"I'm sorry," you say, "I just thought maybe I should have recognized you or something so..."
"Uh, no," she says, "it's okay." She offers your a small smile and continues to walk towards her friend. As the male character in this story, you can interpret her smile in one of two ways. You can either assume that she was made a little uncomfortable by the encounter and choose to leave her alone, or you can assume that, because you're such a stunning and charming young man, that obviously means she wants to keep talking.