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Smith Micro Reports Year-End 2002 Results, Sets sights on a Positive 2003

Feb 13, 2003
Operating Results Show Consistent Quarterly Improvement for the Year

Aliso Viejo, CA -- Smith Micro Software, Inc. (NASDAQ: SMSI), a developer and marketer of a wide range of software and service solutions for the wireless and Internet markets, today reported its year-end 2002 results.

The company reported net revenues for the quarter ended December 31, 2002, of $1.8 million, compared to $3.2 million reported in the fourth quarter of 2001. The company reported net loss of $286,000 in the fourth quarter of 2002 resulting in a net loss of $.02 per basic and diluted share, compared to a net income of $116,000 in the fourth quarter of 2001 or $.01 per basic and diluted share. For the year ended December 31, 2002, the company reported net revenues of $7.1 million, compared to $9.5 million for the year 2001, a net loss of $.04 per basic and diluted share in 2002, compared to a net loss of $.38 per basic and diluted share in 2001. The net loss for the year ended December 31, 2002 includes a $1.1 million income tax benefit.

"Over the past year our effort in the wireless sector showed steady improvement as we added new customers and expanded existing relationships. We are very proud to be able to call both the number one and number two largest domestic wireless carriers, Verizon and Cingular, as customers," said William W. Smith, Jr., President and Chief Executive Officer. "We see an upside to our wireless business, especially in new technologies such as 1XRTT, GPRS and Wi-Fi. Through our diligent efforts on managing our costs and accounts receivable, we have maintained a solid balance sheet. I believe that Smith Micro is on track to return to a positive growth path after the first quarter of 2003," Mr. Smith continued.

Investor Conference Call

Smith Micro will hold an investor conference call to discuss the company's results at 4:30 p.m., Eastern Time later today. Investors may access the conference call over the Internet via the company's website www.smithmicro.com or PRNewswire/Thonpson.

About Smith Micro Software

Smith Micro Software, Inc., headquartered in Aliso Viejo, CA, is a developer and marketer of wireless communication and utility software products. The company designs integrated, cross platform, easy-to-use software for personal computing and business solutions around the world. With a focus on the Wireless, and Broadband technologies, the Internet and the company's products and services enable wireless communications, eCommerce, eBusiness, Internet communications (voice-over-IP), video conferencing, and network fax, along with traditional computer telephony. Smith Micro's complete line of products is available through original equipment manufacturers (OEMs), direct sales, retail stores, value-added resellers (VARs). Smith Micro's common stock trades on The Nasdaq Stock Market® under the symbol SMSI. For more information, contact Smith Micro at (949) 362-5800.

This release may contain forward-looking statements that involve risks and uncertainties, including without limitation risks and uncertainties relating to the company's financial prospects and projections, the company's plans for returning to sustained profitability and the company's ability to increase its business in the Wireless and Broadband segments. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are new and changing technologies, customer acceptance of those technologies, fluctuations or cancellations in orders from distribution customers, new and continuing adverse economic conditions, and the company's ability to compete effectively with other software companies. These and other factors could cause actual results to differ materially from those presented in any forward-looking statement and are discussed in the company's filings with the Securities and Exchange Commission including its recent filings on Forms 10-K and 10-Q.

Smith Micro and the Smith Micro logo are trademarks or registered trademarks of Smith Micro Software, Inc. All other trademarks and product names are the property of their respective companies.

Financial Schedules follow

Smith Micro Software, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (see note below)
(in thousands, except per share amounts)

 Three Months Ended
December 31
(unaudited)
 20022001
Net Revenues:
   Products1,5822,661
   Services193506

Total Net Revenues1,7753,167
 
Cost of Revenues:
   Products309720
   Services122418

Total Cost of Revenues4311,138

Gross Margin1,3442,029
 
Operating Expenses:
   Sales & Marketing427743
   Research & Development599522
   General & Administrative603660

Total Operating Expenses1,6291,925

Operating (Loss) Income(285)104
Other (Expense) Income, net(1)10

(Loss) Income Before Income Tax(286)114
Income Tax (Benefit) Expense-----(2)

Net (Loss) Income$(286)$116

Net (Loss) Income per share, basic and diluted$(0.02)$0.01

Weighted average shares outstanding, basic16,23516,232
Weighted average shares outstanding, diluted16,23516,266

Notes: The adoption of Statement of Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, requires that Smith Micro no longer amortize goodwill. For comparison purposes, goodwill amortization expense was $114,000 in the fourth quarter of 2001.

Certain reclassifications have been made to prior year's balances to conform to the current period's presentation, which includes the adoption of Emerging Issues Task Force (EITF) 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). The result of this adoption was a decrease in revenue with a corresponding decrease in selling and marketing expense of $747,000 for the three months ended December 31, 2001. There was no significant impact in the comparable 2002 quarter.

Smith Micro Software, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (see note below)
(in thousands, except per share amounts)

 Twelve Months Ended
December 31
(unaudited)
 20022001
Net Revenues:
   Products6,0296,945
   Services1,1022,544

Total Net Revenues7,1319,489
 
Cost of Revenues:
   Products1,4201,880
   Services7822,048

Total Cost of Revenues2,2023,928

Gross Margin4,9295,561
 
Operating Expenses:
   Sales & Marketing2,1754,571
   Research & Development2,1622,997
   General & Administrative2,3163,734
   Restructuring Costs 380

Total Operating Expenses6,65311,682

Operating Loss(1,724)(6,121)
Other (Expense) Income, net(26)86

Loss Before Income Tax(1,750)(6,035)
Income Tax (Benefit) Expense(1,062)90

Net Loss$(688)$(6,125)

Net Loss per share, basic and diluted$(0.04)$(0.38)

Weighted average shares outstanding,
basic and diluted
16,23516,232

Note: The adoption of Statement of Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, requires that Smith Micro no longer amortize goodwill. For comparison purposes, goodwill amortization expense was $522,000 in the twelve months ended December 31, 2001.

Certain reclassifications have been made to prior year's balances to conform to the current period's presentation, which includes the adoption of Emerging Issues Task Force (EITF) 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). The result of this adoption was a decrease in revenue with a corresponding decrease in selling and marketing expense of $1.3 million for the twelve months ended December 31, 2001. The impact for the current year is lower revenue and lower selling and marketing expense of $223,000.

Smith Micro Software, Inc.
Consolidated Balance Sheets
(in thousands)

 December 31,
2002
(unaudited)
December 31,
2001
ASSETS
Current Assets:
Cash & Cash Equivalents$3,627$3,226
Accounts Receivable, Net6332,724
Inventory, Net45295
Prepaids & Other Assets263265

   Total Current Assets4,5686,510
Equipment and Improvements, net220482
Other Assets3942
Intangible Assets, Net224508
Goodwill1,7151,715

TOTAL ASSETS$6,766$9,257

 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable$445$1,160
Accrued Liabilities7091,795

   Total Current Liabilities1,1542,955
 
Common Stock1616
Additional Paid In Capital24,78724,789
Accumulated Deficit(19,191)(18,503)

   Total Stockholders' Equity5,6126,302

TOTAL LIABILITIES AND EQUITY$6,766$9,257

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