##### 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, 2011
 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.
  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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



SMITH MICRO SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2011
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    2Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010
    
    
    3Consolidated Statement of Stockholders Equity for the three months ended March 31, 2011
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25EX-31.1EX-31.2EX-32.1
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and par value data)
 March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)
    
    (audited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,689
    
    
    $
    17,856Short-term investments
    
    
    56,683
    
    
    
    54,694Accounts receivable, net of allowances for doubtful accounts
and other adjustments of $774 (2011) and $855 (2010)
    
    
    24,810
    
    
    
    29,812Income tax receivable
    
    
    2,872
    
    
    
    2,872Inventories, net of reserves for excess and obsolete inventory
of $474 (2011) and $558 (2010)
    
    
    352
    
    
    
    370Prepaid expenses and other current assets
    
    
    1,407
    
    
    
    1,167Deferred tax asset
    
    
    1,852
    
    
    
    2,565Total current assets
    
    
    95,665
    
    
    
    109,336Equipment and improvements, net
    
    
    17,478
    
    
    
    11,623Goodwill
    
    
    94,231
    
    
    
    94,231Intangible assets, net
    
    
    17,429
    
    
    
    19,459Other assets
    
    
    240
    
    
    
    243Deferred tax asset
    
    
    6,253
    
    
    
    Total assets
    
    $
    231,296
    
    
    $
    234,892Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    7,224
    
    
    $
    4,592Accrued liabilities
    
    
    8,253
    
    
    
    8,444Deferred revenue
    
    
    438
    
    
    
    1,667Total current liabilities
    
    
    15,915
    
    
    
    14,703Non-current liabilities:Long-term liabilities
    
    
    525
    
    
    
    197Deferred tax liability
    
    
    1,727
    
    
    
    1,727Total non-current liabilities
    
    
    2,252
    
    
    
    1,924Commitments 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;
35,880,291 and 34,971,108 shares issued and outstanding at March 31, 2011
and December 31, 2010, respectively
    
    
    36
    
    
    
    35Additional paid-in capital
    
    
    204,314
    
    
    
    201,702Accumulated other comprehensive loss
    
    
    (6
    )
    
    
    (10
    )Accumulated earnings
    
    
    8,785
    
    
    
    16,538Total stockholders equity
    
    
    213,129
    
    
    
    218,265Total liabilities and stockholders equity
    
    $
    231,296
    
    
    $
    234,892
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SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 Three Months EndedMarch 31,2011
    
    
    2010(unaudited)
    
    
    (unaudited)Revenues
    
    $
    17,791
    
    
    $
    29,862Cost of revenues
    
    
    3,776
    
    
    
    3,732Gross profit
    
    
    14,015
    
    
    
    26,130Operating expenses:Selling and marketing
    
    
    8,362
    
    
    
    7,290Research and development
    
    
    11,680
    
    
    
    10,128General and administrative
    
    
    6,985
    
    
    
    5,806Total operating expenses
    
    
    27,027
    
    
    
    23,224Operating income (loss)
    
    
    (13,012
    )
    
    
    2,906Interest and other income
    
    
    43
    
    
    
    40Income (loss) before taxes
    
    
    (12,969
    )
    
    
    2,946Income tax expense (benefit)
    
    
    (5,216
    )
    
    
    1,354Net income (loss)
    
    $
    (7,753
    )
    
    $
    1,592Net income (loss) per share:Basic
    
    $
    (0.22
    )
    
    $
    0.05Diluted
    
    $
    (0.22
    )
    
    $
    0.05Weighted average shares outstanding:Basic
    
    
    35,263
    
    
    
    33,730Diluted
    
    
    35,263
    
    
    
    34,176
  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, 2010
    
    
    34,971
    
    
    $
    35
    
    
    $
    201,702
    
    
    $
    (10
    )
    
    $
    16,538
    
    
    $
    218,265Exercise of common stock options
    
    
    6
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Non cash compensation recognized on stock options
and ESPP
    
    
    
    
    
    
    
    
    
    
    708
    
    
    
    
    
    
    
    
    
    
    
    708Restricted stock grants, net of cancellations
    
    
    869
    
    
    
    1
    
    
    
    1,398
    
    
    
    
    
    
    
    
    
    
    
    1,399Cancellation of shares for payment of withholding tax
    
    
    (9
    )
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    (130
    )Employee stock purchase plan (ESPP)
    
    
    43
    
    
    
    
    
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    345Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    284Other comprehensive income (loss):Unrealized gain on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,753
    )
    
    
    (7,753
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,749
    )BALANCE, March 31, 2011 (unaudited)
    
    
    35,880
    
    
    $
    36
    
    
    $
    204,314
    
    
    $
    (6
    )
    
    $
    8,785
    
    
    $
    213,129
  4




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SMITH MICRO SOFTWARE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Three Months Ended March 31,2011
    
    
    2010(unaudited)
    
    
    (unaudited)Operating activities:Net income (loss)
    
    $
    (7,753
    )
    
    $
    1,592Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities, net of the effect of acquisitions:Depreciation and amortization
    
    
    2,736
    
    
    
    2,880Provision for doubtful accounts and other adjustments to accounts receivable
    
    
    193
    
    
    
    389Provision for excess and obsolete inventory
    
    
    26
    
    
    
    48Excess tax benefits from stock-based compensation
    
    
    (284
    )
    
    
    (407
    )Non-cash compensation related to stock options and restricted stock
    
    
    2,107
    
    
    
    2,257Change in operating accounts, net of effect from acquisitions:Accounts receivable
    
    
    4,809
    
    
    
    (2,693
    )Deferred taxes
    
    
    (5,540
    )
    
    
    3Inventories
    
    
    (8
    )
    
    
    (13
    )Prepaid expenses and other assets
    
    
    (237
    )
    
    
    228Accounts payable and accrued liabilities
    
    
    1,694
    
    
    
    616Net cash provided by (used in) operating activities
    
    
    (2,257
    )
    
    
    4,900Investing activities:Acquisitions, net of cash received
    
    
    
    
    
    
    (675
    )Capital expenditures
    
    
    (6,561
    )
    
    
    (1,304
    )Purchase of short-term investments
    
    
    (1,985
    )
    
    
    (6,541
    )Net cash used in investing activities
    
    
    (8,546
    )
    
    
    (8,520
    )Financing activities:Excess tax benefits from stock-based compensation
    
    
    284
    
    
    
    407Cash received from stock sale for employee stock purchase plan
    
    
    345
    
    
    
    Cash received from exercise of stock options
    
    
    7
    
    
    
    153Net cash provided by financing activities
    
    
    636
    
    
    
    560Net decrease in cash and cash equivalents
    
    
    (10,167
    )
    
    
    (3,060
    )Cash and cash equivalents, beginning of period
    
    
    17,856
    
    
    
    14,577Cash and cash equivalents, end of period
    
    $
    7,689
    
    
    $
    11,517Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    $
    224
    
    
    $
    49
  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 31,2011
    
    
    2010(unaudited, in thousands, except per share amounts)Numerator:Net income (loss) available to common
stockholders
    
    $
    (7,753
    )
    
    $
    1,592Denominator:Weighted average shares outstanding  basic
    
    
    35,263
    
    
    
    33,730Potential common shares  options (treasury
stock method)
    
    
    
    
    
    
    446Weighted average shares outstanding 
diluted
    
    
    35,263
    
    
    
    34,176Shares excluded (anti-dilutive)
    
    
    429
    
    
    
    Shares excluded due to an exercise price
greater than weighted average stock price for the period
    
    
    1,934
    
    
    
    2,495Net income (loss) per common share:Basic
    
    $
    (0.22
    )
    
    $
    0.05Diluted
    
    $
    (0.22
    )
    
    $
    0.05
 4. Stock-Based Compensation
 Stock Plans
   Employee Stock Purchase Plan
  Stock Compensation
  7




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Valuation of Stock Option and Restricted Stock Awards
   Valuation of ESPP
  Offering Period EndedMarch 31, 2011AssumptionsRisk-free interest rate (average)
    
    
    .18
    %Expected dividend yield
    
    
    Weighted average expected life (years)
    
    
    .5Volatility (average)
    
    
    72.0
    %
 Compensation Costs
  Three Months EndedMarch 31,(unaudited)2011
    
    
    2010Cost of revenues
    
    $
    17
    
    
    $
    28Selling and marketing
    
    
    584
    
    
    
    632Research and development
    
    
    505
    
    
    
    586General and administrative
    
    
    1,001
    
    
    
    1,011Total non-cash stock compensation expense
    
    $
    2,107
    
    
    $
    2,257
  St o ck Options
  8




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Weighted Ave.
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Intrinsic Value(in thousands except per share amounts)Outstanding as of December 31, 2010
    
    
    2,706
    
    
    $
    11.69Granted (unaudited)
    
    
    
    
    
    $
    Exercised (unaudited)
    
    
    (6
    )
    
    $
    1.29Cancelled (unaudited)
    
    
    (1
    )
    
    $
    12.72Outstanding as of March 31, 2011 (unaudited)
    
    
    2,699
    
    
    $
    11.71
    
    
    $
    Exercisable as of March 31, 2011 (unaudited)
    
    
    2,653
    
    
    $
    11.68
    
    
    $
    
   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
    
    
    157
    
    
    
    3.0
    
    
    $
    1.62
    
    
    
    157
    
    
    $
    1.62$4.01 - $6.00
    
    
    469
    
    
    
    4.3
    
    
    $
    4.95
    
    
    
    468
    
    
    $
    4.95$6.01 - $12.00
    
    
    180
    
    
    
    6.5
    
    
    $
    8.81
    
    
    
    165
    
    
    $
    8.90$12.01 - $14.00
    
    
    894
    
    
    
    5.9
    
    
    $
    12.65
    
    
    
    891
    
    
    $
    12.65$14.01 - $16.00
    
    
    630
    
    
    
    6.0
    
    
    $
    15.18
    
    
    
    626
    
    
    $
    15.18$16.01 - $19.00
    
    
    369
    
    
    
    6.2
    
    
    $
    17.77
    
    
    
    346
    
    
    $
    17.832,699
    
    
    
    5.5
    
    
    $
    11.71
    
    
    
    2,653
    
    
    $
    11.68
 Restricted Stock Awards
  SharesUnvested at December 31, 2010
    
    
    1,604Granted (unaudited)
    
    
    910Cancelled/forfeited (unaudited)
    
    
    (41
    )Vested (unaudited)
    
    
    (261
    )Unvested at March 31, 2011 (unaudited)
    
    
    2,212
 9




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5. 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.
    6. Cash and Cash Equivalents
  7. Short-Term Investments
  March 31, 2011
    
    
    December 31, 2010Amortized
    
    
    Net unrealized
    
    
    
    
    
    
    Amortized
    
    
    Net unrealizedFair value
    
    
    cost basis
    
    
    gain (loss)
    
    
    Fair value
    
    
    cost basis
    
    
    gain (loss)Corporate notes, bonds and paper
    
    $
    48,271
    
    
    $
    48,279
    
    
    $
    (5
    )
    
    $
    39,691
    
    
    $
    39,704
    
    
    $
    (8
    )Government securities
    
    
    8,412
    
    
    
    8,414
    
    
    
    (1
    )
    
    
    15,003
    
    
    
    15,007
    
    
    
    (2
    )Total
    
    $
    56,683
    
    
    $
    56,693
    
    
    $
    (6
    )
    
    $
    54,694
    
    
    $
    54,711
    
    
    $
    (10
    )
 10




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##### Table of Contents



8. Accounts Receivable
  9. Inventories
  10. Equipment and Improvements
  11. Goodwill
   12. Intangible Assets
  Useful
    
    
    March 31, 2011
    
    
    December 31, 2010life
    
    
    
    
    
    
    Accumulated
    
    
    Net book
    
    
    
    
    
    
    Accumulated
    
    
    Net book(years)
    
    
    Gross
    
    
    amortization
    
    
    value
    
    
    Gross
    
    
    amortization
    
    
    valueAmortizing:Purchased technology
    
    
    1-3
    
    
    $
    7,347
    
    
    $
    (5,824
    )
    
    $
    1,523
    
    
    $
    7,347
    
    
    $
    (5,344
    )
    
    $
    2,003In process R&D
    
    
    2
    
    
    
    990
    
    
    
    (124
    )
    
    
    866
    
    
    
    990
    
    
    
    (62
    )
    
    
    928Capitalized software
    
    
    1-7
    
    
    
    23,846
    
    
    
    (16,117
    )
    
    
    7,729
    
    
    
    23,846
    
    
    
    (15,336
    )
    
    
    8,510Customer lists
    
    
    3-5
    
    
    
    1,484
    
    
    
    (1,372
    )
    
    
    112
    
    
    
    1,484
    
    
    
    (1,328
    )
    
    
    156Database
    
    
    10
    
    
    
    182
    
    
    
    (61
    )
    
    
    121
    
    
    
    182
    
    
    
    (56
    )
    
    
    126Trademarks
    
    
    5-10
    
    
    
    926
    
    
    
    (559
    )
    
    
    367
    
    
    
    926
    
    
    
    (537
    )
    
    
    389Trade names
    
    
    1-7
    
    
    
    2,121
    
    
    
    (1,307
    )
    
    
    814
    
    
    
    2,121
    
    
    
    (1,208
    )
    
    
    913Non-compete
    
    
    2
    
    
    
    21
    
    
    
    (15
    )
    
    
    6
    
    
    
    21
    
    
    
    (13
    )
    
    
    8Customer
relationships
    
    
    4-7
    
    
    
    11,130
    
    
    
    (5,239
    )
    
    
    5,891
    
    
    
    11,130
    
    
    
    (4,704
    )
    
    
    6,426Totals
    
    
    
    
    
    $
    48,047
    
    
    $
    (30,618
    )
    
    $
    17,429
    
    
    $
    48,047
    
    
    $
    (28,588
    )
    
    $
    19,459
 11




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##### Table of Contents



13. Comprehensive Income
  Three Months EndedMarch 31,(unaudited)2011
    
    
    2010Net income (loss)
    
    $
    (7,753
    )
    
    $
    1,592Change in unrealized gain (loss) on investments, net
    
    
    4
    
    
    
    (19
    )Total comprehensive income (loss)
    
    $
    (7,749
    )
    
    $
    1,573
 14. Segment, Customer Concentration and Geographical Information
 Segment
Information
 Wireless Productivity & Graphics
   Three
Months Ended March 31,(unaudited)2011
    
    
    2010Wireless
    
    $
    15,981
    
    
    $
    26,962Productivity & Graphics
    
    
    1,742
    
    
    
    2,774Corporate/Other
    
    
    68
    
    
    
    126Total revenues
    
    
    17,791
    
    
    
    29,862
 Customer
Concentration:
  Geographical Information:
  12




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##### Table of Contents



Three Months EndedMarch 31,
(unaudited)2011
    
    
    2010Americas
    
    $
    16,457
    
    
    $
    28,015EMEA
    
    
    860
    
    
    
    1,483Asia Pacific
    
    
    474
    
    
    
    364Total revenues
    
    $
    17,791
    
    
    $
    29,862
  15. Recent Accounting Pronouncements
 Intangibles-Goodwill and Other (Topic 350):
When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts (a consensus of the FASB Emerging Issues Task Force).
 Software (Topic 985): Certain Revenue
Arrangements That Include Software Elements (a consensus of the FASB Emerging Issues Task Force).
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements
 16. Commitments and Contingencies
 Leases
  13




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##### Table of Contents



Year Ending December 31,
    
    Operating2011-9 months
    
    $
    2,1192012
    
    
    3,0542013
    
    
    2,7702014
    
    
    2,4262015
    
    
    2,3832016
    
    
    2,127Beyond
    
    
    7,239Total
    
    $
    22,118
  17. Income Taxes
      18. Subsequent Events
  14




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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 continued economic slowdown and uncertainty 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, 2010.
 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). We do not undertake any
obligation to update these statements to reflect events or circumstances occurring after the date
this report is filed.
 Overview
 ®
  15




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##### Table of Contents



Results of Operations
  Three Months EndedMarch 31,2011
    
    
    2010Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    21.2
    
    
    
    12.5Gross profit
    
    
    78.8
    
    
    
    87.5Operating expenses:Selling and marketing
    
    
    47.0
    
    
    
    24.4Research and development
    
    
    65.6
    
    
    
    33.9General and administrative
    
    
    39.3
    
    
    
    19.5Total operating expenses
    
    
    151.9
    
    
    
    77.8Operating income (loss)
    
    
    -73.1
    
    
    
    9.7Interest and other income
    
    
    0.2
    
    
    
    0.2Income (loss) before taxes
    
    
    -72.9
    
    
    
    9.9Income tax expense (benefit)
    
    
    -29.3
    
    
    
    4.6Net income (loss)
    
    
    -43.6
    %
    
    
    5.3
    %
 Revenues and Expense Components
  Revenues.
 
    
    Wireless, which includes our connectivity and security management,
mobile VPN, media and content management, device management, Push-To-Talk,
Visual Voicemail, Visual Voicemail to Text, contact and calendar syncing, video
content delivery and optimization solutions and managed file transfers; and
 
    
    Productivity & Graphics, which includes retail and direct sales of
our compression and broad consumer-based software.
  16




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010Wireless
    
    $
    15,981
    
    
    $
    26,962Productivity & Graphics
    
    
    1,742
    
    
    
    2,774Corporate/Other
    
    
    68
    
    
    
    126Total revenues
    
    
    17,791
    
    
    
    29,862Cost of revenues
    
    
    3,776
    
    
    
    3,732Gross profit
    
    $
    14,015
    
    
    $
    26,130
  Cost of revenues.
 Selling and marketing.
 Research and development.
 General and administrative.
 Interest and other income
 Income tax expense.
   Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010
 Revenues.
 17




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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
  18




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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
    
    $
    22,118
    
    
    $
    2,914
    
    
    $
    5,688
    
    
    $
    4,750
    
    
    $
    8,766Purchase Obligations
    
    
    1,738
    
    
    
    1,738
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    23,856
    
    
    $
    4,652
    
    
    $
    5,688
    
    
    $
    4,750
    
    
    $
    8,766
  Real Property Leases
  Critical Accounting Policies and Estimates
  19




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##### Table of Contents



Revenue Recognition
  Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements
  Sales Incentives
  Accounts Receivable and Allowance for Doubtful Accounts
  In-Process Research and Development
   20




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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.
  Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues
Task Force,
 21




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##### Table of Contents



Income Taxes
  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
  22




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##### Table of Contents



Managements responsibility for financial statements
   Changes in internal control over financial reporting
  23




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors
  
 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.
 24




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##### Table of Contents



SIGNATURES
  SMITH MICRO SOFTWARE, INC.May 5, 2011
    By
    /s/ William W. Smith, Jr.William W. Smith, Jr.President and Chief Executive Officer(Principal Executive Officer)May 5, 2011
    By
    /s/ Andrew C. SchmidtAndrew C. SchmidtVice President and Chief Financial Officer
(Principal Financial Officer) 25