Your menu structure is not valid. The sub UL elements should be enclosed in the parent LI’s (this isn’t the case for “item1” in your sample). It should look like this:
<ul id="main-menu" class="sm sm-vertical sm-clean sm-clean-vertical">
<li><a href="#">item 1</a>
<ul>
<li><a href="#">sub item 1</a></li>
<li><a href="#">sub item 2</a></li>
</ul>
</li>
<li><a href="#">item 2</a></li>
<li><a href="#">item 3</a></li>
<li><a href="#">item 4</a></li>
</ul>
Cheers!
