UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37862

PHUNWARE, INC.

(Exact name of registrant as specified in its charter)


Delaware						30-1205798
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1002 West Avenue, Austin, Texas

78701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 512-693-4199

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol(s)

Name of each exchange on which registered:

Common Stock, par value $0.0001 per share

PHUN

The NASDAQ Capital Market

Warrants to purchase one share of Common Stock

PHUNW

The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~May 10, ~~2022, 98,382,554~~2023, 104,658,145 shares of common stock, par value $0.0001 per share, were ~~issued and~~ outstanding.

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	65
	Notes to the Unaudited Condensed Consolidated Financial Statements	86
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2420
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3631
Item 4.	Controls and Procedures	3732

PART II	OTHER INFORMATION	3833
Item 1.	Legal Proceedings	3833
Item 1A.	Risk Factors	3833
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834
Item 3.	Defaults Upon Senior Securities	3834
Item 4.	Mine Safety Disclosures	3834
Item 5.	Other Information	3934
Item 6.	Exhibits	4035

	Signatures	4136

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report (the “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Table of Contents

Phunware, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share information)


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash	Cash	$	2,705	$	23,137	Cash	$	694	$	1,955
Accounts receivable, net of allowance for doubtful accounts of $0 and $10 at June 30, 2022 and December 31, 2021, respectively		803		967
Accounts receivable, net of allowance for doubtful accounts of $198 at March 31, 2023 and December 31, 2022, respectively						Accounts receivable, net of allowance for doubtful accounts of $198 at March 31, 2023 and December 31, 2022, respectively	1,200		958
Inventory	Inventory	3,528		2,636		Inventory	2,671		2,780
Digital assets, net		12,592		32,581
Digital assets						Digital assets	2,530		10,137
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,188		686		Prepaid expenses and other current assets	807		1,033
Total current assets	Total current assets	20,816		60,007		Total current assets	7,902		16,863
Property and equipment, net	Property and equipment, net	145		—		Property and equipment, net	206		221
Goodwill	Goodwill	33,142		33,260		Goodwill	31,136		31,113
Intangible assets, net	Intangible assets, net	2,858		3,213		Intangible assets, net	2,357		2,524
Deferred tax asset		1,278		1,278

Right-of-use asset	Right-of-use asset	2,595		1,260		Right-of-use asset	3,489		3,712
Other assets	Other assets	402		276		Other assets	367		402
Total assets	Total assets	$	61,236	$	99,294	Total assets	$	45,457	$	54,835
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	7,510	$	6,589	Accounts payable	$	7,765	$	7,699
Accrued expenses	Accrued expenses	6,953		9,621		Accrued expenses	2,506		2,895

Lease liability	Lease liability	614		399		Lease liability	961		954
Deferred revenue	Deferred revenue	1,715		3,973		Deferred revenue	1,512		2,904
PhunCoin deposits	PhunCoin deposits	1,203		1,202		PhunCoin deposits	1,202		1,202

Current maturities of long-term debt, net	Current maturities of long-term debt, net	2,031		4,904		Current maturities of long-term debt, net	5,687		9,667
Warrant liability	Warrant liability	1,136		3,605		Warrant liability	3		256
Total current liabilities	Total current liabilities	21,162		30,293		Total current liabilities	19,636		25,577

Deferred tax liability		1,278		1,278

Deferred revenue	Deferred revenue	859		1,299		Deferred revenue	1,072		1,274
Lease liability	Lease liability	2,244		1,147		Lease liability	2,848		3,103

Total liabilities	Total liabilities	25,543		34,017		Total liabilities	23,556		29,954
Commitments and contingencies (Note 8)	Commitments and contingencies (Note 8)	0		0		Commitments and contingencies (Note 8)
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at June 30, 2022 and December 31, 2021; 98,137,070 and 96,751,610 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		10		10
Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 104,469,310 shares issued and 104,007,810 shares outstanding as of March 31, 2023 and 103,153,337 shares issued and outstanding as of December 31, 2022, respectively						Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 104,469,310 shares issued and 104,007,810 shares outstanding as of March 31, 2023 and 103,153,337 shares issued and outstanding as of December 31, 2022, respectively	10		10
Treasury stock at cost; 461,500 and 0 shares at March 31, 2023 and December 31, 2022, respectively						Treasury stock at cost; 461,500 and 0 shares at March 31, 2023 and December 31, 2022, respectively	(475)		—
Additional paid-in capital	Additional paid-in capital	267,465		264,944		Additional paid-in capital	277,303		275,562
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(469)		(352)		Accumulated other comprehensive loss	(449)		(472)
Accumulated deficit	Accumulated deficit	(231,313)		(199,325)		Accumulated deficit	(254,488)		(250,219)
Total stockholders’ equity	Total stockholders’ equity	35,693		65,277		Total stockholders’ equity	21,901		24,881
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	61,236	$	99,294	Total liabilities and stockholders’ equity	$	45,457	$	54,835

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Phunware, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share information)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net revenues	Net revenues	$	5,485	$	1,436	$	12,263	$	3,082	Net revenues	$	4,747	$	6,778
Cost of revenues	Cost of revenues	3,965		1,124		8,972		1,816		Cost of revenues	4,386		5,007
Gross profit	Gross profit	1,520		312		3,291		1,266		Gross profit	361		1,771

Operating expenses:	Operating expenses:									Operating expenses:
Sales and marketing	Sales and marketing	1,928		639		3,413		1,195		Sales and marketing	1,128		1,485
General and administrative	General and administrative	5,251		3,021		9,556		5,779		General and administrative	4,712		4,305
Research and development	Research and development	1,876		846		2,879		1,898		Research and development	1,772		1,003

Total operating expenses	Total operating expenses	9,055		4,506		15,848		8,872		Total operating expenses	7,612		6,793
Operating loss	Operating loss	(7,535)		(4,194)		(12,557)		(7,606)		Operating loss	(7,251)		(5,022)

Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(273)		(1,845)		(654)		(4,064)		Interest expense	(537)		(381)
Loss on extinguishment of debt		—		(2,184)		—		(7,952)

Impairment of digital assets	Impairment of digital assets	(12,158)		(776)		(21,511)		(776)		Impairment of digital assets	(50)		(9,353)
Gain on sale of digital assets										Gain on sale of digital assets	3,214		26
Fair value adjustment of warrant liability	Fair value adjustment of warrant liability	2,682		1,180		2,469		(1,649)		Fair value adjustment of warrant liability	253		(213)

Other income (expense), net		213		43		265		(36)
Total other expense		(9,536)		(3,582)		(19,431)		(14,477)
Other income, net										Other income, net	102		26
Total other income (expense)										Total other income (expense)	2,982		(9,895)
Loss before taxes	Loss before taxes	(17,071)		(7,776)		(31,988)		(22,083)		Loss before taxes	(4,269)		(14,917)
Income tax expense	Income tax expense	—		—		—		—		Income tax expense	—		—
Net loss	Net loss	(17,071)		(7,776)		(31,988)		(22,083)		Net loss	(4,269)		(14,917)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Cumulative translation adjustment	Cumulative translation adjustment	(85)		5		(117)		15		Cumulative translation adjustment	23		(32)
Comprehensive loss	Comprehensive loss	$	(17,156)	$	(7,771)	$	(32,105)	$	(22,068)	Comprehensive loss	$	(4,246)	$	(14,949)

Net loss per share, basic and diluted		$	(0.17)	$	(0.11)	$	(0.33)	$	(0.32)
Loss per share, basic and diluted										Loss per share, basic and diluted	$	(0.04)	$	(0.15)

Weighted-average common shares used to compute net loss per share, basic and diluted		97,742		71,620		97,293		68,103
Weighted-average common shares used to compute loss per share, basic and diluted										Weighted-average common shares used to compute loss per share, basic and diluted	103,169		96,844

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Phunware, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

Common Stock Additional
Paid-in
Capital Accumulated
Deficit Other
Comprehensive
Loss Total Stockholders’
Equity
Shares Amount
Balance - March 31, 2022 97,251 $ 10 $ 266,606 $ (214,242) $ (384) $ 51,990
Release of restricted stock 790 — — — — —
Issuance of common stock under the 2018 employee stock purchase plan 96 — 116 — — 116
Stock-based compensation expense — — 743 — — 743
Cumulative translation adjustment — — — — (85) (85)
Net income — — — (17,071) — (17,071)
Balance - June 30, 2022 98,137 $ 10 $ 267,465 $ (231,313) $ (469) $ 35,693
Balance - December 31, 2021 96,752 $ 10 $ 264,944 $ (199,325) $ (352) $ 65,277
Exercise of stock options, net of vesting of restricted shares 23 — 16 — — 16
Release of restricted stock 882 — — — — —
Issuance of common stock under the 2018 employee stock purchase plan 96 — 116 — — 116
Issuance of common stock in connection with acquisition of Lyte Technology, Inc. 384 — 1,125 — — 1,125
Stock-based compensation expense — — 1,264 — — 1,264
Cumulative translation adjustment — — — — (117) (117)
Net loss — — — (31,988) — (31,988)
Balance - June 30, 2022 98,137 $ 10 $ 267,465 $ (231,313) $ (469) $ 35,693


	Common Stock			Treasury stock			Additional Paid-in Capital		Accumulated Deficit		Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount









Balance - December 31, 2022	103,153	$	10	—	$	—	$	275,562	$	(250,219)	$	(472)	$	24,881
Exercise of stock options	95	—		—	—		58		—		—		58
Release of restricted stock	849	—		—	—		—		—		—		—
Issuance of restricted stock for earned bonus	373	—		—	—		347		—		—		347
Stock-based compensation expense	—	—		—	—		1,336		—		—		1,336
Cumulative translation adjustment	—	—		—	—		—		—		23		23
Treasury stock repurchase	—	—		(462)	(475)		—		—		—		(475)
Net loss	—	—		—	—		—		(4,269)		—		(4,269)
Balance - March 31, 2023	104,470	$	10	(462)	$	(475)	$	277,303	$	(254,488)	$	(449)	$	21,901

~~Table of Contents~~


		Common Stock			Additional Paid-in Capital				Accumulated Deficit			Other Comprehensive Loss				Total Stockholders’ Equity (Deficit)				Common Stock					Additional Paid-in Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
		Shares	Amount								Shares								Amount
Balance - March 31, 2021		71,204	$	7			$	175,046						$	(160,110)			$	(328)		$	14,615
Balance - December 31, 2021																			Balance - December 31, 2021	96,752			$	10		$	264,944		$	(199,325)		$	(352)		$	65,277
Exercise of stock options, net of vesting of restricted shares	Exercise of stock options, net of vesting of restricted shares	11	—		5				—			—				5			Exercise of stock options, net of vesting of restricted shares	23			—		16			—			—			16
Release of restricted stock	Release of restricted stock	829	—		—				—			—				—			Release of restricted stock	92			—		—			—			—			—
Sales of common stock, net of issuance cost		692	—		832				—			—				832
Issuance of common stock in connection with acquisition of Lyte Technology, Inc.																			Issuance of common stock in connection with acquisition of Lyte Technology, Inc.	384			—		1,125			—			—			1,125
Stock-based compensation expense	Stock-based compensation expense	—	—		1,371				—			—				1,371			Stock-based compensation expense	—			—		521			—			—			521
Cumulative translation adjustment	Cumulative translation adjustment	—	—		—				—			5				5			Cumulative translation adjustment	—			—		—			—			(32)			(32)
Net loss	Net loss	—	—		—				(7,776)			—				(7,776)			Net loss	—			—		—			(14,917)			—			(14,917)
Balance - June 30, 2021		72,736	$	7	$	177,254			$	(167,886)		$	(323)			$	9,052

Balance - December 31, 2020		56,371	$	6	$	144,156			$	(145,803)		$	(338)			$	(1,979)
Exercise of stock options, net of vesting of restricted shares		131	—		70				—			—				70
Release of restricted stock		1,012	—		—				—			—				—
Issuance of common stock for payment of board of director fees		99	—		66				—			—				66
Sales of common stock, net of issuance costs		15,123	1		30,536				—			—				30,537
Stock-based compensation expense		—	—		2,426				—			—				2,426
Cumulative translation adjustment		—	—		—				—			15				15
Net loss		—	—		—				(22,083)			—				(22,083)
Balance - June 30, 2021		72,736	$	7	$	177,254			$	(167,886)		$	(323)			$	9,052
Balance - March 31, 2022																			Balance - March 31, 2022	97,251			$	10	$	266,606		$	(214,242)		$	(384)		$	51,990

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Phunware, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating activities	Operating activities					Operating activities
Net loss	Net loss	$	(31,988)	$	(22,083)	Net loss	$	(4,269)	$	(14,917)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and deferred financing costs	Amortization of debt discount and deferred financing costs	259		2,770		Amortization of debt discount and deferred financing costs	289		155
Loss on change in fair value of warrant liability		(2,469)		1,649
Loss on extinguishment of debt		—		7,952
(Gain) loss on change in fair value of warrant liability						(Gain) loss on change in fair value of warrant liability	(253)		213
Gain on sale of digital assets						Gain on sale of digital assets	(3,214)		(26)
Impairment of digital assets	Impairment of digital assets	21,511		776		Impairment of digital assets	50		9,353

Stock-based compensation	Stock-based compensation	1,270		2,438		Stock-based compensation	1,362		564
Other adjustments	Other adjustments	284		142		Other adjustments	357		(71)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	178		237		Accounts receivable	(245)		(248)
Inventory	Inventory	(892)		—		Inventory	241		(2,063)
Prepaid expenses and other assets	Prepaid expenses and other assets	(631)		(416)		Prepaid expenses and other assets	261		(687)
Accounts payable	Accounts payable	920		(1,282)		Accounts payable	67		219
Accrued legal settlement		—		(1,500)
Accrued expenses						Accrued expenses	(89)		(1,489)

Lease liability payments	Lease liability payments	(347)		(434)		Lease liability payments	(345)		(173)
Accrued expenses		(386)		(3,334)
Deferred revenue	Deferred revenue	(2,698)		(1,286)		Deferred revenue	(1,594)		(1,001)
Net cash used in operating activities	Net cash used in operating activities	(14,989)		(14,371)		Net cash used in operating activities	(7,382)		(10,171)
Investing activities	Investing activities					Investing activities
Acquisition payment		(1,125)		—
Proceeds received from sale of digital assets						Proceeds received from sale of digital assets	10,790		—
Purchase of digital assets	Purchase of digital assets	(923)		(1,497)		Purchase of digital assets	—		(489)
Capital expenditures	Capital expenditures	(158)		—		Capital expenditures	(6)		(80)
Net cash used in investing activities		(2,206)		(1,497)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	10,784		(569)
Financing activities	Financing activities					Financing activities
Proceeds from borrowings, net of issuance costs		—		9,981

Payments on borrowings	Payments on borrowings	(3,132)		(25,095)		Payments on borrowings	(4,270)		(1,566)

Proceeds from exercise of options to purchase common stock	Proceeds from exercise of options to purchase common stock	16		70		Proceeds from exercise of options to purchase common stock	58		16
Proceeds from sales of common stock, net of issuance costs		—		29,670

Net cash (used) provided by financing activities		(3,116)		14,626
Effect of exchange rate on cash and restricted cash		(121)		16
Net decrease in cash and restricted cash		(20,432)		(1,226)
Cash and restricted cash at the beginning of the period		23,137		4,031
Cash and restricted cash at the end of the period		$	2,705	$	2,805
Payment for stock repurchase						Payment for stock repurchase	(475)		—
Net cash used in financing activities						Net cash used in financing activities	(4,687)		(1,550)
Effect of exchange rate on cash						Effect of exchange rate on cash	24		(32)
Net decrease in cash						Net decrease in cash	(1,261)		(12,322)
Cash at the beginning of the period						Cash at the beginning of the period	1,955		23,137
Cash at the end of the period						Cash at the end of the period	$	694	$	10,815

~~Table of Contents~~

Supplemental disclosure of cash flow information:
Interest paid $ 408 $ 1,287
Income taxes paid $ — $ —
Supplemental disclosures of non-cash activities:
Right-of-use assets obtained in exchange for operating lease obligations $ 1,508 $ —
Non-cash exchange of digital assets $ 923 $ —
Issuance of common stock in connection with acquisition of Lyte Technology, Inc. $ 1,125 $ —
Proceeds not received related to sales of common stock $ — $ 867
Issuance of common stock for payment of board of director fees $ — $ 66


Supplemental disclosure of cash flow information:
Interest paid	$	434	$	204
Income taxes paid	$	—	$	—
Supplemental disclosures of non-cash financing activities:
Issuance of common stock in connection with acquisition of Lyte Technology, Inc.	$	—	$	1,125
Issuance of common stock for payment of bonuses previously accrued	$	347	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Phunware, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share information)

(Unaudited)

1. The Company and Basis of Presentation

The Company

Phunware, Inc. and its subsidiaries (the “Company”, "we", "us", or "our") offers a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their ~~mobile application portfolios globally at scale.~~anytime, anywhere users worldwide. Our ~~Multiscreen-as-a-Service ("MaaS")~~location-based software-as-a-service platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship. Our ~~MaaS~~ technology is available in ~~software development kit~~Software Development Kit ("SDK") form for organizations developing their own application, via customized development services and prepackaged solutions. Through our integrated mobile advertising platform of publishers and advertisers, we provide in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. During 2021, we began to sell PhunToken to consumers, developers and brands. PhunToken is an innovative digital asset utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our ~~MaaS~~ platform. PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest. In October 2021, we acquired Lyte Technology, Inc. ("Lyte"), a provider of high-performance computer systems to individual consumers. Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the Company’s accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The balance sheet at December 31, ~~2021~~2022 was derived from our audited consolidated financial statements, but these interim condensed consolidated financial statements do not include all the annual disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, ~~2021,~~2022, which are referenced herein. The accompanying interim condensed consolidated financial statements as of ~~June 30, 2022~~March 31, 2023 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited financial statements, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state our financial position as of ~~June 30, 2022~~March 31, 2023 and the results of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and cash flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. The results for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2022~~2023 or for any future interim period.

~~Revised Financial Statements~~

~~During~~Certain reclassifications have been made to to the ~~preparation of our Quarterly Report on Form 10-Q~~presentation for the ~~period~~three months ended ~~September 30, 2021, the Company determined that it had inaccurately accounted for an adjustment to certain terms~~March 31, 2022. Gain on sale of an outstanding warrant issued in connection with a certain Series A Senior Convertible Note and Series B Senior Convertible Note we issued on July 15, 2020 (collectively, the "2020 Convertible Notes"). As a result of our underwritten public offering in February 2021, the number of shares issuable and the exercise price were each adjusted pursuant to the terms of the warrant. While we accurately accounteddigital assets for the ~~decrease~~three months ended March 31, 2022, which was previously included in Other income, net in the exercise price (from $4.00 per share to $2.25 per share), we did not account for the increase in the number of shares available for exercise under the warrant, from 2,160,000 shares to 3,840,000 shares. This resulted in an understatement of net loss during the three and six months ended June 30, 2021. We assessed the materiality of this misstatement in accordance with Staff Accounting Bulletin No. 108, "~~Quantifying Misstatements" and concluded this error was not qualitatively material as there was no impact on cash, operating income, or cash flow from operations, among other considerations.~~

~~The correction of this error resulted in adjustments to our~~ condensed consolidated ~~statements~~statement of operations and comprehensive loss ~~for~~and Other adjustments in the ~~three and six months ended June 30, 2021. The revised amounts have~~statement of cash flows has been ~~reflected~~reclassified to Gain on sale of digital assets in ~~condensed~~

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~~consolidated~~each respective financial statements presented above. The effect of this revision on certain line items within our condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive loss are set forth below:

As of June 30, 2021
Previously reported Adjustments As revised
Warrant liability $ 1,836 $ 1,427 $ 3,263
Accumulated deficit $ (166,459) $ (1,427) $ (167,886)

For the three months ended June 30, 2021
Previously reported Adjustments As revised
Gain on change in fair value of warrant liability $ 663 $ 517 $ 1,180
Net loss $ (8,293) $ 517 $ (7,776)
Net loss per common share, basic and diluted $ (0.12) $ 0.01 $ (0.11)

For the six months ended June 30, 2021
Previously reported Adjustments As revised
Loss on change in fair value of warrant liability $ (222) $ (1,427) $ (1,649)
Net loss $ (20,656) $ (1,427) $ (22,083)
Net loss per common share, basic and diluted $ (0.30) $ (0.02) $ (0.32)

statement.

Going Concern ~~Liquidity and Management’s Plan~~

Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern ~~("ASC 205-40")~~ requires management to evaluate whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued. As required by this standard, management’s initial evaluation shall ~~initially~~ not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.

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We have a history of net losses ~~in each fiscal year~~ since our inception. ~~Total backlog and cash-on-hand for the period then ended did not meet our expectations, as a result of uncertainty of the broader marketplace.~~ For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we incurred a net loss of ~~$17,071 and~~$4,269, used ~~$14,989~~$7,382 in cash for ~~operations.~~operations and have a working capital deficiency. The foregoing conditions raise substantial doubt about our ability to meet our financial obligations as they become due.

In ~~July 2022,~~performing the ~~Company raised additional cash proceeds in~~next step of our going concern assessment, we are required to evaluate whether our plans to mitigate the ~~amount of $11,795 through~~conditions above alleviate the ~~issuance~~substantial doubt. Our assessment included the preparation of a ~~note, as~~ detailed ~~in Note 12,~~ ~~Subsequent Events. In accordance with~~cash forecast that included projected cash inflows and outflows. We continue to focus on growing our revenues, and accordingly, we expect operating expenditures to exceed future revenue for the ~~note, we can defer one monthly payment in the amount $1,566 up to twelve times. Furthermore, as more fully described in Note 9,~~ ~~Stockholders Equity, in January 2022, we entered into a~~foreseeable future. Future plans may include reducing operating expenses, liquidating our digital asset holdings, sales ~~agreement, pursuant to which we may offer and sell shares~~ of our common stock ~~for aggregate gross proceeds~~under a sales agreement in an at-the-market offering, and issuing additional shares of ~~up to $100 million. We currently anticipate selling~~ common stock, ~~through our at-the-market offering, if needed. Sales of shares of our common~~preferred stock, ~~sold under the sales agreement will be made~~warrants or units pursuant to an effective shelf registration ~~statement on Form S-3 in the amount~~statement.

Despite a history of ~~$200 million filed with the SEC on February 1, 2022. We may also sell additional securities, including common stock, preferred stock, warrants~~successfully implementing similar plans, these sources of working capital are not currently assured, and ~~units through private placement transactions or public offerings. We believe the foregoing plan~~consequently do not sufficiently mitigate the ~~Company’s going concern considerations.~~

risks and uncertainties disclosed above. There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and support our growth. If additional funding cannot be obtained on a timely basis ~~and/or~~and on satisfactory terms, our operations ~~could~~would be materially negatively impacted. We have therefore concluded there is substantial doubt about our ability to continue as a going concern through one year from the issuance of these financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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2. Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, except as set forth below.

~~Use of Estimates~~

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions 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 revenue and expenses during the reporting period. Items subject to the use of estimates include, but are not limited to, the standalone selling price for our products and services, our various digital asset transactions, stock-based compensation, useful lives of long-lived assets including intangibles, fair value of intangible assets and the recoverability or impairment of tangible and intangible assets, including goodwill, contingent consideration for our business combination with Lyte and periodic reassessment of fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in our business combination, reserves and certain accrued liabilities, the benefit period of deferred commissions, assumptions used in Black-Scholes valuation method, such as the current trading price of our common stock at time of exercise of our warrant, expected volatility, risk-free interest rate and expected dividend rate and provision for (benefit from) income taxes. Actual results could differ from those estimates and such differences could be material to the consolidated financial statements.

~~Risks and Uncertainties~~

Regulation governing blockchain technologies, cryptocurrencies, digital assets, utility tokens, security tokens and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens. Regulation of digital assets, like PhunCoin and PhunToken, cryptocurrencies, blockchain technologies and cryptocurrency exchanges, is evolving and likely to continue to evolve. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them. Any such violations could adversely affect the ability of us to maintain PhunCoin and PhunToken, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could also result in a material adverse effect on our operations and financial condition.

~~Concentrations of Credit Risk~~

~~Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable and our digital asset holdings.~~

There is currently no clearing house for our digital assets, including our bitcoin, ethereum or other digital asset holdings, nor is there a central or major depository for the custody of our digital assets. There is a risk that some or all of our digital asset holdings could be lost or stolen. There can be no assurance that the custodians will maintain adequate insurance or that such coverage will cover losses with respect to our digital asset holdings. Further, transactions denominated in digital assets are irrevocable. Stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed transactions could adversely our financial condition. The aggregate cost basis of our digital asset holdings is $42,255 and $41,964 at June 30, 2022 and December 31, 2021, respectively.

Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value.

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~~The following table sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts.~~

June 30, 2022 December 31, 2021
Customer A 12 % — %
Customer B 10 % — %
Customer C 7 % 18 %
Customer D — % 20 %

~~Digital Assets~~

Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum. We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, ~~Intangibles—Goodwill and Other~~. We have ownership of and control over our digital assets and we may use third-party custodial services to secure them. The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.

~~We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820,~~ ~~Fair Value Measurement~~, based on quoted prices on the active exchange(s) that we have determined is the principal market for bitcoin, ethereum and other digital asset holdings (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value.

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. In determining the gain or loss to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other expense in our consolidated statements of operations and comprehensive loss. Impairment loss was $12,158 and $21,511 for the three and six months ended June 30, 2022. We realized gains in the amount of $194 for the six months ended June 30, 2022.

~~The following table sets forth our digital asset holdings as of June 30, 2022:~~

Asset Gross Carrying Amount Accumulated Digital Asset Impairment Digital Asset Carrying
Value
Bitcoin $ 37,882 $ (26,295) $ 11,587
Ether 3,163 (2,471) 692
Other 1,210 (897) 313
Total $ 42,255 $ (29,663) $ 12,592

~~The following table sets forth our digital asset holdings as of December 31, 2021:~~

Asset Gross Carrying Amount Accumulated Digital Asset Impairment Digital Asset Carrying
Value
Bitcoin $ 36,963 $ (8,554) $ 28,409
Ethereum 4,714 (670) 4,044
Other 287 (159) 128
Total $ 41,964 $ (9,383) $ 32,581

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Accumulated digital asset impairment noted above represent impairment on the remaining cost lots as of the respective dates. Changes in our digital asset holdings for the six months ended June 30, 2022 were as follows:

Bitcoin Ethereum Other Total
Net balance at December 31, 2021 $ 28,409 $ 4,044 $ 128 $ 32,581
Received from customers, net of expenses 28 377 — 405
Purchases of digital assets 923 — — 923
Exchanges of digital assets — (923) 923 —
Realized gain 26 168 — 194
Impairment expense (17,799) (2,974) (738) (21,511)
Net balance at 6/30/2022 $ 11,587 $ 692 $ 313 $ 12,592

~~Loss per Common Share~~

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Restricted shares subject to repurchase provisions relating to early exercises under our 2009 Equity Incentive Plan were excluded from basic shares outstanding. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

~~The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:~~

June 30,
2022 2021
Convertible notes — 21,136
Warrants 5,636,801 5,996,112
Options 934,729 1,071,782
Restricted stock units 2,621,346 4,665,060
Restricted shares — 574
Total 9,192,876 11,754,664

~~Fair Value of Financial Instruments~~

~~We follow the guidance in ASC 820,~~ ~~Fair Value Measurement~~, to account for financial assets and liabilities measured on a recurring and non-recurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires fair value measurements be classified and disclosed in one of the following three categories:


•			~~Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.~~
•			~~Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.~~
•			~~Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).~~

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~~Determining which category an asset or liability falls within the hierarchy requires significant judgment. Our financial instruments measured at fair value as of June 30, 2022 are set forth below:~~

Level 1 Level 2 Level 3 Total
Assets:
Digital assets $ 12,592 $ — $ — $ 12,592
Total $ 12,592 $ — $ — $ 12,592
Liabilities:
Warrant liability $ — $ 1,136 $ — $ 1,136
Total $ — $ 1,136 $ — $ 1,136

~~Our financial instruments measured at fair value as of December 31, 2021 are set forth below:~~

Level 1 Level 2 Level 3 Total
Assets:
Digital assets $ 32,581 $ — $ — $ 32,581
Total $ 32,581 $ — $ — $ 32,581
Level 1 Level 2 Level 3 Total
Liabilities:
Warrant liability $ — $ 3,605 $ — $ 3,605
Total $ — $ 3,605 $ — $ 3,605

~~The following table sets forth the assumptions used to calculate the fair values of the liability classified warrant issued in connection with our 2020 Convertible Notes as of the dates presented:~~

June 30, 2022 December 31, 2021
Strike price per share $ 2.25 $ 2.25
Closing price per share $ 1.08 $ 2.63
Term (years) 1.04 1.53
Volatility 205 % 186 %
Risk-free rate 2.85 % 0.56 %
Dividend Yield — —

The carrying value of accounts receivable, inventory, prepaid expenses, other current assets, accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

~~Recent~~Recently Adopted Accounting ~~Standards Not Yet Adopted~~Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 introduces a model based on expected losses for most financial assets and certain other instruments. In addition, for available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a smaller reporting company, the standard is currently effective for us for annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2019. We ~~currently intend to adopt~~adopted this new standard effective January 1, 2023. ~~We currently do not expect the~~The adoption of ASU 2016-13 todid not have a material impact on our condensed consolidated financial statements and disclosures.

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Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. As the Company does not currently have any debt with conversion features outstanding, we do not expect the adoption of ASU 2020-06 to have a material impact on our condensed consolidated financial statements and disclosures.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material.

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3. ~~Business Combination~~Supplemental Information

~~On October 18, 2021, we closed~~Risks and Uncertainties

Regulation governing blockchain technologies, cryptocurrencies, digital assets, digital asset exchanges, utility tokens, security tokens and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the ~~acquisition~~development and the value of ~~Lyte~~our tokens and token ecosystem. Regulation of digital assets, like PhunCoin and PhunToken, cryptocurrencies, blockchain technologies and digital asset exchanges, is evolving and likely to continue to evolve. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them. Any such laws, regulations, guidance or other actions could adversely affect our ability to maintain PhunCoin and PhunToken, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with ~~an adjusted purchase price~~any such laws and regulations, some of approximately $11.0 million (subject to an earn-out provision). This acquisition was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged was recorded at estimated fair values on the date of acquisition. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions at the time of acquisition. Fair valueswhich may not exist yet or are subject to ~~refinement~~interpretation and may be subject to change, could also result in a material adverse effect on our operations and financial condition.

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable and our digital asset holdings.

Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits. Collateral is not required for ~~up to one year after~~accounts receivable, and we believe the ~~closing date as additional information regarding~~carrying value approximates fair value.

There is currently no clearing house for our digital assets, including our bitcoin holdings, nor is there a central or major depository for the ~~closing date fair values becomes available. The fair values of the aggregate assets and liabilities acquired are disclosed in in Note 3,~~ ~~Business Combination, in~~ ~~our Annual Report on Form 10-K filed with the SEC on April 7, 2022. We have not booked any adjustments to the initial fair values booked at acquisition date.~~

Pursuant to terms of the stock purchase agreement, the acquisition and earn-out payments consist of the following: (i) $1,125, as adjusted for working capital items, on June 30, 2022, (ii) the issuance of sharescustody of our ~~common stock~~digital assets. There is a risk that some or all of our digital asset holdings could be lost or stolen. There can be no assurance that the custodians will maintain adequate insurance or that such coverage will cover losses with anrespect to our digital asset holdings. Further, transactions denominated in digital assets are irrevocable. Stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed transactions could adversely our financial condition. The aggregate ~~value~~cost basis (prior to impairment) of ~~$2,250, in 2 equal installments valued~~our digital asset holdings was $8,817 and $37,737 at ~~up to $1,125, determined on the last business day of each of the quarters ending~~ March 31, 2022 and September 30, 2022 and (iii) up to $1,250 in cash and issuance of shares of our common stock valued at up to $1,250 on the first anniversary of closing, as an earn-out payment based upon Lyte achieving certain annual revenue milestones as provided in the purchase agreement in the year following closing. We currently believe Lyte will achieve the annual revenue milestone and we will owe the full amount of the contingent consideration on the first annual anniversary of closing. There is $3,471 and $5,531 recorded in accrued expenses in the condensed consolidated balance sheets as of June 30, 20222023 and December 31, ~~2021, respectively, related to~~2022, respectively.

Collateral is not required for accounts receivable and we believe the carrying value approximates fair ~~value of future acquisition payments and earn out payable due to the seller.~~

value. The following table ~~summarizes~~sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts.


	March 31, 2023		December 31, 2022
Customer A	39	%	23	%
Customer B	14	%	—	%

Inventory

Our inventory balance on the ~~unaudited pro forma condensed consolidated financial information~~dates presented consisted of ~~Phunware for~~ the ~~three and six months ended June 30, 2021, as if the acquisition of Lyte had occurred on January 1, 2021:~~following:

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
(in thousands) (unaudited)
Net revenues $ 3,583 $ 7,353
Net loss (7,943) (22,777)


	March 31, 2023		December 31, 2022
Raw materials	$	2,681	$	2,968
Work-in-process	82		—
Finished goods	38		50
Other	6		30
Inventory reserve	(136)		(268)
Total inventory	$	2,671	$	2,780

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Loss per Common Share

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:


	Three Months Ended March 31,
	2023	2022

Warrants	6,632,561	5,636,801
Options	867,031	897,229
Restricted stock units	5,480,225	3,480,102

Total	12,979,817	10,014,132

Fair Value Measurements

We follow the guidance in ASC 820, Fair Value Measurement, to measure certain assets and liabilities on a recurring and nonrecurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We use a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires fair value measurements be classified and disclosed in one of the following three categories:


•			Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
•			Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
•			Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment. Our assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 are set forth below:


	Level 1		Level 2		Level 3		Total




Liabilities:
Warrant liability	$	—	$	3	$	—	$	3
Total	$	—	$	3	$	—	$	3

Our financial instruments measured at fair value on a recurring basis as of December 31, 2022 are set forth below:


	Level 1		Level 2		Level 3		Total





Liabilities:
Warrant liability	$	—	$	256	$	—	$	256
Total	$	—	$	256	$	—	$	256

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The following table sets forth the assumptions used to calculate the fair values of the liability classified warrant issued in connection with our 2020 Convertible Notes as of the dates presented:


	March 31, 2023			December 31, 2022
Strike price per share	$	1.42		$	1.42
Closing price per share	$	0.71		$	0.77
Term (years)	0.28			0.53
Volatility	57		%	102		%
Risk-free rate	4.97		%	4.70		%
Dividend Yield	—			—

The carrying value of accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

4. Revenue

Our platform revenue consists of SDK license subscriptions and application development services, as well as application transactions, which are comprised of in-app advertising and sales of our digital asset, PhunToken. Hardware revenue relates to the sale of high-performance personal computers. Refer to our revenue recognition policy under the subheading, Revenue Recognition, in Note 2, "Summary of Significant Accounting Policies," in our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022.~~March 31, 2023.

Disaggregation of Revenue

The following table sets forth our net revenues by category:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Platform revenue	Platform revenue	$	1,628	$	1,436	$	4,120	$	3,082	Platform revenue	$	1,345	$	2,492
Hardware revenue	Hardware revenue	3,857		—		8,143		—		Hardware revenue	3,402		4,286
Net revenues	Net revenues	$	5,485	$	1,436	$	12,263	$	3,082	Net revenues	$	4,747	$	6,778

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity. We derived ~~98%~~100% and ~~97%~~95% of our net revenues from within the United States for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, respectively. ~~We derived 99% of our net revenues from within the United States for the three and six months ended June 30, 2021.~~

~~The following table sets forth our concentration of revenue sources as a percentage of total net revenues:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Customer E 1 % 6 % 1 % 11 %
Customer F — % 21 % — % 19 %
Customer G — % 13 % — % 11 %

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Deferred Revenue

Our deferred revenue balance consisted of the following:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Current deferred revenue	Current deferred revenue					Current deferred revenue
Platform revenue	Platform revenue	$	1,616	$	1,824	Platform revenue	$	1,405	$	1,531
Hardware revenue	Hardware revenue	99		2,149		Hardware revenue	107		1,373
Total current deferred revenue	Total current deferred revenue	$	1,715	$	3,973	Total current deferred revenue	$	1,512	$	2,904

Non-current deferred revenue	Non-current deferred revenue					Non-current deferred revenue
Platform revenue	Platform revenue	$	859	$	1,299	Platform revenue	$	1,072	$	1,274
Total non-current deferred revenue	Total non-current deferred revenue	$	859	$	1,299	Total non-current deferred revenue	$	1,072	$	1,274
Total deferred revenue	Total deferred revenue	$	2,574	$	5,272	Total deferred revenue	$	2,584	$	4,178

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers. We recognize deferred revenue as revenue only when revenue recognition criteria are met. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we recognized revenue of ~~$3,182~~$2,133 that was included in our deferred revenue balance as of December 31, ~~2021.~~

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2022.

Remaining Performance Obligations

Remaining performance obligations were ~~$5,243~~$5,696 as of ~~June 30, 2022,~~March 31, 2023, of which we expect to recognize approximately ~~40%~~42% as revenue over the next 12 months and the remainder thereafter.

PhunToken

In ~~May~~ 2021, we announced the commencement of the selling of PhunToken. PhunToken is our innovative digital asset intended to be utilized within our token ecosystem, once developed, to help drive engagement by unlocking features and capabilities of our ~~MaaS~~ platform. We did not sell any PhunToken during three months ended March 31, 2023. During the ~~six~~three months ended ~~June 30,~~March 31, 2022, we sold ~~186.8~~115.8 million PhunToken for an aggregate of ~~$1,533,~~$973, for which we received both cash and digital assets from customers. Sales of PhunToken are recorded within platform revenue in the table above.

In March 2022, certain members of our senior management team purchased 827.5 million PhunToken pursuant to Restricted Token Purchase Agreements, at an aggregate purchase price of approximately $7. The PhunToken will be transferred to employees over a time-based delivery schedule ranging from ~~one~~ ~~to four years. The Company will have the right to repurchase any PhunToken not delivered to the employee as a result of voluntary termination or termination for cause.~~

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, total issued PhunToken were ~~461.3 million and 131.7 million, respectively.~~377.2 million. Total supply of PhunToken is capped at 10 billion.

5. Digital Assets

Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum. We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services or self-custody solutions to secure them. The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.

~~5. Inventory~~

~~Our inventory balance~~We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the ~~dates~~active exchange(s) that we have determined is the principal market for bitcoin, ethereum and other digital asset holdings (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest intraday market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value. The fair value of our digital asset holdings at March 31, 2023 is $4,708.

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The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented ~~consisted~~net of any impairment losses for the same digital assets held. In determining the gain or loss to be recognized upon sale, we calculate the difference between the sales price and carrying value of the ~~following:~~digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other income (expense) in our condensed consolidated statements of operations and comprehensive loss. Impairment loss was $50 and $9,353 for the three months ended March 31, 2023 and 2022, respectively.

June 30, 2022 December 31, 2021
Raw materials $ 3,173 $ 2,075
Work-in-process — 207
Finished goods 113 138
Other 242 216
Total inventory $ 3,528 $ 2,636
The following table set forth our digital asset holdings as of March 31, 2023:


Asset	Gross Carrying Amount		Accumulated Digital Asset Impairment		Digital Asset Carrying Value
Bitcoin	$	6,177	$	(4,267)	$	1,910
Ether	1,391		(1,060)		$	331
Other	1,249		(960)		$	289
Total	$	8,817	$	(6,287)	$	2,530

The following table sets forth our digital asset holdings as of December 31, 2022:


Asset	Gross Carrying Amount		Accumulated Digital Asset Impairment		Digital Asset Carrying Value
Bitcoin	$	34,994	$	(25,534)	$	9,460
Ether	1,506		(1,156)		350
Other	1,237		(910)		327
Total	$	37,737	$	(27,600)	$	10,137

Gross carrying amount and accumulated digital asset impairment noted above represent carrying amount and impairment, respectively, on the remaining cost lots as of the respective dates. Changes in our digital asset holdings for three months ended March 31, 2023 were as follows:


	Bitcoin		Ethereum		Other		Total
Net balance at December 31, 2022	$	9,460	$	350	$	327	$	10,137
Received from customers, net of expenses	—		—		19		19

Exchanges of digital assets	—		7		(7)		—
Disposal proceeds	(10,739)		(51)		—		(10,790)
Gain on sale of digital assets	3,189		25		—		3,214
Impairment expense	—		—		(50)		(50)
Net balance at March 31, 2023	$	1,910	$	331	$	289	$	2,530

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6. Debt

~~2021~~2022 Promissory Note

~~In connection with the acquisition of Lyte,~~On July 6, 2022, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the ~~"2021~~"2022 Promissory Note") with an original principal amount of ~~$5,220~~$12,809 in a private ~~placement that closed on October 18, 2021.~~placement. The ~~2021~~2022 Promissory Note was sold with an original issue discount of ~~$200~~$492 and we paid at closing issuance costs totaling ~~$280.~~$522. After deducting all transaction ~~costs,~~fees paid by us at closing, net cash proceeds to the Company at closing were ~~$4,740.~~$11,795. No interest will accrue on the ~~2021~~2022 Promissory Note unless and until the occurrence of an event of default, ~~(as~~as defined in the ~~2021~~2022 Promissory ~~Note).~~Note. Beginning on ~~January 15,~~November 1, 2022, ~~and on the same day of each month thereafter~~our monthly amortization payment was approximately $1,566, until the ~~2021~~original maturity date of July 1, 2023. We have the right to defer any monthly payment by one month up to twelve times so long as certain conditions, as defined in the 2022 Promissory Note, ~~is paid in full,~~are satisfied. In the event we ~~are required~~exercise the deferral right for any given month: (i) the outstanding balance will automatically increase by 1.85%; (ii) we will not be obligated to make athe monthly ~~amortization payments in the amount of $574 until~~payment for such month; and (iii) the maturity date ~~of October 15, 2022.~~will be extended for one month. We may prepay any or all outstanding balance of the ~~2021~~2022 Promissory Note earlier than it is due ~~with a prepayment premium~~by paying the noteholder 110% of ~~110%.~~the portion of the outstanding balance we elect to prepay. The prepayment premium also applies to the monthly amortization payments.

On March 15, 2023, we elected to defer monthly payment obligations for April, May, June and July 2023, as permitted by the 2022 Promissory Note. In connection therewith, we also entered into a waiver agreement with the holder waiving the Payment Deferral Conditions, as defined in the 2022 Promissory Note. For agreeing to waive the Payment Deferral Conditions, we agreed to compensate the noteholder an amount equal to 5% of the outstanding balance immediately before entering into the waiver agreement. As a result of our election to defer the four (4) monthly payments, ~~which amounts~~the outstanding balance of the 2022 Promissory Note will be increased by 1.85% on the first day of each month beginning on April 1, 2023 and concluding on July 1, 2023. The waiver fee and the additional principal will be paid in connection with our monthly installment payments once the deferral period concludes. Beginning on August 1, 2023 and on the same day of each month thereafter, we will be required to pay to the noteholder the new monthly amortization payment in the amount of $1,769 until the new maturity date of November 1, 2023. We evaluated the modification in accordance with the guidance as in ASC 470 - Debt, and we concluded that the modification was not an extinguishment of the original debt; therefore, no gain or loss was recognized upon modification. As a result of entering into the waiver agreement, the new effective interest rate of the 2022 Promissory Note is approximately ~~18%~~34.98%.

The ~~2021~~2022 Promissory Note had a principal balance of ~~$2,088~~$6,432 and ~~$5,220~~$9,962 and debt discount of ~~$57~~$745 and ~~$316~~$295 at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Interest Expense~~

~~The following table sets forth interest expense for our various debt obligations included on the condensed consolidated statements of operations and comprehensive loss:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
2021 Promissory Note $ 122 $ — $ 300 $ —
2020 Convertible Notes — 659 — 1,111
Accretion of debt discount - issuance costs 103 1,121 258 1,741
Accretion of debt discount - warrants — — — 1,029
All other debt and financing obligations 48 65 96 183
Total $ 273 $ 1,845 $ 654 $ 4,064

Other Debt Obligations

Other than the ~~2021~~2022 Promissory Note referenced above, ~~and disclosures contained within Note 12,~~ ~~Subsequent Events~~, there have been no material changes to the terms and conditions of our other debt obligations ~~including the payments in full thereof,~~ since the filing of our Annual Report on Form 10-K. See Note 9, 8, "~~Debt~~Debt", in our Annual Report on Form 10-K filed with the SEC on ~~April 7,~~March 31, 2022.

Interest Expense

~~7. Leases~~

OnInterest expense amounted to $537 and $381 for three months ended March ~~15,~~31, 2023 and 2022, we entered into a lease agreement, in which we will lease approximately 21,830 square feet in Round Rock, Texas, which we intend to use as manufacturing and warehouse space for our Lyte computer division. The term of the lease is five years and commences on the earliest of (a) the date we occupy any portion of the premises and begin conducting business therein, (b) the date on which construction is substantially completed in the building (as defined in the construction addendum) or (c) the date the landlord would have achieved substantial completion of construction of the building but for a delay caused by us (as defined in the construction addendum). The lease provides for initial base rent payments of approximately $27 per month, subject to escalations. In addition, we will be responsible for payments equal to our proportionate share of operating expenses, which is currently estimated to be approximately $7 per month, which is also subject to adjustment to actual costs and expenses according to provisions of the lease. We took possession of the lease in July 2022. In accordance with authoritative guidance, we will defer recording the right-of-use asset and lease liability until such date the lessor makes the leased premises available for our use.

On June 3, 2022, we entered into a lease agreement pursuant to which we will lease approximately 7,458 square feet in Austin, Texas, which we intend to use as professional office space for our corporate headquarters. The term of the Lease commenced on June 10, 2022 and has a term of sixty-four (64) months. The lease provides for rent abatement until Septemberrespectively.

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30, 2022. Beginning on October 1, 2022, initial base rent payments are approximately $28 per month, subject to escalations contained therein. In addition, we will be responsible for payments equal to our proportionate share of operating expenses, which is currently estimated to be approximately $9 per month, plus electrical and janitorial services, which are to be contracted and paid separately by us. As a result of entering into this lease agreement, we recorded a right-of-use asset and corresponding lease liability of $1,508 on the commencement date noted above.7. Leases

Further information regarding our other office leases and accounting thereof are located in Note 2, "Summary of Significant Accounting Policies," and Note ~~10,~~ 9, "Leases," in our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022.~~March 31, 2023.

~~The weighted-average remaining lease term for our operating leases as of June 30, 2022 was 4.13 years.~~ We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive loss. Lease expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was ~~$236~~$325 and ~~$440,~~$204, respectively. ~~Lease expense~~The weighted-average remaining lease term for ~~the three and six months ended June 30, 2021~~operating leases as of March 31, 2023 was ~~$209 and $421, respectively.~~3.8 years.

Future minimum lease obligations are set forth below:


Future minimum lease obligations years ending December 31,	Future minimum lease obligations years ending December 31,	Lease Obligations		Future minimum lease obligations years ending December 31,	Lease Obligations
2022 (Remainder)		$	404
2023		963
2023 (Remainder)				2023 (Remainder)	$	951
2024	2024	959		2024	1,305
2025	2025	569		2025	929
2026	2026	370		2026	744
2027				2027	508
Thereafter	Thereafter	284		Thereafter	—
		$	3,549		$	4,437
Less: Portion representing interest	Less: Portion representing interest	(691)		Less: Portion representing interest	(628)
		$	2,858		$	3,809

8. Commitments and Contingencies

Litigation

~~There~~Except as set forth below, there have been no material changes to the ~~disclosure~~disclosures related to our litigation matters since the filing of our Annual Report on Form ~~10-K, except as set forth below.~~10-K. See Note ~~11,~~10, "Commitments and Contingencies," in our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022~~March 31, 2023 for further information.

On February 18, 2022, certain stockholders filed a lawsuit against Phunware and its individual officers and directors. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al., was filed ~~in the~~ in the Court of Chancery of the state of Delaware (Cause No. 2022-0168-LWW). Plaintiffs alleged that they invested in various early rounds of financing while the Company was private and that Phunware should not have subjected their shares to a 180-day “lock up” period. Plaintiffs also allege that Phunware’s stock price dropped significantly during the lock up period and seek damages, costs and professional fees. We filed a motion to dismiss the complaint on May 27, 2022 and on July 15, 2022, Plaintiffs filed their answering brief in opposition to the motion to dismiss and a partial motion for summary judgement. ~~Our opposition~~All briefing and oral argument on the motion to dismiss and motion for partial summary judgement is complete. Both parties argued their positions before the Court of Chancery during a hearing on April 4, 2023. The Court did not rule from the bench at the hearing, but instead took the matter under advisement and will rule in ~~response to Plaintiffs’ answering brief is~~ due ~~by August 12, 2022 in accordance with the previously agreed upon schedule.~~course. We ~~further~~ intend to vigorously defend against this lawsuit and any appeals. We have not recorded an expense related to this matter because any potential loss is not currently probable or reasonably estimable. Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter. It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.

From time to time, we are and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. In addition, for the matters disclosed above that do not

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include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

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9. Stockholders’ Equity

Common Stock

Total common stock authorized to be issued as of ~~June 30, 2022~~March 31, 2023 was 1,000,000,000 shares, with a par value of $0.0001 per share. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~98,137,070~~104,007,810 and ~~96,751,610~~103,153,337 shares of our common stock outstanding.

On January 31, 2022, we entered into an At Market Issuance Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell, from time to time, shares of our common stock, par value $0.0001 per share, for aggregate gross proceeds of up to $100,000, through or to Wainwright, as agent or principal. We are not obligated to sell shares of our common stock under the sales agreement with Wainwright. ~~As of June 30, 2022, we~~We have not sold any shares of common stock pursuant to the sales agreement with Wainwright. Sales of shares of our common stock sold under the sales agreement will be made pursuant to an effective shelf registration statement on Form S-3 in the amount of $200,000 filed with the SEC on February 1, 2022.

~~In January 2021, 2,670,121~~ As of March 31, 2023, $95.4 million of shares of our common stock ~~were sold in an at-the-market offering with Ascendiant Capital Markets, LLC ("Ascendiant") for aggregate net cash proceeds of $5,058. Transaction costs were $156. We terminated~~remains issuable pursuant to the ~~Sales Agreement with Ascendiant effective as of March 28, 2021.~~

~~In February 2021, we entered into an underwriting~~sales agreement with ~~Northland Securities, Inc.~~Wainwright.

Stock Repurchase Plan

On January 5, 2023, our board of directors authorized and ~~Roth Capital Partners, LLC, relating~~approved a stock repurchase program for the repurchase of outstanding shares of our common stock with an aggregate value of up to ~~an underwritten public offering~~$5,000. The authorization permits us to ~~which~~repurchase shares of our common stock from time-to-time through open market repurchases at prevailing market prices, in accordance with federal securities laws. The stock repurchase plan is expected to be completed over the next twelve (12) months and may be amended or terminated at any time, in the sole discretion of the board. The exact means, number and timing of stock repurchases will depend on market conditions, applicable legal requirements and other factors, and will be funded through the liquidation of our bitcoin holdings. During the three months ended March 31, 2023, we ~~issued 11,761,111~~repurchased 461,500 shares of our common stock at an ~~offering~~aggregate repurchase price of ~~$2.25 per share. Aggregate cash proceeds at closing, net of transaction costs of $1,740, totaled $24,722. We incurred additional transaction costs paid outside of closing of $75.~~

On April 7, 2021, we entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. ("B. Riley"), pursuant to which we may offer and sell, from time to time, shares of our common stock through or to B. Riley, for an aggregate offering price of up to $25,000. We paid B. Riley a commission of 3% of the gross proceeds of the sales price per share for sales of our common stock sold through or to B. Riley. As of June 30, 2021, 691,584 shares of our common stock has been sold and we have received aggregate net cash proceeds of $979, of which $112 had been received by us in cash as of June 30, 2021. We received the balance subsequent to the end of the quarter, and accordingly, we recorded $867 in prepaid expenses and other current assets as of June 30, 2021. Transaction costs were $30. We also incurred additional transaction costs paid outside of closing of $147. We terminated the sales agreement with B. Riley on February 4, 2022, with an effective date of February 9, 2022.$475.

Warrants

We have various warrants outstanding. A summary of our outstanding warrants is set forth below:

June 30, 2022 December 31, 2021
Warrant Type Cash Exercise
Price per
share Number of warrants Cash Exercise
Price per
share Number of warrants
2020 Convertible Note warrant $ 2.25 1,780,000 $ 2.25 1,780,000
Common stock warrant (Series D-1) $ 2.25 35,555 $ 2.25 35,555
Common stock warrants (Series F) $ 9.22 377,402 $ 9.22 377,402
Public warrants (PHUNW) $ 11.50 1,761,291 $ 11.50 1,761,291
Private placement warrants $ 11.50 1,658,381 $ 11.50 1,658,381
Unit purchase option warrants $ 11.50 24,172 $ 11.50 24,172
Total 5,636,801 5,636,801

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	March 31, 2023			December 31, 2022
Warrant Type	Cash Exercise Price per share		Number of warrants	Cash Exercise Price per share		Number of warrants

2020 Convertible Note warrant	$	1.42	2,811,315	$	1.42	2,811,315
Common stock warrants (Series F)	$	9.22	377,402	$	9.22	377,402
Public warrants (PHUNW)	$	11.50	1,761,291	$	11.50	1,761,291
Private placement warrants	$	11.50	1,658,381	$	11.50	1,658,381
Unit purchase option warrants	$	11.50	24,172	$	11.50	24,172
Total			6,632,561			6,632,561

Except as set forth below, there have been no material changes to the terms of our outstanding warrants. Additional information about our various warrants outstanding is in included under the subheading, "Warrants", in Note ~~13,~~ 12, "Stockholders' Equity," in our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022.~~March 31, 2023.

2020 Convertible Note Warrant

In connection with the issuance of the 2020 Convertible Notes, in 2020, we issued a warrant exercisable for three (3) years for the purchase, initially, of up to an aggregate of 2,160,000 shares of the Company's common stock at an initial exercise price of $4.00 per share. The number of shares and exercise price are each subject to adjustment provided under the warrant. As a result of our underwritten public offering in February 2021, the exercise price of each share decreased to $2.25 per share, and the number of shares for which the warrant is exercisable increased to 3,840,000 shares. Furthermore, in October 2021, we issued shares to the seller of Lyte as purchase consideration at a price of $1.4246 per share, and as a result, the exercise price of

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the warrant adjusted accordingly and the number of shares exercisable thereunder increased to 2,811,315. The holder also partially exercised the warrant in 2021.

If, at the time of exercise of the warrant, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares, then the warrant may also be exercised, in whole or in part, by means of a “cashless exercise.” The registration statement registering 2,160,000 shares of our common stock issuable pursuant to the terms of the warrant was declared effective by the SEC on October 27, 2020. In April 2022, we filed a registration statement, as amended, registering 250% of the additional warrant shares as result of the adjustment noted above. The registration statement was declared effective by the SEC on May 2, 2022. The warrant may not be exercised if, after giving effect to the exercise, the investor would beneficially own amounts in excess of those permissible under the terms of the warrant.

10. Stock-Based Compensation

Stock-Based Compensation

Compensation costs that have been included in our condensed consolidated statements of operations and comprehensive loss for all stock-based compensation arrangements is set forth below:


	Three Months Ended March 31,
Stock-based compensation	2023		2022
Cost of revenues	$	253	$	46
Sales and marketing	97		18
General and administrative	859		472
Research and development	153		28
Total stock-based compensation	$	1,362	$	564

As of March 31, 2023, there was approximately $1,176, $4,607, $295 and $0.4 of total unrecognized compensation cost related to the 2022 Inducement Plan, 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively. These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.8 years, 1.9 years, 1.7 years and 0.5 years for the 2022 Inducement Plan, 2018 Plan, the 2018 ESPP and 2009 Plan, respectively.

~~There~~Except as set forth below, there have been no material changes to the terms of our 2018 Equity Incentive Plan (the "2018 Plan"), 2018 Employee Stock Purchase Plan ~~("2018~~(the "2018 ESPP") and 2009 Equity Incentive Plan ~~("2009~~(the "2009 Plan") since the filing of our Annual Report on Form 10-K. Refer to Note ~~14,~~ 13, "Stock-Based Compensation," in our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022~~March 31, 2023 for more information on our various equity incentive plans.

2022 Inducement Plan

Our board of directors adopted the Phunware, Inc. 2022 Inducement Plan (the "2022 Inducement Plan") in January 2023. As permitted by Nasdaq Stock Market rules, our stockholders were not required to approve the 2022 Inducement Plan. The plan provides of up to 1,470,588 shares of our common stock under awards granted to newly-hired employees. An "award" is any right to receive common stock of the Company consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards or restricted stock units.

In January 2023, we made an inducement grant to a newly-hired officer of the Company of 1,470,588 restricted stock units under the 2022 Inducement Plan with a grant date fair value of $0.87 per share. One-third, or 490,196, of the restricted stock units will vest on December 28, 2023 and the remainder will vest in equal installments over eight quarterly periods beginning on March 31, 2024 with the final vesting date occurring on December 28, 2025, subject to the employee's continued service on such vesting date. Shares will be delivered electronically to the holder shortly after vest date.

2018 Equity Incentive Plan

Shares of common stock reserved for issuance under the 2018 Plan also ~~will~~ include any shares of common stock subject to stock options, restricted stock units or similar awards granted under the 2009 Plan, that, on or after the adoption of the 2018 Plan, expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that are forfeited to or repurchased by us. As of ~~June 30, 2022,~~March 31, 2023, the maximum number of shares of

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common stock that may be added to the 2018 Plan pursuant to the foregoing is ~~897,229.~~779,531. Not including the maximum number of shares from the 2009 Plan that may be added to the 2018 Plan, the 2018 Plan had ~~3,582,435~~7,267,124 and ~~762,038~~4,382,662 shares of common stock reserved for future issuances as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Restricted Stock Units

A summary of our restricted stock unit activity under the 2018 Plan for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 is set forth below:


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021		3,576,270	$	1.94
Outstanding as of December 31, 2022					Outstanding as of December 31, 2022	2,957,995	$	1.75
Granted	Granted	—	—		Granted	2,293,704	0.92
Released	Released	(881,924)	1.85		Released	(1,221,562)	0.97
Forfeited	Forfeited	(73,000)	2.33		Forfeited	(20,500)	2.69
Outstanding as of June 30, 2022		2,621,346	$	1.95
Outstanding as of March 31, 2023					Outstanding as of March 31, 2023	4,009,637	$	1.37

During the first quarter of 2023, we granted 1,921,000 restricted stock unit awards to team members with an average grant date fair value of $0.92 per share. The vesting provisions were generally such that one-third of the awards vested immediately with the remaining vesting at various dates through November 2024. We also granted 372,704 restricted stock unit awards to members of our team in lieu of cash bonus earned during 2022 with a grant date fair value of $0.93. These awards vested immediately.

Stock Options

~~During third quarter of 2021, we granted an option to purchase 50,000 shares~~A summary of our common stock to a non-employee consultant with an exercise price of $1.08 per share. The option vests over one year in 12 equal monthly installments. The non-employee consultant ceased providing services to us during the second quarter of 2022, and, as such, 12,500 shares of this

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stock option ~~were forfeited as of such date. As of June 30, 2022, the holder had not exercised the balance of this stock option and this is the only stock option grant outstanding~~activity under the 2018 ~~Plan.~~Plan and related information is as follows:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2022	87,500	$	1.43	5.6	$	—
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding as of March 31, 2023	87,500	$	1.43	5.4	$	—
Exercisable as of March 31, 2023	87,500	$	1.43	5.4	$	—

2018 Employee Stock Purchase Plan

We use a Black-Scholes option pricing model to determine the fair value of shares to be purchased under the 2018 ESPP. Stock-based compensation expense related to our 2018 ESPP for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 was not significant. There were ~~911,245~~1,621,717 and ~~189,215~~802,893 shares of common stock available for sale and reserved for issuance as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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2009 Equity Incentive Plan

A summary of our option activity under the 2009 Plan and related information is as follows:


		Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2021		925,467	$	0.80	5.59	$	1,692
Outstanding as of December 31, 2022								Outstanding as of December 31, 2022	874,279	$	0.80	4.2	$	130
Granted	Granted	—	—					Granted	—	—
Exercised	Exercised	(22,757)	0.68					Exercised	(94,748)	0.61
Forfeited	Forfeited	(5,481)	2.00					Forfeited	—	—
Outstanding as of June 30, 2022		897,229	$	0.80	5.21	$	374
Exercisable as of June 30, 2022		895,638	$	0.79	5.21	$	374
Outstanding as of March 31, 2023								Outstanding as of March 31, 2023	779,531	$	0.83	4.5	$	73
Exercisable as of March 31, 2023								Exercisable as of March 31, 2023	779,138	$	0.83	4.5	$	73

For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the aggregate intrinsic value of options exercised was ~~$374~~$16 and the total fair value of options vested was ~~$16.~~

~~Stock-Based Compensation~~

~~Compensation costs that have been included in our condensed consolidated statements of operations and comprehensive loss for all stock-based compensation arrangements is set forth below:~~

Three Months Ended June 30, Six Months Ended June 30,
Stock-based compensation 2022 2021 2022 2021
Cost of revenues $ 49 $ 323 $ 95 $ 532
Sales and marketing 27 129 45 231
General and administrative 595 709 1,067 1,334
Research and development 35 222 63 341
Total stock-based compensation $ 706 $ 1,383 $ 1,270 $ 2,438

As of June 30, 2022, there was approximately $4,588, $293 and $2 of total unrecognized compensation cost related to the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively. These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.3 years, 1.3 years and 0.9 years for the 2018 Plan, the 2018 ESPP and 2009 Plan, respectively.not significant.

11. Segment and Geographic Information

Our chief operating decision maker is our Chief Executive Officer ("CEO"). Our CEO reviews operating segment information for purposes of allocating resources and evaluating financial performance. We have determined that the Company operates in 2a two reporting segments: Phunware and Lyte. ~~In 2021, but prior to the acquisition of Lyte, our CEO reviewed the~~

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~~financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.~~

Selected information for the Company's operating segments and a reconciliation to the condensed consolidated financial statement amounts are as follows:


		Three Months Ended June 30, 2022							Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
		Phunware		Lyte		Consolidated			Phunware		Lyte		Consolidated		Phunware		Lyte		Consolidated
Net revenues	Net revenues	$	1,628	$	3,857	$	5,485	Net revenues	$	1,345	$	3,402	$	4,747	$	2,492	$	4,286	$	6,778

Loss before taxes	Loss before taxes	$	(16,708)	$	(363)	$	(17,071)	Loss before taxes	$	(3,712)	$	(557)	$	(4,269)	$	(14,359)	$	(558)	$	(14,917)

Six Months Ended June 30, 2022
Phunware Lyte Consolidated
Net revenues $ 4,120 $ 8,143 $ 12,263
Loss before taxes $ (31,067) $ (921) $ (31,988)

June 30, 2022
Phunware Lyte Consolidated
Goodwill $ 25,769 $ 7,373 $ 33,142
Total assets $ 57,057 $ 4,179 $ 61,236


		December 31, 2021							March 31, 2023						December 31, 2022
		Phunware		Lyte		Consolidated			Phunware		Lyte		Consolidated		Phunware		Lyte		Consolidated
Goodwill	Goodwill	$	25,887	$	7,373	$	33,260	Goodwill	$	25,788	$	5,348	$	31,136	$	25,765	$	5,348	$	31,113
Total assets	Total assets	$	94,621	$	4,673	$	99,294	Total assets	$	33,476	$	11,981	$	45,457	$	42,349	$	12,486	$	54,835

Identifiable long-lived assets attributed to the United States and international geographies are based upon the country in which the asset is located or owned. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, all of our identifiable long-lived assets were in the United States.

12. Subsequent Events

WeOn April 13, 2023, we received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”) because the bid price of the Company’s common stock on the Nasdaq Capital Market had closed below $1.00 per share for the previous 30 consecutive business days. The notice from Nasdaq states that, under Nasdaq Listing Rule 5810(c)(3)(A), we have ~~evaluated subsequent events through the date the financial statements were issued.~~

~~On July 6, 2022, we entered into~~been provided a ~~note purchase agreement and completed the sale~~period of ~~an unsecured promissory note~~180 calendar days, or until October 10, 2023 (the ~~"2022 Promissory Note"~~“Compliance Date”) ~~with an original principal amount of $12,809 in a private placement~~, to regain compliance with the ~~same investor~~Bid Price Requirement. To regain compliance, the bid price of our ~~2021 Promissory Note. The 2022 Promissory Note was~~common stock must close at $1.00 per share or more for a minimum of ten consecutive business days.

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If we fail to regain compliance with the Bid Price Requirement prior to the Compliance Date, the Company may be eligible for an additional 180 calendar day compliance period, provided (i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market (except for the Bid Price Requirement), and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the Company does not regain compliance with the Bid Price Requirement prior to the expiration of the initial period, and if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if we are not otherwise eligible, Nasdaq will provide us with written notification that its securities are subject to delisting from the Nasdaq Capital Market. At that time, we may appeal the delisting determination to a hearings panel.

Through May 12, 2023, we sold 221,632 shares of our common stock pursuant to the terms of our At Market Issuance Sales Agreement with ~~an original issue discount of $492 and we paid at closing issuance costs totaling $522. After deducting all transaction fees paid by us at closing,~~Wainwright for aggregate net cash proceeds of $129. Transaction costs were not significant.

Through May 12, 2023, vested RSUs covering 428,703 shares of our common stock were released to ~~the Company at closing were $11,795. No interest will accrue on the 2022 Promissory Note unless~~team members and until the occurrence of an event of default, as defined in the 2022 Promissory Note. Beginning on November 1, 2022 and on the same day of each month thereafter until the 2022 Promissory Note is paid in full, we are requiredservice providers that related to ~~make a monthly amortization payments in the amount of $1,566 until the maturity date of July 1, 2022, which is subject~~grants previously awarded to adjustment for any payment deferrals we elect. We have the right to defer any monthly payment by one month up to twelve times so long as certain conditions, as defined in the 2022 Promissory Note, are satisfied. In the event we exercise the deferral right for any given month: (i) the outstanding balance will automatically increase by 1.85%; (ii) we will not be obligated to make the monthly payment for such month; and (iii) the maturity date will be extended for one month. We may prepay any or all outstanding balance of the 2022 Promissory Note earlier than it is due with a prepayment premium of 110%. The prepayment premium also applies to the monthly amortization payments.those individuals.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this section to “we,” “us,” "our," or “the Company” refer to ~~Phunware.~~Phunware, Inc. References to “management” or “management team” refer to ~~Phunware’s~~our officers and directors.

The following discussion and analysis of ~~Phunware’s~~our financial condition and results of operations should be read in conjunction with ~~Phunware’s~~our condensed consolidated financial statements and the related notes ~~to those statements~~thereto presented in “Part I – Item 1. Financial Statements.” ~~In addition to historical financial information,~~ As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. ~~Phunware’s~~Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed in the section titled “Risk Factors” and elsewhere in this Report.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Overview

Phunware, Inc. offers a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios globally at scale. Our ~~MaaS~~location-based software-as-a-service platform provides the entire mobile lifecycle of applications, media and data in one login through one procurement relationship. Our offerings include:


			•Enterprise mobile software development kits (SDKs) including content management, location-based services, marketing automation, business intelligence and analytics, alerts, notifications and messaging, audience engagement and audience monetization;
			•Integration of our SDK licenses into existing applications maintained by our customers, as well as custom application development and support services;
			•Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application portfolios, solutions and services that address: the patient experience for healthcare, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate, the luxury guest experience for hospitality, the student experience for education and the generic user experience for all other verticals and applications; and
			•Application transactions for mobile audience building, user acquisition, application discovery, audience engagement and monetization, including our engagement-driven digital asset PhunToken.

We also offer and sell pre-packaged and custom high-end personal computer systems for gaming, streaming and cryptocurrency mining enthusiasts.

We intend to continue investing for long-term growth. We have invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We also expect to continue investing in the development and improvement of new and existing products and services to address customers' needs. We currently do not expect to be profitable in the near future.

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Key Business Metrics

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important of these measures include backlog and deferred revenue.

Backlog and Deferred Revenue. Backlog represents future amounts to be invoiced under our current agreements. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in ~~revenues,~~revenue, deferred revenue, accounts receivable or elsewhere in our condensed consolidated financial statements, and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals. We reasonably expect approximately ~~36%~~45% of our backlog as of ~~June 30, 2022~~March 31, 2023 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.

In addition, our deferred revenue consists of amounts that have been invoiced but ~~that~~ have not yet been recognized as revenues as of the end of a reporting period. Together, the sum of deferred revenue and backlog represents the total billed and unbilled contract value yet to be recognized in revenues, and provides visibility into future revenue streams.

The following table sets forth our backlog and deferred revenue:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands)	(in thousands)					(in thousands)
Backlog	Backlog	$	2,669	$	3,316	Backlog	$	3,112	$	3,824
Deferred revenue	Deferred revenue	2,574		5,272		Deferred revenue	2,584		4,178
Total backlog and deferred revenue	Total backlog and deferred revenue	$	5,243	$	8,588	Total backlog and deferred revenue	$	5,696	$	8,002

Non-GAAP Financial Measures

Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We also use certain non-GAAP financial measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit, adjusted gross margin and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") (our "non-GAAP financial measures"). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for ~~its~~our employees, (iii) for planning purposes including the preparation of ~~its~~our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.

Our non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net ~~income (loss),~~loss, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Our non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include:


			•Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;
			•Our non-GAAP financial measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing ~~operations, and;~~operations; and
			•Other companies in our industry may calculate our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

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We compensate for these limitations to our non-GAAP financial measures by relying primarily on our GAAP results and using our non-GAAP financial measures only for supplemental purposes. Our non-GAAP financial measures include adjustments for items that may not occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other peer companies over time. For example, it is useful to exclude non-cash, stock-based compensation expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly across periods due to timing of new stock-based awards. We may also exclude certain discrete, unusual, one-time, or non-cash costs in order to facilitate a more useful period-over-period comparison of ~~its~~our financial performance. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

The following table sets forth the non-GAAP financial measures we monitor.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2022			2021			2022			2021			(in thousands, except percentages)	2023			2022
Adjusted gross profit (1)	Adjusted gross profit (1)	$	1,569		$	638		3,386			1,805			Adjusted gross profit (1)	$	614		$	1,817
Adjusted gross margin (1)	Adjusted gross margin (1)	28.6		%	44.4		%	27.6		%	58.6		%	Adjusted gross margin (1)	12.9		%	26.8		%
Adjusted EBITDA (2)	Adjusted EBITDA (2)	$	(6,602)		$	(2,743)		$	(10,848)		$	(5,146)		Adjusted EBITDA (2)	$	(5,599)		$	(4,246)

(1)Adjusted gross profit and adjusted gross margin are non-GAAP financial measures. We believe that adjusted gross profit and adjusted gross margin provide supplemental information with respect to gross profit and gross margin regarding ongoing performance. We define adjusted gross profit as net revenues less cost of revenue, adjusted to exclude one-time revenue adjustments, stock-based compensation and amortization of intangible assets. We define adjusted gross margin as adjusted gross profit as a percentage of net revenues.

(2)Adjusted EBITDA is a non-GAAP financial measure. We believe ~~Adjusted~~adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define adjusted EBITDA as net loss plus (i) interest expense, (ii) income tax expense, (iii) depreciation, (iv) amortization, and further adjusted for (v) non-cash impairment, ~~and~~(vi) valuation adjustments and ~~(vi)~~(vii) stock-based compensation expense.

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Reconciliation of Non-GAAP Financial Measures

The following tables set forth a reconciliation of the most directly comparable GAAP financial measure to each of the non-GAAP financial measures discussed above.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2022			2021			2022			2021			(in thousands, except percentages)	2023			2022
Gross profit	Gross profit	$	1,520		$	312		$	3,291		$	1,266		Gross profit	$	361		$	1,771

Add back: Amortization of intangibles		—			3			—			7

Add back: Stock-based compensation	Add back: Stock-based compensation	49			323			95			532			Add back: Stock-based compensation	253			46
Adjusted gross profit	Adjusted gross profit	$	1,569		$	638		$	3,386		$	1,805		Adjusted gross profit	$	614		$	1,817
Adjusted gross margin	Adjusted gross margin	28.6		%	44.4		%	27.6		%	58.6		%	Adjusted gross margin	12.9		%	26.8		%


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022
Net loss	Net loss	$	(17,071)	$	(7,776)	$	(31,988)	$	(22,083)	Net loss	$	(4,269)	$	(14,917)
Add back: Depreciation and amortization	Add back: Depreciation and amortization	182		25		368		58		Add back: Depreciation and amortization	188		186
Add back: Interest expense	Add back: Interest expense	273		1,845		654		4,064		Add back: Interest expense	537		381

EBITDA	EBITDA	(16,616)		(5,906)		(30,966)		(17,961)		EBITDA	(3,544)		(14,350)

Add back: Stock-based compensation		706		1,383		1,270		2,438
Add Back: Stock-based compensation										Add Back: Stock-based compensation	1,362		564

Add back: Loss on extinguishment of debt		—		2,184		—		7,952
Add back: Impairment of digital assets		12,158		776		21,511		776

(Less) Add back: Fair value adjustment of warrant liability		(2,682)		(1,180)		(2,469)		1,649
Less: Gain on sale of digital asset		(168)		—		(194)		—
Add Back: Impairment of digital currencies										Add Back: Impairment of digital currencies	50		9,353
(Less)/Add back: Fair value adjustment for warrant liabilities										(Less)/Add back: Fair value adjustment for warrant liabilities	(253)		213
Less: Gain on sale of digital assets										Less: Gain on sale of digital assets	(3,214)		(26)
Adjusted EBITDA	Adjusted EBITDA	$	(6,602)	$	(2,743)	$	(10,848)	$	(5,146)	Adjusted EBITDA	$	(5,599)	$	(4,246)

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Components of Results of Operations

Revenue and Gross Profit

There are a number of factors that impact the revenue and margin profile of the product, service and technology offerings we provide, including, but not limited to, solution and technology complexity, technical expertise requiring the combination of products and types of services provided, as well as other elements that may be specific to a particular client solution.

Platform Revenue and Gross Profit

Our platform revenue consists of software subscriptions, application development services and support and application transactions, which are comprised of in-app advertising and PhunToken sales.

Subscription revenue is derived from software license fees, which ~~comprise~~are comprised of subscription fees from customers licensing our Software Development Kits (SDKs), that ~~includes accessing the MaaS~~include access to our platform. Subscription revenue from SDK licenses gives the customer the right to access our ~~MaaS~~location-based software platform.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. Support revenue is comprised of support and maintenance fees offor customer applications, software updates and technical support for application development services for a support term. From time to time, we may also provide professional services by outsourcing employees’ time and materials to customers.

We generate application transaction revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads. Fees from advertisers are commonly based on the number of ads delivered or views, clicks or actions by users on mobile advertisements delivered, and we recognize revenue at the time the user views, clicks or otherwise acts on the ad. We sell ads through several offerings: cost per thousand impressions and cost per click. ~~During~~In 2021, we ~~announced the commencement of~~commenced PhunToken sales. PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest. We recognize revenue related to PhunToken at time of delivery to a customer's ethereum-based wallet.

Platform gross profit is equal to subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of ~~Phunware’s MaaS~~our software platform are expensed in research and development. Furthermore, gross profit related to application transactions is equal to application transaction revenue less cost of revenue associated with application transactions, which is impacted by the cost of advertising traffic we pay to our suppliers, the amount of traffic which we can purchase from those suppliers and ethereum blockchain fees paid to deliver PhunToken.

As a result, platform gross profit may fluctuate from period to period.

Hardware Revenue and Gross Profit

We acquired Lyte in October 2021. Revenue from Lyte is primarily derived from the sale of high-performance personal computers. Lyte computers are sold with a variety of pre-packaged solutions, as well as customizable solutions selected by our customers. A majority of Lyte's customers pay us via credit card payments, which is managed through a third party processor. We recognize revenue at the time a completed unit ships from our facility.

Hardware gross profit is equal to hardware revenue less the costs associated with the assembly of computers. Hardware gross profit is impacted by the costs that we pay for parts incorporated into a Lyte computer system, as well as labor costs of our employees directly attributable to building computer systems and shipping. Demand may exceed available supply at times, which may hamper our ability to deliver computer systems timely and may increase the costs at which we can obtain inventory needed for computer builds. Customizable solutions we offer our customers may also vary from time to time. As a result, computer hardware revenue and gross profit may fluctuate from period to period. Although we plan to invest in Lyte for future growth, we may experience revenue and gross profit fluctuations as a result of seasonality.

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Gross Margin

Gross margin measures gross profit as a percentage of revenue. Gross margin is generally impacted by the same factors that affect changes in the mix of platform and hardware revenue.

Operating Expenses

Our operating expenses include sales and marketing expenses, general and administrative expenses, research and development expenses, depreciation and amortization of acquired intangible assets. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation and, in sales and marketing expense, commissions. ~~Legal settlements pertaining to litigation brought as a result of the Company's operations is also included in operating expenses.~~

Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. ~~We expect our~~Our sales and marketing expense ~~will~~may increase in absolute dollars as we increase our sales and marketing organizations as we plan to increase revenue but may fluctuate as a percentage of our total revenue from period to period.

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We ~~expect to~~ incur ~~additional~~ general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative function to support the growth of our business. As a result, ~~we expect that~~ our general and administrative expenses ~~will~~may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, ~~we expect~~ our research and development expenses ~~will~~may increase in absolute dollars as our business grows but may fluctuate as a percentage of revenue from period to period.

Interest Expense

Interest expense includes interest related to our outstanding debt, including amortization of discounts and deferred issuance costs.

Refer to Note 6 "Debt" in the notes to the condensed consolidated financial statements included Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our debt offerings.

We also may seek additional debt financings to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

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Results of Operations

Net Revenues

Three Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 Amount %
Net Revenues
Platform revenue $ 1,628 $ 1,436 $ 192 13.4 %
Hardware revenue 3,857 — 3,857 100.0 %
Net revenues $ 5,485 $ 1,436 $ 4,049 282.0 %
Platform revenue as percentage of total revenue 29.7 % 100.0 %
Hardware revenue as percentage of total revenue 70.3 % — %


		Six Months Ended June 30,						Change					Three Months Ended March 31,						Change
(in thousands, except percentages)	(in thousands, except percentages)	2022			2021			Amount		%		(in thousands, except percentages)	2023			2022			Amount		%
Net Revenues	Net Revenues											Net Revenues
Platform revenue	Platform revenue	$	4,120		$	3,082		$	1,038	33.7	%	Platform revenue	$	1,345		$	2,492		$	(1,147)	(46.0)	%
Hardware revenue	Hardware revenue	8,143			—			8,143		100.0	%	Hardware revenue	3,402			4,286			(884)		(20.6)	%
Net revenues	Net revenues	$	12,263		$	3,082		$	9,181	297.9	%	Net revenues	$	4,747		$	6,778		$	(2,031)	(30.0)	%
Platform revenue as percentage of total revenue	Platform revenue as percentage of total revenue	33.6		%	100.0		%					Platform revenue as percentage of total revenue	28.3		%	36.8		%
Hardware revenue as percentage of total revenue	Hardware revenue as percentage of total revenue	66.4		%	—		%					Hardware revenue as percentage of total revenue	71.7		%	63.2		%

Net revenues ~~increased $4.0~~decreased $2.0 million, or ~~282.0%~~30.0%, for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the corresponding period in ~~2021.~~2022.

Platform revenue ~~increased $0.2~~decreased $1.1 million, or ~~13.4%~~(46.0)%, for the three months ended ~~June 30, 2022,~~March 31, 2023 compared to the corresponding period in ~~2021,~~2022, primarily due to PhunToken sales of ~~$0.6~~$1.0 million ~~as we commenced the sale of~~in 2022. We did not sell any PhunToken in the second quarter of 2021. These increases were partially offset by lower platform revenues for development, licensing and support services provided to a customer in 2021, as compared to 2022. This customer is identified as "~~Customer F"~~ ~~in Note 4,~~ ~~Revenue, in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.~~during three months ended March 31, 2023.

Hardware revenue ~~of $3.9~~decreased by $0.9 million, or (20.6)%, for the three months ended ~~June 30, 2022, was a result of the acquisition of Lyte, in October 2021.~~

~~Net revenues increased $9.2 million, or 297.9%, for the six months ended June 30, 2022~~March 31, 2023 compared to the corresponding period in ~~2021.~~

~~Platform revenue increased $1.0 million, or 33.7%, for the six months ended June 30,~~ 2022, ~~compared to the corresponding period in 2021, primarily due to PhunToken sales~~as a result of ~~$1.5 million,~~lower order backlog as ~~we commenced the sale~~ of PhunToken in the second quarter of 2021 and $0.5 million from an increase in advertising campaigns. These increases were partially offset by greater platform revenues for development, licensing and support services provided to two customers in 2021,December 31, 2022, as compared to ~~2022. These customers are identified as "Customer E" and~~ "~~Customer F"~~ ~~in Note 4,~~ ~~Revenue, in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.~~

~~Hardware revenue of $8.1 million for the six months ended June 30, 2022, was a result of the acquisition of Lyte, in October~~December 31, 2021.

~~Table of Contents~~

Cost of Revenues, Gross Profit and Gross Margin

Three Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 Amount %
Cost of Revenues
Platform revenue $ 572 $ 1,124 $ (552) (49.1) %
Hardware revenue 3,393 — 3,393 100.0 %
Total cost of revenues $ 3,965 $ 1,124 $ 2,841 252.8 %
Gross Profit
Platform revenue $ 1,056 $ 312 $ 744 238.5 %
Hardware revenue 464 — 464 100.0 %
Total gross profit $ 1,520 $ 312 $ 1,208 387.2 %
Gross Margin
Platform revenue 64.9 % 21.7 %
Hardware revenue 12.0 % — %
Total gross margin 27.7 % 21.7 %


		Six Months Ended June 30,							Change					Three Months Ended March 31,						Change
(in thousands, except percentages)	(in thousands, except percentages)	2022				2021			Amount		%		(in thousands, except percentages)	2023			2022			Amount		%
Cost of Revenues	Cost of Revenues												Cost of Revenues
Platform revenue	Platform revenue	$	1,639			$	1,816		$	(177)	(9.7)	%	Platform revenue	$	1,271		$	1,067		$	204	19.1	%
Hardware revenue	Hardware revenue	7,333				—			7,333		100.0	%	Hardware revenue	3,115			3,940			(825)		(20.9)	%
Total cost of revenues	Total cost of revenues	$	8,972			$	1,816		$	7,156	394.1	%	Total cost of revenues	$	4,386		$	5,007		$	(621)	(12.4)	%

Gross Profit	Gross Profit												Gross Profit
Platform revenue	Platform revenue	$	2,481			$	1,266		$	1,215	96.0	%	Platform revenue	74			$	1,425		$	(1,351)	(94.8)	%
Hardware revenue	Hardware revenue	810				—			810		100.0	%	Hardware revenue	287			$	346		$	(59)	(17.1)	%
Total gross profit	Total gross profit	$	3,291			$	1,266		$	2,025	160.0	%	Total gross profit	$	361		$	1,771		$	(1,410)	(79.6)	%

Gross Margin	Gross Margin												Gross Margin
Platform revenue	Platform revenue	60.2		%		41.1		%					Platform revenue	5.5		%	57.2		%
Hardware revenue	Hardware revenue	9.9		%		—		%					Hardware revenue	8.4		%	8.1		%
Total gross margin	Total gross margin	26.8		%	%	41.1		%					Total gross margin	7.6		%	26.1		%

Total gross profit ~~increased $1.2~~decreased $1.4 million, or ~~387.2% and $2.0 million, or 160.0%~~79.6%, for the three ~~and six~~ months ended ~~June 30, 2022, when~~March 31, 2023 compared to the corresponding period of ~~2021, due to~~2022, as a result of the revenue items described above. Further decreases in gross profit are attributable to $0.2 million increase in stock-based compensation expense $0.2 million in less lower gross margin as a result of a lower transactional revenue.

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Operating Expenses

Three Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 Amount %
Operating expenses
Sales and marketing $ 1,928 $ 639 $ 1,289 201.7 %
General and administrative 5,251 3,021 2,230 73.8 %
Research and development 1,876 846 1,030 121.7 %
Total operating expenses $ 9,055 $ 4,506 $ 4,549 101.0 %
Six Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 Amount %
Operating expenses
Sales and marketing $ 3,413 0 $ 1,195 $ 2,218 185.6 %
General and administrative 9,556 5,779 3,777 65.4 %
Research and development 2,879 1,898 981 51.7 %
Total operating expenses $ 15,848 $ 8,872 $ 6,976 78.6 %


	Three Months Ended March 31,				Change
(in thousands, except percentages)	2023		2022		Amount		%
Operating expenses
Sales and marketing	$	1,128	$	1,485	$	(357)	(24.0)	%
General and administrative	4,712		4,305		407		9.5	%
Research and development	1,772		1,003		769		76.7	%

Total operating expenses	$	7,612	$	6,793	$	819	12.1	%

Sales and Marketing

Sales and marketing expense ~~increased $1.3~~decreased $0.4 million, or ~~201.7%~~(24.0)%, for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the corresponding period of ~~2021,~~2022, primarily due to an ~~increase of $1 million~~decrease of marketing related expenditures ~~mostly related to Lyte and PhunToken. Other increases of $0.3 million of employee compensation costs due to higher headcount.~~

~~Sales and marketing expense increased $2.2 million, or 185.6%~~ for the six months ended June 30, 2022 compared to the corresponding period of 2021, primarily due to an increase of $1.8 million of marketing related expenditures mostly related to Lyte and PhunToken. Other increases of $0.6 million of employee compensation costs due to higher headcount. These increases were offset by the decrease in stock-based compensation of $0.2 million.Lyte.

General and Administrative

General and administrative expense increased ~~$2.2~~$0.4 million, or ~~73.8%~~9.5%, for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the corresponding period of ~~2021, primarily~~2022, due to an increase of $0.9 million in payroll costs mainly related to employee retention credit received during 2021, $0.7 million in legal fees, $0.2 million related to amortization of trade name related to Lyte acquisition and $0.5 million in other general and administrative expenses. This increase was minimally offset by in decrease in stock-based ~~compensation.~~

General and administrative expense increased $3.8 million, or 65.4% for the six months ended June 30, 2022 compared to the corresponding period of 2021, primarily due to an increase of $1.5 million in payroll costs mainly related to employee retention credit received during 2021, $1.1 million in legal fees, $0.3 million related to amortization of trade name related to Lyte acquisition, $0.3 million in bad debt recoveries that occurred in 2021 and $0.6 million in other general and administrative expenses. This increase was minimally offset by in decrease in stock-based compensation.compensation expense.

Research and Development

Research and development expense increased ~~$1.0~~$0.8 million, or ~~121.7% and $1.0 million, or 51.7%~~76.7%, for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 compared to the corresponding period of ~~2021, respectively, primarily for~~2022, as a result of $0.6 million in increased ~~headcount dedicated to research~~compensation expenses, $0.1 million in contract labor and ~~development projects. This increase was minimally offset by in decrease~~$0.1 million in stock-based ~~compensation.~~compensation expenses.

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Other expense


		Three Months Ended June 30,				Change					Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2022		2021		Amount		%		(in thousands, except percentages)	2023		2022
Other income (expense)	Other income (expense)									Other income (expense)
Interest expense	Interest expense	$	(273)	$	(1,845)	$	1,572	(85.2)	%	Interest expense	$	(537)	$	(381)
Loss on extinguishment of debt		—		(2,184)		2,184		(100.0)	%

Impairment of digital assets	Impairment of digital assets	(12,158)		(776)		(11,382)		1,466.8	%	Impairment of digital assets	(50)		(9,353)
Gain on sale of digital assets										Gain on sale of digital assets	3,214		26
Fair value adjustment of warrant liability	Fair value adjustment of warrant liability	2,682		1,180		1,502		127.3	%	Fair value adjustment of warrant liability	253		(213)

Other income (expense)		213		43		170		395.3	%
Total other expense		$	(9,536)	$	(3,582)	$	(5,954)	166.2	%
Other income										Other income	102		26
Total other income (expense)										Total other income (expense)	$	2,982	$	(9,895)

Six Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 Amount %
Other income (expense)
Interest expense $ (654) $ (4,064) $ 3,410 (83.9) %
Loss on extinguishment of debt — (7,952) 7,952 (100.0) %
Impairment of digital assets (21,511) (776) (20,735) 2,672.0 %
Fair value adjustment of warrant liability 2,469 (1,649) 4,118 (249.7) %
Other income (expense) 265 (36) 301 (836.1) %
Total other expense $ (19,431) $ (14,477) $ (4,954) 34.2 %

~~Other expense increased $6.0 million and $5.0 million for~~During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, we recorded other income of $3.0 million primarily as a result of realized gains on the sales of our bitcoin holdings.

During the three months ended March 31, 2022, ~~compared~~we recorded other expenses of $9.9 million primarily as a result of impairment charges related to ~~the corresponding period of 2021, respectfully, primarily due to an impairment of~~ our digital asset holdings. These losses were offset due to losses on extinguishment of debt related to payments on our 2020 Convertible Notes in 2021, fair value adjustment of our outstanding warrant issued to the holder of our 2020 Convertible Notes and a decrease in interest expense, as we had paid off multiple debt obligations in 2021.holding.

Refer to Note ~~2, "Summary of Significant Accounting Policies"~~5, "Digital Assets," of the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion regarding our digital asset holdings. Further, reference is made to Note 6 "Debt" of the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion on our debt holdings.

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Liquidity and Capital Resources

As of ~~June 30, 2022,~~March 31, 2023, we held total cash of ~~$2.7~~$0.7 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

We may, if needed, sell our digital asset holdings for cash to fund our ongoing operations. As of ~~June 30, 2022,~~March 31, 2023, we held ~~653~~122 bitcoins and ~~780~~377 ethereum, of which consist of the majority of the digital assets recorded on our balance sheet. The digital asset market historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of instability in the digital asset market, we may not be able to sell our digital asset holdings at reasonable prices, or at all. As a result, our digital assets are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

On October 18, 2021, we closed the acquisition of Lyte with an adjusted purchase price of approximately $11.0 million (subject to an earn-out provision). Pursuant to terms of the stock purchase agreement, future cash payments of up to $1.25 million on the first anniversary of closing, as an earn-out payment based upon Lyte achieving certain annual revenue milestones as provided in the purchase agreement. We currently believe Lyte will achieve the annual revenue milestone and we will owe the full amount of the contingent consideration on the first annual anniversary of closing.

In connection with the acquisition of Lyte, we entered into a note purchase agreement and completed the sale of an unsecured promissory note with an original principal amount of $5.2 million in a private placement that closed on October 18, 2021. After deducting all transaction cost, net cash proceeds to the Company were $4.7 million. No interest will accrue on the promissory note unless and until the occurrence of an event of default (as defined in the promissory note). We may prepay outstanding balance of the promissory note earlier than it is due with a prepayment premium of 110%. Beginning on January 15, 2022 and on the same day of each month thereafter until the promissory note is paid in full, we are required to make a monthly amortization payments in the amount of $574 thousand which are considered prepayments subject to the prepayment premium.

On February 1, 2022, we filed a Form S-3, which was subsequently declared effective by the SEC on February 9, 2022, pursuant to which we may issue up to $200 million in common stock, preferred stock, warrants and units. Contained therein, was a prospectus supplement inpursuant to which we may sell up to $100 million of our common stock in an “at the market offering” pursuant to an At Market Issuance Sales Agreement we entered into with H.C. Wainwright & Co., LLC on January 31, 2022. ~~To date, we have not sold any~~As of March 31, 2023, 2,623,460 shares of our common stock ~~under the sales agreement with H.C. Wainwright or issued any securities under our Form S-3 filed on February 1, 2022.~~have been sold for aggregate cash proceeds of $4.6 million.

On July 6, 2022, we entered into a note purchase agreement and completed the sale of an unsecured promissory note with an original principal amount of $12.8 million in a private placement ~~with the same investor of the note described above.~~(the "2022 Promissory Note"). After deducting all transaction fees paid by us at closing, net cash proceeds to us at closing were $11.8 million. No interest will accrue on the ~~promissory note~~2022 Promissory Note unless and until the occurrence of an event of default (as defined in the ~~promissory note)~~2022 Promissory Note). Beginning on November 1, 2022 and on the same day of each month thereafter until the ~~promissory note~~2022 Promissory Note is paid in full, we are required to make a monthly amortization payments in the amount of $1.6 million until the maturity date of July 1, 2022, which is subject to adjustment for any payment deferrals we elect. We may prepay any or all of the outstanding balance of the ~~promisory note~~2022 Promissory Note earlier than it is due with a prepayment premium of 110%. The prepayment premium also applies to the monthly amortization payments.

On March 15, 2023, we entered into a waiver agreement with the holder of our 2022 Promissory Note, waiving the Payment Deferral Conditions, as defined in the 2022 Promissory Note. For agreeing to waive the Payment Deferral Conditions, we agreed to compensate the noteholder an amount equal to 5% of the outstanding balance immediately before entering into the waiver agreement. In connection therewith, we elected to defer the monthly payments under the 2022 Promissory Note for the months of April, May, June and July 2023. As a result of our election to defer the ~~financing events described above, while~~monthly payments, the outstanding balance of the 2022 Promissory Note will be increased by 1.85% on the first day of each month beginning on April 1, 2023 and concluding on July 1, 2023. The waiver fee and the additional principal will be paid in connection with our ~~liquidity risk continues~~monthly installment payments once the deferral period concludes. Beginning on August 1, 2023 and on the same day of each month thereafter, we are required to pay to the noteholder the new monthly amortization payment in the amount of $1,769 until the new maturity date of November 1, 2023.

Our expectation that we will generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations, raise substantial doubt regarding our ability to continue as a ~~result~~going concern. Management believes that our existing cash and liquidation of ~~continued losses~~some, or all, of our digital asset holdings would not be sufficient to satisfy our operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q, and ~~the ongoing and evolving effects~~substantial doubt exists about our ability to continue as a going concern for a period of ~~the COVID-19 pandemic, management believes it has sufficient cash on hand for~~ at ~~least~~ one year following the filing date of this Quarterly Report on Form 10-Q.

Additional plans may include selling shares of our common stock in our "at the market" offering, and as of the date of this Report, shares of our common stock with a maximum aggregate offering price of up to $95.3 million may be sold pursuant to the sales agreement. We may also issue shares of our common stock, preferred stock, warrants and units in other offerings pursuant to our effective registration statement.

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the pace at which we can scale Lyte, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financings, or issue securities ~~subject to the~~under our effective registration statement described above. In the event that additional financing is required from outside sources, we may not be able to raise it on terms

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acceptable to us, or at all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be adversely affected.

~~Table~~The accompanying consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of ~~Contents~~

assets and settlement of liabilities in the ordinary course of business.

The following table summarizes our cash flows for the periods presented:


		Six Months Ended June 30,				Change					Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2022		2021		Amount		%		(in thousands, except percentages)	2023		2022
Consolidated statement of cash flows	Consolidated statement of cash flows									Consolidated statement of cash flows
Net cash used in operating activities	Net cash used in operating activities	$	(14,989)	$	(14,371)	$	(618)	4.3	%	Net cash used in operating activities	$	(7,382)	$	(10,171)
Net cash used in investing activities		$	(2,206)	$	(1,497)	$	(709)	47.4	%
Net cash (used) provided by financing activities		$	(3,116)	$	14,626	$	(17,742)	(121.3)	%
Net cash provided by (used in) investing activities										Net cash provided by (used in) investing activities	$	10,784	$	(569)
Net cash used in financing activities										Net cash used in financing activities	$	(4,687)	$	(1,550)

Operating Activities

The primary source of cash from operating activities is receipts from sales of our various product and service offerings to customers. The primary uses of cash from operating activities are payments to employees for compensation and related expenses, publishers and other vendors for the purchase of digital media inventory and related costs, payments to vendors for the costs of inventory related to the assembly and shipping of Lyte computers, sales and marketing expenses and general operating expenses.

We utilized ~~$15.0~~$7.4 million of cash from operating activities during the ~~six~~three months ended ~~June 30, 2022, primarily~~March 31, 2023, resulting ~~from~~in a net loss of ~~$32.0~~$4.3 million. The net loss included a gain on the sale of digital assets of $3.2 million and non-cash charges of $1.8 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decreases of $1.7 million, primarily relating to a decrease in deferred revenue.

We utilized $10.2 million of cash from operating activities during the three months ended March 31, 2022, resulting in a net loss of $14.9 million. The net loss included non-cash charges of ~~$20.9~~$10.2 million, primarily consisting of impairment of digital assets ~~fair value adjustment of our outstanding warrant~~ and stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in significant cash (decreases) as follows: ~~$0.5~~$(1.3) million from ~~an increase~~a decrease in accounts payable and accrued expenses, as well as ~~$(4.4)~~$(4.2) million from other working capital changes, primarily ana increase in inventory purchases and ~~decrease in deferred revenue.~~

We utilized $14.4 million of cash from operating activities during the six months ended June 30, 2021, primarily resulting from a net loss of $20.7 million. The net loss included non-cash charges of $15.7 million, primarily consisting of the loss on the extinguishment and amortization of debt issuance costs related to our 2020 Convertible Notes, fair value adjustment of our outstanding warrant and stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in significant cash (decreases) as follows: $(6.1) million from a decrease in accounts payable, accrued expenses and an installment payment to Uber related to the settlement of our lawsuit, as well as $(1.9) million from other working capital changes, primarily a decrease in deferred revenue.

Investing Activities

Investing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021,~~ consisted mainly of the ~~purchase~~sales and purchases of digital assets, ~~and payments for acquisition of Lyte Technology, Inc.~~respectively.

Financing Activities

Our financing activities during the ~~six~~three months ended ~~June 30, 2022 primarily~~March 31, 2023 consisted of payments on ~~debt. We had payments on debt~~our 2022 Promissory Note of ~~$3.1~~$4.3 million and $0.5 million for repurchases of ~~which all were payments on the 2021 Promissory Note.~~shares of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Company's financing activities.

Our financing activities during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 primarily consisted of ~~proceeds from equity financings and debt borrowings offset by~~ payments on debt. We acquired $14.6 million of cash from financing activities resulting primarily from $29.7 million in proceeds from the sale of our common stock and $10 million in proceeds from our Series B Convertible Note. These sources of financing were partially offset by $25.1 million ofhad payments on debt ~~a majority~~of $1.6 million, of which all were payments on the ~~2020 Convertible Notes.~~2021 Promissory Note.

Contractual Obligations

Information set forth in Note 7, "Leases,", in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

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Off-Balance Sheet Arrangements

Through ~~June 30, 2022,~~March 31, 2023, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Indemnification Agreements

In the ordinary course of business, we provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, solutions to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain current and former officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of, or are related to, their status or service as directors, officers or employees.

Recent Accounting Pronouncements

~~None.~~Refer to Note 2, "Summary of Significant Accounting Policies," in the notes to the condensed consolidated financial statements included in Item I, Part I of this Quarterly Report on Form 10-Q for analysis of recent accounting pronouncements applicable to our business.

Summary of Significant Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Except for the changes described in Note 2, "Summary of Significant Accounting Policies," in the notes to the condensed consolidated financial statements included in Item I, Part I of this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on ~~April 7, 2022.~~March 31, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers (as defined below), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

As previously disclosed, we identified a material weakness in internal control over financial reporting related to the accounting for an adjustment in certain terms of an outstanding warrant issued in connection with our 2020 Convertible Notes. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

In response to this material weakness, we implemented a remediation plan previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. The remediation actions we implemented included a control to create and review on a quarterly basis a summary schedule of material terms of all outstanding debt and equity instruments and a control to review all existing financing agreements in conjunction with any new financing arrangements. We have tested the related internal controls and have concluded, through testing, that the newly implemented controls are operating effectively, and the material weakness previously identified has been remediated as of June 30, 2022.

~~Other than the changes made to remediate the material weakness described above, there~~There were no ~~other~~ changes in our internal control over financial reporting identified in ~~connection~~conjunction with the evaluation required by ~~Rule~~Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the ~~most recent fiscal~~ quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures, 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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the "Litigation" subheading in Note 8, "Commitments and Contingencies," in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A, ~~"Risk Factors”~~"Risk Factors” of our Annual Report on Form 10-K filed with the SEC on ~~April 7, 2022~~March 31, 2023 for the year ended December 31, 2021, as supplemented by the "Risk Factors" sections in our registration statement on Form S-3 filed with the SEC on February 1, 2022, our registration statement on Form S-3, as amended, filed with the SEC on April 27, 2022 and the information set forth below or contained elsewhere in this Report. The risks and uncertainties described within our Form 10-K for the year ended December 31, ~~2021~~2022 and ~~the registration statements,~~ as ~~amended,~~set forth below are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

~~Our business is subject to evolving corporate governance and public disclosure regulations and expectationsthat have increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on our stock price.~~

~~We are subject to changing rules and regulations promulgated by a number~~If we cannot meet the continued listing requirements of ~~governmental and self-regulatory organizations, including the SEC,~~Nasdaq, the Nasdaq Stock Market and the FASB. These rules and regulations continue to evolve in scope and complexity, making compliance more difficult and uncertain. In addition, increasingly regulators, customers, investors, employees and other stakeholders are focusing on environmental, social and governance (ESG) matters and related disclosures. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on ESG initiatives, and collecting, measuring and reporting ESG information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s recently proposed climate-related reporting requirements. These initiatives and related reporting requirements may ~~present operational, reputational, financial, legal and other risks,~~delist our common stock, which ~~could have a material impact on us.~~

We are currently operating in a period of significant macro-economic uncertainty, including supply-chain disruptions, COVID-related lockdowns and inflationary pressures. Weakened economic conditions maywould have an adverse impact on the trading volume, liquidity and market price of our ~~business~~common stock and ~~results of operations.~~would trigger a default under our 2022 Promissory Note.

Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demandOur common stock is currently listed on the Nasdaq Capital Market. On April 13, 2023, we were notified by the Nasdaq Stock Market LLC (the “Nasdaq”) that the closing bid price for our ~~products~~common stock had been below $1.00 for the last 30 consecutive business days and ~~services. Inflationary pressures~~that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). Under the Nasdaq Listing Rules, the Company has a period of 180 calendar days from the date of the notice, or October 10, 2023 (the "Compliance Date"), to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 for a minimum of ten consecutive business days prior to the Compliance Date.

We intend to monitor the closing bid price of our common stock and ~~supply chain disruptions~~may, if appropriate, consider available options to regain compliance with the Bid Price Requirement. To regain compliance with Nasdaq listing standards we may have to implement a reverse stock split, subject to approval of our board of directors and stockholders. However, there can be no assurance that we will be able to regain compliance with the Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.

If our common stock ultimately were to be delisted for any reason, it could negatively impact us as it would likely reduce the price at which we acquire components required in the assembly of Lyte by Phunware computer systems. Our principal operating expense is compensation related costs. Inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and ~~limits on~~market price of our common stock; reduce the number of investors willing to hold or acquire our common stock; and negatively impact our ability to access ~~credit or otherwise raise capital. In addition,~~equity markets and obtain financing. If our common stock were to be removed from listing on the ~~effects of inflation~~Nasdaq (and our common stock were not to become listed on ~~consumers budgets could result~~other specified stock exchanges), it would trigger a default under our 2022 Promissory Note, and the outstanding balance would be immediately due and payable in cash at the Mandatory Default Amount (as defined in the ~~reduction~~2022 Promissory Note).

Table of ~~our customers’ spending plans. These and other economic factors could materially adversely affect our business, results of operations and financial condition.~~Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~The following table summarizes the Company's stock repurchase activity for the three months ended March 31, 2023:


Issuer Purchases of Common Stock
	Total Number of Shares Purchased	Average Price Paid per Common Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs (in thousands) (1)
January 2023	328,907	$	1.04	328,907	$	4,658
February 2023	132,593	$	1.00	132,593	$	4,525
March 2023	—	$	—	—	$	4,525
Total quarter ended March 31, 2023	461,500	$	1.03	461,500	$	4,525


(1)			On January 5, 2023, our board of directors authorized and approved a stock repurchase program for the repurchase of outstanding shares of our common stock with an aggregate value of up to $5 million. The authorization permits us to repurchase shares of our common stock from time-to-time through open market repurchases at prevailing market prices, in accordance with federal securities laws. The stock repurchase plan is expected to be completed over the next twelve (12) months and may be amended or terminated at any time, in the sole discretion of our board of directors. The exact means, number and timing of stock repurchases will depend on market conditions, applicable legal requirements and other factors, and will be funded through the liquidation of our bitcoin holdings.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

~~Table of Contents~~

Item 5. Other Information

None.

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Table of Contents

Item 6. Exhibits

Unless otherwise noted, the exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX


Exhibit No.						Description
3.1						Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
3.2						Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
~~10.1~~10.1+						~~At Market Issuance Sales~~Phunware, Inc. 2022 Inducement Plan (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on January 6, 2023).
10.2+						Amended and Restated Employment Agreement by and between Phunware, Inc. and ~~HC Wainwright & Co., LLC~~Matt Lull (Incorporated by reference to Exhibit ~~1.2~~10.44 of the ~~Registrants~~Registrant's Form ~~S-3~~10-K (File No. ~~333-262461) filed with the SEC on February 1, 2022).~~
~~10.2~~						~~Lease Agreement, dated March 15, 2022, between Phunware, Inc. and Jonsson ATX Warehouse, LLC (Incorporated by reference to Exhibit 10.1 of the Registrants Form 8-K (File No.~~ 001-37862), filed with the SEC on March ~~18, 2022)~~31, 2023).
~~10.3~~10.3+						~~Lease~~Amended and Restated Employment Agreement ~~dated June 3, 2022,~~by and between Phunware, Inc. and ~~ATX Acquisitions, LLC~~Chris Olive (Incorporated by reference to Exhibit ~~10.1~~10.43 of the ~~Registrants~~Registrant's Form ~~8-K~~10-K (File No. 001-37862), filed with the SEC on ~~June 10, 2020).~~
~~10.4~~						Note Purchase Agreement, dated July 6, 2022, between Phunware, Inc. and Streeterville Capital, LLC (Incorporated by reference to Exhibit 10.1 of the Registrants Form 8-K (File No. 001-37862) filed with the SEC on June 8, 2022).
~~10.5~~						Promissory Note, dated July 6, 2022, between Phunware, Inc. and Streeterville Capital, LLC (Incorporated by reference to Exhibit 10.1 of the Registrants Form 8-K (File No. 001-37862) filed with the SEC on June 8, 2022)March 31, 2023).
31.1*						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2*						Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1(1)						Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
101.INS						XBRL Instance Document*
101.SCH						XBRL Taxonomy Extension Schema*
101.CAL						XBRL Taxonomy Calculation Linkbase*
101.LAB						XBRL Taxonomy Label Linkbase*
101.PRE						XBRL Definition Linkbase Document*
101.DEF						XBRL Definition Linkbase Document*
104						Cover Page Interactive Data File*

*Filed herewith

(1)The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

4035

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


~~August 15, 2022~~May 12, 2023	Phunware, Inc.

	By:	/s/ ~~Alan S. Knitowski~~Russell Buyse
		Name:	~~Alan S. Knitowski~~Russell Buyse
		Title:	Chief Executive Officer
			(Principal Executive Officer)


May 12, 2023	By:	/s/ Matt Aune
		Name:	Matt Aune
		Title:	Chief Financial Officer
			(Principal Accounting and Financial Officer)

4136


Supplemental disclosure of cash flow information:
Interest paid	$	408	$	1,287
Income taxes paid	$	—	$	—
Supplemental disclosures of non-cash activities:

Right-of-use assets obtained in exchange for operating lease obligations	$	1,508	$	—
Non-cash exchange of digital assets	$	923	$	—
Issuance of common stock in connection with acquisition of Lyte Technology, Inc.	$	1,125	$	—
Proceeds not received related to sales of common stock	$	—	$	867
Issuance of common stock for payment of board of director fees	$	—	$	66


	As of June 30, 2021
	Previously reported		Adjustments		As revised
Warrant liability	$	1,836	$	1,427	$	3,263
Accumulated deficit	$	(166,459)	$	(1,427)	$	(167,886)


	For the six months ended June 30, 2021
	Previously reported		Adjustments		As revised
Loss on change in fair value of warrant liability	$	(222)	$	(1,427)	$	(1,649)
Net loss	$	(20,656)	$	(1,427)	$	(22,083)
Net loss per common share, basic and diluted	$	(0.30)	$	(0.02)	$	(0.32)


	June 30,
	2022	2021
Convertible notes	—	21,136
Warrants	5,636,801	5,996,112
Options	934,729	1,071,782
Restricted stock units	2,621,346	4,665,060
Restricted shares	—	574
Total	9,192,876	11,754,664


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
(in thousands)	(unaudited)
Net revenues	$	3,583	$	7,353
Net loss	(7,943)		(22,777)


	Six Months Ended June 30, 2022
	Phunware		Lyte		Consolidated
Net revenues	$	4,120	$	8,143	$	12,263

















Loss before taxes	$	(31,067)	$	(921)	$	(31,988)