Phunware, Inc. 10-Q

Item 1. Financial Statements 1 Table of Contents Phunware, Inc. Condensed Consolidated Balance Sheets (In thousands, except share and per share information) June 30, 2022 December 31, 2021 ( Unaudited) Assets Current assets: Cash $ 2,705 $ 23,137 Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 10 at June 30, 2022 and December 31, 2021, respectively 803 967 Inventory 3,528 2,636 Digital assets, net 12,592 32,581 Prepaid expenses and other current assets 1,188 686 Total current assets 20,816 60,007 Property and equipment, net 145 — Goodwill 33,142 33,260 Intangible assets, net 2,858 3,213 Deferred tax asset 1,278 1,278 Right-of-use asset 2,595 1,260 Other assets 402 276 Total assets $ 61,236 $ 99,294 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 7,510 $ 6,589 Accrued expenses 6,953 9,621 Lease liability 614 399 Deferred revenue 1,715 3,973 PhunCoin deposits 1,203 1,202 Current maturities of long-term debt, net 2,031 4,904 Warrant liability 1,136 3,605 Total current liabilities 21,162 30,293 Deferred tax liability 1,278 1,278 Deferred revenue 859 1,299 Lease liability 2,244 1,147 Total liabilities 25,543 34,017 Commitments and contingencies (Note 8) 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 Additional paid-in capital 267,465 264,944 Accumulated other comprehensive loss ( 469 ) ( 352 ) Accumulated deficit ( 231,313 ) ( 199,325 ) Total stockholders’ equity 35,693 65,277 Total liabilities and stockholders’ equity $ 61,236 $ 99,294 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 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, 2022 2021 2022 2021 Net revenues $ 5,485 $ 1,436 $ 12,263 $ 3,082 Cost of revenues 3,965 1,124 8,972 1,816 Gross profit 1,520 312 3,291 1,266 Operating expenses: Sales and marketing 1,928 639 3,413 1,195 General and administrative 5,251 3,021 9,556 5,779 Research and development 1,876 846 2,879 1,898 Total operating expenses 9,055 4,506 15,848 8,872 Operating loss ( 7,535 ) ( 4,194 ) ( 12,557 ) ( 7,606 ) Other income (expense): Interest expense ( 273 ) ( 1,845 ) ( 654 ) ( 4,064 ) Loss on extinguishment of debt — ( 2,184 ) — ( 7,952 ) Impairment of digital assets ( 12,158 ) ( 776 ) ( 21,511 ) ( 776 ) Fair value adjustment of warrant liability 2,682 1,180 2,469 ( 1,649 ) Other income (expense), net 213 43 265 ( 36 ) Total other expense ( 9,536 ) ( 3,582 ) ( 19,431 ) ( 14,477 ) Loss before taxes ( 17,071 ) ( 7,776 ) ( 31,988 ) ( 22,083 ) Income tax expense — — — — Net loss ( 17,071 ) ( 7,776 ) ( 31,988 ) ( 22,083 ) Other comprehensive income (loss): Cumulative translation adjustment ( 85 ) 5 ( 117 ) 15 Comprehensive loss $ ( 17,156 ) $ ( 7,771 ) $ ( 32,105 ) $ ( 22,068 ) Net loss per share, basic and diluted $ ( 0.17 ) $ ( 0.11 ) $ ( 0.33 ) $ ( 0.32 ) Weighted-average common shares used to compute net loss per share, basic and diluted 97,742 71,620 97,293 68,103 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 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 4 Table of Contents Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity (Deficit) Shares Amount Balance - March 31, 2021 71,204 $ 7 $ 175,046 $ ( 160,110 ) $ ( 328 ) $ 14,615 Exercise of stock options, net of vesting of restricted shares 11 — 5 — — 5 Release of restricted stock 829 — — — — — Sales of common stock, net of issuance cost 692 — 832 — — 832 Stock-based compensation expense — — 1,371 — — 1,371 Cumulative translation adjustment — — — — 5 5 Net loss — — — ( 7,776 ) — ( 7,776 ) 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 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents Phunware, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended June 30, 2022 2021 Operating activities Net loss $ ( 31,988 ) $ ( 22,083 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of debt discount and deferred financing costs 259 2,770 Loss on change in fair value of warrant liability ( 2,469 ) 1,649 Loss on extinguishment of debt — 7,952 Impairment of digital assets 21,511 776 Stock-based compensation 1,270 2,438 Other adjustments 284 142 Changes in operating assets and liabilities: Accounts receivable 178 237 Inventory ( 892 ) — Prepaid expenses and other assets ( 631 ) ( 416 ) Accounts payable 920 ( 1,282 ) Accrued legal settlement — ( 1,500 ) Lease liability payments ( 347 ) ( 434 ) Accrued expenses ( 386 ) ( 3,334 ) Deferred revenue ( 2,698 ) ( 1,286 ) Net cash used in operating activities ( 14,989 ) ( 14,371 ) Investing activities Acquisition payment ( 1,125 ) — Purchase of digital assets ( 923 ) ( 1,497 ) Capital expenditures ( 158 ) — Net cash used in investing activities ( 2,206 ) ( 1,497 ) Financing activities Proceeds from borrowings, net of issuance costs — 9,981 Payments on borrowings ( 3,132 ) ( 25,095 ) Proceeds from exercise of options to purchase common stock 16 70 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 6 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 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 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. Our Multiscreen-as-a-Service ("MaaS") 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 ("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 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, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 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 and the results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim period. Revised Financial Statements During the preparation of our Quarterly Report on Form 10-Q for the period ended September 30, 2021, the Company determined that it had inaccurately accounted for an adjustment to certain terms 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 accounted for the decrease 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 of operations and comprehensive loss for the three and six months ended June 30, 2021. The revised amounts have been reflected in condensed 8 Table of Contents consolidated 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 ) 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 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. We have a history of 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 months ended June 30, 2022, we incurred a net loss of $ 17,071 and used $ 14,989 in cash for operations. In July 2022, the Company raised additional cash proceeds in the amount of $ 11,795 through the issuance of a note, as detailed in Note 12, Subsequent Events . In accordance with 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 sales agreement, pursuant to which we may offer and sell shares of our common stock, for aggregate gross proceeds 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 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 million filed with the SEC on February 1, 2022. We may also sell additional securities, including common stock, preferred stock, warrants and units through private placement transactions or public offerings. We believe the foregoing plan mitigate the Company’s going concern considerations. 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 growth. If additional funding cannot be obtained on a timely basis and/or on satisfactory terms, our operations could be materially impacted. 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. 9 Table of Contents 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, 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. 10 Table of Contents 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 11 Table of Contents 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). 12 Table of Contents 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 Accounting Standards Not Yet Adopted 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 this new standard effective January 1, 2023. We currently do not expect the adoption of ASU 2016-13 to have a material impact on our condensed consolidated financial statements and disclosures. 13 Table of Contents 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. 14 Table of Contents 3. Business Combination 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). 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 values are subject to refinement for up to one year after the closing date as additional information regarding 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 shares of our common stock with an aggregate value of $ 2,250 , in two equal installments valued 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, 2022 and December 31, 2021, respectively, related to fair value of future acquisition payments and earn out payable due to the seller. The following table summarizes the unaudited pro forma condensed consolidated financial information of Phunware for the three and six months ended June 30, 2021, as if the acquisition of Lyte had occurred on January 1, 2021: 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 ) 15 Table of Contents 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. Disaggregation of Revenue The following table sets forth our net revenues by category: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Platform revenue $ 1,628 $ 1,436 $ 4,120 $ 3,082 Hardware revenue 3,857 — 8,143 — Net revenues $ 5,485 $ 1,436 $ 12,263 $ 3,082 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 % and 97 % of our net revenues from within the United States for the three and six months ended June 30, 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 % Deferred Revenue Our deferred revenue balance consisted of the following: June 30, 2022 December 31, 2021 Current deferred revenue Platform revenue $ 1,616 $ 1,824 Hardware revenue 99 2,149 Total current deferred revenue $ 1,715 $ 3,973 Non-current deferred revenue Platform revenue $ 859 $ 1,299 Total non-current deferred revenue $ 859 $ 1,299 Total deferred revenue $ 2,574 $ 5,272 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 months ended June 30, 2022, we recognized revenue of $ 3,182 that was included in our deferred revenue balance as of December 31, 2021. 16 Table of Contents Remaining Performance Obligations Remaining performance obligations were $ 5,243 as of June 30, 2022, of which we expect to recognize approximately 40 % 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. During the six months ended June 30, 2022, we sold 186.8 million PhunToken for an aggregate of $ 1,533 , 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 and December 31, 2021, issued PhunToken were 461.3 million and 131.7 million, respectively. Total supply of PhunToken is capped at 10 billion. 5. Inventory Our inventory balance on the dates presented consisted of the following: 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 17 Table of Contents 6. Debt 2021 Promissory Note In connection with the acquisition of Lyte, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the "2021 Promissory Note") with an original principal amount of $ 5,220 in a private placement that closed on October 18, 2021. The 2021 Promissory Note was sold with an original issue discount of $ 200 and we paid at closing issuance costs totaling $ 280 . After deducting all transaction costs, net cash proceeds to the Company were $ 4,740 . No interest will accrue on the 2021 Promissory Note unless and until the occurrence of an event of default (as defined in the 2021 Promissory Note). Beginning on January 15, 2022 and on the same day of each month thereafter until the 2021 Promissory Note is paid in full, we are required to make a monthly amortization payments in the amount of $ 574 until the maturity date of October 15, 2022. We may prepay any or all outstanding balance of the 2021 Promissory Note earlier than it is due with a prepayment premium of 110 %. The prepayment premium also applies to the monthly amortization payments, which amounts to an effective interest rate of approximately 18 %. The 2021 Promissory Note had a principal balance of $ 2,088 and $ 5,220 and debt discount of $ 57 and $ 316 at June 30, 2022 and December 31, 2021, 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 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, Debt , in our Annual Report on Form 10-K filed with the SEC on April 7, 2022. 7. Leases On March 15, 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 September 18 Table of Contents 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. Further information regarding our other office leases and accounting thereof are located in Note 2, Summary of Significant Accounting Policies, and Note 10, Leases, in our Annual Report on Form 10-K filed with the SEC on April 7, 2022. 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, 2022 was $ 236 and $ 440 , respectively. Lease expense for the three and six months ended June 30, 2021 was $ 209 and $ 421 , respectively. Future minimum lease obligations are set forth below: Future minimum lease obligations years ending December 31, Lease Obligations 2022 (Remainder) $ 404 2023 963 2024 959 2025 569 2026 370 Thereafter 284 $ 3,549 Less: Portion representing interest ( 691 ) $ 2,858 8. Commitments and Contingencies Litigation There have been no material changes to the disclosure related to our litigation matters since the filing of our Annual Report on Form 10-K, except as set forth below. See Note 11, " Commitments and Contingencies " in our Annual Report on Form 10-K filed with the SEC on April 7, 2022 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 in response to Plaintiffs’ answering brief is due by August 12, 2022 in accordance with the previously agreed upon schedule. 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 19 Table of Contents 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. 9. Stockholders’ Equity Common Stock Total common stock authorized to be issued as of June 30, 2022 was 1,000,000,000 shares, with a par value of $ 0.0001 per share. At June 30, 2022 and December 31, 2021, there were 98,137,070 and 96,751,610 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 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 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 the Sales Agreement with Ascendiant effective as of March 28, 2021. In February 2021, we entered into an underwriting agreement with Northland Securities, Inc. and Roth Capital Partners, LLC, relating to an underwritten public offering to which we issued 11,761,111 shares of our common stock at an offering 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. 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 20 Table of Contents 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, Stockholders' Equity , in our Annual Report on Form 10-K filed with the SEC on April 7, 2022. 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. 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 There have been no material changes to the terms of our 2018 Equity Incentive Plan (the "2018 Plan"), 2018 Employee Stock Purchase Plan ("2018 ESPP") and 2009 Equity Incentive Plan ("2009 Plan") since the filing of our Annual Report on Form 10-K. Refer to Note 14, Stock-Based Compensation , in our Annual Report on Form 10-K filed with the SEC on April 7, 2022 for more information on our various equity incentive plans. 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, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing is 897,229 . 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 and 762,038 shares of common stock reserved for future issuances as of June 30, 2022 and December 31, 2021, respectively. Restricted Stock Units A summary of our restricted stock unit activity under the 2018 Plan for the six months ended June 30, 2022 is set forth below: Shares Weighted Average Grant Date Fair Value Outstanding as of December 31, 2021 3,576,270 $ 1.94 Granted — — Released ( 881,924 ) 1.85 Forfeited ( 73,000 ) 2.33 Outstanding as of June 30, 2022 2,621,346 $ 1.95 Stock Options During third quarter of 2021, we granted an option to purchase 50,000 shares 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 twelve 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 21 Table of Contents 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 under the 2018 Plan. 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 was not significant. There were 911,245 and 189,215 shares of common stock available for sale and reserved for issuance as of June 30, 2022 and December 31, 2021, respectively. 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 Outstanding as of December 31, 2021 925,467 $ 0.80 5.59 $ 1,692 Granted — — Exercised ( 22,757 ) 0.68 Forfeited ( 5,481 ) 2.00 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 For the six months ended June 30, 2022, the aggregate intrinsic value of options exercised was $ 374 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. 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 two reporting segments: Phunware and Lyte. In 2021, but prior to the acquisition of Lyte, our CEO reviewed the 22 Table of Contents 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 Phunware Lyte Consolidated Net revenues $ 1,628 $ 3,857 $ 5,485 Loss before taxes $ ( 16,708 ) $ ( 363 ) $ ( 17,071 ) 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 Phunware Lyte Consolidated Goodwill $ 25,887 $ 7,373 $ 33,260 Total assets $ 94,621 $ 4,673 $ 99,294 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 and December 31, 2021, all of our identifiable long-lived assets were in the United States. 12. Subsequent Events We have evaluated subsequent events through the date the financial statements were issued. On July 6, 2022, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the "2022 Promissory Note") with an original principal amount of $ 12,809 in a private placement with the same investor of our 2021 Promissory Note. The 2022 Promissory Note was sold 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, net cash proceeds to the Company at closing were $ 11,795 . No interest will accrue on the 2022 Promissory Note unless 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 required to make a monthly amortization payments in the amount of $ 1,566 until the maturity date of July 1, 2022, which is subject 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. 23 Table of Contents