		43		141
Total revenues	$	43,346	$	26,285

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

	Year Ended December 31,
	2019			2018
	(in thousands, except per share amounts)
Numerator:
Net income (loss)	$	10,722		$	(2,740	)
Dividends paid to preferred stockholders		(119	)		(404	)
Net income (loss) available to common stockholders	$	10,603		$	(3,144	)
Denominator:
Weighted average shares outstanding - basic		34,513			22,322
Potential common shares - options (treasury    stock method)		2,478			—
Weighted average shares outstanding - diluted		36,991			22,322
Shares excluded due to an exercise price greater than    weighted average stock price for the period		88			1,081
Earnings (loss) per common share:
Basic	$	0.31		$	(0.14	)
Diluted	$	0.29		$	(0.14	)

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Acquisitions - Summary of Consideration Paid for Acquisitions (Detail) - Smart Retail [Member] $ in Thousands	Jan. 09, 2019 USD ($)
Business Acquisition [Line Items]
Fair value of assets acquired	$ 9,394
Fair value of liabilities assumed	291
Total purchase price	9,103
Components of purchase price:
Cash	3,974
Common stock	5,129
Total purchase price	$ 9,103

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Stock-Based Compensation - Non-Cash Stock-Based Compensation Expenses (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total non-cash stock compensation expense	$ 1,494	$ 935
Selling and Marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total non-cash stock compensation expense	247	112
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total non-cash stock compensation expense	278	207
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total non-cash stock compensation expense	$ 969	$ 616

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred income tax assets
Net operating loss carry forwards	$ 41,650	$ 41,356
Credit carry forwards	3,159	3,292
Fixed assets	373	493
Intangibles	4,679	6,417
Equity-based compensation	308	439
Nondeductible accruals	319	565
Various reserves	209	55
Other	2	107
Valuation allowance	(50,397)	(52,414)
Total deferred income taxes - net	302	310
Deferred income tax liabilities
Foreign intangibles	(27)	(74)
Unrealized translation gain	(120)	(4)
Prepaid expenses	(61)	(41)
Total deferred income liabilities	(208)	(119)
Net deferred income tax assets	$ 94	$ 191

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Employee Benefit Plans - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Compensation And Retirement Disclosure [Abstract]
Employers matching contribution percentage to 401(k) plan	20.00%
Total employer contributions to 401(k) plan	$ 0.2	$ 0.1

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Gain on Sale of Software Product - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2019
Income Statement Balance Sheet and Additional Disclosures by Disposal Groups Including Discontinued Operations [Line Items]
Proceeds from sale of software product		$ 370
Gain on sale of software product		$ 483
Asset Purchase Agreement [Member] | Poser 3D Software Product [Member] | Bondware, Inc. [Member]
Income Statement Balance Sheet and Additional Disclosures by Disposal Groups Including Discontinued Operations [Line Items]
Consideration for sale of asset	$ 500
Proceeds from sale of software product	$ 350
Remaining consideration payment period	3 years
Gain on sale of software product	$ 483

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Segment, Customer Concentration and Geographical Information - Quarterly Revenues Generated by the Wireless Segment (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue from External Customer [Line Items]
Total revenues	$ 12,278	$ 11,782	$ 10,854	$ 8,432	$ 7,352	$ 6,525	$ 6,945	$ 5,463	$ 43,346	$ 26,285
Wireless [Member]
Revenue from External Customer [Line Items]
Total revenues	$ 12,181	$ 11,614	$ 10,637	$ 8,172	$ 6,869	$ 6,283	$ 6,506	$ 4,816	$ 42,604	$ 24,474

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2016
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets amortization expense		$ 900,000	$ 200,000
Impairment loss of intangible assets	$ 400,000			$ 400,000
Impairment of goodwill		$ 0	$ 0

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Acquisitions - Summary of Unaudited Proforma Results of Operation (Detail) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Business Acquisition Pro Forma Information [Abstract]
Revenues	$ 43,346	$ 30,086
Net income (loss)	$ 10,722	$ (1,421)
Earnings (loss) per share:
Basic	$ 0.31	$ (0.08)
Diluted	$ 0.29	$ (0.08)

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Income Taxes - Schedule of Income (Loss) before Provision for Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Domestic	$ 10,833	$ (2,541)
Foreign	(31)	(186)
Income (loss) before provision for income taxes	$ 10,802	$ (2,727)

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Revenues - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2019
Disaggregation Of Revenue [Abstract]
Sales return period	30 days

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Leases - Summary of Operating Lease Cost (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Lease Cost [Abstract]
Lease cost, gross	$ 2,076
Sublease income	603
Total lease cost, net	$ 1,473

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 28,268	$ 12,159
Accounts receivable, net of allowances for doubtful accounts and other adjustments of $253 and $135 at December 31, 2019 and 2018, respectively	10,894	7,130
Prepaid expenses and other current assets	802	795
Total current assets	39,964	20,084
Equipment and improvements, net	2,109	865
Right-of-use assets	6,464
Deferred tax asset, net	94	191
Other assets	234	140
Intangible assets, net	4,535	238
Goodwill	7,797	3,685
Total assets	61,197	25,203
Current liabilities:
Accounts payable	2,050	1,160
Accrued payroll and benefits	2,107	1,745
Current operating lease liabilities	1,221
Other accrued liabilities	244	450
Deferred revenue	98	28
Total current liabilities	5,720	3,383
Non-current liabilities:
Operating lease liabilities	5,774
Deferred rent	885	723
Other long term liabilities	134	534
Total non-current liabilities	6,793	1,257
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; 0 and 1,345 shares issued and outstanding at December 31, 2019 and 2018, respectively
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 38,475,084 and 28,241,129 shares issued and outstanding at December 31, 2019 and 2018, respectively	38	28
Additional paid-in capital	274,041	256,626
Accumulated comprehensive deficit	(225,395)	(236,091)
Total stockholders’ equity	48,684	20,563
Total liabilities and stockholders' equity	$ 61,197	$ 25,203

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of Income (Loss) before Provision for Income Taxes

Income (loss) before provision for income taxes was generated from the following sources (in thousands):

	Year Ended December 31,
	2019			2018
Domestic	$	10,833		$	(2,541	)
Foreign		(31	)		(186	)
Total loss before provision for income taxes	$	10,802		$	(2,727	)

Summary of Income Tax Expense (Benefit)

A summary of the income tax expense (benefit) is as follows (in thousands):

	Year Ended December 31,
	2019			2018
Current:
Federal	$	(132	)	$	(265	)
State		7			2
Foreign		108			63
Total current		(17	)		(200	)
Deferred:
Federal		144			265
State		—			—
Foreign		(47	)		(52	)
Total deferred		97			213
Total income tax expense (benefit)	$	80		$	13

Federal Statutory Rate to Loss Before Income Taxes

A reconciliation of the provision for income taxes to the amount of income tax expense (benefit) that would result from applying the federal statutory rate to the loss before income taxes is as follows:

	Year Ended December 31,
	2019				2018
Federal statutory rate		21.0		%		21.0		%
State tax, net of federal benefit		3.6				3.0
Equity compensation		0.1				(0.7	)
International tax items		0.2				(1.7	)
Foreign taxes		0.6				(0.4	)
State NOL true-up		(6.1	)			(30.4	)
Miscellaneous		0.4				(7.7	)
Effect of change in rate		0.9				(12.6	)
Change in valuation allowance		(19.8	)			29.0
		0.7		%		(0.5	)	%

Components of Deferred Tax Assets and Liabilities

The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	Year Ended December 31,
	2019			2018
Deferred income tax assets
Net operating loss carry forwards	$	41,650		$	41,356
Credit carry forwards		3,159			3,292
Fixed assets		373			493
Intangibles		4,679			6,417
Equity-based compensation		308			439
Nondeductible accruals		319			565
Various reserves		209			55
Other		2			107
Valuation allowance		(50,397	)		(52,414	)
Total deferred income taxes - net		302			310
Deferred income tax liabilities
Foreign intangibles		(27	)		(74	)
Unrealized translation gain/loss		(120	)		(4	)
Prepaid expenses		(61	)		(41	)
Total deferred income liabilities		(208	)		(119	)
Net deferred income tax assets	$	94		$	191

Gross Unrecognized Tax Benefits Changes in Balances

The Company’s gross unrecognized tax benefits as of December 31, 2019 and 2018 and the changes in those balances are as follows (in thousands):

	Year Ended December 31,
	2019		2018
Beginning balance	$	428	$	428
Increases (decreases) in tax positions for the    current year		—		—
Increases (decreases) in tax positions for the    prior year		—		—
Gross unrecognized tax benefits, ending balance	$	428	$	428

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Operating activities:
Net income (loss)	$ 10,722	$ (2,740)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	1,341	779
Non-cash rent expense	954
Amortization of debt discounts and financing issuance costs		239
Restructuring costs	194	173
Gain on sale of software product	(483)
Change in fair value of warrant liability		812
Loss on debt extinguishment		203
Provision for adjustments to accounts receivable and doubtful accounts	143	(82)
Provision for excess and obsolete inventory	1	(16)
Loss on disposal of fixed assets	6	7
Non-cash compensation related to stock options and restricted stock	1,494	935
Deferred income taxes	97	213
Change in operating accounts:
Accounts receivable	(3,811)	(1,903)
Prepaid expenses and other assets	(32)	(197)
Accounts payable and accrued liabilities	(417)	(1,252)
Deferred revenue	(221)	(45)
Net cash provided by (used in) operating activities	9,988	(2,874)
Investing activities:
Acquisitions, net	(3,974)
Proceeds from sale of software product	370
Capital expenditures	(1,659)	(173)
Net cash used in investing activities	(5,263)	(173)
Financing activities:
Proceeds from exercise of common stock warrants	11,457
Proceeds from (payments related to) issuance of common stock	(14)	17,600
Repayments of short-term secured promissory notes		(1,000)
Repayments of related-party notes payable		(1,200)
Repayments of notes payable		(2,000)
Proceeds from exercise of stock options	50
Proceeds from stock sale for employee stock purchase plan	10	5
Preferred stock dividends	(119)	(404)
Net cash provided by financing activities	11,384	13,001
Net increase in cash and cash equivalents	16,109	9,954
Cash and cash equivalents, beginning of period	12,159	2,205
Cash and cash equivalents, end of period	28,268	12,159
Supplemental disclosures of cash flow information:
Cash paid for income taxes	104	2
Cash paid for interest		386
Non-cash investing and financing activities:
Issuance of common stock in connection with acquisition	5,129
Issuance of common stock warrants in connection with stock offering		10,792
Reclassification of warrants from liabilities to equity		7,604
Conversion of preferred stock to common stock	$ 1	$ 4

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Restructuring

12 Months Ended

Dec. 31, 2019

Restructuring And Related Activities [Abstract]

Restructuring

15. Restructuring

Restructuring charges in 2019 and 2018 related to one-time employee termination costs.

The activity in our restructuring liability for the year ended December 31, 2019 (in thousands) follows:

	Balance at December 31, 2018		Provision, net			Usage			Transfer			Balance at December 31, 2019
Lease/rental terminations	$	495		(11	)		—			(484	)	$	—
One-time employee termination    benefits		114		194			(308	)		—			—
Total	$	609	$	183		$	(308	)	$	(484	)	$	—

On January 1, 2019, $0.5 million of reserves associated with lease terminations was offset with the right-of-use assets upon the adoption of ASC 842.

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Organization, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

The Company

The Company

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless and cable service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. Our portfolio includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set.

In general, we offer our customers:

• Valuable digital services that connect today’s digital lifestyle, including leading edge family location and parental controls, as well as enabling connected family and consumer IoT devices to mobile consumers worldwide;

• Easy visual access to wirelessly delivered voicemail messages, while also providing easy conversion of voice messages to text and email messages that can be delivered through a variety of devices;

• Immediate, consistent and measurable retail content that educates consumers, creates awareness of products and services and drives in store sales; and

• Engaging retail content displayed on wireless devices in retail locations that also gather valuable actionable analytics.

We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in emerging markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace. The key to our longevity, however, is not simply technological innovation, but our never-ending focus on understanding our customers’ needs and delivering value.

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements reflect the operating results and financial position of Smith Micro and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany amounts have been eliminated in consolidation.

Foreign Currency Transactions

Foreign Currency Transactions

The Company has international operations resulting from current and prior year acquisitions. The countries in which the Company has a subsidiary or branch office are Serbia, Sweden, and Portugal. The functional currency for all of these foreign entities is the U.S. dollar in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 830-30, Foreign Currency Matters-Translation of Financial Statements. Foreign currency transactions that increase or decrease expected functional currency cash flows is a foreign currency transaction gain or loss that are included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction is included in determining net income for the period in which the transaction is settled.

Business Combinations

Business Combinations

The Company applies the provisions of FASB ASC Topic No. 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period that exists up to twelve months from the acquisition date, the Company may record adjustments to the tangible and specifically identifiable intangible assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the reporting period in which the adjusted amounts are determined. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations. 

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as a one-time termination and exit cost pursuant to FASB ASC Topic No. 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the Company’s consolidated statement of operations in the period in which the liability is incurred.

Uncertain income tax positions and tax-related valuation allowances that are acquired in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date, with any adjustments to the preliminary estimates being recorded to goodwill if such adjustments occur within the 12-month measurement period. Subsequent to the end of the measurement period or the Company’s final determination of the value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the consolidated statement of operations, and could have a material impact on results of operations and financial position.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

Fair value is an exit price, representing the amount that would be received upon the sale of an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

• Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

• Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs. 

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can 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 are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.

As required by FASB ASC Topic No. 350, for goodwill and other intangibles impairment analysis, we utilize fair value measurements which are categorized within Level 3 of the fair value hierarchy.

Significant Concentrations

Significant Concentrations

For the year ended December 31, 2019, one customer, accounting for over 10% of revenues, made up 84% of revenues and 92% of accounts receivable, and one service provider with more than 10% of purchases totaled 10% of accounts payable. For the year ended December 31, 2018, one customer, accounting for over 10% of revenues, made up 81% of revenues and 82% of accounts receivable, and one service provider with more than 10% of purchases totaled 21% of accounts payable.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in one financial institution and are uninsured except for the minimum Federal Deposit Insurance Corporation coverage, and have original maturity dates of three months or less. As of December 31, 2019 and 2018, bank balances totaling approximately $28.0 million and $11.8 million, respectively, were uninsured.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

We sell our products worldwide. 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 an allowance for doubtful accounts 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. 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.

Equipment and Improvements

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.

Internal Software Development Costs

Internal 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 December 31, 2019, software has been substantially completed concurrently with the establishment of technological feasibility; accordingly, no costs have been capitalized to date.

Impairment or Disposal of Long-Lived Assets

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable.  They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was an impairment of its Customer Relationships intangible asset in the amount of $0.4 million as of December 31, 2016. 

Goodwill

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, we review 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.

Intangible Assets and Amortization

Intangible Assets and Amortization

Amortization expense related to other intangibles acquired in acquisitions is calculated on a straight line basis over two to ten years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.

Derivatives

Derivatives

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, Distinguishing Liabilities from Equity and FASB ASC Topic No. 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.

Going Concern Evaluation

Going Concern Evaluation

In connection with preparing consolidated financial statements for the year ended December 31, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the historical operating loss and negative cash flow from operating activities trends, including the positive trends occurring in the recent year.  

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued and management believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.

Revenue Recognition

Revenue Recognition

The Company adopted FASB ASC Topic No. 606, Revenue from Contracts with Customers, as of January 1, 2018, and recognizes the sale of goods and services based on the five step analysis of transactions as provided in Topic 606 which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services.

In our Wireless segment, we transfer software licenses to our customers on a royalty free, non-exclusive, non-transferrable, limited use basis during the term of the agreement. In some instances, we perform customization services to ensure the software operates within our customer’s operating platforms as well as the operating platforms of the mobile devices used by their end customers before transferring the license. Revenue related to these services is recognized at a point in time upon acceptance of the software license by the customer. We also earn usage based revenue on our platforms. Usage based revenue is generated based on active licenses used by our customer’s end customers, the provision of hosting services, revenue share based on media placements on our platform, and use of our Cloud Based services. We recognize our usage based revenue when we have completed our performance obligation and have the right to invoice the customer. This revenue is generally recognized monthly or quarterly. Finally, in this segment, we ratably recognize revenue over the contract period when customers pay in advance of our service delivery.

We also provide consulting services to develop customer specified functionality that are generally not on our software development roadmap. We recognize revenue from our consulting services upon delivery and acceptance by the customer of our software enhancements and upgrades. For certain Wireless segment customers we provide maintenance and technology support services for which the customer pays upfront or as we provide the services. When the customer pays upfront, we record the payments as contract liabilities and recognize revenue ratably over the contract period as this is our stand ready performance obligation that is satisfied ratably over the maintenance and technology services period.

For our Graphics products where we sell off-the-self software products with no customization or post sale technology support services, we recognize revenue at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our resellers. We offer a 30 day return option to our customers; a return reserve is established at the time revenue is recorded and the reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Product and Services Warranties

Product and Services Warranties

Warranty related costs are recorded in our operating expenses as incurred as these costs are immaterial for the products and services we sell.  

Shipping and Handling Costs

Shipping and Handling Costs

We incur shipping and handling costs as part of our Graphics software sales. These costs are treated as fulfillment costs and are expensed as incurred.

Principal and Agent Considerations

Principal and Agent Considerations

We own the Intellectual Property and retain ownership when we license our customized software solutions for use by our Wireless segment customers. We are a principal in these transactions and as such we recognize our Wireless segment revenue on a gross basis.

We sell our Graphics software products directly to end consumers as well as through our distributors and re-sellers. We are a principal in these transactions as we bear the inventory risk, customers (or customer’s end users) view us as the primary obligor responsible for supporting the software products, and we have full discretion in establishing the prices for our graphics software products. As a principal we record our Graphics revenues on a gross basis.

Sales Incentives

Sales Incentives

For our Graphics sales, 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 as required by FASB ASC Topic No. 605-50, Revenue Recognition-Customer Payments and Incentives. We use historical redemption rates to estimate the cost of customer incentives. Total sales incentives were $16 thousand and $0.1 million for the years ended December 31, 2019 and 2018, respectively.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The Company adopted ASU 2014-09 as of January 1, 2018 utilizing the modified retrospective approach. This adoption did not have a material impact on our consolidated financial statements. See Note 11 for further details.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The Company adopted the FASB ASC Topic No. 842, Leases, and related amendments, as of January 1, 2019, utilizing the modified retrospective approach through a cumulative-effect adjustment to equity. Management elected the package of practical expedients permitted under the transition guidance within the new standard which allowed for the carry forward of the historical lease classification. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $3.1 million as of January 1, 2019, and an adjustment to retained earnings of $0.1 million. The standard did not materially impact the consolidated net income or earnings per share and had no impact on cash flows. See Note 13 for further details.

Recently Issued Accounting Standards Not Yet Adopted

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

Earnings Per Share

Earnings Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share.  Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents, and are only included in the calculation of diluted earnings per share when their effect is dilutive.

	Year Ended December 31,
	2019			2018
	(in thousands, except per share amounts)
Numerator:
Net income (loss)	$	10,722		$	(2,740	)
Dividends paid to preferred stockholders		(119	)		(404	)
Net income (loss) available to common stockholders	$	10,603		$	(3,144	)
Denominator:
Weighted average shares outstanding - basic		34,513			22,322
Potential common shares - options (treasury    stock method)		2,478			—
Weighted average shares outstanding - diluted		36,991			22,322
Shares excluded due to an exercise price greater than    weighted average stock price for the period		88			1,081
Earnings (loss) per common share:
Basic	$	0.31		$	(0.14	)
Diluted	$	0.29		$	(0.14	)

Segment Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has historically had two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility: Wireless and Graphics. Wireless primarily includes our SafePath®, CommSuite®, and ViewSpot® family of products. Graphics includes our consumer-based products: Moho®, MotionArtist®, Rebelle, PhotoDonut and StuffIt®, Poser® (through June 2019), and Clip Studio® (through April 2018).

With the more recent divestitures of Poser and Clip Studio, the Graphics business has become insignificant in relation to total consolidated revenues and no longer qualifies as a reportable operating segment. Therefore, the Company will disclose only one reportable operating segment, Wireless, and the following disclosures reflect this change.

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Income Taxes - Summary of Income Tax Expense (Benefit) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Current:
Federal	$ (132)	$ (265)
State	7	2
Foreign	108	63
Total current	(17)	(200)
Deferred:
Federal	144	265
Foreign	(47)	(52)
Total deferred	97	213
Total income tax expense (benefit)	$ 80	$ 13

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Goodwill and Intangible Assets - Future Amortization Expense Related to Intangible Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Finite Lived Intangible Assets Net [Abstract]
2020	$ 907
2021	901
2022	869
2023	345
2024	1,513
Total	$ 4,535	$ 238

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Equipment and Improvements - Summary of Equipment and Improvements (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Gross, Total	$ 13,398	$ 20,961
Less accumulated depreciation and amortization	(11,289)	(20,096)
Equipment and improvements, net	2,109	865
Computer Hardware, Software, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Gross, Total	9,079	14,658
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Gross, Total	2,808	5,316
Office Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Gross, Total	1,017	962
Construction In Progress [Member]
Property, Plant and Equipment [Line Items]
Gross, Total	$ 494	$ 25

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Stock-Based Compensation - Summary of Outstanding Restricted Stock Awards and Related Activity (Detail) - Restricted Stock [Member] - $ / shares shares in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, beginning balance	1,007	167
Number of shares, Granted	1,250	1,125
Number of shares, Vested	(673)	(283)
Number of shares, Canceled and forfeited	(25)	(2)
Number of shares, ending balance	1,559	1,007
Weighted average grant date fair value, beginning balance	$ 2.01	$ 3.49
Weighted average grant date fair value, Granted	2.00	1.92
Weighted average grant date fair value, Vested	2.06	2.52
Number of shares, Canceled and forfeited	1.97	0.83
Weighted average grant date fair value, ending balance	$ 1.98	$ 2.01

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Leases - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2019
Lessee Lease Description [Line Items]
Operating lease description	The Company leases office space and equipment, and certain office space is subleased. Management determines if a contract is a lease at the inception of the arrangement and reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised.
Right-of-use assets	$ 6,464
Lease liabilities	6,995
PA
Lessee Lease Description [Line Items]
Right-of-use assets		$ 3,000
Lease liabilities		3,000
CA
Lessee Lease Description [Line Items]
Right-of-use assets		1,500
Lease liabilities		$ 1,500
Serbia
Lessee Lease Description [Line Items]
Right-of-use assets	200
Lease liabilities	$ 200

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Segment, Customer Concentration and Geographical Information

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment, Customer Concentration and Geographical Information

14. Segment, Customer Concentration and Geographical Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has historically had two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility: Wireless and Graphics. Wireless primarily includes our SafePath®, CommSuite®, and ViewSpot® family of products. Graphics includes our consumer-based products: Moho®, MotionArtist®, Rebelle, PhotoDonut and StuffIt®, Poser® (through June 2019), and Clip Studio® (through April 2018).

With the more recent divestitures of Poser and Clip Studio, the Graphics business has become insignificant in relation to total consolidated revenues and no longer qualifies as a reportable operating segment. Therefore, the Company will disclose only one reportable operating segment, Wireless, and the following disclosures reflect this change.

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.

The following table presents the Wireless revenues by product (in thousands):

	Year Ended December 31,
	2019		2018
CommSuite	$	18,713	$	17,760
SafePath		17,782		3,327
ViewSpot		4,229		—
Netwise		1,642		3,104
Other		238		283
Total wireless revenues	$	42,604	$	24,474

The following table presents the quarterly revenues generated by the Wireless segment (in thousands):

	Year Ended December 31,
	2019		2018
Quarter 1	$	8,172	$	4,816
Quarter 2		10,637		6,506
Quarter 3		11,614		6,283
Quarter 4		12,181		6,869
Total wireless revenues	$	42,604	$	24,474

Customer Concentration Information

Revenues generated from our sales to Sprint and their respective affiliates in the Wireless business segment accounted for 84% and 81% of the Company’s total revenues for fiscal years 2019 and 2018, respectively. This customer comprised 92% and 82% of our accounts receivable as of December 31, 2019 and 2018, respectively. This major customer could reduce their orders of our products in favor of a competitor's product or for any other reason. The loss of this major customer or decisions by a significant customer to substantially reduce purchases could have a material adverse effect on our business.

Geographical Information

During the years ended December 31, 2019 and 2018, the Company operated in three geographic locations: the Americas, EMEA (Europe, the Middle East, and Africa), and Asia Pacific. Revenues attributed to the geographic location of the customer’s bill-to address were as follows (in thousands):

	Year Ended December 31,
	2019		2018
Americas	$	43,236	$	26,054
EMEA		67		90
Asia Pacific		43		141
Total revenues	$	43,346	$	26,285

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

18. Quarterly Financial Data (Unaudited)

The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. Summarized quarterly data for fiscal 2019 and 2018 are as follows (in thousands, except per share data):

	Year Ended December 31, 2019
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Selected quarterly financial data:
Revenues	$	8,432	$	10,854	$	11,782	$	12,278
Gross profit	$	7,516	$	9,880	$	10,771	$	11,252
Operating income	$	62	$	2,932	$	3,480	$	3,631
Net income	$	48	$	3,436	$	3,567	$	3,671
Net earnings per share - basic (1)	$	—	$	0.11	$	0.10	$	0.10
Weighted average shares outstanding - basic		31,297		32,068		36,094		38,501
Net earnings per share - diluted (1)	$	—	$	0.10	$	0.09	$	0.09
Weighted average shares outstanding - diluted		31,323		35,308		39,472		41,767

	Year Ended December 31, 2018
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Selected quarterly financial data:
Revenues	$	5,463		$	6,945		$	6,525		$	7,352
Gross profit	$	4,154		$	5,829		$	5,546		$	6,423
Operating income (loss)	$	(2,021	)	$	74		$	55		$	678
Net income (loss)	$	(2,381	)	$	(2,177	)	$	(983	)	$	2,801
Net earnings (loss) per share - basic (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - basic		15,299			21,888			25,020			26,925
Net earnings (loss) per share - diluted (1)	$	(0.16	)	$	(0.10	)	$	(0.04	)	$	0.10
Weighted average shares outstanding - diluted		15,299			21,888			25,020			27,395

(1) Basic and diluted net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal the total for the year.

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Allowances for doubtful accounts receivable	$ 253	$ 135
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	1,345
Preferred stock, shares outstanding	0	1,345
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	38,475,084	28,241,129
Common stock, shares outstanding	38,475,084	28,241,129

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Acquired Intangible Assets by Major Asset Class

The following table sets forth our acquired intangible assets by major asset class as of December 31, 2019 and December 31, 2018 (in thousands, except for useful life data):

		December 31, 2019
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	2,253	$	(687	)	$	1,831	$	—		$	1,831
Customer relationships	3-10		999		2,976		(860	)		3,115		(411	)		2,704
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(51	)		—		—			—
Total		$	1,353	$	5,229	$	(1,636	)	$	4,946	$	(411	)	$	4,535
		December 31, 2018
	Useful life (years)	Gross		Additions		Accumulated amortization			Net book value before impairment		Impairment charge in 2016			Net book value
Purchased technology	4-6	$	265	$	—	$	(125	)	$	140	$	—		$	140
Customer relationships	3-6		999		—		(499	)		500		(411	)		89
Trademarks/trade names	2		38		—		(38	)		—		—			—
Non-compete	3		51		—		(42	)		9		—			9
Total		$	1,353		—	$	(704	)	$	649	$	(411	)	$	238

Future Amortization Expense Related to Intangible Assets

Future amortization expense related to intangible assets as of December 31, 2019 are as follows (in thousands):

Year Ending December 31,
2020	$	907
2021		901
2022		869
2023		345
2024		1,513
Total	$	4,535

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Organization, Basis of Presentation and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization, Basis of Presentation and Summary of Significant Accounting Policies

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

The Company

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless and cable service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. Our portfolio includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, retail content display optimization and performance analytics on any product set.

In general, we offer our customers:

• Valuable digital services that connect today’s digital lifestyle, including leading edge family location and parental controls, as well as enabling connected family and consumer IoT devices to mobile consumers worldwide;

• Easy visual access to wirelessly delivered voicemail messages, while also providing easy conversion of voice messages to text and email messages that can be delivered through a variety of devices;

• Immediate, consistent and measurable retail content that educates consumers, creates awareness of products and services and drives in store sales; and

• Engaging retail content displayed on wireless devices in retail locations that also gather valuable actionable analytics.

We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in emerging markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace. The key to our longevity, however, is not simply technological innovation, but our never-ending focus on understanding our customers’ needs and delivering value.

Basis of Presentation

The accompanying consolidated financial statements reflect the operating results and financial position of Smith Micro and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany amounts have been eliminated in consolidation.

Foreign Currency Transactions

The Company has international operations resulting from current and prior year acquisitions. The countries in which the Company has a subsidiary or branch office are Serbia, Sweden, and Portugal. The functional currency for all of these foreign entities is the U.S. dollar in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 830-30, Foreign Currency Matters-Translation of Financial Statements. Foreign currency transactions that increase or decrease expected functional currency cash flows is a foreign currency transaction gain or loss that are included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction is included in determining net income for the period in which the transaction is settled.

Business Combinations

The Company applies the provisions of FASB ASC Topic No. 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period that exists up to twelve months from the acquisition date, the Company may record adjustments to the tangible and specifically identifiable intangible assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the reporting period in which the adjusted amounts are determined. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations. 

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as a one-time termination and exit cost pursuant to FASB ASC Topic No. 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the Company’s consolidated statement of operations in the period in which the liability is incurred.

Uncertain income tax positions and tax-related valuation allowances that are acquired in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date, with any adjustments to the preliminary estimates being recorded to goodwill if such adjustments occur within the 12-month measurement period. Subsequent to the end of the measurement period or the Company’s final determination of the value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the consolidated statement of operations, and could have a material impact on results of operations and financial position.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

Fair value is an exit price, representing the amount that would be received upon the sale of an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

• Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

• Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs. 

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can 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 are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.

As required by FASB ASC Topic No. 350, for goodwill and other intangibles impairment analysis, we utilize fair value measurements which are categorized within Level 3 of the fair value hierarchy.

Significant Concentrations

For the year ended December 31, 2019, one customer, accounting for over 10% of revenues, made up 84% of revenues and 92% of accounts receivable, and one service provider with more than 10% of purchases totaled 10% of accounts payable. For the year ended December 31, 2018, one customer, accounting for over 10% of revenues, made up 81% of revenues and 82% of accounts receivable, and one service provider with more than 10% of purchases totaled 21% of accounts payable.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in one financial institution and are uninsured except for the minimum Federal Deposit Insurance Corporation coverage, and have original maturity dates of three months or less. As of December 31, 2019 and 2018, bank balances totaling approximately $28.0 million and $11.8 million, respectively, were uninsured.

Accounts Receivable and Allowance for Doubtful Accounts

We sell our products worldwide. 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 an allowance for doubtful accounts 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. 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.

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.

Internal 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 December 31, 2019, software has been substantially completed concurrently with the establishment of technological feasibility; accordingly, no costs have been capitalized to date.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable.  They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was an impairment of its Customer Relationships intangible asset in the amount of $0.4 million as of December 31, 2016. 

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, we review 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.

Intangible Assets and Amortization

Amortization expense related to other intangibles acquired in acquisitions is calculated on a straight line basis over two to ten years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.

Derivatives

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, Distinguishing Liabilities from Equity and FASB ASC Topic No. 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.

Going Concern Evaluation

In connection with preparing consolidated financial statements for the year ended December 31, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the historical operating loss and negative cash flow from operating activities trends, including the positive trends occurring in the recent year.  

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued and management believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.

Revenue Recognition

The Company adopted FASB ASC Topic No. 606, Revenue from Contracts with Customers, as of January 1, 2018, and recognizes the sale of goods and services based on the five step analysis of transactions as provided in Topic 606 which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services.

In our Wireless segment, we transfer software licenses to our customers on a royalty free, non-exclusive, non-transferrable, limited use basis during the term of the agreement. In some instances, we perform customization services to ensure the software operates within our customer’s operating platforms as well as the operating platforms of the mobile devices used by their end customers before transferring the license. Revenue related to these services is recognized at a point in time upon acceptance of the software license by the customer. We also earn usage based revenue on our platforms. Usage based revenue is generated based on active licenses used by our customer’s end customers, the provision of hosting services, revenue share based on media placements on our platform, and use of our Cloud Based services. We recognize our usage based revenue when we have completed our performance obligation and have the right to invoice the customer. This revenue is generally recognized monthly or quarterly. Finally, in this segment, we ratably recognize revenue over the contract period when customers pay in advance of our service delivery.

We also provide consulting services to develop customer specified functionality that are generally not on our software development roadmap. We recognize revenue from our consulting services upon delivery and acceptance by the customer of our software enhancements and upgrades. For certain Wireless segment customers we provide maintenance and technology support services for which the customer pays upfront or as we provide the services. When the customer pays upfront, we record the payments as contract liabilities and recognize revenue ratably over the contract period as this is our stand ready performance obligation that is satisfied ratably over the maintenance and technology services period.

For our Graphics products where we sell off-the-self software products with no customization or post sale technology support services, we recognize revenue at the time we transfer control of the product to the customer. This occurs upon shipment of the product or when the customer downloads the software from our website or website of our resellers. We offer a 30 day return option to our customers; a return reserve is established at the time revenue is recorded and the reserve is monitored and adjusted based on actual experience. Historically, returns have been insignificant.

Product and Services Warranties

Warranty related costs are recorded in our operating expenses as incurred as these costs are immaterial for the products and services we sell.  

Shipping and Handling Costs

We incur shipping and handling costs as part of our Graphics software sales. These costs are treated as fulfillment costs and are expensed as incurred.

Principal and Agent Considerations

We own the Intellectual Property and retain ownership when we license our customized software solutions for use by our Wireless segment customers. We are a principal in these transactions and as such we recognize our Wireless segment revenue on a gross basis.

We sell our Graphics software products directly to end consumers as well as through our distributors and re-sellers. We are a principal in these transactions as we bear the inventory risk, customers (or customer’s end users) view us as the primary obligor responsible for supporting the software products, and we have full discretion in establishing the prices for our graphics software products. As a principal we record our Graphics revenues on a gross basis.

Sales Incentives

For our Graphics sales, 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 as required by FASB ASC Topic No. 605-50, Revenue Recognition-Customer Payments and Incentives. We use historical redemption rates to estimate the cost of customer incentives. Total sales incentives were $16 thousand and $0.1 million for the years ended December 31, 2019 and 2018, respectively.

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. The Company adopted ASU 2014-09 as of January 1, 2018 utilizing the modified retrospective approach. This adoption did not have a material impact on our consolidated financial statements. See Note 11 for further details.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The Company adopted the FASB ASC Topic No. 842, Leases, and related amendments, as of January 1, 2019, utilizing the modified retrospective approach through a cumulative-effect adjustment to equity. Management elected the package of practical expedients permitted under the transition guidance within the new standard which allowed for the carry forward of the historical lease classification. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $3.1 million as of January 1, 2019, and an adjustment to retained earnings of $0.1 million. The standard did not materially impact the consolidated net income or earnings per share and had no impact on cash flows. See Note 13 for further details.

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

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Equity Transactions

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Equity Transactions

6.  Equity Transactions

Preferred Stock Offering

On September 29, 2017, the Company entered into a Securities Purchase Agreement with several investors for the issuance and sale (the “Offering”) of 5,500 shares of the Company’s newly designated Series B 10% Convertible Preferred Stock (the “Series B Preferred Stock”) at a stated value of $1,000 per share, for a total purchase price of $5.5 million.  The Series B Preferred Stock is convertible into the Company’s Common Stock at a conversion price of $1.14 per share, which was the closing bid price of the Common Stock on September 28, 2017, or 4,824,562 shares of Common Stock in the aggregate. The holders of Series B Preferred Stock were entitled to receive cumulative dividends out of funds legally available thereof at a rate of ten percent (10%) per annum, payable (i) when and as declared by the Board of Directors, in quarterly installments on March 1, June 1, September 1 and December 1, (ii) upon conversion into Common Stock with respect the Series B Preferred Stock being converted, and (iii) upon redemption of the Series B Preferred Stock by the Company.

In the event that the trading price of the Company’s Common Stock for 20 consecutive trading days (as determined in the Certificate of Designation) exceeds 400% of the then effective Conversion Price of the Series B Preferred Stock (initially set at $1.14), the Company may force conversion of the Series B Preferred Stock into shares of Common Stock or elect to redeem the Series B Preferred Stock for cash. In addition, upon the occurrence of certain triggering events, each holder of Series B Preferred Stock will have the right to require the Company to redeem such holder’s shares for cash equal to the stated value plus accrued and unpaid dividends and liquidated damages, costs, expenses and other amounts due in respect of the Series B Preferred Stock, and with respect to certain other triggering events, each holder will have the right to increase the dividend rate on such holder’s Series B Preferred Stock to twelve percent (12%) while such triggering event is continuing.

In the Offering, the Company raised gross cash proceeds of $2.7 million, and exchanged outstanding indebtedness with a principal amount of $2.8 million owed to Smith (both long and short-term debt) and $0.1 million owed to Arno for 2,750 and 50 shares, respectively. The Offering raised net cash proceeds of $2.5 million (after deducting the placement agent fee and expenses of the Offering).

In connection with the Offering, the Company entered into a Registration Rights Agreement with investors (the “Series B Registration Rights Agreement”) under which the Company agreed to prepare and file a registration statement with the SEC within 30 days after closing of the Series B Transaction for the purpose of registering the resale of shares of common stock issuable upon conversion of the Series B Preferred Stock (the “Conversion Shares”). The Company agreed to use its reasonable best efforts to cause such resale registration statement to be declared effective by the SEC within 90 days after the closing of the Series B Transaction (120 days in the event the registration statement is reviewed by the SEC) and agreed to pay liquidated damages to the Series B Stockholders if such resale registration statement were not to become effective within the applicable time period. The Conversion Shares were included in the registration statement filed in connection with the March Offering, and such registration statement became effective on April 19, 2018, which was later than the deadline specified in the Series B Registration Rights Agreement, resulting in liquidated damage payments of $48 thousand to Series B Stockholders. Certain Series B Stockholders, including without limitation, Smith and Arno, waived their rights to receive such liquidated damage payments.

During the third quarter of 2019, the Company forced conversion of all outstanding Series B Preferred Stock in accordance with its terms.

Common Stock Offerings

March 2018 Offering

On March 6, 2018, the Company completed the March Offering, wherein a total of 2,857,144 shares of the Company’s common stock were issued at a purchase price of $1.75 per share, for a total purchase price of $5.0 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the offering at an exercise price of $2.17 per share. The March Offering raised net cash proceeds of approximately $4.5 million (after deducting the placement agent fee and expenses of the March Offering). The Company used the net cash proceeds from the March Offering for working capital purposes, to fund required dividend payments, payment of principal and interest payments under short-term borrowing obligations, and payment of interest (but not principal) under long-term borrowing obligations.

The Company engaged Chardan as placement agent for the March Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 8.0% of the gross proceeds of the March Offering, and issued to Chardan a warrant to purchase shares of common stock equal to 3.0% of the number of shares sold in the March Offering (the “Chardan Warrant”). The Chardan Warrant has an exercise price of $2.365 per share, a term of 5.5 years from the closing date of the March Offering, and otherwise has identical terms to the warrants issued to the investors in the March Offering.

Pursuant to the purchase agreement entered in connection with the March Offering (the “March Purchase Agreement”), the Company used its best efforts to cause the conversion of all shares of the Company’s Series B 10% Convertible Preferred Stock (the “Series B Preferred Stock”) into shares of common stock pursuant to the terms of the Company’s Certificate of Designation (the “Certificate of Designation”) with respect to the Series B Preferred Stock. In connection therewith, the Company entered into letter agreements with each of William W. Smith, Jr. (“Smith”) and Andrew Arno (“Arno”), whereby each of Smith and Arno agreed to take certain action to convert the shares of Series B Preferred Stock held by them pursuant to terms outlined in the March Purchase Agreement, and further agreed that the shares of common stock issued upon such conversion shall not be subject to resale registration rights. Each of Smith and Arno completed the conversion of their shares of Series B Preferred Stock in accordance with such letter agreements.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the March Offering, and such registration statement became effective within the time period agreed by the parties to the March Offering.

The Company has outstanding warrants issued pursuant to an agreement entered into on September 6, 2016 with Unterberg Koller Capital Fund L.P. (the “Unterberg Warrant Agreement”). The March Offering caused a Triggering Event as defined in the Unterberg Warrant Agreement, and the warrants were repriced from an exercise price of $2.14 to $2.07. The Triggering Event charges of $11 thousand were recorded to Stockholders’ Equity during the first quarter of 2018.

May 2018 Offering

On May 3, 2018, the Company completed the May Offering, wherein a total of 3,170,000 shares of the Company’s common stock were issued at a purchase price of $2.21 per share, for a total purchase price of approximately $7.0 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the Offering at an exercise price of $2.11 per share. The May Offering raised net cash proceeds of approximately $6.3 million (after deducting the placement agent fee and expenses). The Company used the net cash proceeds from the May Offering for working capital purposes, and to fund required dividend payments, payment of principal and interest payments under short-term borrowing obligations, and payment of interest (but not principal) under long-term borrowing obligations.

The Company engaged Chardan as placement agent for the May Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 7.0% of the gross proceeds of the May Offering. The Company also engaged Roth Capital Partners, LLC (“Roth”) as its financial advisor for the May Offering. The Company agreed to pay Roth a cash fee equal to 2.0% of the gross proceeds of the May Offering.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the May Offering, and such registration statement became effective within the time period agreed by the parties to the May Offering.

November 2018 Offering

On November 7, 2018, the Company completed the November Offering, wherein a total of 3,239,785 shares of the Company’s common stock were issued at a purchase price of $2.32 per share, for a total purchase price of approximately $7.5 million, with each investor also receiving a warrant to purchase up to a number of shares of common stock equal to the number of shares of common stock purchased by such investor in the Offering at an exercise price of $2.20 per share.

As part of the November Offering, the previously issued warrant agreements from the March and May 2018 Offerings were amended, which allowed the Company to reclassify them from liability to equity treatment. These warrants were initially accounted for as liabilities under ASC 815-40-25 since the original warrants provided the investors a cash settlement option in the event of a fundamental transaction that was not also provided to the common stockholders. In connection with the November Offering, these warrants were amended to remove the cash settlement option in the event of a fundamental transaction, thereby allowing equity treatment.

The November Offering raised net cash proceeds of approximately $6.9 million (after deducting the placement agent fee and expenses). The Company is using the net cash proceeds for general corporate purposes and repaid certain short and long-term debt obligations of $3.2 million.

The Company engaged Chardan as placement agent for the November Offering pursuant to an engagement letter agreement. The Company agreed to pay Chardan a cash placement fee equal to 6.0% of the gross proceeds of the November Offering. The Company also engaged Roth as its financial advisor for the November Offering. The Company agreed to pay Roth a cash fee equal to 2.0% of the gross proceeds of the November Offering.

The Company prepared and filed a registration statement with the SEC for the purpose of registering the resale of shares of common stock issued in the November Offering, and such registration statement became effective within the time period agreed by the parties to the November Offering.

Warrants

The Company issued warrants to purchase shares of Common Stock in connection with a registered direct offering completed in May 2017, March 2018, May 2018 and November 2018. See the prior section under the heading “Common Stock Offering” for additional details regarding the warrants issued in connection with those offerings.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

Stock Plans

On June 18, 2015, our stockholders approved the 2015 Omnibus Equity Incentive Plan (“2015 OEIP”) and a subsequent amendment to the 2015 OEIP to increase the number of shares reserved thereunder was approved by our stockholders on June 14, 2018.  The 2015 OEIP replaced the 2005 Stock Option / Stock Issuance Plan (“2005 Plan”) which was due to expire on July 28, 2015. All outstanding options under the 2005 Plan remain outstanding, but no new grants will be made under the 2005 Plan. The maximum number of shares of the Company’s common stock available for issuance over the term of the 2015 OEIP may not exceed 4,625,000 shares.

The 2015 OEIP provides for the issuance of full value awards (restricted stock, performance stock, dividend equivalent right or restricted stock units) and partial value awards (stock options or stock appreciation rights) to employees, non-employee members of the board and consultants. Any full value award settled in shares will be debited as 1.2 shares, and partial value awards settled in shares will be debited as 1.0 shares against the share reserve. The exercise price per share for stock option grants 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. Stock options may be exercisable immediately 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 stock options terminate and all vested stock options may be exercised within a period of 90 days following termination. In general, stock options expire ten years from the date of grant. Restricted stock is valued using the closing stock price on the date of the grant. The total value is expensed over the vesting period of 12 to 48 months.

Employee Stock Purchase Plan

The Company has a shareholder approved employee stock purchase plan (“ESPP”), under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning and end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s compensation and employees may not purchase more than the lesser of $25,000 of stock, or 250 shares, for any purchase period. Additionally, no more than 250,000 shares in the aggregate may be purchased under the plan.

Stock Compensation Expense

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation.

Valuation of Stock Option and Restricted Stock Awards

The assumptions used to compute the share-based compensation costs for the stock options granted during the years ended December 31, 2019 and 2018, using the Black-Scholes option pricing model, were as follows:

	Year Ended December 31,
	2019			2018
Weighted average grant date fair value of    stock options	$	1.84		$	1.56
Assumptions
Risk-free interest rate (weighted average)		2.36	%		2.90	%
Expected dividend yield		—			—
Weighted average expected life (years)		6.2			6.2
Volatility (weighted average)		78.7	%		73.8	%
Forfeiture rate		26.0	%		26.6	%

The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The Company assumed no dividend yield because it does not expect to pay dividends for the foreseeable future. The weighted average expected life is the vesting period for those options granted during that period. The average volatility is based on the actual historical volatility of our common stock. The forfeiture rate was based on modified employee turnover.

Valuation of ESPP

The fair values are estimated at the beginning of each offering period using a Black-Scholes valuation model that uses the assumptions noted in the following table. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. Expected volatility was based on the historical volatility on the day of grant. Following is a schedule of the shares purchased, the fair value per share, and the Black-Scholes model assumptions for each offering period:

	September30,			March 31,			September30,			March 31,
Offering Period Ended	2019			2019			2018			2018
Shares purchased for offering    period		2,195			2,112			1,843			3,250
Fair value per share	$	2.28		$	1.07		$	0.96		$	0.75
Assumptions
Risk-free interest rate (average)		1.84	%		2.44	%		2.29	%		1.92	%
Expected dividend yield		—			—			—			—
Weighted average expected life    (years)		0.5			0.5			0.5			0.5
Volatility (average)		86.3	%		51.7	%		54.3	%		81.4	%

Compensation Costs

Non-cash stock-based compensation expenses related to stock options, restricted stock grants and the ESPP were recorded in the financial statements as follows (in thousands):

	Year Ended December 31,
	2019		2018
Selling and marketing	$	247	$	112
Research and development		278		207
General and administrative		969		616
Total non-cash stock compensation expense	$	1,494	$	935

Stock Options

A summary of the Company’s stock options outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019 and the activity during the years ended herein are as follows (in thousands except per share amounts):

	Shares			Weighted Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
Outstanding as of December 31, 2017		137		$	5.71			$	7
(114 options exercisable at a weighted average    exercise price of $6.18)
Granted		30		$	2.32			$	—
Exercised		—		$	—			$	—
Canceled / expired		(9	)	$	8.96			$	—
Outstanding as of December 31, 2018		158		$	4.88		5.9	$	—
(121 options exercisable at a weighted average    exercise price of $5.64)
Granted		65		$	2.65			$	—
Exercised		(13	)	$	3.81			$	28
Canceled / expired		(13	)	$	7.81			$	22
Outstanding as of December 31, 2019		197		$	4.03		6.3	$	171
Exercisable as of December 31, 2019		112		$	5.16		4.1	$	35
Vested and expected to vest at December 31, 2019		163		$	3.67		6.0	$	133

As of December 31, 2019, there was $2.9 million of unrecognized compensation costs related to non-vested stock options and restricted stock granted under the Plans. At December 31, 2019, there were 1.3 million and 0 shares available for future grants under the 2015 OEIP and 2005 Plan, respectively.

Restricted Stock Awards

A summary of the Company’s restricted stock awards outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019, and the activity during years ended therein, are as follows (in thousands):

				Weightedaverage
	Number			grant date
	of shares			fair value
Unvested at December 31, 2017		167			3.49
Granted		1,125			1.92
Vested		(283	)		2.52
Canceled and forfeited		(2	)		0.83
Unvested at December 31, 2018		1,007			2.01
Granted		1,250			2.00
Vested		(673	)		2.06
Canceled and forfeited		(25	)		1.97
Unvested at December 31, 2019		1,559			1.98

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Acquisitions - Summary of Allocation of Purchase Price (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jan. 09, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill	$ 7,797		$ 3,685
Smart Retail [Member]
Business Acquisition [Line Items]
Costs incurred on projects not complete		$ 53
Intangible assets		5,229
Goodwill		4,112
Total assets		9,394
Deferred revenue		291
Total liabilities		291
Total purchase price		$ 9,103

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Restructuring (Tables)

12 Months Ended

Dec. 31, 2019

Restructuring And Related Activities [Abstract]

Activity in Restructuring Liability Account

The activity in our restructuring liability for the year ended December 31, 2019 (in thousands) follows:

	Balance at December 31, 2018		Provision, net			Usage			Transfer			Balance at December 31, 2019
Lease/rental terminations	$	495		(11	)		—			(484	)	$	—
One-time employee termination    benefits		114		194			(308	)		—			—
Total	$	609	$	183		$	(308	)	$	(484	)	$	—

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Assumptions Used to Compute Share-Based Compensation Costs for Stock Options Granted

The assumptions used to compute the share-based compensation costs for the stock options granted during the years ended December 31, 2019 and 2018, using the Black-Scholes option pricing model, were as follows:

	Year Ended December 31,
	2019			2018
Weighted average grant date fair value of    stock options	$	1.84		$	1.56
Assumptions
Risk-free interest rate (weighted average)		2.36	%		2.90	%
Expected dividend yield		—			—
Weighted average expected life (years)		6.2			6.2
Volatility (weighted average)		78.7	%		73.8	%
Forfeiture rate		26.0	%		26.6	%

Assumptions Used Estimate Fair Value of Employee Stock Purchase Plans

Following is a schedule of the shares purchased, the fair value per share, and the Black-Scholes model assumptions for each offering period:

	September30,			March 31,			September30,			March 31,
Offering Period Ended	2019			2019			2018			2018
Shares purchased for offering    period		2,195			2,112			1,843			3,250
Fair value per share	$	2.28		$	1.07		$	0.96		$	0.75
Assumptions
Risk-free interest rate (average)		1.84	%		2.44	%		2.29	%		1.92	%
Expected dividend yield		—			—			—			—
Weighted average expected life    (years)		0.5			0.5			0.5			0.5
Volatility (average)		86.3	%		51.7	%		54.3	%		81.4	%

Non-Cash Stock-Based Compensation Expenses

Non-cash stock-based compensation expenses related to stock options, restricted stock grants and the ESPP were recorded in the financial statements as follows (in thousands):

	Year Ended December 31,
	2019		2018
Selling and marketing	$	247	$	112
Research and development		278		207
General and administrative		969		616
Total non-cash stock compensation expense	$	1,494	$	935

Summary of Outstanding Stock Options and Related Activity

A summary of the Company’s stock options outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019 and the activity during the years ended herein are as follows (in thousands except per share amounts):

	Shares			Weighted Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
Outstanding as of December 31, 2017		137		$	5.71			$	7
(114 options exercisable at a weighted average    exercise price of $6.18)
Granted		30		$	2.32			$	—
Exercised		—		$	—			$	—
Canceled / expired		(9	)	$	8.96			$	—
Outstanding as of December 31, 2018		158		$	4.88		5.9	$	—
(121 options exercisable at a weighted average    exercise price of $5.64)
Granted		65		$	2.65			$	—
Exercised		(13	)	$	3.81			$	28
Canceled / expired		(13	)	$	7.81			$	22
Outstanding as of December 31, 2019		197		$	4.03		6.3	$	171
Exercisable as of December 31, 2019		112		$	5.16		4.1	$	35
Vested and expected to vest at December 31, 2019		163		$	3.67		6.0	$	133

Summary of Outstanding Restricted Stock Awards and Related Activity

A summary of the Company’s restricted stock awards outstanding under the 2015 OEIP and 2005 Plan as of December 31, 2019, and the activity during years ended therein, are as follows (in thousands):

				Weightedaverage
	Number			grant date
	of shares			fair value
Unvested at December 31, 2017		167			3.49
Granted		1,125			1.92
Vested		(283	)		2.52
Canceled and forfeited		(2	)		0.83
Unvested at December 31, 2018		1,007			2.01
Granted		1,250			2.00
Vested		(673	)		2.06
Canceled and forfeited		(25	)		1.97
Unvested at December 31, 2019		1,559			1.98

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Income Taxes - Federal Statutory Rate to Loss Before Income Taxes (Detail)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Federal statutory rate	21.00%	21.00%
State tax, net of federal benefit	3.60%	3.00%
Equity compensation	0.10%	(0.70%)
International tax items	0.20%	(1.70%)
Foreign taxes	0.60%	(0.40%)
State NOL true-up	(6.10%)	(30.40%)
Miscellaneous	0.40%	(7.70%)
Effect of change in rate	0.90%	(12.60%)
Change in valuation allowance	(19.80%)	29.00%
Total	0.70%	(0.50%)

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Earnings Per Share - Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Numerator:
Net income (loss)									$ 10,722	$ (2,740)
Dividends paid to preferred stockholders									(119)	(404)
Net income (loss) available to common stockholders									$ 10,603	$ (3,144)
Denominator:
Weighted average shares outstanding - basic	38,501	36,094	32,068	31,297	26,925	25,020	21,888	15,299	34,513	22,322
Potential common shares - options (treasury stock method)									2,478
Weighted average shares outstanding - diluted	41,767	39,472	35,308	31,323	27,395	25,020	21,888	15,299	36,991	22,322
Shares excluded due to an exercise price greater than weighted average stock price for the period									88	1,081
Earnings (loss) per common share:
Basic	$ 0.10	$ 0.10	$ 0.11		$ 0.10	$ (0.04)	$ (0.10)	$ (0.16)	$ 0.31	$ (0.14)
Diluted	$ 0.09	$ 0.09	$ 0.10		$ 0.10	$ (0.04)	$ (0.10)	$ (0.16)	$ 0.29	$ (0.14)

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Stock-Based Compensation - Assumptions Used Estimate Fair Value of Employee Stock Purchase Plans (Detail) - $ / shares shares in Thousands	6 Months Ended				12 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Shares purchased for offering period	2,195	2,112	1,843	3,250
Fair value per share	$ 2.28	$ 1.07	$ 0.96	$ 0.75
Assumptions
Risk-free interest rate (average)	1.84%	2.44%	2.29%	1.92%	2.36%	2.90%
Weighted average expected life (years)	6 months	6 months	6 months	6 months	6 years 2 months 12 days	6 years 2 months 12 days
Volatility (average)	86.30%	51.70%	54.30%	81.40%	78.70%	73.80%

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Subsequent Events - Additional Information (Detail) - USD ($) $ in Thousands, shares in Millions		1 Months Ended	12 Months Ended
	Feb. 12, 2020	Feb. 29, 2020	Dec. 31, 2019
Subsequent Event [Line Items]
Proceeds from exercise of common stock warrants			$ 11,457
Subsequent Event [Member]
Subsequent Event [Line Items]
Number of warrants exercised		1.0
Proceeds from exercise of common stock warrants		$ 2,200
Asset Purchase Agreement [Member] | Subsequent Event [Member] | Circle Media Labs Inc. [Member]
Subsequent Event [Line Items]
Cash	$ 13,500

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Segment, Customer Concentration and Geographical Information - Company Revenue in Different Geographic Locations (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue from External Customer [Line Items]
Total revenues	$ 12,278	$ 11,782	$ 10,854	$ 8,432	$ 7,352	$ 6,525	$ 6,945	$ 5,463	$ 43,346	$ 26,285
Americas [Member] | Reportable Geographical Components [Member]
Revenue from External Customer [Line Items]
Total revenues									43,236	26,054
EMEA [Member] | Reportable Geographical Components [Member]
Revenue from External Customer [Line Items]
Total revenues									67	90
Asia Pacific [Member] | Reportable Geographical Components [Member]
Revenue from External Customer [Line Items]
Total revenues									$ 43	$ 141