SMITH MICRO SOFTWARE, INC.

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

The Company

Smith Micro Software, Inc. (“Smith Micro” or “the Company”) develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, the Company strives to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer Internet of Things (“IoT”) devices. Smith Micro’s portfolio includes family safety software solutions to support families in the digital age and a wide range of products for creating, sharing, and monetizing rich content, such as visual voice messaging. We provided retail content display optimization and performance analytics until the sale of our ViewSpot product in* June 2025.*

Smith Micro’s solution portfolio is comprised of proven products that enable its customers to provide:

On* June 3, 2025,the Company divested its ViewSpot product for total consideration of $1.3 million, of which $1.0 million was paid on the closing date, with the remaining amounts paid intwo* installments, thefirst of which was collected on* July 1, 2025,and the final balance was collected on October 1, 2025.*

On* April 3, 2024,the Company filed a certificate of amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect aone*-for-eight (1:8) reverse stock split of the shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), with an effective time of11:59 p.m., Eastern Time on* April 10, 2024 (the "Reverse Stock Split"). At the effective time, everyeight* shares of common stock, whether issued and outstanding or held by the Company as treasury stock were automatically combined and converted (without any further act) intoone share of fully paid and nonassessable common stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole share. The number of outstanding shares of common stock was reduced from approximately 76.8 million shares to approximately 9.6 million shares due to the Reverse Stock Split.

The Reverse Stock Split didnot change the Company's authorized shares of common stock from 100,000,000 shares or the par value of the common stock, and, therefore, the Company reclassified an amount equal to the reduction in the number of shares of common stock at par value to additional paid-in-capital. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise of stock options and the settlement of restricted stock awards and the number of shares authorized and reserved for issuance pursuant to the Company's equity incentive plans (see Note11). Additionally, there were adjustments to the per share exercise price and the number of shares issuable upon exercise of warrants (see Note5).

All share and per share amounts for common stock (including share amounts underlying convertible securities and the applicable exercise prices of such convertible securities) in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in the number of shares of common stock at par value to additional paid-in capital.

Basis of Presentation

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

Use of Estimates

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

F-8

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current presentation.

Foreign Currency Transactions

During2025 and2024, the Company had a subsidiary or branch office in Serbia, Sweden, Portugal, and Slovakia. The functional currency for all of these foreign entities is the U.S. dollar in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) TopicNo. 830. Foreign currency transactions that increase or decrease expected functional currency cash flows is a foreign currency transaction gain or loss that are included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction is included in determining net income for the period in which the transaction is settled.

Business Combinations and Exit or Restructuring Costs

The Company applies the provisions of FASB ASC TopicNo. 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period that exists up totwelve months from the acquisition date, the Company* may*record adjustments to the tangible and specifically identifiable intangible assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the reporting period in which the adjusted amounts are determined. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, the impact of any subsequent adjustments is included in the consolidated statements of operations.

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as aone-time termination and exit cost pursuant to FASB ASC TopicNo. 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the Company’s consolidated statement of operations in the period in which the liability is incurred.

Uncertain income tax positions and tax-related valuation allowances that are acquired in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date, with any adjustments to the preliminary estimates being recorded to goodwill if such adjustments occur within the12-month measurement period. Subsequent to the end of the measurement period or the Company’s final determination of the value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the consolidated statement of operations and could have a material impact on results of operations and financial position.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash and money market funds. The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments.

Accounts Receivable and Allowance for Credit Losses

Smith Micro sells its products worldwide. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history, the customer’s current credit worthiness and various other factors, as determined by review of their current credit information. The Company continuously monitors collections and payments from its customers. The Company estimates credit losses and maintains an allowance based upon these estimates. While such credit losses have historically been within its estimated reserves, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. Ifnot, this could have an adverse effect on Smith Micro’s consolidated financial statements.

F-9

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three toseven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

Internal Software Development Costs

Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding, and testing has been completed according to design specifications. After technological feasibility is established, any additional costs are capitalized. Through* December**31,* 2025, software has been substantially completed concurrently with the establishment of technological feasibility; accordingly,no costs have been capitalized to date.

Impairment or Disposal of Long-Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate their carrying value* may**not* be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether ornot impairment to such value has occurred.

Intangible Assets

The Company hasno indefinite-lived intangible assets. Amortization expense related to the Company’s definite-lived intangible assets resulting from acquisitions is calculated based on the pattern of economic benefit expected to be generated from the use of that asset and reassessed as determined necessary. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.

Warrants

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC TopicNo. 480, Distinguishing Liabilities from Equity, and FASB ASC TopicNo. 815, Derivatives and Hedging. Warrant liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in the Statements of Operations as adjustments to fair value.

Going Concern

In connection with preparing its consolidated financial statements, management evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern withinone year from the date that the financial statements are issued.

Revenue Recognition

In accordance with FASB ASC TopicNo. 606, Revenue from Contracts with Customers, the Company recognizes the sale of goods and services based on thefive-step analysis of transactions as provided in Topic606, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services.

Smith Micro primarily sell its software solutions, cloud-based services and consulting services to major wireless network and cable operators. For all contracts with customers, the Companyfirst identifies the contract which usually is established when a contract is fully executed by each party and consideration is expected to be received. Next, the Company identifies the performance obligations in the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company then determines the transaction price in the arrangement and allocates the transaction price, if necessary, to each performance obligation identified in the contract. The allocation of the transaction price to the performance obligations are based on the relative standalone selling prices for the goods and services contained in a particular performance obligation. The transaction price is adjusted for the Company’s estimate of variable consideration. The Company evaluates the total amount of variable consideration expected to be earned by using the expected value method, as the Company believes this method represents the most appropriate estimate for this consideration, based on historical service trends, the individual contract considerations, and its best judgment at the time. The Company includes estimates of variable consideration in revenues only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized willnot occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company also generates the majority of its revenue on usage-based fees which are variable and depend entirely on customers’ use of perpetual licenses, transactions processed on the Company’s hosted environment, advertisement placements on the Company’s service platform, and activity on the Company’s cloud-based service platform.

F-10

Smith Micro grants certain software licenses to its customers on a royalty free, non-exclusive, non-transferable, limited use basis during the term of the agreement. In some instances, the Company performs integration services to ensure the software operates within its customer’s operating platforms as well as the operating platforms of the mobile devices used by their end customers, before transferring the license. Revenue related to these services is recognized at a point in time upon acceptance of the licensed software by the customer. The Company also earns usage-based revenue on its platforms. The Company’s contracts with the certain customers* mayinclude promises to transfer multiple products and services. Smith Micro’s cloud-based service includes a software solution license integrated with cloud-based services. Judgment is required to determine whether the software license is considered distinct and accounted for separately, ornot* distinct and accounted for together with the cloud service and recognized over time. Smith Micro doesnot allow its customers to take possession of the software solution, and since the utility of the license comes from the cloud-based services that are provided, the Company considers the software license and the cloud-based services to be a single performance obligation. Usage based revenue is generated based on licenses used by Smith Micro’s customer’s active subscribers’ access and usage of Smith Micro’s software licenses and cloud-based services on Smith Micro’s platforms, the provision of hosting services, and revenue share based on media placements on Smith Micro’s platform. Smith Micro recognizes usage-based revenue when the Company has completed its performance obligation and has the right to invoice the customer. This revenue is generally recognized monthly or quarterly. Finally, the Company ratably recognizes usage-based revenue over the contract period when customers pay in advance of service delivery.

Smith Micro also provides consulting services to develop customer-specified functionality that are generallynot on its software development roadmap. The Company recognizes revenue from its consulting services upon delivery and acceptance by the customer of its software enhancements and upgrades. For certain customers the Company provides maintenance and technology support services for which the customer either pays upfront or as the Company provides the services. When the customer pays upfront, the payments are recorded as contract liabilities and revenue is recognized ratably over the contract period as this is the Company’s stand ready performance obligation that is satisfied ratably over the maintenance and technology services period.

The Company received upfront payments from customers from services to be provided under its ViewSpot contracts. Those advance receipts were deferred and subsequently recognized ratably over the contract period. Smith Micro also provided consulting services to configure new devices or ad hoc targeted promotional content for its customers upon request. These requests were driven by customers’ marketing initiatives and tended to be short term “bursts” of activity. These revenues were recognized upon delivery of the configured promotional content to the cloud platform or upon certification of the new device. On* June 3, 2025,*the Company sold its ViewSpot product for total consideration of $1.3 million.

Smith Micro has made accounting policy elections to exclude all taxes by governmental authorities from the measurement of the transaction price, and since the Company’s standard payment terms are less thanone year, the Company has elected the practical expedientnot to assess whether a contract has a significant financing component.

Principal and Agent Considerations

Smith Micro owns the Intellectual Property and retains ownership when the Company licenses its customized software solutions for use by its customers. The Company is a principal in these transactions and as such revenue is recognized with respect thereto on a gross basis.

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC TopicNo. 718, Compensation-Stock Compensation.

F-11

Income Taxes

The Company accounts for income taxes as required by FASB ASC TopicNo. 740*, Income Taxes*. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely thannot that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater thanfifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely thannot” realization standard. Thefour sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

Recently Adopted Accounting Pronouncements

In* November 2023**,the FASB issued Accounting Standards Update ("ASU")2023-07, Segment Reporting (Topic280)– Improvements to Reportable Segment Disclosures.The amendments in this update are intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only reportable segment. In addition to the current requirements, the amendments require all segment profit or loss and asset disclosures to be provided on an annual and interim basis. The amendments are effective for fiscal years beginning after December 15, 2023** and will be effective for interim reporting periods beginning after December 15, 2024**.The Company adopted ASU2023*-07 withno material effect on its consolidated financial statements other than the additional disclosure requirements, which are included in Note15.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*): Improvements to Income Tax Disclosures*, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after* December 15, 2024,and the adoption of this standard didnot* have a significant impact on the Company's consolidated financial statements other than adding new disclosures, which are included in Note8.

Recently Issued Accounting Pronouncements

In* November 2024,the FASB issued ASU2024*-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220*-40), which is intended to improve the decision-usefulness of expense information on public companies' income through disaggregation of relevant expense captions in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026and interim periods beginning after December 15, 2027,*with early adoption permitted. The Company is currently evaluating the impact of this ASU on the consolidated financial statements and related disclosures.

In** September 2025,the FASB issued ASU2025**-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic350*-40): Targeted Improvements to the Accounting for Internal-Use Software*. The amendments in this update make targeted improvements to increase the operability of the recognition guidance considering different software development methods. The amendments in this update will be effective for annual and interim reporting periods beginning after* December 15, 2027**,*with early adoption permitted. The Company is evaluating the impact of this ASU on the consolidated financial statements and related disclosures.

2. Going Concern

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In connection with preparing consolidated financial statements for the year ended* December 31, 2025*, certain conditions in the Company's evaluation, considered in the aggregate, have raised substantial doubt about the Company's ability to continue as a going concern withinone year from the date that the financial statements are issued, which hasnot been alleviated. The evaluation considered the Company's financial condition, including its liquidity sources, funds necessary to maintain the Company's operations considering the current financial condition, obligations, and other expected cash flows, and negative financial trends of recurring operating losses and negative cash flows.

F-12

The Company has continuing operations and is generating revenues in the normal course, however the Company is dependent, to an extent, on the timing of subscriber and revenue growth for its products and the related cash generation from that growth and/or the ability to obtain the necessary capital to meet its obligations and fund its working capital requirements to maintain normal business operations. Management believes that the actions presently being taken to implement the Company's business plan to expand subscriber growth, to acquire new customers, and to expand its offerings to existing customers to generate increased revenues, and, if necessary, to raise additional capital will support the Company's operations; as such the financial statements donot include any adjustments that* maybe necessary if the Company is unable to continue as a going concern. The Company believes, based on its history of being able to complete debt and equity financings, that it would be able to raise additional funds as necessary, through public or private equity offerings, including by filingone* or more registration statements, through debt financings, or from a combination of these funding sources. However, it* may**not* be able to secure such incremental capital in a timely manner or on favorable terms, if at all. To preserve liquidity, the Company* mayalso takeone* or more of the following additional actions:

While management believes that the Company’s plans for growing revenue and the other potential actions available to it would alleviate the conditions that raise substantial doubt, these strategies arenot entirely within the Company’s control and cannot be assessed as being probable of occurring.

3. Equipment and Improvements

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

Depreciation and amortization expense on equipment and improvements was $0.3 million and $0.4 million for each of the years ended* December 31, 2025and2024*, respectively.

4. Goodwill and Intangible Assets

Goodwill

The carrying amount of goodwill and the impairment losses are as follows (in thousands):

F-13

In accordance with FASB ASC TopicNo. 350, Intangibles-Goodwill and Other, Smith Micro reviews the recoverability of the carrying value of the Company's single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. The annual impairment testing date is* December 31** *of each year. Recoverability of goodwill is determined by comparing the estimated fair value of the reporting unit to the carrying value of the underlying net assets in the reporting unit. If the estimated fair value of a reporting unit is determined to be less than the carrying value, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the fair value.

During thethree months ended* March 31, 2024,the Company performed an interim quantitative impairment test on its goodwill as of February**29,* 2024 and as a result of this interim assessment, the Company recorded a goodwill impairment charge totaling $24 million. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level3 inputs including estimates of revenue growth, EBITDA contribution and discount rates.

In connection with the preparation of its quarterly financial statements for thesecond quarter of2025, the Company assessed changes in circumstances to determine whether it was more likely thannot that the fair value of its single reporting unit was below its carrying amount. While there wasno single determinative event or factor, considerations including recent financial performance compared to expected forecasts, trends in stock valuation, pricing of the most recent equity raise, and the receipt of the Nasdaq minimum bid price requirement notice on* June 24, 2025** led the Company to conclude that when considering the events and factors in totality it was necessary to perform an interim quantitative valuation assessment. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level3* inputs including estimates of revenue growth, EBITDA contribution and discount rates. Based on the results of the assessment, a full goodwill impairment charge of $11.1 million was recorded.

Intangible Assets

The following table sets forth the Company’s acquired intangible assets by major asset class as of* December 31, 2025and2024*, respectively (in thousands, except for useful life data):

F-14

The Company recorded amortization expense of $5.1 million and $5.9 million on intangible assets for the years ended* December 31, 2025and2024*, respectively.

Future amortization expense related to intangible assets as of* December 31, 2025* is as follows (in thousands):

5. Equity Transactions

Minimum Bid Price Requirement and Reverse Stock Split

On* December 27, 2023,the Company received a notice from the Nasdaq Stock Market ("Nasdaq") that the Company wasnot* in compliance with the*$1.00* minimum bid price requirement for continued listing, as set forth in Nasdaq Listing Rule5550(a)(2) (the "Minimum Bid Price Requirement"), as the closing bid price of the Company’s Common Stock had been below*$1.00* per share for more thanthirty (30) consecutive business days as of the date of that notice. The Company undertook aone-for-eight (1:8) reverse stock split (the “Reverse Stock Split”), which became effective* April 10, 2024at11:59* pm Eastern time, to enable the Company to regain compliance with the Minimum Bid Price Requirement. On* April 29, 2024,*the Company received notice from Nasdaq that it had regained compliance with the Minimum Bid Price Requirement, and the matter is now closed.

On* November 26, 2024,the Company received a notice from Nasdaq that the Company’s Common Stock didnot* meet the*$1.00* minimum bid price requirement pursuant to the Minimum Bid Price Requirement, and in accordance with Nasdaq Listing Rule5810(c)(3)(A), the Company was provided an initial compliance period of180 calendar days, or until* May 26, 2025,to regain compliance with the Minimum Bid Price Requirement. On January 8, 2025,the Company received written notification from Nasdaq indicating that the Company’s Common Stock had a closing price at or greater than$1.00* per share for the last10 consecutive business days, from* December 23, 2024to January 7, 2025,*and that, as a result, the Company has regained compliance with the Minimum Bid Price Requirement and the matter is now closed.

On* June 23, 2025,Smith Micro Software, Inc. (the “Company”) received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market (“Nasdaq”) advising that the Company wasnot* in compliance with the*$1.00* minimum bid price requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule5550(a)(2) (the “Minimum Bid Price Requirement”) as a result of the closing bid price of the Company’s common stock (“Common Stock”) having been below*$1.00* forthirty consecutive business days. In accordance with Nasdaq Listing Rule5810(c)(3)(A), the Company was granted a period of180 calendar days from the notification date, or until* December 22, 2025,*to regain compliance with the Minimum Bid Price Requirement.

F-15

On* December 23, 2025,the Company received a written notice from Nasdaq (the “DecemberNotice”) granting an additional180* days, or until* June 22, 2026,to regain compliance with the Minimum Bid Price Requirement. If at any time before June 22, 2026,the closing bid price of the Company’s Common Stock is at least$1.00* per share for a minimum often consecutive business days, unless Nasdaq exercises its discretion to extend thisten-day period, Nasdaq will provide written confirmation stating that the Company has achieved compliance with the Minimum Bid Price Requirement.

The* DecemberNotice hasno* immediate effect on the continued listing status of the Company’s Common Stock on The Nasdaq Capital Market, and the Company’s listing remains fully effective.

The Company intends to monitor the closing bid price of its Common Stock and assess its available options in order to regain compliance with the Minimum Bid Price Requirement and continue listing on The Nasdaq Capital Market, including by effecting a reverse stock split, if necessary. There can beno assurance that the Company will regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with the other Nasdaq listing requirements.

**** May 2024Registered Direct Offering & Private Placement**

On* May 10, 2024,the Company entered into a securities purchase agreement with certain institutional and accredited investors relating to the registered direct offering and sale of an aggregate of 1,065,000 shares of the Company’s Common Stock at an offering price of $2.15 per share of Common Stock and pre-funded warrants (“Pre-Funded Warrants") to purchase up to 845,000 shares of Common Stock (the “Registered Direct Offering”). The Pre-Funded Warrants were purchased at a price of $2.149 per underlying share and had an exercise price of $0.001 per share and could be exercised at any time after their original issuance until such Pre-Funded Warrants were exercised in full. The shares of Common Stock and Pre-Funded Warrants (including the shares of Common Stock underlying the warrants) were offered by the Company pursuant to a prospectus supplement dated May 10, 2024,and accompanying prospectus dated May 12, 2022,in connection with a takedown from the Company’s shelf registration statement on Form S-3 (FileNo.* 333-264667), which was declared effective by the SEC on* May 12, 2022.*

In a private placement on* May 14, 2024,concurrent with the Registered Direct Offering, the Company also sold to the Purchasers unregistered warrants (the “Common Warrants”) to purchase up to an aggregate of 1,910,000 shares of Common Stock (the “Private Placement”). Each unregistered Common Warrant has an exercise price of $2.34 per share, is exercisable at any time beginning November 14, 2024and will expire November 14, 2029.Both the Registered Direct Offering and the Private Placement closed on May 14, 2024.*

Roth Capital Partners, LLC (“Roth”) acted as the exclusive placement agent for the Registered Direct Offering and the Private Placement pursuant to a placement agency agreement (the “Placement Agency Agreement”) dated* May 10, 2024,by and between the Company and Roth, and a related engagement letter with Roth. Pursuant to the Placement Agency Agreement, on May 14, 2024the Company issued to Roth warrants to purchase up to 133,700 shares of Common Stock (the “Placement Agent Warrants”), which represented 7.0% of the aggregate number of shares of Common Stock and Pre-Funded Warrants sold in the Registered Direct Offering. The Placement Agent Warrants are exercisable at any time beginning November 14, 2024,have an exercise price equal to $2.86, and expire November 16, 2026.*

The shares of Common Stock underlying the Common Warrants and the Placement Agent Warrants (collectively referred to herein as the “Warrants”) were registered on a registration statement on Form S-1 (FileNo. 333-280542) filed with the SEC on* June 27, 2024,which was declared effective by the SEC on July 10, 2024.Shares of Common Stock issued by the Company upon exercise of the Warrants maybe resold by the holders pursuant to the prospectus dated July 11, 2024.*The filings made by the Company in connection with the potential resale of the Common Stock underlying the Warrants were filed within the time period agreed by the parties in the Purchase Agreement.

The net cash proceeds to the Company, after deducting offering related expenses was $3.4 million. The Pre-Funded Warrants, Common Warrants, and Placement Agent Warrants were all assessed and recorded as equity instruments.

In2024, all 845,000 Pre-Funded Warrants from the* MayRegistered Direct Offering and Private Placement were exercised on a cashless basis resulting in the issuance of 844,061 shares of Common Stock.No other warrants were exercised during the year ended December 31, 2025*.

F-16

**** October 2024Registered Direct Offering and Private Placement**

On* October 3, 2024**,the Company announced its completion oftwo* securities offerings raising aggregate gross proceeds of $6.9 million: a registered direct offering of 3,321,881 registered shares of Common Stock and concurrent private placement of unregistered warrants exercisable for an equal number of shares of Common Stock (collectively, the*“** October 2024** RDO”) for gross proceeds of approximately $3.9 million, including $0.2 million from a related party, and an unregistered private placement transaction of 2,575,107 shares of Common Stock and warrants exercisable for an equal number of shares of Common Stock with William W. Smith Jr., the Company's Chief Executive Officer, a related party, who participated in the private placement through a trust for which he serves as co-trustee (the“** October 2024** Private Placement”), for gross proceeds of approximately $3.0 million. Both offerings were approved by an independent special committee of the Company's Board of Directors and were priced based on the market value of the offered securities, at a purchase price of $1.165 per share of Common Stock with a warrant exercise price of $1.04 per share of Common Stock. Each of the warrants issued in the October 2024** offerings was initially exercisable at any time beginningsix* months following its original issuance and expiresfive andone-half years from the initial issuance of the warrant. In* January 2025**,at the request of certain holders of the warrants issued in the October 2024** RDO, the Company provided all of the October 2024** RDO warrant holders the opportunity to amend their warrants to adjust the start of the warrant exercise period to January 9, 2025**,and as a result a portion of the warrants issued in connection with the October 2024** *RDO were so amended.No other terms were changed as a result of that amendment to certain of the warrants.

In addition, concurrent with the offerings, the Company issued to Roth a warrant to purchase up to 20,000 shares of the Company’s Common Stock (the “Roth Warrant”), which has substantially the same terms as the warrants issued in the registered offering, except that the Roth Warrant has an exercise price of $1.46 per share of Common Stock and will expiretwo-and-a-half years from the effective date of the* October** *registered offering.

On* October 21, 2024,the Company filed a definitive proxy statement for a Special Meeting of Stockholders to approve the issuance of the number of shares of the Company’s Common Stock that would cause William W. Smith, Jr. to beneficially owntwenty* percent or more of the Company, through the exercise of the warrants purchased in the unregistered private placement transaction. The shareholders approved this proposal on* December 10, 2024.*

On* October 28, 2024,the Company filed a registration statement with the SEC (FileNo.* 333-282858) registering the resale of the shares of stock issued in the* October 2024Private Placement and the shares of common stock issuable upon exercise of the warrants issued in the October 2024RDO and the October 2024Private Placement. This registration statement was declared effective by the SEC on November 8, 2024.*

The net cash proceeds to the Company from both offerings, after deducting offering related expenses, was $6.6 million. All warrants associated with these transactions were assessed and recorded as equity instruments.

**** July 2025Registered Direct Offering and Private Placement**

On* July 18, 2025,the Company announced the closing of a registered direct offering of 1,612,903 shares of Common Stock for $0.93 per share and concurrent private placement of unregistered warrants to purchase an equal number of shares of the Company's Common Stock with certain institutional and accredited investors, which resulted in gross proceeds to the Company of approximately $1.5 million, prior to offering fees and transaction expenses. The registered offering and concurrent private placement were approved by the Company's Board of Directors and a special Pricing Committee thereof. The warrants issued to the investors in the concurrent private placement had an initial exercise price of $1.20 per share, are immediately exercisable, expire five years after issuance, and contain a “full-ratchet” anti-dilution adjustment, such that the exercise price will be adjusted if the Company issues shares of Common Stock (or Common Stock equivalents) at a price below the exercise price of the warrant. The number of shares issuable upon exercise of such shares will then be proportionately adjusted. Additionally, in the event of a reverse stock split, the exercise price of each warrant is subject to adjustment (along with a proportionate adjustment in the number of shares) if the market price of the Common Stock is less than the exercise price of the Common Warrant (after giving effect to the split) during a period before and after the effective date of the reverse split. However, pursuant to the securities purchase agreement between the company and the investors relating to the registered offering and concurrent private placement dated July 17, 2025,an investor’s right to exercise the warrants, and the Company’s ability to issue shares upon exercise, is subject to certain limitations set forth in the purchase agreement pursuant to which the warrants were issued, including a limit on the number of shares that maybe issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.9% of the Company’s outstanding shares of common stock pursuant to the registered offering and concurrent private placement in accordance with Nasdaq listing standards. The Company obtained stockholder approval of these matters at a meeting held on October 16, 2025.*

The net cash proceeds to the Company from the offering, after deducting offering related expenses was $1.0 million. All warrants associated with the transaction were assessed and recorded as equity instruments.

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**** November 2025Registered Direct Offering and Private Placement Transaction**

Securities Purchase Agreement- Registered Direct Offering:

On* November 5, 2025,*the Company entered into a securities purchase agreement relating to the registered direct offering and sale of an aggregate of 1,714,373 shares of the Company’s Common Stock for $0.6708 per share of Common Stock. Pursuant to the purchase agreement, in a concurrent private placement, the Company also agreed to sell to the purchasers unregistered common warrants to purchase up to an aggregate of 1,714,373 shares of Common Stock. Each unregistered common warrant has an exercise price of $0.6708 per share, is exercisable at any time beginningsix months following their original issuance and will expire five years from the initial exercise date.

Roth Capital Partners, LLC (the “Placement Agent”) acted as the exclusive placement agent for the Offering and the concurrent private placement of Common Warrants pursuant to a placement agency agreement (the “Placement Agency Agreement”) dated* November 5, 2025,*by and between the Company and the Placement Agent. The gross proceeds to the Company from the completed Offering was approximately $1.15 million, before deducting offering expenses payable by the Company.

Securities Purchase Agreement- Private Placement Transaction:

On* November 5, 2025,the Company separately entered into asecond* securities purchase agreement with a trust for which the Company’s Chief Executive Officer serves as co-trustee relating to a private placement transaction and sale of 2,236,136 unregistered shares of the Company’s Common Stock at an offering price of $0.6708 per share of Common Stock and unregistered warrants to purchase up to an aggregate of 2,236,136 shares of Common Stock. Each of these unregistered private placement common warrants has an exercise price of $0.6708 per share, is exercisable following receipt of stockholder approval of the same and will expire five years from the initial exercise date. The gross proceeds to the Company from the completed Private Placement was approximately $1.5 million, before deducting offering expenses payable by the Company.

The closing of the* November 2025registered direct offering and private placement transaction occurred on or about November 6, 2025.*

On* December 4, 2025the Company filed a registration statement with the SEC registering for resale the shares issuable upon exercise of the shares issued in the November 2025private placement transaction and the warrants issued in connection with the November 2025registered direct offering and private placement transaction, which registration statement was declared effective by the SEC on December 12, 2025.*

Pursuant to the Placement Agency Agreement, the Company agreed to pay to Roth a cash fee equivalent to 6.0% of the gross proceeds raised in the* November 2025registered direct offering, excluding amounts invested by certain individuals or entities mutually agreed upon by the Company and Roth. The Company also reimbursed Roth's expenses of up to $125,000, upon the closing of the November 2025*registered direct offering.

Warrants

The Company’s outstanding Common Stock warrants are a combination of equity and liability classified. As of* December 31, 2025and December 31, 2024**,the Company had 16,868,306 and 8,382,048 warrants outstanding, each having the right to purchaseone share of the Company’s Common Stock at a weighted average exercise prices of $1.21 and $1.41, respectively, and expire at various dates through May 2031**.*

6. Debt and Warrants Transactions

Note Purchase Agreements

** September 11, 2025Note Purchase Agreements:

Effective* September 11, 2025,the Company entered into note purchase agreements (the “September 11, 2025Note Agreements”) with the Smith Living Trust, for which William W. Smith, Jr., the Company’s Chairman, President and Chief Executive Officer, and his wife, Dieva L. Smith, serve as co-trustees (“Smith”) and with Timothy C. Huffmyer, the Company’s Chief Operating Officer and Chief Financial Officer (“Huffmyer”). Pursuant to the September 11, 2025Note Agreements, Smith agreed to loan to the Company an amountnot* to exceed approximately $0.7 million and Huffmyer agreed to loan to the Company an amountnot to exceed $0.1 million, in each case in return forone or more secured promissory notes (the* “September 11, 2025Notes”) and accompanying unregistered common stock purchase warrants. The September 11, 2025Notes are secured by the Company’s accounts receivable and certain other assets, bear interest at a rate of 15% per annum, and are due on or before March 31, 2026,*unless otherwise mutually agreed to by the parties. The transactions were approved by an independent committee of the Company’s Board of Directors and the Company’s Audit Committee.

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Each* September 11, 2025Note was accompanied by the issuance by the Company of an unregistered warrant (each, “September 11, 2025Warrant”) to purchase up to a number of shares of the Company’s Common Stock equal to the principal amount of such September 11, 2025Note divided by the Market Price (as defined under Nasdaq regulations) of the Company’s Common Stock on the date of issuance of the note (the “September 11, 2025Warrant Shares”). The Company received an amount equal to $0.125 per September 11, 2025Warrant Share for each September 11, 2025Warrant issued. Each September 11, 2025Warrant is exercisable at any time beginningsix* months following its original issuance, will expire five years from the initial exercise date and has an exercise price equal to the greater of the Market Price on the date of the* September 11, 2025Note Agreement or on the date of issuance of the warrant. The September 11, 2025Warrants contain a “full-ratchet” anti-dilution adjustment, such that the exercise price will be adjusted if the Company issues Common Stock (or Common Stock equivalents) at a price below the exercise price of such warrants. The number of shares issuable upon exercise of the September 11, 2025Warrants will then be proportionately adjusted. Additionally, in the event of a reverse stock split, the exercise price of each September 11, 2025Warrant is subject to adjustment (along with a proportionate adjustment in the number of shares) if the market price of the Common Stock is less than the exercise price of the September 11, 2025Warrants (after giving effect to the split) during a period before and after the effective date of the reverse split. However,no adjustment to the exercise price (or proportional adjustment to the number of shares) will be made under the “full-ratchet” adjustment or the anti-dilution adjustment, unless and until the Company has received approval from the Company’s stockholders in accordance with Nasdaq Listing Rule5635.*

The Company and Smith completed an initial closing of the transactions contemplated by the* September 11, 2025Note Agreements on September 11, 2025,and the Company completed subsequent closings with each of Smith and Huffmyer on September 17, 2025.The gross proceeds to the Company from the closings with Smith totals approximately $0.8 million (comprised of approximately $0.7 million as a loan and approximately $0.1 million for the purchase of the accompanying September 11, 2025Warrants) and the gross proceeds to the Company from the closing with Huffmyer totals approximately $0.1 million (comprised of approximately $85 thousand as a loan and approximately $15 thousand for the purchase of the accompanying September 11, 2025Warrants), in each case, before deducting transaction expenses payable by the Company. Pursuant to the September 11, 2025Note Agreements, the Company agreed to file a registration statement with the SEC registering the September 11, 2025*Warrant Shares for resale.

** September 29, 2025Note Purchase Agreement:

On* September 29, 2025,the Company entered into a note purchase agreement (the “September 29, 2025Note Agreement”) with certain accredited investors (“Purchasers”), pursuant to which the Purchasers agreed to provide loans in an aggregate amount of $0.4 million, of which $0.3 million was received and recorded on September 30, 2025,and the remaining$0.1 million was received by October 2, 2025and recorded in thefourth* quarter, in each case, in return for a secured promissory note (collectively, the* “September 29, 2025Notes”) and an accompanying unregistered common stock purchase warrant (collectively, the “September 29, 2025Warrants”). The September 29, 2025Notes have substantially the same terms as the September 11, 2025*Notes.

Each* September 29, 2025Note was accompanied by the issuance of a warrant to purchase up to a number of shares of the Company’s Common Stock equal to the principal amount of such Note divided by the Market Price (as defined under Nasdaq regulations) of the Company’s Common Stock on the date of issuance (the “September 29, 2025Warrant Shares”). Each September 29, 2025Warrant is exercisable at any time beginningsix* months following its original issuance, will expire five years from the initial exercise date, and has an exercise price equal to the greater of $0.73 or the Market Price on the date of issuance of the warrant. The* September 29, 2025Warrants contain a “full-ratchet” anti-dilution adjustment, such that the exercise price will be adjusted if the Company issues Common Stock (or Common Stock equivalents) at a price below the exercise price of such warrants. The number of shares issuable upon exercise of the September 29, 2025Warrants will then be proportionately adjusted. Additionally, in the event of a reverse stock split, the exercise price of each September 29, 2025Warrant is subject to adjustment (along with a proportionate adjustment in the number of shares) if the market price of the Common Stock is less than the exercise price of the September 29, 2025Warrants (after giving effect to the split) during a period before and after the effective date of the reverse split. However,no adjustment to the exercise price (or proportional adjustment to the number of shares) will be made under the “full-ratchet” adjustment or the anti-dilution adjustment, unless and until the Company has received approval from the Company’s stockholders in accordance with Nasdaq Listing Rule5635.* Neither the* September 29, 2025Warrants nor the September 29, 2025Warrant Shares have been registered under the Securities Act. Pursuant to the September 29, 2025Note Agreement, the Company filed a registration statement with the SEC registering the September 29, 2025Warrant Shares for resale, which was declared effective December 12, 2025.*

The Company received total cash proceeds from the* September 11, 2025Note Purchase Agreements and the September 29, 2025Note Purchase Agreement of approximately $1.2 million in the year ended December 31, 2025.Furthermore, the proceeds were allocated to the notes and their 1,512,934 equity-classified warrants on a relative fair value basis, resulting in a debt discount of approximately $0.4 million which is being amortized over the term of the agreements using the effective interest method. This resulted in an immaterial amount of amortization expense in the year ended December 31, 2025.The valuation of the equity-classified warrants was based on a Black-Scholes model at inception. The following assumptions were utilized in the Black-Scholes option pricing model for the year ended December 31, 2025:common stock market price of $0.72 to$0.73, risk-free interest rate of 3.6% to 3.7%, expected volatility of 88.7% to 89.8%, and expected term of 5.5 years. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation. Expected volatility is based on the historical volatility over the expected remaining term of the warrants. The Company hasno* reason to believe future volatility over the expected remaining life of the warrants is likely to differ materially from historical volatility. Expected life is based on the term of the applicable warrants.

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Deemed Dividends

In connection with the issuance of the* September 11, 2025Warrants with an exercise price of $0.73, pursuant to the full-ratchet anti-dilution provisions of the July 2025Warrants, the exercise price of each of the July 2025Warrants was adjusted from $1.20 to $0.73 and the aggregate number of warrant shares underlying the July 2025*Warrants increased from 1,612,903 to 2,651,348. As a result, the Company recorded a deemed dividend of $0.6 million and a reduction in income available to common shareholders in the Basic EPS calculation. In accordance with U.S. GAAP, the incremental fair value of the warrants resulting from the decrease in the exercise price and the increase in the number of warrant shares was measured using Black-Scholes valuation models at the time of the event. The following assumptions were utilized in the Black-Scholes option pricing model: common stock market price of $0.73, risk-free interest rate of 3.6%, expected volatility of 90.7%, and expected term of 4.85 years. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation.

Further, in connection with the issuance of the* November 5, 2025Common Stock at $0.6708 and Warrants with an exercise price of $0.6708, the exercise price of each of the July 2025Warrants was further adjusted from $0.73 to $0.6708 and the aggregate number of warrant shares underlying the July 2025*Warrants increased from 2,651,348 to 2,885,339. As a result, the Company recorded a deemed dividend of $0.1 million and a reduction in income available to common shareholders in the Basic EPS calculation. In accordance with U.S. GAAP, the incremental fair value of the warrants resulting from the decrease in the exercise price and the increase in the number of warrant shares was measured using Black-Scholes valuation models at the time of the event. The following assumptions were utilized in the Black-Scholes option pricing model: common stock market price of $0.66, risk-free interest rate of 3.8%, expected volatility of 93.6%, and expected term of 4.70 years.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation. Expected volatility is based on the historical volatility over the expected remaining term of the warrants. The Company hasno reason to believe future volatility over the expected remaining life of the warrants is likely to differ materially from historical volatility. Expected life is based on the term of the applicable warrants.

The warrants underlying the* September 11, 2025Note Purchase Agreements and the September 29, 2025Note Purchase Agreement are also subject to the same provisions, however,no adjustment to the exercise price (or proportional adjustment to the number of shares) shall be made unless and until the Company has received approval from the Company’s stockholders in accordance with Nasdaq Listing Rule5635.*

Warrant Liabilities

On* August 11, 2022**,the Company issued warrants (the "Notes Warrants") to purchase Common Stock in conjunction with a senior secured convertible notes (the "Notes") and warrants offering (the "Notes and Warrants Offering"), at an initial fair value of $3.8 million. The Notes sold by the Company in the Notes and Warrants Offering were subsequently retired upon maturity at December 31, 2023**.The exercise price of and number of shares underlying the Notes Warrants were immediately proportionately adjusted pursuant to the Reverse Stock Split to $26.80 and 279,851 shares, respectively, and on May 2, 2024**,*the exercise price for each of the Notes Warrants was further adjusted to $2.06 in accordance with their terms.

The Company issued additional warrants (the "Additional Warrants") to purchase Common Stock on* August 12, 2022** in conjunction with a registered direct offering for the sale of shares of the Company's Common Stock and the Additional Warrants. The Additional Warrants donot* reprice further beyond the immediate proportionate adjustments to the per share exercise price and number of shares issuable of $21.20 and 141,509 shares, respectively, that occurred upon and as a result of the Reverse Stock Split.

All changes in the fair value of the Notes Warrants and Additional Warrants liabilities are recognized in the Company's consolidated statements of operations until they are either exercised or expire. Since their issuance,none of the Notes Warrants or Additional Warrants have been exercised. The Notes Warrants and Additional Warrants arenot traded in an active securities market and, as such, the estimated fair value is determined by using a Black-Scholes option pricing model which considers the likelihood of repricing adjustments and utilizes assumptions noted in the following table. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation. Expected volatility is based on the historical volatility over the expected remaining term of the warrants. The Company hasno reason to believe future volatility over the expected remaining life of the Notes Warrants and Additional Warrants is likely to differ materially from historical volatility. Expected life is based on the term of the applicable warrants. Below are the specific assumptions utilized:

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7. Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC TopicNo. 820: Fair Value Measurements and Disclosures. Fair value is an exit price, representing the amount that would be received upon the sale of an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes athree-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

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

The following table presents information about the financial liabilities that are measured at fair value on a recurring basis at* December 31, 2025and2024* (in thousands):

The following table presents the changes in the fair value of Level3 instruments for the years ended* December 31, 2025and2024.* (in thousands):

The carrying values for all other financial assets and liabilities approximated fair value for the years ended* December 31, 2025and2024*.

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8. Income Taxes

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

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

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

The state and local income taxes which comprise the majority of the state and local income taxes, net of federal effect category are Oregon, Kansas, Missouri, Colorado, and then Pennsylvania.

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

The Company has federal and state net operating loss ("NOL") carryforwards of approximately $233.9 million and $192.2 million, respectively, at* December 31, 2025*, and federal and state NOL carryforwards of $207.3 million and $180.9 million at* December 31, 2024,respectively, to reduce future cash payments for income taxes. The federal NOL carryforwards generated prior to2018* will expire from2031 and2037 and state NOL carryforwards will expire through2041. Federal NOL carryforwards generated in2018 and thereafter haveno expiration date.

The Company has federal tax credit carryforwards of approximately $2.5 million at both* December 31, 2025* and* December 31, 2024*. The Company has state tax credit carryforwards of $0.7 million at both* December 31, 2025* and* December 31, 2024*. These tax credits will begin to expire in2028. To the extent that an ownership change has occurred under Internal Revenue Code Sections382 and383, the Company’s use of its loss carryforwards and credit carryforwards to offset future taxable income* maybe limited.No ownership changes have occurred as of December 31, 2025*.

At* December 31, 2025and2024*, the Company had unrecognized tax benefits, including interest and penalties, of approximately $0.4 million, withno changes in those balances.

We account for income taxes as required FASB ASC TopicNo. 740,* Income Taxes.* This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely thannot that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater thanfifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

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In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company has been in athree-year historical cumulative loss as of the end of fiscal2025. In addition, the Company was also in a loss for the year ending* December 31, 2023as well as for the year ending December 31, 2024.*These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of thefour sources of taxable income as of* December 31, 2025* (as described above), and after consideration of the Company’s continuing cumulative loss position as of* December 31, 2025*, the Company recorded a valuation allowance related to its U.S.-based deferred tax assets of $75.0 million at* December 31, 2025*. The valuation allowance on deferred tax assets increased by $4.9 million and increased by $11.7 million in2025 and2024, respectively.

The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Currently there areno audits in process or pending from Federal or state tax authorities. The outcome of any tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a mannernot consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. As of* December 31, 2025*, a current estimate of the range of changes that* mayoccur within the nexttwelve* months cannot be made due to the uncertainty regarding the timing of these events.

For financial reporting purposes, income before provision for income taxes for the Company’s foreign subsidiaries was approximately $0.2 million and $0.1 million years ended* December 31, 2025and2024*, respectively. Smith Micro doesnot provide for U.S. taxes on its unremitted earnings of foreign subsidiaries that havenot been previously taxed since the Company intends to invest such undistributed earnings indefinitely outside of the U.S.

The2017 U.S. Tax Cuts and Jobs Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company's accounting policy is to recognize the tax on GILTI as a period expense in the period the tax is incurred. The current income related to the GILTI inclusion in2025 is $0.6 million.

On* July 4, 2025the One Big Beautiful Bill Act (OBBBA) was signed into law which introduces significant changes to the U.S. corporate tax system. The main impacts of OBBBA for the Company are the ability to deduct domestic Section174* Research and Development costs for tax years2025 forward,100% bonus depreciation, and changes to163(j) interest limitations to remove depreciation and amortization expense from adjusted taxable income. These changes donot have a material impact on the Company’s taxable position. The Company is electing under OBBBA to continue to amortize Section174 costs capitalized in2022-2024 through the remaining lives of the assets instead of taking aone-time deduction in2025 for all unamortized amounts.

The cash paid for income taxes (net of refunds) for the years ended* December 31, 2025and2024*, respectively, as follows (in thousands):

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9. Earnings Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC TopicNo. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, plus the weighted average number of dilutive common stock equivalents outstanding for the period using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company, options, warrants, and convertible notes are considered to be common stock equivalents, and are only included in the calculation of diluted earnings per share when their effect is dilutive.

The following table sets forth the details of basic and diluted earnings per share (in thousands, except per share amounts):

The following shares were excluded from the computation of diluted net loss per share as the impact of including those shares would be anti-dilutive (in thousands):

10. Employee Benefit Plans

The Company offers its U.S. employees participation in a401(k) plan, in which the Company matches the employee contributions at a rate of 20%, subject to a vesting schedule. Total employer contributions amounted to $0.2 million and $0.4 million for the years ended* December 31, 2025and2024*, respectively.

11. Stock-Based Compensation

Stock Plans

On* June 18, 2024,the Company's stockholders approved the Company's Amended and Restated Omnibus Equity Incentive Plan (the "OEIP") which amended and restated (and renamed) the Company's2015* Omnibus Equity Incentive Plan (as previously amended, the*"2015* Plan") and increased the number of shares reserved thereunder by 3.0 million shares. As of* December 31, 2025*, there were approximately 1.7 million shares available for future grants under the Company’s OEIP. References to the OEIP herein include the2015 Plan prior to its amendment and restatement. The maximum number of shares available for issuance over the term of the OEIP* may**not* exceed 7.2 million shares. During the year ended* December 31, 2025*, the Company granted 3.4 million shares of restricted stock under the OEIP.

The Company previously maintained a2005 Stock Option/Stock Issuance Plan (the*"2005* Plan"), which was replaced by the2015 Plan. As of* December 31, 2025*, no options issued under the2005 Plan remain outstanding, andno new grants have been made under the2005 Plan.

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The OEIP provides for the issuance of full value awards (restricted stock, performance stock, dividend equivalent right or restricted stock units) and partial value awards (stock options or stock appreciation rights) to employees, non-employee members of the board and consultants. Any full value award settled in shares will be debited as 1.2 shares, and partial value awards settled in shares will be debited as 1.0 shares against the share reserve. The exercise price per share for stock option grants isnot to be less than the fair market value per share of the Company’s common stock on the date of grant. The Board of Directors has the discretion to determine the vesting schedule. Stock options* maybe exercisable immediately or in installments, but generally vest over afour-year period from the date of grant. In the event the holder ceases to be employed by the Company, all unvested stock options terminate, and all vested stock options maybe exercised within a period of90* days following termination. In general, stock options expireten years from the date of grant. Restricted stock is valued using the closing stock price on the date of the grant. The total value is expensed over the vesting period, which typically ranges fromtwo toforty-eight months.

Stock Compensation Expense

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC TopicNo. 718, Compensation-Stock Compensation.

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

As of* December 31, 2025*, there was approximately $1.7 million of unrecognized compensation costs related to non-vested stock options and restricted stock granted under the OEIP, which is expected to be recognized over the next 2.1 years.

Stock Options

In2025, there were 25,000 stock option awards granted with a vesting period ofone year and a contractual term often years. There wereno stock options awards granted in2024. The assumptions used to compute the share-based compensation costs for the stock options granted during the year ended* December 31, 2025*, using the Black-Scholes option pricing model, were as follows:

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A summary of the Company’s stock options outstanding under the OEIP and2005 Plan as of* December 31, 2025and2024* and the related activity during2025 is as follows (in thousands except per share amounts):

Employee Stock Purchase Plan

The Company has a shareholder-approved employee stock purchase plan (“ESPP”), under which substantially all employees* maypurchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning and end ofsix*-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s compensation and employees* may**not* purchase more than the lesser of $25,000 of stock or 250 shares for any calendar year. Additionally,no more than 281,250 shares in the aggregate* maybe purchased under the ESPP. There wereno* shares purchased for the offering period ended* September 30, 2025.*

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

Restricted Stock Awards

A summary of the Company’s restricted stock awards outstanding under the OEIP as of* December 31, 2025and2024*, and the activity during years ended therein, are as follows (in thousands, except weighted average grant date fair value):

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12. Revenues

Performance Obligations

Family Safety Cloud Based Services

Smith Micro’s Family Safety solutions, which includes the SafePath family of products, are a hybrid software as a service (“SaaS”) offering. The Company considers the provision of the perpetual license and the cloud-based platform as a single performance obligation. The Company provides the perpetual license on a royalty free basis and earns revenue on a revenue share arrangement. Smith Micro recognizes the revenue share fees when it is entitled to the consideration earned for the distinct service period based on its customer’s usage of its cloud-based services.

ViewSpot Cloud Based Services

The Company's ViewSpot product was a cloud-based platform that Smith Micro's customers used to display their promotional content on mobile devices in their retail outlets. Smith Micro sold a royalty free license and cloud-based services to serve the promotional content and capture consumer interaction with the in-store display mobile device. ViewSpot services depended on a significant level of integration, interdependency, and interrelation between the on-premise applications and the cloud services, and were accounted for together as a single performance obligation. ViewSpot services were sold on a fixed fee basis to Smith Micro’s customers based on pre-defined purchase orders. Since Smith Micro was obligated to provide the required services over the contract period, the revenue was recognized over time.

From time to time, the Company also provided services to either to configure ad hoc targeted promotional content for Smith Micro’s customers or to set up new devices for optimization on the ViewSpot platform upon request. These requests were driven by the customers’ marketing initiatives and tended to be short term “bursts” of activity. Smith Micro recognized revenues from these ad hoc services at a point in time which is upon delivery of the configured promotional content to the cloud platform or upon certification of the new device.

Smith Micro divested its ViewSpot product in* June 2025.*

CommSuite®*** Revenue***

For the CommSuite product, the Company* mayprovide integration services for a fee to ensure the Company’s software solution can operate on the customer’s operating platforms and the operating platform of the mobile devices of Smith Micro’s customer’s end users. In addition, since the mobile device OEMs change their operating systems regularly, Smith Micro provides maintenance services to ensure utility of the software license isnot* diminished for the Company’s customers. Smith Micro considers the integration services, the software license, and maintenance services to maintain the utility of the software license for its customers as a single performance obligation. The Company provides the perpetual license on a royalty free basis. Revenue related to integration services, if charged, is recognized at a point in time upon delivery and acceptance of the licensed software by the customer.

To support the CommSuite solution, Smith Micro also provides customers with its hosted environment and Application Service Provider (“ASP”) services for the duration of the license term. The Company considers the provision of these services to be a separate performance obligation. In these transactions, the total consideration expected is variable. The Company doesnot estimate when the variable consideration will be recognized because the License Usage Based Fees, Hosting Service Fees and ASP Advertising Fees relate specifically to the Company’s efforts to transfer the services for a specified period (month or quarter) which are distinct from the services provided in other specified periods. Smith Micro’s customer’s or the customer’s end customer’s usage occurs within the defined period, and the variability of Smith Micro’s license, hosting and ASP fees is resolved in the specified period, and such fees earned arenot subject to adjustment based on the activity in other periods.

Smith Micro earns revenue from these services and for advertisements placed by its customers on the Company’s platform on a revenue share arrangement.

Consulting Services and Other

Smith Micro has developed a roadmap for adding new functionality to its wireless products to extend the product lifecycle and expand its customer’s use of the product on their networks. From time to time, the Company enters into consulting services arrangements with its customers to develop incremental functionalitynot included on the developmental roadmap. The Company earns revenue from these consulting services that is recognized at the time of delivery of the software when the services have been completed and control has been transferred to the customers, or in certain circumstances when the Company is customizing functionality specific to customers' requirements and when the Company has an enforceable right to payment for work completed to date, revenue is recognized as the work progresses.

The Company also* may*enter into arrangements with certain customers to provide technology support services beyond the initial warranty period. Technology support services include e-mail and telephone support and unspecified rights to bug fixes available on a when-and-if available basis. Smith Micro considers the provision of such technology support services to be a separate performance obligation which is generally billed in advance for a fixed term and recognized as revenue ratably over the contractual term as the Company performs its services.

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Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue hasnot been recognized. Deferred revenue primarily consists of the unearned portion of monthly, quarterly, and annually billed service fees and prepayments made by customers for a future period. Smith Micro recognizes revenue upon transfer of control. As of* December 31, 2025and2024*, the Company’s total deferred revenue balances were nominal.

Costs to Obtain a Customer Contract

The Company generally pays sales commissions to its sales force, which are incremental and recoverable costs of acquiring contracts. In most instances, sales commissions are only paid when the Company earns usage-based fees on the contracts. The commission obligation is established each quarter based on the usage-based fees earned. The commission obligation isnot adjusted by future usage-based fees earned, meaning each period is discrete from the other. As a result of the structure of the commission plan, Smith Micro records the commission expense when the commission obligation is determined, which is generally quarterly.

Certain provisions of the sales commission plan incentivize and recognize the efforts of eligible participants to earn bonuses on future revenue generated on new contracts, sale of a new product to an existing customer, or revision of contract terms with an existing customer expected to result in an increase in revenues. The sales bonuses are tiered based on the opportunity size. Sales bonuses paid under these provisions of the sales commission plan are incremental contract acquisition costs, and accordingly are recorded as a deferred contract asset that is amortized on a straight-line basis over the average contract life of the new, renewed, and modified contract.

Costs to Fulfill a Customer Contract

The Company incurs costs to fulfill obligations under a contract which are recognized as the Company fulfills its performance obligation and recognizes revenue. Where the Company provides services and earns revenue over the contract term based on usage of Smith Micro’s platforms, the associated fulfillment costs are recognized as they are incurred and as usage-based revenue is recognized.

Disaggregation of Revenues

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

The opening balance of accounts receivable as of* January 1, 2024*was $7.9 million.

13. Commitments and Contingencies

Litigation

The Company* maybecome involved in various legal proceedings arising from its business activities. While management doesnot* believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows, or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows, or financial position in a particular period.

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Other Contingent Contractual Obligations

During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it* maybe required to make payments in connection with certain transactions. These include indemnities to the Company’s customers pursuant to contracts for the Company’s products and services, including indemnities with respect to intellectual property; confidentiality and data privacy; indemnities to various lessors in connection with facility leases for certain claims arising from use of such facility or under such lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has made or maymake contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company mayalso issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments, and guarantees varies, and in certain cases maybe indefinite. The majority of these indemnities, commitments, and guarantees may**not* provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company hasnot recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets.

14. Leases

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

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

The Company’s lease contracts generally donot provide a readily determinable implicit rate. For these contracts, the estimated incremental borrowing rate is based on information available at the inception of the lease.

Operating lease cost was $1.6 million for each of the years ended* December 31, 2025and2024*, respectively. Cash payments for lease liabilities were $1.5 million and $1.6 million for the years ended* December 31, 2025and2024*, respectively.

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

The Company recognized noncash increases for the right-of-use assets obtained in exchange for the new operating lease liabilities in the amount of $1.0 million for* December 31, 2024*. There wereno noncash right-of-use asset transactions for year ended* December 31, 2025.Subsequent to year end the Company executed a lease renewal and will recognize a noncash increase for the right-of-use asset obtained in exchange for a new operating lease liability of approximately $1.0 million for December 31, 2026.*

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

Additional information relating to the Company’s operating leases follows:

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15. Segment, Concentration and Geographical Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC TopicNo. 280, Segment Reporting (“Topic280**”). The Company hasone primary business unit based on how management internally evaluates separate financial information, business activities and management responsibility: Wireless. The Wireless segment includes the Family Safety (which includes SafePath), CommSuite, and ViewSpot families of products (prior to the divestiture of ViewSpot in2025).

The Company's chief operating decision maker (“CODM”) as such term is defined in Topic280, is its President and CEO. As infrastructure and resources are shared across the Company’s operations, the CODM manages the Company's operations based on consolidated financial information for purposes of evaluating financial performance, investment, cash flow metrics and allocating resources.

The accounting policies of the Company's single operating segment are the same as those described in the summary of significant accounting policies appearing in Note1. Although the CODM uses other measures of operating performance, the Company concluded that consolidated net loss is the measure required to be disclosed as the segment measure of profit or loss. Adjusted operating loss and net loss are used to evaluate the effectiveness of Smith Micro's performance and to monitor budget versus actual results. The measure of segment assets is reflected as "total assets" in the accompanying consolidated balance sheet.

Revenue and expenses regularly provided to the CODM are included in the following reconciliation of the Company's net adjusted operating loss and net loss. It includes the significant expense categories computed under U.S. GAAP, reconciled to the Company's total net loss as presented in the consolidated statement of operations.

(1) Adjusted amounts exclude depreciation expense and other adjustments as further described in footnote3 to this table.

(2) Adjusted amounts exclude stock-based compensation expense and other adjustments as further described in footnote3 to this table.

(3) Other segment expenses include personnel severance and reorganization activities, amortization of debt discount, and other corporate non-recurring expenditures, offset by the gain on sale from the divestiture of the Company's ViewSpot product.

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

Concentration Information

The Company has certain customers whose revenues individually represented greater than10% of the Company’s total revenues, or whose accounts receivable balances individually represented greater than10% of the Company’s total accounts receivable.

For the year ended* December 31, 2025*, three customers made up 60%,21%, and 18% of revenues. For the year ended* December 31, 2024*, three customers made up 58%,20%, and 14% of revenues.

As of* December 31, 2025*, three customers accounted for 44%,29%, and 16% of accounts receivable, and as of* December 31, 2024*, two customers accounted for 68% and 14% of accounts receivable.

The Company’s major customers could reduce their orders of the Company’s products in favor of a competitor's product or for any reason. The loss of these major customers or decisions by a significant customer to substantially reduce purchases could have a material adverse effect on Smith Micro’s business.

For the year ended* December 31, 2025*, three service providers accounted for 16%,15%, and 11% of purchases in the year, totaling 41% of trade payables as of* December 31, 2025*. For the year ended* December 31, 2024*, three service providers accounted for 22%,18%, and 14% of purchases in the year, totaling 35% of trade payables as of* December 31, 2024*.

Geographical Information

During the years ended* December 31, 2025* and2024, the Company operated intwo geographic locations: the Americas and Europe, Middle East and Africa (EMEA). Revenues attributed to the geographic location of the customers’ bill-to address were as follows (in thousands):

The Company doesnot separately allocate specific assets to these geographic locations.

16. Subsequent Events

The Company evaluates and discloses subsequent events as required by ASC TopicNo. 855, Subsequent Events. The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.

On* February 3, 2026,the Company entered into a Note Purchase Agreement (the “Note Agreement”) with the Smith Living Trust, for which William W. Smith, Jr., the Company’s Chairman, President and Chief Executive Officer, and his wife, Dieva L. Smith, serve as co-trustees (“Smith”). Pursuant to the Note Agreement, Smith agreed to loan funds to the Company in return forone* or more secured promissory notes (in each case, a “Note”) and accompanying unregistered common stock purchase warrants (in each case, a “Warrant”). The Note Agreement provides that each Note will be secured by the Company’s accounts receivable and certain other assets, will bear interest at a rate of 15.0% per annum, and will be due on or before* March 31, 2026 (the “Maturity Date”), unless otherwise mutually agreed by the parties. Pursuant to the Note Agreement, each Note will be accompanied by the issuance of a Warrant to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), which will be exercisable at any time beginningsix* months following its original issuance, will expire five years from the initial exercise date and will have an exercise price equal to the greater of (a) $0.68 and (b) the greater of the market price of the Company’s Common Stock on the date of the Note Agreement or on the date of issuance. On* February 3, 2026,the Company and Smith completed a closing of a loan transaction under the Note Agreement, and the Company issued a Note and a Warrant to Smith pursuant to the terms of the Note Agreement. The Warrant has an exercise price of $0.68 and will be exercisable during the period beginning August 3, 2026and ending August 3, 2031.*The gross proceeds to the Company from the closing totals approximately $1,000,000 (comprised of approximately $814,979 as a loan and approximately $185,021 for the purchase of the accompanying Warrant), before deducting transaction expenses payable by the Company. The Company expects to use the net proceeds from the transaction for working capital and general corporate purposes. The transaction was approved by the Company’s Board of Directors and the Company’s Audit Committee.

On* March 4, 2026,the Company entered into a Securities Purchase Agreement for the sale of Secured Convertible Notes (the“2026* Convertible Notes”) with an aggregate original principal amount of $4.9 million and an initial conversion price of $0.68 per share, subject to adjustment, and warrants to acquire up to an aggregate amount of approximately 9.4 million additional shares of the Company's common stock. The Smith Living Trust, for which William W. Smith, Jr., the Company’s Chairman, President and Chief Executive Officer, and his wife, Dieva L. Smith serve as co-trustees, and Timothy C. Huffmyer, the Company’s Chief Operating Officer, Chief Financial Officer and Treasurer, are among the buyers in the offering. The Company has agreed to use the proceeds of the offering (i) to repay in full the principal and interest outstanding under those certain notes due on* March 31, 2026in the aggregate amount of up to $2.2 million plus any additional interest amounts that mayaccrue in connection with the extension of the maturity date under the existing notes and (ii) for general corporate purposes. The2026* Convertible Notes will mature on* March 31, 2029;however, this date maybe extended at the option of the holder. The2026* Convertible Notes will accrue interest at the rate of 8.0% per annum, which will be payable in full upon the Maturity Date. Upon the occurrence and during the continuance of an Event of Default (as defined in the2026 Convertible Notes), the2026 Convertible Notes will accrue interest at the rate of 12.0% per annum. At any time after thesixth month anniversary of the issuance of the2026 Convertible Notes, each2026 Convertible Note will be convertible, at the option of the holder, into shares of our common stock at an initial conversion price equal to $0.68, which is subject to standard adjustments. The offering was approved by the Company’s Board of Directors and the Company’s Audit Committee and is expected to close on or about* March 6, 2026,*subject to customary closing conditions. The aggregate gross proceeds from the offering are expected to be approximately $4.9 million, before deducting offering expenses payable by the Company.

On* March 3, 2026,the Company's Board of Directors approved the appointments of William W. Smith Jr. as Executive Chairman of the Board of Directors, Timothy C. Huffmyer as President and Chief Executive Officer, and Bethany M. Braund as Chief Financial Officer and Treasurer, each effective as of the close of business on March 31, 2026.*

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