SMITH MICRO SOFTWARE INC

The Summary Compensation Table below summarizes the compensation of the executive officers and the other key executives of the Company named therein (our “named executive officers” or “NEOs”) during 2023 and 2022. Our NEOs for 2023 were as follows:

•William W. Smith. Jr., President and Chief Executive Officer

•James M. Kempton, Vice President and Chief Financial Officer

•Von Cameron, Vice President and Chief Revenue Officer

The principal elements of our executive compensation program are base salary, cash incentive compensation, long-term equity incentives in the form of restricted stock, other benefits and perquisites, including certain reimbursements and matching contributions under our 401(k) savings plan, and in the case of Mr. Cameron, a sales compensation plan. We view these components of compensation as related but distinct. Although our Compensation Committee does review total compensation, we do not believe that significant compensation derived from one component of compensation should negate or offset compensation from other components. Our executive compensation program is designed to attract, motivate, and retain talented and dedicated executives, who are critical to our success. Under this program, a significant portion of our named executive officers and other executives' overall compensation is tied to the achievement of key strategic financial and operational goals, as measured by metrics such as revenue and adjusted operating expense. The following highlights our approach to executive compensation:

Competitive Positioning: We seek to establish the overall compensation of our named executive officers and other executives at levels that we believe are roughly comparable with the average levels of compensation of executives at other growth technology companies of similar size.

Significant Portion of Executive Compensation Tied to Performance: With respect to the four primary components of our compensation program, both cash incentive compensation and equity compensation are tied in whole or in part to the satisfaction of pre-determined performance criteria. Performance-based incentive compensation constitutes a significant portion of potential compensation for our named executive officers and other executives.

Limited other Compensation: Consistent with our “pay-for-performance” philosophy, we restrict all other forms of compensation to our named executive officers and other executives to levels that are consistent with competitive market practices.

Base Salary Compensation

We provide our named executive officers and other executives with base salaries that we believe enable us to hire and retain highly qualified individuals in a competitive environment and to reward individual performance and contributions to our overall business goals, while taking into account the unique circumstances of our Company. We review base salaries for our named executive officers and other executives annually and increases or decreases are generally based on Company and individual performance. We also take into account the base compensation paid by companies that we believe to be our competitors and by other public companies with which we believe we generally compete for executives. Beginning in March 2023, in connection with a review of the Company’s cost structure, we instituted a temporary 10% reduction in executive base salaries that continued throughout 2023.

Discretionary Bonus Compensation

In order to retain and motivate our named executive officers and other executives and in addition to the incentive plans described below, the Compensation Committee approved a discretionary quarterly cash bonus program and the applicable bonus amounts thereunder in which each of our named executive officers and other executives participated during 2023, subject to achievement of key performance milestones. The Committee approved a similar quarterly bonus program and the applicable bonus amounts thereunder for our named executive officers and other executives who were employed by the Company during 2022, subject to the achievement of key performance milestones. Pursuant to the bonus program, eligible participants received a quarterly cash bonus payment provided that they remained employed by the Company as of the date of payment. During 2023, in connection with the Company’s review of its cost structure, the Company suspended its discretionary bonus program for the second quarter, and the Compensation Committee approved a change to the discretionary bonus program such that in lieu of paying the discretionary bonuses for the third and fourth quarters in cash, each of the named executive officers and other executives received a grant of restricted stock in a number of shares equal to such individual’s target discretionary bonus amount for each of the third and fourth quarters of 2023 divided by the closing price of the Company’s common stock the day immediately preceding the grant date. The vesting conditions for the shares of restricted stock granted in lieu of the discretionary cash bonus were the same performance metrics that would otherwise have been used to determine whether and in what amount the discretionary cash bonus would have been earned for each quarter. These restricted stock awards are described further under the heading, “Equity Compensation,” below. The total of the cash payments to each of our participating NEOs is reflected in the “bonus” column of the Summary Compensation Table.

Performance-based Cash Bonus Awards

As part of our compensation program and in order to maintain appropriate financial incentives, the Company maintains an annual corporate incentive bonus plan in which our named executive officers and other key executives participate. Pursuant to the corporate incentive bonus plan, our NEOs and other executives are eligible for cash bonus compensation. Under the plan, cash bonuses are determined and paid each fiscal year on a quarterly basis based upon the achievement of certain pre-determined performance metrics. Our cash bonus plan is designed to focus our management on achieving key corporate financial objectives, motivate certain desirable behaviors and reward achievement of our key corporate financial objectives and individual goals. Under the terms of the cash bonus plan, performance objectives and annual target cash bonus amounts are established for each named executive officer and other executives participating in the plan. In determining the appropriate level of annual target cash bonus for each named executive officer or other executive the Compensation Committee considers information provided through independent, third-party surveys and other information collected from public sources for similar positions at peer companies, relative base salary and bonus amounts for each individual and the recommendations of our Chief Executive Officer.

Our bonus plan contains performance objectives with a percentage of the total target bonus amount ascribed to each objective, so that the sum total equals the approved annual target cash bonus for each named executive officer or other executive. For 2022 and 2023, the objectives for NEOs and other executives participating in the plan were related to (1) revenue achievement and (2) operating expense management, which were evenly weighted in terms of target cash bonuses. For each objective, the percentage by which the objective was achieved (which could exceed 100% in the case of quantitative performance objectives) was applied to the dollar value ascribed to each objective. The dollar values for each objective were then combined to determine the actual cash bonuses paid to each such NEO or other executive.

Achievement of the quantitative performance objectives for bonus amounts paid under the corporate incentive bonus plan is determined and paid on a quarterly basis following the completion of each quarter. As a result, the cash paid in a given fiscal year is the result of the attainment achieved for the fourth quarter of the previous year and the first three quarters of the current year. During 2023, the Company suspended the corporate incentive bonus program for the second quarter, and in lieu of paying corporate incentive bonuses for the third and fourth quarters of 2023 in cash, each of the named executive officers and other executives received a grant of restricted stock in a number of shares equal to such individual’s target corporate incentive bonus amount for each of the third and fourth quarters of 2023 divided by the closing price of the Company’s common stock the day immediately preceding the grant date. The vesting conditions for the shares of restricted stock granted in lieu of the corporate incentive cash bonus were the same performance metrics that would otherwise have been used to determine whether and in what amount the cash bonuses would have been earned for each quarter. These restricted stock awards are described further under the heading, “Equity Compensation,” below.

The total of the cash payments under the annual corporate incentive bonus plan is included in the amount of non-equity plan compensation reflected in the Summary Compensation Table.

The table below outlines the quantitative performance objectives that were established for each named executive officer and other executive participating in the plan and the actual results that correspond with their performance bonus payouts during 2023 (except as noted in the table below):

(1)Excluding stock-based compensation, amortization of intangible assets and personnel severance and reorganization activities, and for Q1 2023 and Q3 2023, also excluding depreciation and amortization of debt issuance costs and discount.

(2)The bonus program was suspended and no bonuses were paid based on second quarter 2023 performance.

(3)As described above, for the third quarter 2023, in lieu of payout of cash bonuses under the Company’s corporate incentive bonus plan, each executive received a grant of restricted stock, and the vesting of such shares of restricted stock was subject to achievement of the same performance metrics that would otherwise have been used to determine whether and in what amount the cash bonuses were would have been earned for each quarter, as set forth in the table above.

We believe that the performance objectives for our named executive officers and other executives participating in the plan were sufficiently challenging to achieve and that performance at a high level, while devoting full time and attention to their responsibilities, is required for our participating named executive officers and other executives to earn their respective cash bonuses.

Sales Compensation Plan

As the executive leader of our worldwide sales organization, Mr. Cameron participated in a sales compensation plan during 2023 pursuant to which he was eligible to earn cash compensation for achievement of specified revenue targets. A target commission amount was established for each quarter. The amount of compensation actually earned was determined and paid on a quarterly basis following the end of each quarter, and was based on the percentage of target revenue actually achieved. As a result of the timing of calculation and payment of amounts earned, the cash actually paid under the sales compensation plan during 2023 is the amount achieved for the fourth quarter of 2022 and the first three quarters of 2023. The total of these payments is included in the non-equity plan compensation reflected for Mr. Cameron in the Summary Compensation Table.

The table below outlines the revenue objectives that were established under the sales compensation plan for Mr. Cameron and the actual results that correspond with her sales compensation plan payouts during 2023:

We believe that the revenue and associated commission targets under the sales compensation plan were sufficiently challenging to achieve and that performance at a high level, while devoting full time and attention to his responsibilities, is required for Mr. Cameron to earn the commission amounts under the plan.

Equity Compensation

We believe that for growth companies in the software technology sector, such as Smith Micro, equity awards are a significant compensation-related motivator in attracting and retaining executive-level employees. Accordingly, we have provided our named executive officers and other executives with long-term equity incentive awards to attract key executives to join the Company and incentivize those individuals to stay with us for long periods of time, which in turn should provide us with greater stability over such periods than we would experience without such awards.

Each of our named executive officers received a grant of restricted stock during 2023, which vests over a period of four years from the grant date. Half of each total grant vests on a monthly basis and will be earned based on continuous service by the executive over the vesting period. The vesting of the remaining half is subject to the Company’s achievement of certain performance-based criteria for 2023 and the continuous service by the executive over the remaining vesting period. One quarter of each total grant will be eligible to vest if the Company achieves a defined 2023 annual revenue target, and an additional one quarter of each total grant will be eligible to vest if the Company achieves a defined 2023 annual operating expense target (determined on a non-GAAP basis, excluding stock-based compensation, depreciation, amortization of intangible assets, notes and stock offering fees and amortization, and personnel severance and reorganization activities), with a proportionate adjustment to the total performance portion of the grant if the targets are not fully met. Shares earned under the performance conditions cannot exceed the total number of performance shares, even if the sum of the revenue attainment and the expense attainment exceed 100%. Once performance against this criteria is determined, the shares that are eligible to vest will vest 25% on the determination date and then ratably over the next thirty-six months, based on continuous service by the executive.

In addition to these awards, as noted under the headings “Discretionary Bonus Compensation” and “Performance-based Cash Bonus Awards,” each of the Company’s named executive officers and other executives received a grant of restricted stock in lieu of discretionary cash bonuses and corporate incentive plan bonuses for the third and fourth quarters of 2023. The vesting conditions for such awards were identical to the performance metrics that would otherwise have been applied to determine whether and in what amount the cash bonuses would have been earned for the applicable quarter.

Executive Benefits and Perquisites

We provide the opportunity for our named executive officers and other executives to receive certain limited perquisites and general health and welfare benefits. We also offer participation in our defined contribution 401(k) plan to our named executive officers. We provide a 20% match on all eligible employee contributions to our 401(k) plan. We provide these benefits to create additional incentives for our executives and to remain competitive in the general marketplace for executive talent.

Summary Compensation Table – 2023 and 2022

(1)The amounts in this column reflect the cash awards paid pursuant to a quarterly discretionary cash bonus program in 2023 and 2022.

(2)The amounts shown in this column represent the aggregate grant date fair value of Restricted Shares computed in accordance with FASB ASC Topic 718. Generally, the aggregate grant date fair value is the amount that the company expects to expense in its financial statements over the award’s vesting schedule. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be realized by the named executive officers. For Restricted Shares, the fair value is calculated using the closing price of our stock on the date of grant. The assumptions we used with respect to the valuation of stock grants are set forth in Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K.

(3)The amounts in this column reflect the cash awards paid during 2023 and 2022 pursuant to our annual corporate incentive bonus plan and, in the case of Mr. Cameron only, our sales compensation plan.

(4)Amount comprised of $5,000 in tax preparation fees paid by the Company and 401(k) matching contributions of $4,500 made by the Company.

(5)Amount comprised of $4,974 in tax preparation fees paid by the Company and 401(k) matching contributions of $4,100 made by the Company.

(6)Amount comprised of 401(k) matching contributions made by the Company.

(7)Mr. Cameron joined the Company in April 2022. All amounts reported for 2022 reflect his service for the partial year.

Outstanding Equity Awards at December 31, 2023

The following table sets forth the number of securities underlying outstanding equity awards for each named executive officer as of December 31, 2023, comprised of outstanding unvested shares of restricted stock as of such date.

(1)Determined by multiplying the number of shares by $0.83, the closing price for our stock on the Nasdaq Capital Market on December 29, 2023.

(2)Unvested portion of an award granted during 2020, 50% of which was subject to time-based vesting and 50% of which was subject to performance and time-based vesting. Shares are currently vesting in monthly installments. Shares will be fully vested in March 2024.

(3)Unvested portion of an award granted during 2021, 50% of which was subject to time-based vesting and 50% of which was subject to performance and time-based vesting. Shares are currently vesting in monthly installments. Shares will be fully vested in March 2025.

(4)Unvested portion of an award granted during 2022, 50% of which was subject to time-based vesting and 50% of which was subject to performance and time-based vesting. Shares are currently vesting in monthly installments. Shares will be fully vested in March 2026.

(5)Unvested portion of an award granted during 2023, 50% of which was subject to time-based vesting and 50% of which was subject to performance and time-based vesting. Shares are currently vesting in monthly installments. Shares will be fully vested in March 2027.

(6)Unvested portion of an award granted during 2023 in lieu of the payment of cash bonuses for third and fourth quarter 2023 under the Company’s discretionary cash bonus program and corporate incentive bonus program, all of which is subject to performance-based vesting.

Employment Agreements

Agreement with William W. Smith, Jr.

In June 2005, we agreed to make to William W. Smith, Jr., our Chairman of the Board, President and Chief Executive Officer, a lifetime payment of $6,000 annually, subject to annual increases of 5%, to commence at the time of his future retirement or resignation from employment. The agreement provides that we may, at our option, discharge our obligations under the agreement by purchasing a single premium annuity for the benefit of Mr. Smith. We estimate that it would cost approximately $65,000 to purchase such an annuity.

Other than as disclosed above, none of the named executive officers has an employment agreement with us, and the employment of each of the named executive officers may be terminated at any time at the discretion of the Board of Directors.

Potential Payments Upon Termination or Change in Control

The terms of the restricted stock award agreements associated with restricted stock granted under our Plan provide that the shares of restricted stock granted thereunder automatically become fully vested, no longer subject to restrictions and freely transferable upon a “Change of Control” as such term is defined in our Plan. We provide this benefit in order to properly incentivize our executives to support a Change of Control that would be deemed beneficial to our stockholders.

Pay versus Performance - 2023, 2022, and 2021

The following table reports the compensation of our principal executive officer (PEO) and the average compensation of the other named executive officers as reported in the Summary Compensation Table ("SCT") for the past two fiscal years (the"Non-PEO NEOs"), as well as their “compensation actually paid” as calculated pursuant to SEC rules and certain performance measures required by the rules.

(1)William W. Smith, Jr. was the Company’s PEO during each of 2021, 2022 and 2023. The other Non-PEO NEOs during 2023 were Messrs. Kempton and Cameron, and during 2022 were Mr. Kempton and David P. Sperling, the Company’s Chief Technology Officer. During 2021, the other Non-PEO NEOs were Charles B. Messman, Vice President Marketing; Gail Redmond, our former SVP Worldwide Sales; Timothy Huffmyer, who served as CFO until his resignation in September 2021; Michael Fox, who joined the Company on an interim basis in August 2021 and served as interim CFO from September to November 2021 and continued on in an advisory role through mid-December 2021; and Mr. Kempton, who assumed the role of CFO in November 2021. Average SCT total compensation for Non-PEO NEOs in 2021 is impacted due to the fact that we had three executives who served as CFO during that year, with such persons serving, and only being compensated, for approximately eight, four and two months, respectively.

(2)"Compensation actually paid" is an SEC-derived and required reporting metric, premised on the reported total in the Summary Compensation Table for the PEO and the average Summary Compensation Table totals for the Non-PEO NEOs, subject to the adjustments set forth below to arrive at "compensation actually paid" for our PEO and for our non-PEO NEOs during each of the years set forth in the table above:

Adjustments to Determine Compensation "Actually Paid" for PEO:

Average Adjustments to Determine Average Compensation "Actually Paid" for non-PEO NEOs:

(1) No dividends or other earnings were paid or accrued with respect to the equity contemplated in this table, and no adjustments, amendments or modifications were made with respect to any equity awards.

Compensation Actually Paid Versus Company Performance

In the “Executive Compensation” section of this Report, we provide greater detail on the elements of our executive compensation program and our pay-for-performance compensation philosophy. We believe the Company’s executive compensation program and the executive compensation decisions included in the Summary Compensation Table and related disclosures appropriately reward our PEO and the other named executive officers for Company and individual performance, assist the Company in retaining our senior leadership team and support long-term value creation for our stockholders.

Comparison to Total Shareholder Return. The values included in the column for "compensation actually paid" to our PEO and to the Non-PEO NEOs is calculated in accordance with the SEC promulgated disclosure rules in each of the fiscal years reported above and over the three-year cumulative period and shows how the compensation awarded to them changed year-over-year and is generally aligned to the Company’s total shareholder return. This alignment is due to the fact that a significant portion of “compensation actually paid” is comprised of equity awards, which decreased in value during 2022 and 2023. In addition, there was a 10% reduction in base compensation for all of the NEO's which began in March 2023, no bonuses were paid to the NEOs for the second quarter 2023 performance, and additional equity award grants in 2023 replaced cash bonuses for the third and fourth quarter 2023 performance, a portion of which remained unvested at December 31, 2023, which further aligned average compensation paid to our NEOs to shareholder return throughout 2023.

Comparison to Net Income. We believe the amount of “compensation actually paid” to the PEO and to the Non-PEO NEOs is generally aligned with the Company’s net loss, as the continued net loss is relatively consistent with the non-equity related compensation, which, as indicated above, is comprised of base salary and incentive compensation. Our bonus compensation, which was paid for the first quarter of 2023 and for all of 2022 and 2021, is generally measured based on revenue and operating expenses as compared to an operating plan, which align with the primary drivers of the net loss. There was no bonus paid to the NEOs in the second quarter of 2023 as part of our cost reduction initiatives, and the cash bonus component of the NEOs' compensation was replaced by performance based equity awards for third and fourth quarter 2023 performance. The continued net losses in 2023 and 2022 also contributed to the decrease in share price over that time period, which has resulted in the reductions in value of the equity awards.

Restrictions on Hedging Transactions

Our insider trading policy guidelines acknowledge that buying or selling publicly-traded options, including buying or selling puts or calls or other hedging transactions in the Company’s stock may permit a holder to continue to own our common stock obtained through benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, our directors, employees, and officers to whom our policy applies, may no longer have the same objectives as our other stockholders. As such, the Company’s directors, officers and employees are prohibited from engaging in such transactions, except as otherwise may be approved in writing by the Company’s CFO or General Counsel, and no such transactions have been approved.

Director Compensation - 2023

The following table sets forth compensation that our directors (other than Mr. Smith, who is a named executive officer and does not separately receive any compensation for his board service) earned during 2023 for services as members of our Board of Directors.

(1)The amounts shown represent the grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions we used with respect to the valuation of stock awards are set forth in Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K.

(2)As of December 31, 2023, each director held 2,084 shares of unvested restricted stock, pursuant to restricted stock awards granted to them in connection with their service as directors.

Summary of Director Compensation

Non-employee members of the Board of Directors receive quarterly fees for Board and committee service, and are reimbursed for their out-of-pocket expenses in connection with service on the Board of Directors. During 2023, the quarterly fee paid to our non-employee directors was set at $7,500, however in March 2023 the Board determined to implement a temporary 10% reduction in Board fees. Non-employee members of the Board of Directors are eligible to receive discretionary awards under our Plan. On January 27, 2023, each non-employee director received a grant of 25,000 shares of restricted stock valued at $3.10 per share, which vested in equal installments over a period of 12 months from the grant date. Our Chairman of the Board, William W. Smith, Jr., is also a named executive officer and does not receive any separate compensation for his service as a director.