SMITH MICRO SOFTWARE, INC. Stock Compensation Disclosure
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's 2015 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 the 2015 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 a 2005 Stock Option/Stock Issuance Plan (the "2005 Plan"), which was replaced by the 2015 Plan. As of December 31, 2025, no options issued under the 2005 Plan remain outstanding, and no new grants have been made under the 2005 Plan.
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 is not 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 may be exercisable immediately or in installments, but generally vest over a -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 may be exercised within a period of 90 days following termination. In general, stock options expire 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 from to 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 Topic No. 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):
| | Year Ended December 31, | | |||||
| | 2025 | | | 2024 | | ||
Sales and marketing | | $ | 940 | | | $ | 1,207 | |
Research and development | | | 731 | | | | 1,076 | |
General and administrative | | | 1,938 | | | | 2,220 | |
Total non-cash stock compensation expense | | $ | 3,609 | | | $ | 4,503 | |
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
In 2025, there were 25,000 stock option awards granted with a vesting period of year and a contractual term of years. There were no stock options awards granted in 2024. 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:
|
| December 31, 2025 |
| |
Weighted average grant date fair value of stock options |
| $ | 0.68 |
|
Assumptions |
|
|
| |
Risk-free interest rate (weighted average) |
|
| 4.1 | % |
Expected dividend yield |
|
| — |
|
Weighted average expected life (years) |
|
| 6.2 |
|
Volatility (weighted average) |
|
| 143.8 | % |
Forfeiture rate |
|
| 0.0 | % |
A summary of the Company’s stock options outstanding under the OEIP and 2005 Plan as of December 31, 2025 and 2024 and the related activity during 2025 is as follows (in thousands except per share amounts):
| | Shares | | | Weighted Avg. Exercise Price | | | Wtd. Avg. Remaining Contractual Life (Yrs) | | | Aggregate Intrinsic Value | | ||||
Outstanding as of December 31, 2024 | | | 5 | | | $ | 27.57 | | | | 4.1 | | | $ | — | |
Granted | | | 25 | | | $ | 1.26 | | | | — | | | $ | — | |
Outstanding as of December 31, 2025 | | | 30 | | | $ | 5.96 | | | | 8.0 | | | $ | — | |
Vested and expected to vest at December 31, 2025 | | | 30 | | | $ | 5.96 | | | | 8.0 | | | $ | — | |
Exercisable as of December 31, 2025 | | | 5 | | | $ | 27.68 | | | | 2.9 | | | $ | — | |
Employee Stock Purchase Plan
The Company has a shareholder-approved employee stock purchase plan (“ESPP”), under which substantially all employees may purchase 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 of six-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 may be purchased under the ESPP. There were no 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:
Offering Period Ended | | March 31, 2025 | | | September 30, 2024 | | | March 31, 2024 | | |||
Shares purchased for offering period | | | 3,000 | | | | 3,942 | | | | 844 | |
Fair value per share as of the beginning of the offering period | | $ | — | | | $ | 1.31 | | | $ | 0.47 | |
Assumptions | | | | | | | | | | | | |
Risk-free interest rate (average) | | | 4.6 | % | | | 5.4 | % | | | 5.5 | % |
Expected dividend yield | | | — | | | | — | | | | — | |
Weighted average expected life (years) | | | 0.5 | | | | 0.5 | | | | 0.5 | |
Volatility (average) | | | 159.0 | % | | | 111.1 | % | | | 66.3 | % |
Restricted Stock Awards
A summary of the Company’s restricted stock awards outstanding under the OEIP as of December 31, 2025 and 2024, and the activity during years ended therein, are as follows (in thousands, except weighted average grant date fair value):
|
| Shares |
|
| Weighted average grant date fair value |
| ||
Unvested at December 31, 2023 |
|
| 256 |
|
| $ | 20.88 |
|
Granted |
|
| 695 |
|
| $ | 3.77 |
|
Vested |
|
| (515 | ) |
| $ | 8.81 |
|
Canceled and forfeited |
|
| (17 | ) |
| $ | 7.75 |
|
Unvested at December 31, 2024 |
|
| 419 |
|
| $ | 7.86 |
|
Granted |
|
| 3,380 |
|
| $ | 0.97 |
|
Vested |
|
| (2,154 | ) |
| $ | 1.96 |
|
Canceled and forfeited |
|
| (153 | ) |
| $ | 1.02 |
|
Unvested at December 31, 2025 |
|
| 1,492 |
|
| $ | 1.47 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.