Smith Micro Software, Inc.: Form 10-Q for the period ended Sep 30, 2025

In this document, the terms “Smith Micro,” “Company,” “we,” “us,” and “our” refer to Smith Micro Software, Inc. and, where appropriate, its subsidiaries.

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements regarding Smith Micro which include, but are not limited to, statements concerning customer concentration, projected revenues, market acceptance of products, the success and timing of new product introductions, the competitive factors affecting our business, our ability to raise additional capital, gross profit and income, our expenses, the protection of our intellectual property, and our ability to remain a going concern. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “estimates,” “should,” “may,” “will,” and variations of these words or similar expressions are intended to identify forward-looking statements. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, our actual results or performance could differ materially from those expressed or implied in any forward-looking statements as a result of various factors. Such factors include, but are not limited to, the following:

• our customer concentration, given that the majority of our sales currently depend on a few large client relationships;
• our ability to establish and maintain strategic relationships with our customers and mobile device manufacturers, their ability to attract customers, and their willingness to promote our products;
• our ability and/or customers’ ability to distribute our mobile software applications to their end users through third party mobile software application stores, which we do not control;
• our dependency upon effective operation with operating systems, devices, networks and standards that we do not control and on our continued relationships with mobile operating system providers, device manufacturers and mobile software application stores on commercially reasonable terms or at all;
• our ability to hire and retain key personnel;
• the possibility of security and privacy breaches in our systems and in the third-party software and/or systems that we use, damaging client relations and inhibiting our ability to grow;
• interruptions or delays in the services we provide from our data center hosting facilities that could harm our business;
• the existence of undetected software defects in our products and our failure to resolve detected defects in a timely manner;
• our ability to remain a going concern;
• our ability to raise additional capital and the risk of such capital not being available to us at commercially reasonable terms or at all;
• our ability to be profitable;
• changes in our operating income due to shifts in our sales mix and variability in our operating expenses;
• our current client concentration within the vertical wireless carrier market, and the potential impact to our business resulting from changes within this vertical market, or failure to penetrate new markets;
• rapid technological evolution and resulting changes in demand for our products from our key customers and their end users;
• intense competition in our industry and the core vertical markets in which we operate, and our ability to successfully compete;
• the risks inherent with international operations;
• the impact of evolving information security and data privacy laws on our business and industry;
• the impact of governmental regulations on our business and industry;
• our ability to protect our intellectual property and our ability to operate our business without infringing on the rights of others;
• the risk of being delisted from Nasdaq if we continue to fail to meet any of its applicable listing requirements;
• our ability to assimilate acquisitions without diverting management attention and impacting current operations;
• failure to realize the expected benefits of prior acquisitions;
• the availability of third-party intellectual property and licenses needed for our operations on commercially reasonable terms, or at all;
• the difficulty of predicting our quarterly revenues and operating results and the chance of such revenues and results falling below analyst or investor expectations, which could cause the price of our Common Stock to fall; and
• those additional factors which are listed under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 12, 2025 (the "2024 Form 10-K") under the caption “RISK FACTORS.”

The forward-looking statements contained in this Report are made on the basis of the views and assumptions of management regarding future events and business performance as of the date this Report is filed with the Securities and Exchange Commission (the “SEC”). In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. We do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date this Report is filed.

Overview

Smith Micro provides software solutions that simplify and enhance the mobile experience to some of the leading wireless service providers around the globe. From enabling the Digital Family Lifestyle™ to providing powerful voice messaging capabilities, we strive to enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer Internet of Things ("IoT") devices. Our portfolio includes family safety software solutions to support families in the digital age and visual voice messaging.

We continue to innovate and evolve our business to respond to industry trends and maximize opportunities in growing and evolving markets, such as digital lifestyle services and online safety, “Big Data” analytics, automotive telematics, and the consumer IoT marketplace. The key to our longevity, however, is not simply technological innovation, but our focus on understanding our customers’ needs and delivering value.

In the third quarter of 2025, our revenues decreased by 6% to $4.3 million compared to the third quarter of 2024, primarily driven by a $0.4 million decrease in our Family Safety product line, coupled with a nominal decrease in ViewSpot revenue, partially offset by an increase of $0.1 million in CommSuite revenues. The revenue decline primarily resulted from decreases associated with legacy Sprint Safe & Found revenue as subscribers migrate to the T-Mobile network. As a result of the decline in revenues, our gross profit during the third quarter of 2025 was $3.2 million, representing a decrease of $0.1 million as compared to the third quarter of the prior year. In connection with the preparation of our second quarter 2025 financial statements, we evaluated our goodwill and determined that the carrying value of our single reporting unit exceeded its fair value which resulted in a non-cash pretax impairment charge of $11.1 million for the quarter. On June 3, 2025, we sold our ViewSpot product for total consideration of $1.3 million, of which $1.0 million was paid on the closing date, with the remaining amounts were paid in two installments, the first of which was collected on July 1, 2025, and the final balance was collected on October 1, 2025. Our operating expenses decreased during the third quarter of 2025 compared to the third quarter of 2024 by approximately $2.1 million. This was primarily due to quarter-over-quarter reductions in sales and marketing and research and development expenses due to cost reduction initiatives undertaken during 2025. The net loss attributable to common stockholders for the third quarter of 2025 was $5.2 million, resulting in a net loss of $0.25 per basic and diluted share.

We believe that we still remain strategically positioned to offer our market-leading family safety platform to the majority of U.S. mobile subscribers, as we currently provide white-label Family Safety applications to two Tier 1 wireless carriers operating in the United States. Further, a Tier 1 carrier in Europe launched a new SafePath-based family safety solution in the fourth quarter of 2024 and began conducting robust marketing activities related to that solution during the first quarter of 2025. In addition, with the recent expansion of our SafePath product line, most notably with SafePath Kids and SafePath OS, we believe that we are well-positioned to grow our Family Safety revenues more broadly with these Tier 1 carriers as well as with other operators in our industry. Further, our development of SafePath 8 is completed, and we expect to launch the new features that it enables with our customers. We believe that we have an opportunity to increase the respective subscriber bases, and in turn, grow the revenues associated with these Tier 1 carriers.

In the third quarter we received approximately $1.1 million in gross proceeds in exchange for short-term notes and warrants. Additionally, in October we announced strategic cost reductions in our organization, primarily comprised of workforce reorganization, which we expect to result in cost savings of approximately $1.8 million per quarter as compared to the second quarter of 2025, or approximately $7.2 million reduction in costs for 2026, excluding payment of employee separation costs of which approximately $0.5 million is currently expected to be paid by the end of the second quarter of 2026. These efforts are part of our broader initiative to realign the Company's cost structure with long-term business goals, strengthen the financial foundation, and accelerate our path to profitability.

Refer to the section titled "Liquidity and Capital Resources" for discussion of material changes in cash, Note 4 of our Notes to the Consolidated Financial Statements for discussion regarding the changes related to Common Stock, Note 5 for discussion regarding changes related to the warrant liabilities and Note 7 for discussion regarding changes to goodwill.

Results of Operations

On April 3, 2024, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a one-for-eight (1:8) reverse stock split of the shares of the Company's Common Stock, par value $0.001 per share, with an effective time of 11:59 p.m., Eastern Time on April 10, 2024 (the "Reverse Stock Split"). At the effective time, every eight shares of our Common Stock, whether issued and outstanding or held by the Company as treasury stock were automatically combined and converted (without any further act) into one 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. See further information in Note 1. All shares and per share amounts in this Report have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

The table below sets forth certain statements of operations and comprehensive loss data expressed as a percentage of revenues for the three and nine months ended September 30, 2025 and 2024. Our historical results are not necessarily indicative of the operating results that may be expected in the future.

Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024

Revenues. Revenues were $4.3 million and $4.6 million for the three months ended September 30, 2025 and 2024, respectively, representing a decrease of $0.3 million, or 6%. This decrease was primarily related to declines associated with our Family Safety product line of $0.4 million, which was mostly driven by Sprint Safe & Found revenue declining as legacy Sprint subscribers migrated to the T-Mobile network, coupled with a nominal decline in ViewSpot revenue that was primarily due to a contract that concluded during 2024 and the sale of that product in June 2025, partially offset by an increase in CommSuite revenues of approximately $0.1 million.

Cost of revenues. Cost of revenues were $1.1 million and $1.3 million for the three months ended September 30, 2025 and 2024, respectively. This decrease of $0.2 million was primarily due to the period-over-period decline in revenue coupled with the impact of cost reduction efforts undertaken.

Gross profit. Gross profit was $3.2 million, or 73.9% of revenues, for the three months ended September 30, 2025, compared to $3.3 million, or 71.6% of revenues, for the three months ended September 30, 2024. The decrease of $0.1 million in gross profit was driven by the period-over-period decline in revenue volume.

Selling and marketing. Selling and marketing expenses were $1.5 million and $2.1 million for the three months ended September 30, 2025 and 2024, respectively. This decrease of $0.6 million was primarily due to decreases in personnel related costs due to cost reduction activities undertaken.

Research and development. Research and development expenses were $2.6 million and $3.6 million for the three months ended September 30, 2025 and 2024, respectively. This decrease of $1.0 million was primarily due to decreases in personnel related costs due to cost reduction activities undertaken.

General and administrative. General and administrative expenses were $2.3 million and $2.7 for each of the three months ended September 30, 2025 and 2024, respectively. This decrease of approximately $0.4million was primarily due to decreases in personnel related costs due to cost reduction activities undertaken.

Depreciation and amortization. Depreciation expense was $0.1 million for both the three months ended September 30, 2025 and 2024. Amortization expense was $1.3 million for the three months ended September 30, 2025 and 2024, respectively. Amortization expense is recognized based on the pattern of economic benefit expected to be generated from the use of the intangible assets.

Change in fair value of warrant liabilities. Change in fair value of warrant liabilities was nominal for the three months ended September 30, 2025 and 2024, respectively. Change in fair value of warrant liabilities was nominal and $0.2 million for the three months ended September 30, 2025 and 2024, respectively. The total decrease in income of $0.2 million resulted from valuation related impacts to the warrant liabilities in the respective periods.

Interest (expense) income, net. Interest expense, net was nominal for each of the three months ended September 30, 2025 and 2024.

Other (expense) income, net. Other expense, net was nominal for each of the three months ended September 30, 2025 and 2024.

Provision for income tax expense. Because of our cumulative loss position, the provision for income tax expense consists of state income taxes, foreign tax withholdings, and foreign income taxes for the three months ended September 30, 2025 and 2024. There were no material changes in the period-to-period comparison.

Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024

Revenues. Revenues were $13.4 million and $15.6 million for the nine months ended September 30, 2025 and 2024, respectively, representing a decrease of $2.2 million, or 14%. This decrease was primarily related to declines associated with our Family Safety product line of $1.7 million, which was mostly driven by Sprint Safe & Found revenue declining as legacy Sprint subscribers migrated to the T-Mobile network, coupled with a decline in ViewSpot revenue of $1.0 million partially offset by an increase in CommSuite revenues of $0.5 million.

Cost of revenues. Cost of revenues were $3.6 million and $4.9 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease of $1.3 million was primarily due to the period-over-period decline in revenue coupled with the impact of cost reduction efforts undertaken.

Gross profit. Gross profit was $9.8 million, or 73.4% of revenues, for the nine months ended September 30, 2025, compared to $10.7 million, or 68.5% of revenues, for the nine months ended September 30, 2024. The decrease of approximately $0.8 million in gross profit was driven by the period-over-period decline in revenue volume.

Selling and marketing. Selling and marketing expenses were $4.8 million and $7.2 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease of approximately $2.4 million was primarily due to decreases in personnel related costs due primarily to cost reduction activities undertaken by the Company.

Research and development. Research and development expenses were $8.2 million and $11.3 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease of approximately $3.1 million was primarily due to decreases in personnel related costs due to cost reduction activities undertaken by the Company.

General and administrative. General and administrative expenses were $7.7 million and $8.2 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease of approximately $0.6 million was primarily related to declines in personnel related costs of $0.2 million, stock compensation costs of approximately $0.2 million and other corporate expense reductions.

Depreciation and amortization. Depreciation expense was $0.2 million and $0.3 million for the nine months ended September 30, 2025 and 2024, respectively. Amortization expense was $3.8 million and $4.6 million for the nine months ended September 30, 2025 and 2024, respectively. Amortization expense is recognized based on the pattern of economic benefit expected to be generated from the use of the intangible assets, and as such it decreased by approximately $0.8 million period-over-period.

Gain on Sale of ViewSpot. On June 3, 2025, we sold our 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 in two installments, the first of which was collected on July 1, 2025, and the final balance was collected on October 1, 2025. There were no such amounts for the nine months ended September 30, 2024.

Goodwill impairment. A goodwill impairment charge of $11.1 million was recorded for the nine months ended September 30, 2025 due to an analysis whereby we concluded that the carrying value of our single reporting unit exceeded its fair value. A goodwill impairment charge was recorded in the amount of $24.0 million for the nine months ended September 30, 2024.

Change in fair value of warrant liabilities. Change in fair value of warrant liabilities was $0.1 million and $0.4 million for the nine months ended September 30, 2025 and 2024, respectively. The total decrease in income of $0.3 million resulted from valuation related impacts to the warrant liabilities in the respective periods.

Interest (expense) income, net. Interest expense, net was $0.1 million for the nine months ended September 30, 2025 and interest income, net was $0.1 million for the nine months ended September 30, 2024.The period-over-period change is related to additional interest incurred on short-term obligations.

Other (expense) income, net. Other expense, net was $0.1 million for the nine months ended September 30, 2025 and other income, net was $0.1 million for the nine months ended September 30, 2024. The period over period change was primarily related to the licensing of several of our patents in February 2024.

Provision for income tax expense. Because of our cumulative loss position, the provision for income tax expense consists of state income taxes, foreign tax withholdings, and foreign income taxes for the nine months ended September 30, 2025 and 2024. There were no material changes in the period-to-period comparison.

Liquidity and Capital Resources

The Company’s principal sources of liquidity are its existing cash and cash equivalents, and cash generated by operations. As of September 30, 2025, the Company's cash and cash equivalents were approximately $1.4 million. Since December 31, 2024, we have utilized cash collections, including the proceeds from the sale of our ViewSpot product and cash on hand to cover routine working capital requirements. On July 18, 2025, we closed on a registered direct offering of Common Stock and a concurrent placement of warrants, which provided gross proceeds to the Company of approximately $1.5 million, prior to offering fees and transaction expenses. Additionally, on September 11, 2025 and September 29, 2025, we entered into Notes Purchase Agreements, as more fully described in Note 5, which provided gross cash proceeds of approximately $1.2 million by September 30, 2025.

The timing of our anticipated revenue growth relative to the costs of operating, maintaining, innovating and evolving our business to respond to industry trends and maximize growth opportunities may result in cash and cash equivalents being insufficient to fund operations at current levels over the next twelve months and beyond.

This adverse impact on liquidity does not trigger a violation of any covenants in our material agreements, particularly as the September 11, 2025 and September 29, 2025 Notes Purchase Agreements do not contain any material financial covenants. The availability of sufficient funds will depend to an extent on the existence and timing of subscriber growth and the related cash generation thereof, and/or the ability to obtain the necessary capital to meet our obligations and fund our working capital requirements to maintain normal business operations. To meet future cash needs, the Company may determine to take additional actions, as noted in the Risk Factor appearing in our 2024 Form 10-K under the heading, "If we are unable to meet our obligations as they become due over the next twelve months, the Company may not be able to continue as a going concern." There can be no assurance that any such potential actions will be available or will be available on satisfactory terms. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. As a result of these uncertainties, and notwithstanding management's plans and efforts to date, we have been unable to alleviate substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued.

Cash Flows

Changes in cash and cash equivalents are as follows:

(in thousands)

Operating activities

Net cash used in operating activities was $5.0 million for the nine months ended September 30, 2025. The primary uses of operating cash were a net loss of $24.8 million less non-cash expenses totaling $18.0 million, including a goodwill impairment charge of $11.1 million, and depreciation and amortization of $4.0 million and stock compensation expense of $2.8 million, coupled with a decrease in accounts payable and accrued liabilities of $0.3 million, primarily due to the timing and change in payments for accounts payable and payroll, partially offset by a decrease in accounts receivable of $3.0 million.

Net cash used in operating activities was $9.4 million for the nine months ended September 30, 2024. The primary uses of operating cash were a net loss of $44.3 million less non-cash expenses totaling $31.7 million, driven by a goodwill impairment charge of $24.0 million, depreciation and amortization of $4.9 million and stock compensation expense of $3.5 million, and a decrease in accounts payable and accrued liabilities of $1.4 million, partially offset by a decrease in accounts receivable of $4.5 million.

Investing activities

Net cash provided by investing activities of $1.2 million for nine months ended September 30, 2025 was primarily due to the net proceeds from the sale of ViewSpot in June 2025, offset by capital expenditures. Net cash provided by investing activities of $0.2 million for the nine months ended September 30, 2024 was primarily attributable to the net proceeds from licensing several of our patents in February 2024.

Financing activities

Net cash provided by financing activities of $2.4 million for the nine months ended September 30, 2025 was attributable to the net cash proceeds to the Company of $1.0 million from the July 2025 Registered Direct and Private Placement offering, and the September 2025 gross proceeds of $1.2 million from the issuance of notes and warrants, and the timing of borrowings of $0.9 million less repayments of $0.8 million from short-term insurance premium financing arrangements.

Net cash provided by financing activities of $3.6 million for the nine months ended September 30, 2024 was primarily attributable to the net cash proceeds of $3.4 million from the Registered Direct Offering and Private Placement conducted in May 2024, and borrowings of $1.0 million less repayments of $0.8 million from short-term insurance premium financing arrangements.

Recent Accounting Guidance

See Note 2 of our Notes to the Consolidated Financial Statements for information regarding our recent accounting guidance.

Critical Accounting Estimates

Our discussion and analysis of results of operations, financial condition, and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an ongoing basis, we review our estimates to ensure that they appropriately reflect changes in our business or new information as it becomes available. See Note 1 of our Notes to the Consolidated Financial Statements in our 2024 Form 10-K for information regarding our critical accounting estimates. There have been no material changes to the Company's critical accounting estimates since the 2024 Form 10-K.

Evaluation of disclosure controls and procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of September 30, 2025. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have determined that as of September 30, 2025, our disclosure controls and procedures were effective to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s responsibility for financial statements

Our management is responsible for the integrity and objectivity of all information presented in this Report. The consolidated financial statements were prepared in conformity with U.S. GAAP and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations for the periods and as of the dates stated therein.

The Audit Committee of the Company’s Board of Directors, which is composed solely of independent directors, meets regularly with our independent registered public accounting firm, SingerLewak LLP, and representatives of management to review accounting, financial reporting, internal control, and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors have free access to the Audit Committee.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information included in this Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2024 Form 10-K, and the factors identified at the beginning of Part I, Item 2 of this Report, under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which could materially affect our business, financial condition, cash flows, or results of operations. The risks described in the 2024 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently considers immaterial also may materially adversely affect its business, financial condition, and/or operating results. Other than as set forth below in this Item 1, there have been no material changes to the risk factors included in our 2024 Form 10-K.

If we continue to fail to meet the requirements for continued listing on the Nasdaq Capital Market, our common stock could be delisted from trading on Nasdaq, which would likely reduce the liquidity of our common stock and could cause our trading price to decline.

Our common stock is currently listed for quotation on the Nasdaq Capital Market. We are required to meet specified financial requirements in order to maintain our listing on Nasdaq. We could lose our listing on Nasdaq if the closing bid price of our common stock does not increase or if in the future, we fail to meet any of the other Nasdaq listing requirements. The loss of our Nasdaq listing would in all likelihood make our common stock significantly less liquid and adversely affect its value.

As initially disclosed on our Current Report on Form 8-K filed with the SEC on June 24, 2025, we received a letter from the Listing Qualifications Department, or the Staff, of The Nasdaq Stock Market LLC, or Nasdaq, on June 23, 2025, indicating that as result of the closing bid price of the Company’s common stock for the last 30 consecutive business days having been below the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) the Company was not in compliance with the Minimum Bid Price Requirement (the “Minimum Bid Price Notice”). The Minimum Bid Price Notice has no immediate effect on the continued listing status of the Company’s common stock on The Nasdaq Capital Market, and, therefore, the Company’s listing remains fully effective.

Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has been provided an initial compliance period of 180 calendar days, or until December 22, 2025 to regain compliance with the Minimum Bid Price Requirement. If at any time before December 22, 2025, the closing bid price of the common stock is at least $1.00 per share for a minimum of ten consecutive business days, unless Nasdaq exercises its discretion to extend this ten-day period, Nasdaq will provide written confirmation stating that the Company has achieved compliance with the Minimum Bid Price Requirement. If the Company’s common stock does not regain compliance with the Minimum Bid Price Requirement during this initial 180-day compliance period, the Company may be eligible for an additional compliance period of 180 calendar days provided that (i) the Company satisfies Nasdaq’s continued listing requirement for market value of publicly held shares and all other initial listing standards, other than the Minimum Bid Price Requirement; and (ii) the Company provides written notice to Nasdaq of its intention to cure the deficiency during the second grace period.

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. If among such options the Company elects to pursue a reverse stock split to regain compliance with the Minimum Bid Price requirement, there can be no assurance that it would accomplish this objective for any meaningful period of time, or at all, or that it would result in any permanent or sustained increase in the market price of our Common Stock; and if such an event would be viewed unfavorably by the market, it could have the effect of reducing our market capitalization. Furthermore, pursuant to a recent modification to Nasdaq’s listing standards, if a company effects a reverse stock split and within one year thereafter becomes non-compliant with the Minimum Bid Price Requirement, it would immediately receive a notification letter from the Nasdaq Listing Qualifications Department commencing delisting proceedings, with no opportunity for a compliance period.

There can be no 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. In the event of a delisting from the Nasdaq Capital Market, our common stock would likely be traded in the over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions in securities traded on the securities exchanges, such as the Nasdaq Capital Market, or, together, Exchange-listed stocks. Many OTC stocks trade less frequently and in smaller volumes than Exchange-listed stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the prices of OTC stocks are often more volatile than Exchange-listed stocks. Additionally, institutional investors are usually prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.