##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 0-26536
 SMITH MICRO SOFTWARE, INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    33-0029027(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 51 COLUMBIA
ALISO VIEJO, CA 92656
 (949) 362-5800
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Small reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



SMITH MICRO SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2010
  
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    2Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009
    
    
    3Consolidated Statement of Stockholders Equity for the three months ended March 31, 2010
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EX-31.1EX-31.2EX-32.1
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (unaudited)
 SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and par value data)
 March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)
    
    
    (audited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,517
    
    
    $
    14,577Short-term investments
    
    
    37,806
    
    
    
    31,284Accounts receivable, net of allowances for doubtful accounts
and other adjustments of $1,076 (2010) and $1,045 (2009)
    
    
    26,451
    
    
    
    24,147Income tax receivable
    
    
    980
    
    
    
    980Inventories, net of reserves for excess and obsolete inventory
of $1,230 (2010) and $1,221 (2009)
    
    
    371
    
    
    
    406Prepaid expenses and other current assets
    
    
    1,244
    
    
    
    1,506Deferred tax asset
    
    
    2,669
    
    
    
    2,696Total current assets
    
    
    81,038
    
    
    
    75,596Equipment and improvements, net
    
    
    8,912
    
    
    
    8,193Goodwill
    
    
    94,374
    
    
    
    94,320Intangible assets, net
    
    
    26,089
    
    
    
    27,662Other assets
    
    
    197
    
    
    
    163Total assets
    
    $
    210,610
    
    
    $
    205,934Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    3,640
    
    
    $
    4,215Accrued liabilities
    
    
    11,797
    
    
    
    11,359Deferred revenue
    
    
    1,833
    
    
    
    1,317Total current liabilities
    
    
    17,270
    
    
    
    16,891Non-current liabilities:Long-term liabilities
    
    
    70
    
    
    
    70Deferred tax liability
    
    
    997
    
    
    
    994Total non-current liabilities
    
    
    1,067
    
    
    
    1,064Commitments and contingenciesStockholders equity:Preferred stock, par value $0.001 per share; 5,000,000 shares
authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, par value $0.001 per share; 50,000,000 shares authorized;
34,203,148 and 33,380,496 shares issued and outstanding at March 31, 2010
and December 31, 2009, respectively
    
    
    34
    
    
    
    33Additional paid-in capital
    
    
    186,476
    
    
    
    183,756Accumulated other comprehensive loss
    
    
    (21
    )
    
    
    (2
    )Accumulated earnings
    
    
    5,784
    
    
    
    4,192Total stockholders equity
    
    
    192,273
    
    
    
    187,979Total liabilities and stockholders equity
    
    $
    210,610
    
    
    $
    205,934
  2




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SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 Three Months EndedMarch 31,2010
    
    
    2009(unaudited)
    
    
    (unaudited)Revenues
    
    $
    29,862
    
    
    $
    23,788Cost of revenues
    
    
    3,732
    
    
    
    4,523Gross profit
    
    
    26,130
    
    
    
    19,265Operating expenses:Selling and marketing
    
    
    7,290
    
    
    
    6,277Research and development
    
    
    10,128
    
    
    
    8,112General and administrative
    
    
    5,806
    
    
    
    4,487Total operating expenses
    
    
    23,224
    
    
    
    18,876Operating income
    
    
    2,906
    
    
    
    389Interest and other income
    
    
    40
    
    
    
    255Profit before taxes
    
    
    2,946
    
    
    
    644Income tax expense
    
    
    1,354
    
    
    
    366Net income
    
    $
    1,592
    
    
    $
    278Net income per share:Basic
    
    $
    0.05
    
    
    $
    0.01Diluted
    
    $
    0.05
    
    
    $
    0.01Weighted average shares outstanding:Basic
    
    
    33,730
    
    
    
    31,675Diluted
    
    
    34,176
    
    
    
    31,904
  3




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SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (in thousands)
 AccumulatedAdditional
    
    
    otherCommon stock
    
    
    paid-in
    
    
    comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    capital
    
    
    loss
    
    
    income
    
    
    TotalBALANCE, December 31, 2009
    
    
    33,380
    
    
    $
    33
    
    
    $
    183,756
    
    
    $
    (2
    )
    
    $
    4,192
    
    
    $
    187,979Exercise of common stock options
    
    
    32
    
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    153Non cash compensation recognized on stock options
    
    
    
    
    
    
    
    
    
    
    1,173
    
    
    
    
    
    
    
    
    
    
    
    1,173Restricted stock grants
    
    
    800
    
    
    
    1
    
    
    
    1,083
    
    
    
    
    
    
    
    
    
    
    
    1,084Cancellation of shares for payment of withholding tax
    
    
    (9
    )
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (69
    )Tax benefit related to the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    407Tax benefit deficiencies related to restricted stock expense
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (27
    )Other comprehensive income:Unrealized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,592
    
    
    
    1,592Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,573BALANCE, March 31, 2010 (unaudited)
    
    
    34,203
    
    
    $
    34
    
    
    $
    186,476
    
    
    $
    (21
    )
    
    $
    5,784
    
    
    $
    192,273
  4




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SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Three Months Ended March 31,2010
    
    
    2009(unaudited)
    
    
    (unaudited)Operating activities:Net income
    
    $
    1,592
    
    
    $
    278Adjustments
to reconcile net income to net cash provided by (used in) operating activities, net of the effect of acquisitions:Depreciation and amortization
    
    
    2,880
    
    
    
    2,510Provision for doubtful accounts and other adjustments to accounts receivable
    
    
    389
    
    
    
    269Provision for excess and obsolete inventory
    
    
    48
    
    
    
    385Tax benefits from stock-based compensation
    
    
    (407
    )
    
    
    (10
    )Non-cash compensation related to stock options and restricted stock
    
    
    2,257
    
    
    
    2,374Change in operating accounts, net of effect from acquisitions:Accounts receivable
    
    
    (2,693
    )
    
    
    (1,232
    )Deferred taxes
    
    
    3
    
    
    
    Inventories
    
    
    (13
    )
    
    
    (11
    )Prepaid expenses and other assets
    
    
    228
    
    
    
    (240
    )Accounts payable and accrued liabilities
    
    
    616
    
    
    
    870Net cash provided by operating activities
    
    
    4,900
    
    
    
    5,193Investing activities:Acquisitions, net of cash received
    
    
    (675
    )
    
    
    Capital expenditures
    
    
    (1,304
    )
    
    
    (846
    )Purchase of short-term investments
    
    
    (6,541
    )
    
    
    (7,584
    )Net cash used in investing activities
    
    
    (8,520
    )
    
    
    (8,430
    )Financing activities:Tax benefits from stock-based compensation
    
    
    407
    
    
    
    10Cash received from exercise of stock options
    
    
    153
    
    
    
    33Net cash provided by financing activities
    
    
    560
    
    
    
    43Net decrease in cash and cash equivalents
    
    
    (3,060
    )
    
    
    (3,194
    )Cash and cash equivalents, beginning of period
    
    
    14,577
    
    
    
    13,966Cash and cash equivalents, end of period
    
    $
    11,517
    
    
    $
    10,772Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    $
    49
    
    
    $
    661
  5




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SMITH MICRO SOFTWARE, INC.
 
 Notes to the Consolidated Financial Statements
 1. The Company
 ®
 2. Basis of Presentation
     3. Net Income (Loss) Per Share
  6




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##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009(unaudited, in thousands, except per share amounts)Numerator:Net income available to common stockholders
    
    $
    1,592
    
    
    $
    278Denominator:Weighted average shares outstanding  basic
    
    
    33,730
    
    
    
    31,675Potential common shares  options (treasury stock method)
    
    
    446
    
    
    
    229Weighted average shares outstanding  diluted
    
    
    34,176
    
    
    
    31,904Shares
excluded due to an exercise price greater than weighted average stock price for the period
    
    
    2,495
    
    
    
    2,783Net income per common share:Basic
    
    $
    0.05
    
    
    $
    0.01Diluted
    
    $
    0.05
    
    
    $
    0.01
 4. Acquisitions
 Core Mobility, Inc.
   Cash paid at closing
    
    $
    6,970Holdback (including interest)
    
    
    3,041Common stock issued
    
    
    6,881Milestone payments
    
    
    1,839Total purchase price
    
    $
    18,731
 7




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##### Table of Contents



Assets:Cash
    
    $
    63Accounts receivable
    
    
    997Unbilled receivable
    
    
    324Prepaid and other assets
    
    
    136Fixed assets
    
    
    856Deferred tax assets
    
    
    1,735Intangible assets
    
    
    8,858Goodwill
    
    
    10,837Total assets
    
    
    23,806Liabilities:Accounts payable
    
    
    26Accrued expenses
    
    
    258Deferred revenue
    
    
    1,280Deferred tax liability
    
    
    3,511Total liabilities
    
    
    5,075Total purchase price
    
    $
    18,731
  5. Stock-Based Compensation
 Stock Plans
   Stock Compensation
   8




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Valuation of Stock Option and Restricted Stock Awards
   Compensation Costs
  Three Months EndedMarch 31,(unaudited)2010
    
    
    2009Cost of revenues
    
    $
    28
    
    
    $
    73Selling and marketing
    
    
    632
    
    
    
    679Research and development
    
    
    586
    
    
    
    607General and administrative
    
    
    1,011
    
    
    
    1,015Total non-cash stock compensation expense
    
    $
    2,257
    
    
    $
    2,374
  St o ck Options
  Weighted Ave.
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Intrinsic Value(in thousands except per share amounts)Outstanding as of December 31, 2009
    
    
    3,536
    
    
    $
    11.29Granted (unaudited)
    
    
    
    
    
    $
    Exercised (unaudited)
    
    
    (32
    )
    
    $
    4.87Cancelled (unaudited)
    
    
    (1
    )
    
    $
    15.15Outstanding as of March 31, 2010 (unaudited)
    
    
    3,503
    
    
    $
    11.34
    
    
    $
    Exercisable as of March 31, 2010 (unaudited)
    
    
    2,879
    
    
    $
    10.79
    
    
    $
    
  9




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##### Table of Contents



Options outstanding
    
    Options exercisableWeighted average
    
    Weighted
    
    
    
    
    
    WeightedRange of
    
    Number
    
    remaining
    
    average
    
    Number
    
    averageexercise
    
    outstanding
    
    contractual
    
    exercise
    
    exercisable
    
    exerciseprices
    
    (in thousands)
    
    life (years)
    
    price
    
    (in thousands)
    
    price$0.24  $4.00
    
    
    186
    
    
    
    3.9
    
    
    $
    1.56
    
    
    
    186
    
    
    $
    1.56$4.01  $6.00
    
    
    657
    
    
    
    5.3
    
    
    $
    4.95
    
    
    
    657
    
    
    $
    4.95$6.01  $12.00
    
    
    303
    
    
    
    6.9
    
    
    $
    9.02
    
    
    
    259
    
    
    $
    9.17$12.01  $14.00
    
    
    1,310
    
    
    
    6.9
    
    
    $
    12.68
    
    
    
    1,011
    
    
    $
    12.68$14.01  $16.00
    
    
    667
    
    
    
    7.0
    
    
    $
    15.18
    
    
    
    502
    
    
    $
    15.18$16.01  $19.00
    
    
    380
    
    
    
    7.2
    
    
    $
    17.73
    
    
    
    264
    
    
    $
    17.793,503
    
    
    
    6.5
    
    
    $
    11.34
    
    
    
    2,879
    
    
    $
    10.79
 Restricted Stock Awards
  SharesUnvested at December 31, 2009
    
    
    1,415Granted (unaudited)
    
    
    833Cancelled/forfeited (unaudited)
    
    
    (33
    )Vested (unaudited)
    
    
    (205
    )Unvested at March 31, 2010 (unaudited)
    
    
    2,010
 6. Fair Value of Financial Instruments
    
    
    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.
   10




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7. Cash and Cash Equivalents
  8. Short-Term Investments
  March 31, 2010
    
    
    December 31, 2009Fair value
    
    
    Unrealized (loss)
    
    
    Fair value
    
    
    Unrealized (loss)Corporate bonds and notes
    
    $
    7,131
    
    
    $
    (12
    )
    
    $
    3,499
    
    
    $
    Government securities
    
    
    30,675
    
    
    
    (9
    )
    
    
    27,785
    
    
    
    (2
    )Total
    
    $
    37,806
    
    
    $
    (21
    )
    
    $
    31,284
    
    
    $
    (2
    )
 9. Accounts Receivable
  10. Inventories
  11. Equipment and Improvements
  11




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12. Goodwill
   13. Intangible Assets
  Useful
    
    

    March 31, 2010

    
    

    December 31, 2009life
    
    
    
    
    
    
    Accumulated
    
    
    Net book
    
    
    
    
    
    
    Accumulated
    
    
    Net book(years)
    
    
    Gross
    
    
    amortization
    
    
    value
    
    
    Gross
    
    
    amortization
    
    
    valueAmortizing:Purchased technology
    
    
    2
    
    
    $
    7,347
    
    
    $
    (3,801
    )
    
    $
    3,546
    
    
    $
    6,667
    
    
    $
    (3,349
    )
    
    $
    3,318In process R&D
    
    
    2
    
    
    
    990
    
    
    
    
    
    
    
    990
    
    
    
    990
    
    
    
    
    
    
    
    990Capitalized software
    
    
    5-7
    
    
    
    23,846
    
    
    
    (12,515
    )
    
    
    11,331
    
    
    
    23,846
    
    
    
    (11,485
    )
    
    
    12,361Distribution rights
    
    
    5
    
    
    
    482
    
    
    
    (465
    )
    
    
    17
    
    
    
    482
    
    
    
    (447
    )
    
    
    35Customer lists
    
    
    5
    
    
    
    1,484
    
    
    
    (1,136
    )
    
    
    348
    
    
    
    1,484
    
    
    
    (1,048
    )
    
    
    436Database
    
    
    10
    
    
    
    182
    
    
    
    (42
    )
    
    
    140
    
    
    
    182
    
    
    
    (38
    )
    
    
    144Trademarks
    
    
    5-10
    
    
    
    926
    
    
    
    (468
    )
    
    
    458
    
    
    
    926
    
    
    
    (445
    )
    
    
    481Trade names
    
    
    1-2
    
    
    
    2,121
    
    
    
    (907
    )
    
    
    1,214
    
    
    
    2,121
    
    
    
    (807
    )
    
    
    1,314Non-compete
    
    
    2
    
    
    
    21
    
    
    
    (5
    )
    
    
    16
    
    
    
    21
    
    
    
    (2
    )
    
    
    19Customer agreements
    
    
    4-7
    
    
    
    1,135
    
    
    
    (1,135
    )
    
    
    
    
    
    
    1,135
    
    
    
    (1,135
    )
    
    
    Customer relationships
    
    
    1-9
    
    
    
    11,130
    
    
    
    (3,101
    )
    
    
    8,029
    
    
    
    11,130
    
    
    
    (2,566
    )
    
    
    8,564Totals
    
    
    
    
    
    $
    49,664
    
    
    $
    (23,575
    )
    
    $
    26,089
    
    
    $
    48,984
    
    
    $
    (21,322
    )
    
    $
    27,662
  14. Comprehensive Income
  Three Months EndedMarch 31,(unaudited)2010
    
    
    2009Net income
    
    $
    1,592
    
    
    $
    278Change in unrealized loss on investments, net
    
    
    (19
    )
    
    
    (45
    )Total comprehensive income
    
    $
    1,573
    
    
    $
    233
 12




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15. Segment and Geographical Information
 Segment Information
 Wireless Productivity & Graphics
   Three Months EndedMarch 31,2010
    
    
    2009(unaudited)Wireless
    
    $
    26,962
    
    
    $
    19,257Productivity & Graphics
    
    
    2,774
    
    
    
    4,251Corporate/Other
    
    
    126
    
    
    
    280Total Revenues
    
    $
    29,862
    
    
    $
    23,788
  Geographical Information
  Three Months EndedMarch 31,2010
    
    
    2009(unaudited)Americas
    
    $
    28,015
    
    
    $
    20,951Asia Pacific
    
    
    364
    
    
    
    1,319EMEA
    
    
    1,483
    
    
    
    1,518Total Revenues
    
    $
    29,862
    
    
    $
    23,788
  16. Recent Accounting Pronouncements
 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
 13




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Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements
 Software (Topic 985): Certain
Revenue Arrangements That Include Software Elements (a consensus of the FASB Emerging Issues Task
Force).
 Fair Value Measurements and Disclosures (Topic
820): Measuring Liabilities at Fair Value
 Amendments to FASB Interpretation No. 46(R). Consolidation of Variable Interest Entities, Accounting for Transfers of Financial
Assets,
 Accounting for Transfers of Financial Assetsan
amendment of FASB Statement No. 140.
 14




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##### Table of Contents



17. Commitments and Contingencies
 Leases
  Year Ending December 31,
    
    Operating2010-9 months
    
    $
    1,5242011
    
    
    1,9672012
    
    
    1,7572013
    
    
    1,4842014
    
    
    1,1362015
    
    
    1,090Beyond
    
    
    1,264Total
    
    $
    10,222
  18. Income Taxes
     19. Subsequent Events
  15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 In this document, the terms Smith Micro, Company, we, us, and our refer to Smith
Micro Software, Inc. and, where appropriate, its subsidiaries.
 This report contains forward-looking statements regarding Smith Micro which include, but are
not limited to, statements concerning projected revenues, expenses, gross profit and income, the
competitive factors affecting our business, market acceptance of products, customer concentration,
the success and timing of new product introductions and the protection of our intellectual
property. These forward-looking statements are based on our current expectations, estimates and
projections about our industry, managements beliefs, and certain assumptions made by us. Words
such as anticipates, expects, intends, plans, predicts, potential, believes, seeks,
estimates, should, may, will and variations of these words or similar expressions are
intended to identify forward-looking statements. Forward-looking statements also include the
assumptions underlying or relating to any of the foregoing statements. These statements are not
guarantees of future performance and are subject to risks, uncertainties and assumptions that are
difficult to predict. Therefore, our actual results could differ materially and adversely from
those expressed or implied in any forward-looking statements as a result of various factors. Such
factors include, but are not limited to, the following:
 
    
    the duration and depth of the current economic slowdown and its effects on
capital expenditures by our customers and their end users;
 
    
    our ability to predict consumer needs, introduce new products, gain broad market
acceptance for such products and ramp up manufacturing in a timely manner;
 
    
    changes in demand for our products from our customers and their end-users;
 
    
    the intensity of the competition and our ability to successfully compete;
 
    
    the pace at which the market for new products develop;
 
    
    the response of competitors, many of whom are bigger and better financed than us;
 
    
    our ability to successfully execute our business plan and control costs and
expenses;
 
    
    our ability to protect our intellectual property and our ability to not infringe
on the rights of others; and
 
    
    those additional factors which are listed under the section Risk Factors in our
Annual Report onForm 10-Kfor the year ended December 31, 2009.
 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 SEC. We do not undertake any obligation to update these statements to
reflect events or circumstances occurring after the date this report is filed.
 Overview
    16




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##### Table of Contents



Results of Operations
  Three Months EndedMarch 31,2010
    
    
    2009Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    12.5
    %
    
    
    19.0
    %Gross profit
    
    
    87.5
    %
    
    
    81.0
    %Operating expenses:Selling and marketing
    
    
    24.4
    %
    
    
    26.4
    %Research and development
    
    
    33.9
    %
    
    
    34.1
    %General and administrative
    
    
    19.5
    %
    
    
    18.9
    %Total operating expenses
    
    
    77.8
    %
    
    
    79.4
    %Operating income
    
    
    9.7
    %
    
    
    1.6
    %Interest and other income
    
    
    0.2
    %
    
    
    1.1
    %Profit before taxes
    
    
    9.9
    %
    
    
    2.7
    %Income tax expense
    
    
    4.6
    %
    
    
    1.5
    %Net income
    
    
    5.3
    %
    
    
    1.2
    %
 Revenues and Expense Components
  Revenues.
 
    
    Wireless, which includes our connection manager solutions, mobile VPN,
music and multimedia manager, device management suite, Push-To-Talk and Visual
Voicemail; and
 
    
    Productivity & Graphics, which includes retail and direct sales of our
compression and broad consumer-based software.
 
    
    Corporate/Other refers to the consulting portion of our services sector which
has been de-emphasized and is no longer considered a strategic element of our future
plans.
 17




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##### Table of Contents



Three Months EndedMarch 31,2010
    
    
    2009Wireless
    
    $
    26,962
    
    
    $
    19,257Productivity & Graphics
    
    
    2,774
    
    
    
    4,251Corporate/Other
    
    
    126
    
    
    
    280Total Revenues
    
    
    29,862
    
    
    
    23,788Cost of revenues
    
    
    3,732
    
    
    
    4,523Gross Profit
    
    $
    26,130
    
    
    $
    19,265
 Cost of revenues.
 Selling and marketing.
 Research and development.
 General and administrative.
 Interest and other income
 Income tax expense.
   Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Revenues.
 18




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##### Table of Contents



Cost of revenues
 Gross profit.
 Selling and marketing.
 Research and development.
 General and administrative.
 Interest and other income.
 Income tax provision.
 Liquidity and Capital Resources
  Operating activities
  19




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##### Table of Contents



Investing activities
  Financing activities
  Contractual obligations and commercial commitments
  Payments due by period1 year
    
    
    
    
    
    
    
    
    
    
    More thanContractual obligations:
    
    Total
    
    
    or less
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsOperating Lease Obligations
    
    $
    10,222
    
    
    $
    2,049
    
    
    $
    3,566
    
    
    $
    2,523
    
    
    $
    2,084Purchase Obligations
    
    
    1,113
    
    
    
    1,113
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,335
    
    
    $
    3,162
    
    
    $
    3,566
    
    
    $
    2,523
    
    
    $
    2,084
  Real Property Leases
  Critical Accounting Policies and Estimates
  20




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##### Table of Contents



Revenue Recognition
  Sales Incentives
  Accounts Receivable and Allowance for Doubtful Accounts
  Internal Software Development Costs
  In-Process Research and Development
   21




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##### Table of Contents



Capitalized Software and Amortization
  Intangible Assets and Amortization
  Impairment or Disposal of Long Lived Assets
  Valuation of Goodwill and Intangible Assets
  
    
    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.
  Deferred Income and Income Taxes
  22




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##### Table of Contents



Stock-Based Compensation
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Interest Rate Risk
  Foreign Currency Risk
  
 Item 4. Controls and Procedures.
 Evaluation of disclosure controls and procedures
  Managements responsibility for financial statements
  23




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##### Table of Contents



Changes in internal control over financial reporting
  24




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors
  Item 5. Other Information.
      
 Item 6. Exhibits.
 31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 25




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##### Table of Contents



SIGNATURES
  SMITH MICRO SOFTWARE, INC.May 6, 2010
    By
    /s/ William W. Smith, Jr.William W. Smith, Jr.President and Chief Executive Officer(Principal Executive Officer)May 6, 2010
    By
    /s/ Andrew C. SchmidtAndrew C. SchmidtVice President and Chief Financial Officer(Principal Financial Officer) 26