SMITH MICRO SOFTWARE INC

To the Stockholders and the Board of Directors of Smith Micro Software, Inc.

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, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows, for the years then ended and the related notes to the consolidated financial statements (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, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has projected future cash flow requirements to meet continuing operations in excess of current available cash. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 Public Company Accounting Oversight Board (United States) (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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Refer to Note 1 and Note 12 of the financial statements

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company primarily sells software solutions, cloud-based services and consulting services to major wireless network and cable operators.

Significant judgement is exercised by the Company in determining revenue recognition, and includes the following:

•Determination of whether promised services are capable of being distinct and are distinct in the context of the Company’s customer contracts which leads to whether they should be accounted for as individual or combined performance obligations.

•Determination of prices for each distinct performance obligation, including for products and services sold separately.

•Determination of the timing of when revenue is recognized for each distinct performance obligation either over time or at a point in time.

We identified revenue recognition as a critical audit matter because of the significant judgements required by management. This required a high degree of auditor judgement and an increased extent of effort when performing audit procedures to evaluate whether revenue was appropriately recognized.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the Company’s revenue recognition included the following, among others:

•We selected a sample of recorded revenue transactions and performed the following procedures:

•Obtained an understanding of management’s processes and controls related to revenue recognition.

•Obtained customer source documents and agreed them against the respective contract, related amendments, if any, or Statement of Work, if applicable, for each selection, to test if the contractual terms of the agreement have been appropriately applied to each selection.

•Evaluated management’s application of each step within the revenue accounting guidance and tested revenue recognition for specific performance obligations, including the allocation of pricing.

•Tested the mathematical accuracy of management’s calculations of revenue and associated timing of revenue recognized in the financial statements.

Goodwill and Definite-Lived Intangible Assets Impairment Analysis – Refer to Note 1 and Note 4 of the financial statements

Critical Audit Matter Description

As of December 31, 2023, the Company’s goodwill and definite-lived intangible assets, net of accumulated amortization, were $35.0 million and $29.5 million, respectively. The Company has a single reporting unit and performs an impairment test of goodwill at least annually during its fourth quarter or whenever events or circumstances indicate the carrying amount may not be recoverable. The Company periodically reviews its definite-lived intangible assets for impairment whenever events or circumstances occur indicating the carrying value of such assets may exceed their fair value. Due to a triggering event in February 2023, the Company performed a quantitative impairment assessment of goodwill and definite-lived intangible assets as of February 28, 2023 by estimating the fair value of the reporting unit and the related asset group, respectively. The Company determined the respective fair values by utilizing a combination of a discounted cash flow analysis and market-based valuation methodologies that included significant assumptions such as discount rate, forecasted revenue, gross margin and operating expense projections, and comparable entity industry data. Based on the quantitative assessment performed, the Company concluded that goodwill and definite-lived intangible assets were not impaired as of February 28, 2023. The Company further performed its annual goodwill impairment test as of December 31, 2023 using a qualitative assessment. Management considered factors such as macroeconomic conditions, industry and market trends, and performed a sensitivity analysis of the prior quantitative analysis conducted during the first quarter of 2023. The Company concluded that goodwill and definite-lived intangible assets were not impaired as of December 31, 2023.

We identified the estimation of the fair values of goodwill and definite-lived intangible assets as a critical audit matter because of certain significant assumptions used by management. Auditing management’s assumptions involved a high degree of auditor judgment and increased audit efforts, which included the use of a valuation professional with specialized skills and knowledge.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the Company’s goodwill and definite-lived intangible assets impairment analysis included the following, among others:

•Obtained an understanding of management's process and controls related to the Company's impairment analysis and determination of the fair value estimates.

•Evaluated the reasonableness of management's significant assumptions and underlying data used in the valuation models such as forecasted revenues, gross margin and operating expense projections by comparing management's forecasts to current and historical results.

•Performed a sensitivity analysis on the quantitative amounts utilized by management to assess impairment to evaluate the potential impact on the qualitative impairment assessment performed at year end.

•Evaluated management's significant accounting policies related to impairment of goodwill and definite-lived intangible assets for reasonableness, including the determination of a single reporting unit and asset groups.

•Utilized a valuation professional with specialized skills and knowledge to assist in:

▪Evaluating the appropriateness of the selection and application of the income and market-based valuation methods;

▪Testing the mathematical accuracy of the significant calculations in the valuation methods;

▪Determining the reasonableness of the selection of significant assumptions such as discount rates, long-term growth rate range, and multiples using publicly available market data for comparable entities.

/s/SingerLewak LLP

We have served as the Company’s auditor since 2005.

Los Angeles, California

February 26, 2024