What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-10 compared with 2022-08-15 · 168 added, 161 removed, 477 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except share and per share information)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

Cash $ 8,538 $ 23,137

Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 10 at June 30, 2022 and December 31, 2021, respectively

Inventory 3,528 2,636

Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 10 at September 30, 2022 and December 31, 2021, respectively

Inventory, net 3,236 2,636

Digital assets, net 12,617 32,581

25 unchanged sentences

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

1,000,000,000 shares authorized at September 30, 2022 and December 31, 2021;

101,321,268 and 96,751,610 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 272,657 264,944

5 unchanged sentences

Phunware, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except per share information)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

9 unchanged sentences

Other income (expense):

Interest expense ( 273 ) ( 1,845 ) ( 654 ) ( 4,064 )

Interest (expense) income ( 991 ) 7 ( 1,645 ) ( 4,057 )

Loss on extinguishment of debt — — — ( 7,952 )

1 unchanged sentence

Fair value adjustment of warrant liability 797 1,501 3,267 ( 148 )

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 )

Gain on forgiveness of PPP loan — 2,850 — 2,850

Other income, net 54 51 318 15

Total other (expense) income ( 140 ) 4,409 ( 19,571 ) ( 10,068 )

(Loss) income before taxes ( 8,018 ) 372 ( 40,006 ) ( 21,711 )

Income tax expense — — — —

Net loss ( 17,071 ) ( 7,776 ) ( 31,988 ) ( 22,083 )

Other comprehensive income (loss):

Net (loss) income ( 8,018 ) 372 ( 40,006 ) ( 21,711 )

Other comprehensive (loss) income:

Cumulative translation adjustment ( 84 ) ( 33 ) ( 201 ) ( 18 )

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

Comprehensive (loss) income $ ( 8,102 ) $ 339 $ ( 40,207 ) $ ( 21,729 )

Net (loss) income per share, basic $ ( 0.08 ) $ 0.01 $ ( 0.41 ) $ ( 0.31 )

Net (loss) income per common share, diluted $ ( 0.08 ) $ — $ ( 0.41 ) $ ( 0.31 )

Weighted-average common shares used to compute net (loss) income per share, basic 98,822 74,347 97,803 70,185

Weighted-average common shares used to compute net (loss) income per share, diluted 98,822 74,699 97,803 70,185

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

8 unchanged sentences

Shares Amount

Balance - March 31, 2022 97,251 $ 10 $ 266,606 $ ( 214,242 ) $ ( 384 ) $ 51,990

Balance - June 30, 2022 98,137 $ 10 $ 267,465 $ ( 231,313 ) $ ( 469 ) $ 35,693

Release of restricted stock 527 — — — — —

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.

464 — 689 — — 689

Sales of common stock, net of issuance costs 2,193 — 3,654 — — 3,654

Stock-based compensation expense — — 849 — — 849

Cumulative translation adjustment — — — — ( 84 ) ( 84 )

Net income — — — ( 17,071 ) — ( 17,071 )

Balance - June 30, 2022 98,137 $ 10 $ 267,465 $ ( 231,313 ) $ ( 469 ) $ 35,693

Net loss — — — ( 8,018 ) — ( 8,018 )

Balance - September 30, 2022 101,321 $ 10 $ 272,657 $ ( 239,331 ) $ ( 553 ) $ 32,783

Balance - December 31, 2021 96,752 $ 10 $ 264,944 $ ( 199,325 ) $ ( 352 ) $ 65,277

4 unchanged sentences

848 — 1,814 — — 1,814

Sales of common stock, net of issuance costs 2,193 — 3,654 3,654

Stock-based compensation expense — — 2,113 — — 2,113

1 unchanged sentence

Net loss — — — ( 40,006 ) — ( 40,006 )

Balance - June 30, 2022 98,137 $ 10 $ 267,465 $ ( 231,313 ) $ ( 469 ) $ 35,693

Balance - September 30, 2022 101,321 $ 10 $ 272,657 $ ( 239,331 ) $ ( 553 ) $ 32,783

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance - March 31, 2021 71,204 $ 7 $ 175,046 $ ( 160,110 ) $ ( 328 ) $ 14,615

Balance - June 30, 2021 72,736 $ 7 $ 177,254 $ ( 167,886 ) $ ( 323 ) $ 9,052

Exercise of stock options, net of vesting of restricted shares 2 — 1 — — 1

3 unchanged sentences

Cumulative translation adjustment — — — — ( 33 ) ( 33 )

Net loss — — — ( 7,776 ) — ( 7,776 )

Balance - June 30, 2021 72,736 $ 7 $ 177,254 $ ( 167,886 ) $ ( 323 ) $ 9,052

Net income — — — 372 — 372

Balance - September 30, 2021 75,549 $ 8 $ 180,887 $ ( 167,514 ) $ ( 356 ) $ 13,025

Balance - December 31, 2020 56,371 $ 6 $ 144,156 $ ( 145,803 ) $ ( 338 ) $ ( 1,979 )

6 unchanged sentences

Net loss — — — ( 21,711 ) — ( 21,711 )

Balance - June 30, 2021 72,736 $ 7 $ 177,254 $ ( 167,886 ) $ ( 323 ) $ 9,052

Balance - September 30, 2021 75,549 $ 8 $ 180,887 $ ( 167,514 ) $ ( 356 ) $ 13,025

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

2 unchanged sentences

Amortization of debt discount and deferred financing costs 690 2,770

Loss on change in fair value of warrant liability ( 2,469 ) 1,649

(Gain) loss on change in fair value of warrant liability ( 3,267 ) 148

Loss on extinguishment of debt — 7,952

Impairment of digital assets 21,511 776

Gain on forgiveness of PPP loan — ( 2,850 )

Stock-based compensation 2,169 3,933

20 unchanged sentences

Proceeds from sales of common stock, net of issuance costs 3,655 32,610

Net cash (used) provided by financing activities ( 3,116 ) 14,626

Net cash provided by financing activities 10,768 17,547

Effect of exchange rate on cash and restricted cash ( 209 ) ( 19 )

33 unchanged sentences

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 accompanying interim condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 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.

1 unchanged sentence

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

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 )

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 September 30, 2022 and the results of operations for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021.

The results for the three and nine months ended September 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.

Going Concern, Liquidity and Management’s Plan

3 unchanged sentences

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 .

For the nine months ended September 30, 2022, we incurred a net loss of $ 40,006 and used $ 22,872 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 6, Debt .

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.

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 $ 100,000 .

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.

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.

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.

We believe the foregoing plans 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.

23 unchanged sentences

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.

As a result, any incorrectly executed

transactions could adversely our financial condition.

The aggregate cost basis of our digital asset holdings was $ 42,280 and $ 41,964 at September 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.

1 unchanged sentence

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Customer A 24 % — %

14 unchanged sentences

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:

Impairment losses and gains or losses on sales are recognized within other expense in our consolidated statements of operations and comprehensive (loss) income.

Impairment loss was $ 21,511 and $ 776 for the nine months ended September 30, 2022 and 2021, respectively.

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

Asset Gross Carrying Amount Accumulated Digital Asset Impairment Digital Asset Carrying

9 unchanged sentences

Total $ 41,964 $ ( 9,383 ) $ 32,581

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:

Accumulated digital asset impairment noted above represents impairment on the remaining cost lots as of the respective dates.

Changes in our digital asset holdings for the nine months ended September 30, 2022 were as follows:

Bitcoin Ethereum Other Total

3 unchanged sentences

Exchanges of digital assets — ( 911 ) 911 —

Realized gain 26 168 — 194

Other 26 169 — 195

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.

Net balance at September 30, 2022 $ 11,587 $ 704 $ 326 $ 12,617

Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (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.

Diluted net income (loss) per common share is computed by giving effect to all potential shares of common stock adjusted to include the effect of shares issuable pursuant to our convertible note(s), the exercise of in-the-money warrants and options and unvested restricted stock units, to the extent dilutive.

Shares are excluded from the calculation of diluted net income (loss) per common share when their inclusion would have been anti-dilutive or out-of-the-money.

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Convertible notes — 19,324 — 19,324

8 unchanged sentences

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 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:

3 unchanged sentences

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:

Our financial instruments measured at fair value as of September 30, 2022 are set forth below:

Level 1 Level 2 Level 3 Total

11 unchanged sentences

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

September 30, 2022 December 31, 2021

Strike price per share $ 2.25 $ 2.25

5 unchanged sentences

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.

All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.

Recent Accounting Standards Not Yet Adopted

18 unchanged sentences

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.

As of September 30, 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)

The revenue milestones were achieved, and accordingly, we made the earn out payment in October 2022.

There is $ 2,449 and $ 5,531 recorded in accrued expenses in the condensed consolidated balance sheets as of September 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 nine months ended September 30, 2021, as if the acquisition of Lyte had occurred on January 1, 2021:

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

(in thousands)

Net revenues $ 5,421 $ 12,774

Net loss ( 7,943 ) ( 22,777 )

Net income (loss) $ 338 $ ( 23,108 )

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.

3 unchanged sentences

The following table sets forth our net revenues by category:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

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.

We derived 99 % and 97 % of our net revenues from within the United States for the three and nine months ended September 30, 2022, respectively.

We derived 99 % of our net revenues from within the United States for the three and nine months ended September 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,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Customer B 1 % 35 % 1 % 15 %

Customer E — % 8 % — % 14 %

Customer F — % 21 % — % 19 %

Customer G — % 13 % — % 11 %

Deferred Revenue

Our deferred revenue balance consisted of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current deferred revenue

8 unchanged sentences

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.

During the nine months ended September 30, 2022, we recognized revenue of $ 3,624 that was included in our deferred revenue balance as of December 31, 2021.

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.

Remaining performance obligations were $ 5,598 as of September 30, 2022, of which we expect to recognize approximately 39 % as revenue over the next 12 months and the remainder thereafter.

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.

During the nine months ended September 30, 2022, we sold 187.0 million PhunToken for an aggregate of $ 1,535 , for which we received both cash and digital assets from customers.

Sales of PhunToken are recorded within platform revenue in the table above.

2 unchanged sentences

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.

In October 2022, our Board of Directors terminated the PhunToken Restricted Purchase Agreements, with no further PhunToken to be delivered to the employees after April 1, 2022.

As of September 30, 2022 and December 31, 2021, issued PhunToken were 461.4 million and 131.7 million, respectively.

Total supply of PhunToken is capped at 10 billion.

Our inventory balance on the dates presented consisted of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Raw materials $ 3,168 $ 2,075

1 unchanged sentence

Finished goods 169 138

Other 242 216

Inventory reserve ( 131 ) —

Total inventory $ 3,236 $ 2,636

2022 Promissory Note

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, discussed further below.

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, 2023, 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.

The 2022 Promissory Note had a principal balance of $ 12,809 and debt discount of $ 634 at September 30, 2022.

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.

5 unchanged sentences

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.

The 2021 Promissory Note had a principal balance of $ 522 and $ 5,220 and debt discount of $ 6 and $ 316 at September 30, 2022 and December 31, 2021, respectively.

In October 2022, we paid the final payment amount of $ 574 on the 2021 Promissory Note.

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2022 Promissory Note $ 463 $ — $ 463 $ —

2021 Promissory Note 49 — 349 —

2020 Convertible Notes — — — 1,111

4 unchanged sentences

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.

Other than the 2021 and 2022 Promissory Notes referenced above, 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.

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).

On March 15, 2022, we entered into a lease agreement, in which we 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 commenced in July 2022.

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.

In addition, we are 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.

During the third quarter of 2022, we recorded a right-of-use asset and corresponding lease liability of $ 1,545 .

On June 3, 2022, we entered into a lease agreement pursuant to which we 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.

4 unchanged sentences

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.

The weighted-average remaining lease term for our operating leases as of September 30, 2022 was 4.21 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.

The components of lease expense are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive (loss) income.

Lease expense for the three and nine months ended September 30, 2022 was $ 338 and $ 778 , respectively.

Lease expense for the three and nine months ended September 30, 2021 was $ 208 and $ 629 , respectively.

Future minimum lease obligations are set forth below:

8 unchanged sentences

The case, captioned Wild Basin Investments, LLC, et al.

Phunware, Inc., et al., was filed in the in the Court of Chancery of the state of Delaware (Cause No.

Phunware, Inc., et al., was filed in the Court of Chancery of the state of Delaware (Cause No.

2022-0168-LWW).

2 unchanged sentences

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.

All briefing on the motion to dismiss and motion for partial summary judgement is complete.

The Court of Chancery has not yet set a date for a hearing on the motions.

We 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.

3 unchanged sentences

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

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.

In addition, for the matters disclosed above that do not 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.

Stockholders’ Equity

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.

Total common stock authorized to be issued as of September 30, 2022 was 1,000,000,000 shares, with a par value of $ 0.0001 per share.

At September 30, 2022 and December 31, 2021, there were 101,321,268 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.

1 unchanged sentence

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.

As of September 30, 2022, 2,193,460 shares of our common stock have been sold for aggregate cash proceeds of $ 3,817 , net of transaction costs of $ 86 .

We also incurred additional transaction costs paid outside of closing of $ 163 .

11 unchanged sentences

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.

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.

As of September 30, 2021, 2,730,654 shares of our common stock had been sold and we had received aggregate net cash proceeds of $ 3,149 , of which $ 3,052 had been received by us in

cash as of September 30, 2021.

We received the balance subsequent to the end of the quarter, and accordingly, we recorded $ 97 in prepaid expenses and other current assets as of September 30, 2021.

Transaction costs were $ 97 .

4 unchanged sentences

A summary of our outstanding warrants is set forth below:

June 30, 2022

September 30, 2022

December 31, 2021

24 unchanged sentences

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.

As of September 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 2,272,435 and 762,038 shares of common stock reserved for future issuances as of September 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:

A summary of our restricted stock unit activity under the 2018 Plan for the nine months ended September 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 1,292,000 1.58

Released ( 1,409,494 ) 1.76

Forfeited ( 105,000 ) 2.22

Outstanding as of June 30, 2022 2,621,346 $ 1.95

Outstanding as of September 30, 2022 3,353,776 $ 1.86

During the third quarter of 2022, we granted 1,267,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.57 per share.

The awards granted to team members vest over a range of 39 to 49 months with various installment and vesting dates, and are subject to service conditions.

We also granted 25,000 restricted stock units to non-employee, each with a grant date fair value of $ 1.70 .

The award vest on March 31, 2023 and are subject to service conditions.

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

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.

A summary of our stock option activity under the 2018 Plan and related information is as follows:

Number of Shares Weighted Average

Exercise Price Weighted Average

Contractual Term

(years) Aggregate Intrinsic

Outstanding as of December 31, 2021 50,000 $ 1.08 1.37 $ 78

Granted 50,000 1.70

Exercised — —

Forfeited ( 12,500 ) 1.08

Outstanding as of September 30, 2022 87,500 $ 1.43 5.9 $ 4

Exercisable as of September 30, 2022 68,750 $ 1.36 4.82 $ 4

During third quarter of 2022, we granted options to purchase 50,000 shares of our common stock to two non-employee consultants with an exercise price of $ 1.70 per share.

The options vest over five months with half on August 30, 2022, then four equal monthly installments until December 30, 2022.

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.

Stock-based compensation expense related to our 2018 ESPP for the three and nine months ended September 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 September 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:

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

Number of Shares Weighted Average

5 unchanged sentences

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 .

Outstanding as of September 30, 2022 897,229 $ 0.80 4.96 $ 452

Exercisable as of September 30, 2022 896,155 $ 0.80 4.96 $ 452

For the nine months ended September 30, 2022, the aggregate intrinsic value of options exercised was $ 42 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,

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

Three Months Ended September 30, Nine Months Ended September 30,

Stock-based compensation 2022 2021 2022 2021

4 unchanged sentences

Total stock-based compensation $ 899 $ 1,495 $ 2,169 $ 3,933

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.

As of September 30, 2022, there was approximately $ 5,702 , $ 224 and $ 1 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 2.7 years, 1.1 years and 0.8 years for the 2018 Plan, the 2018 ESPP and 2009 Plan, respectively.

4 unchanged sentences

Phunware and Lyte.

In 2021, but prior to the acquisition of Lyte, our CEO reviewed the

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

In 2021, but prior to the acquisition of Lyte, our CEO reviewed the 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 September 30, 2022

Phunware Lyte Consolidated

1 unchanged sentence

Loss before taxes $ ( 6,858 ) $ ( 1,160 ) $ ( 8,018 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Phunware Lyte Consolidated

1 unchanged sentence

Loss before taxes $ ( 37,925 ) $ ( 2,081 ) $ ( 40,006 )

June 30, 2022

September 30, 2022

Phunware Lyte Consolidated

6 unchanged sentences

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.

As of September 30, 2022 and December 31, 2021, all of our identifiable long-lived assets were in the United States.

Subsequent Events

We have evaluated subsequent events through the date the financial statements were issued.

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.

Through November 10, 2022, we sold an additional 430,000 shares of our common stock pursuant to the terms of our At Market Issuance Sales Agreement with Wainwright.

Aggregate net cash proceeds were $ 643 and transaction costs were $ 15 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements