What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-04-07 · 376 added, 456 removed, 826 unchanged (50% of the section changed)

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes Stockholders’ Equity (Deficit)

Consolidated Statements of Changes Stockholders’ Equity

Consolidated Statements of Cash Flows

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the Accounting for and Disclosure of Digital Assets

Description of the Matter

As described in Note 2 to the consolidated financial statements, the Company’s digital assets held as of December 31, 2021, which consist mainly of Bitcoin and Ethereum, are accounted for as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet.

As described in Note 2 to the financial statements, the Company’s digital assets held as of December 31, 2022, which consist mainly of Bitcoin and Ethereum, are accounted for as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet.

The Company’s digital assets as of December 31, 2022 were approximately $10.1 million.

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• Evaluated management’s rationale for inclusion of digital assets as a current asset on the balance sheet;

• Evaluated management’s disclosures of its digital assets activity in the financial statement footnotes;

• In connection with the sales of digital assets, we traced and agreed the details of the transactions to the underlying documents, examined supporting sale and cash receipt evidence, and tested the fair value of the assets received;

• Confirmed the existence of the Company’s digital asset balances through a third-party custodian platform;

• Evaluated the third-party custodian platform’s pricing sources with various independent pricing sources.

• Evaluated management’s disclosures of its digital assets activity, including risks related to PhunToken in the notes to the financial statements;

• Tested the existence of the Company’s digital assets by evaluating the Company’s self-custody wallet and reconciling the Company’s internal records of digital asset positions for specific wallet addresses to the quantities of digital assets held on those addresses per the Bitcoin ledger;

• Tested the pricing sources used to value the digital assets held and tested the Company’s write-downs by reperforming an independent pricing on the digital assets held using various independent pricing sources for the full year.

/s/ Marcum LLP

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Houston, Texas

April 7, 2022

March 31, 2023

Phunware, Inc.

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Intangible assets, net 2,524 3,213

Deferred tax asset 1,278 537

Restricted cash — 91

Right-of-use asset 3,712 1,260

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Total assets 54,835 98,016

Liabilities and stockholders’ equity (deficit)

Liabilities and stockholders’ equity

Current liabilities:

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Accrued expenses 2,895 9,621

Accrued legal settlement — 3,000

Lease liability 954 399

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Total current liabilities 25,577 30,293

Long-term debt — 3,762

Long-term debt - related party — 195

Deferred tax liability 1,278 537

Deferred revenue 1,274 1,299

Lease liability 3,103 1,147

Deferred rent — 180

Total liabilities 29,954 32,739

Commitments and contingencies (Note 10)

Stockholders’ equity (deficit)

Stockholders’ equity

Common stock, $ 0.0001 par value;

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Accumulated deficit ( 250,219 ) ( 199,325 )

Total stockholders’ equity (deficit) 65,277 ( 1,979 )

Total liabilities and stockholders’ equity (deficit) 99,294 31,836

Total stockholders’ equity 24,881 65,277

Total liabilities and stockholders’ equity 54,835 98,016

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

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Research and development 6,149 4,179

Legal Settlement — 4,500

Impairment of goodwill 2,061 —

Total operating expenses 34,578 20,457

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Loss before taxes ( 50,890 ) ( 53,948 )

Income tax benefit (expense) 426 ( 2 )

Income tax (expense) benefit ( 4 ) 426

Net loss ( 50,894 ) ( 53,522 )

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Release of restricted stock 2,494 — — — — —

Issuance of common stock for payment of legal, earned bonus and board of director fees 1,348 — 1,283 — — 1,283

Issuance of common stock under the 2018 employee stock purchase plan 84 — 100 — — 100

Issuance of common stock for payment of board of director fees 99 — 66 — — 66

Sales of common stock, net of issuance costs 35,383 4 94,733 — — 94,737

Common stock issued pursuant to warrant exercises 2,060 — 20,782 — — 20,782

Stock-based compensation expense — — 4,928 — — 4,928

Issuance of common stock upon partial conversions of Senior Convertible Note 1,764 1 2,266 — — 2,267

Reacquisition of equity component of Senior Convertible Notes — — ( 1,388 ) — — ( 1,388 )

Equity classified cash conversion feature of Senior Convertible Note — — 219 — — 219

Cumulative translation adjustment — — — — ( 14 ) ( 14 )

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Issuance of common stock under the 2018 employee stock purchase plan 205 — 214 — — 214

Issuance of common stock for payment of board of director fees 99 — 66 — — 66

Issuance of common stock in connection with acquisition of Lyte Technology, Inc.

1,724 — 3,064 — — 3,064

Sales of common stock, net of issuance costs 2,623 — 4,298 — — 4,298

Common stock issued pursuant to warrant exercises 2,060 — 20,782 — — 20,782

Stock-based compensation expense — — 3,014 — — 3,014

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Accretion of debt discount and amortization of deferred financing costs 1,034 2,942

Loss (gain) on change in fair value of warrant liability 18,139 ( 872 )

(Gain) loss on change in fair value of warrant liability ( 3,349 ) 18,139

Loss on extinguishment of debt — 7,952

Impairment of digital assets 22,911 9,383

Impairment of goodwill 2,061 —

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

Stock-based compensation 3,009 4,941

Deferred income taxes — —

Other adjustments 1,466 ( 478 )

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Investing activities

Proceeds received from sale of digital assets 1,282 —

Purchases of digital assets ( 923 ) ( 41,284 )

Acquisitions, net of cash acquired ( 5,101 ) —

Acquisition payments, net of cash acquired ( 2,375 ) ( 5,101 )

Capital expenditures ( 271 ) —

Net cash used in investing activities ( 2,287 ) ( 46,385 )

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Proceeds from borrowings, net of issuance costs 11,795 14,711

Proceeds from related party bridge loans — 560

Payments on borrowings ( 8,066 ) ( 26,243 )

Payments on related party notes — ( 560 )

Net repayments on factoring agreement — ( 1,077 )

Proceeds from sales of common stock, net of issuance costs 4,298 94,737

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Effect of exchange rate on cash and restricted cash ( 123 ) ( 14 )

Net increase (decrease) in cash and restricted cash 19,106 3,669

Net (decrease) increase in cash and restricted cash ( 21,182 ) 19,106

Cash and restricted cash at the beginning of the period 23,137 4,031

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Supplemental disclosure of non-cash information

Right-of-use assets obtained in exchange for operating lease obligations $ 3,053 $ —

Non-cash exchange of digital assets $ 906 $ —

Issuance of common stock in connection with acquisition of Lyte Technology, Inc.

Issuance of common stock under the 2018 employee stock purchase plan $ 214 $ 100

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Non-cash issuance of common stock upon partial exercise of a warrant $ — $ 16,147

Issuance of common stock upon partial conversions of the Senior Convertible Note $ — $ 2,266

Reacquisition of equity component of the Senior Convertible Note $ — $ ( 1,388 )

Equity classified cash conversion feature of the Senior Convertible Note $ — $ 219

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

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During 2021, we began to sell PhunToken to consumers, developers and brands.

PhunToken is an innovative cryptocurrency utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our MaaS platform.

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.

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All intercompany transactions and balances have been eliminated in consolidation.

Reclassifications of Prior Year Presentation

Certain reclassifications have been made to our consolidated statement of cash flows for year ended December 31, 2020.

We combined individual line items that we considered to be immaterial and recorded these in our consolidated statement of cash flows as other adjustments to conform to current year presentation.

These reclassifications had no impact on previously reported operating, investing or financing cash flows.

Going Concern

Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern ("ASC 205-40") requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued.

Under ASC 205-40, management has the responsibility 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.

Reclassification of Prior Year Presentation

Certain amounts in the consolidated balance sheet of the prior period have been reclassified to conform to the current period presentation.

A reclassification was made to the consolidated balance sheet as of December 31, 2021 to net deferred tax assets with deferred tax liabilities.

The reclassification had no impact on previously reported net income or cash flows.

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.

Our assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows.

During 2021, we secured additional cash financings through the sales and issuances of our common stock through an underwritten public offering, an at-the-market offering and a partial exercise of a warrant.

However, we continue to focus on growing our revenues.

Accordingly, operating expenditures may exceed the revenue we expect to receive for the foreseeable future.

We, also, have a history of operating losses and negative operating cash flows and expect these trends to continue into the foreseeable future.

As of the date of this Annual Report on Form 10-K, while we believe we have adequate capital resources to complete our near-term operations, there is no guarantee that such capital resources will be sufficient until such time we reach profitability.

We may access capital markets to fund strategic acquisitions or ongoing operations on terms we believe are favorable.

The timing and amount of capital that may be raised is dependent on market conditions and the terms and conditions upon which investors would require to provide such capital.

We may utilize debt or sell newly issued equity securities through public or private transactions, or through the use of our at-the-market offering facility.

We currently have an effective "shelf"

registration statement on Form S-3, which we may utilize for future financings for the issuance of our common stock, preferred stock, warrants or units.

We also hold digital assets, which management believes can be readily sold and converted into cash.

As a result of the cash financings described above, we believe we have sufficient cash on-hand to fund potential net cash outflows for one year following the filing date of this Annual Report on Form 10-K.

Accordingly, we believe there does not exist any indication of substantial doubt about our ability to continue as a going concern for one year following the filing date of this Annual Report on Form 10-K.

We have a history of losses in each fiscal year since our inception.

For the year ended December 31, 2022, we incurred a net loss of $ 50,894 , used $ 26,827 in cash for operations and have a working capital deficiency.

Total backlog and cash-on-hand for the period then ended did not meet our expectations.

The foregoing conditions raise substantial doubt about our ability to meet our financial obligations as they become due.

In performing the second step of this assessment, we are required to evaluate whether our plans to mitigate the conditions above alleviate the substantial doubt.

Our assessment included the preparation of a detailed cash forecast that included projected cash inflows and outflows.

We continue to focus on growing our revenues, and accordingly, we expect operating expenditures to exceed future revenue for the foreseeable future.

Future plans may include reducing operating expenses, liquidating our digital asset holdings, sales of our common stock under a sales agreement in an at-the-market offering, issuing additional shares of common stock, preferred stock, warrants or units pursuant to an effective shelf registration statement.

Despite a history of successfully implementing similar plans, these sources of working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above.

There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all.

In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and support our growth.

If additional funding cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted;

however, we have been successful in accessing capital markets in the past, and we are confident in our ability to access capital markets again, if needed.

If additional funding cannot be

obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted.

We have therefore concluded there is substantial doubt about our ability to continue as a going concern through one year from the issuance of these financial statements.

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

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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, digital assets, 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, fair value of debt component of convertible notes at issuance and derecognition, 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.

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 likely to evolve.

Regulation governing blockchain technologies, cryptocurrencies, digital assets, digital asset exchanges, utility tokens, security tokens and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens and token ecosystem.

Regulation of digital assets, like PhunCoin and PhunToken, cryptocurrencies, blockchain technologies and digital asset exchanges, is evolving and likely to continue to evolve.

Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty.

Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them.

Any such 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.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 includes the removal of certain exceptions to the general principles of ASC 740 and simplifies the accounting for income taxes by clarifying and amending existing guidance.

We adopted the update January 1, 2021 and it did not have a material impact on our consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) ("ASU 2016-02").

We adopted ASU 2016-02 effective January 1, 2021.

The core principle of ASU 2016-02 is that a lessee should recognize the assets and liabilities that arise from leases.

For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially

measured at the present value of the lease payments, in the statement of financial position.

We have elected certain practical expedients permitted under the transition guidance that allow us to use the beginning of the period of adoption (January 1, 2021) as the date of initial recognition.

As a result, prior period comparative financial information was not recast under the new standard and continues to be presented under the prior lease accounting standards.

Other practical expedients include our election to not separate non-lease components from lease components and to not reassess lease classification, treatment of initial direct costs or whether an existing or expired contract contains a lease.

We have also elected to apply the short-term lease exception for all leases, which we will not recognize right-of-use assets or lease liabilities for leases that, at the commencement date, have a term of twelve (12) months or less.

The adoption of the new lease standard on January 1, 2021, resulted in the recognition of right-of-use assets and operating lease liabilities of $ 2,101 on our consolidated balance sheet.

In connection with the adoption of this standard, short-term deferred rent of $ 8 , which was previously recorded in accrued expenses and long term deferred rent of $ 180 previously recorded in deferred rent on our consolidated balance sheet was offset against the right-of-use asset.

The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 are set forth below:

January 1, 2021

Right-of-use asset $ 2,101

Straight-line rent accrual ( 188 )

Lease liability, current $ 500

Lease liability, non-current 1,601

The adoption of ASU 2016-02 did not have a material impact on our consolidated statements of operations and comprehensive loss.

Any such laws, regulations, guidance or other actions could adversely affect our ability to maintain PhunCoin and PhunToken, which could have a material adverse effect on our operations and financial condition.

Failure by us to comply with any such laws 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.

Revenue Recognition

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When selling our platform subscriptions and services, our contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

For contracts with

multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required.

Determining whether products and services are considered distinct performance

obligations that should be accounted for separately versus together may require significant judgment.

For contracts with multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required.

Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time.

Significant judgment is also required relating to the timing of the satisfaction of performance obligations.

Platform Subscriptions and Services Revenue

Platform Revenue

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

Excluding PhunToken sales, in which we are paid in advance, typically our platform revenue customers pay us on net-30 day terms.

Subscriptions and Services.

We derive subscription revenue from software license fees, which comprise subscription fees from customers licensing our Software Development Kits (SDKs), which include accessing the MaaS platform and/or MaaS platform data;

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License fees are typically billed annually in advance.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications.

We recognize application development revenue upon the transfer of control of the completed application or application development services.

We typically bill for application development revenue in advance at contract signing, but may at times, bill one-half in advance at contract execution and one-half upon completion.

Subscription revenue from SDK licenses gives the customer the right to access our MaaS platform.

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Support revenue is recognized ratably over the support term.

Support and maintenance is typically billed annually in advance.

We typically bill subscriptions and support and maintenance annually in advance.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications.

We recognize application development revenue upon the transfer of control of the completed application or application development services.

We typically bill for application development revenue in advance at contract signing, but may at times, bill one-half in advance at contract execution and one-half upon completion.

When a customer contract consists of licensing, application development and support and maintenance, we consider these separate performance obligations, which would require an allocation of consideration, of which significant judgement is required.

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cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers;

cost per click, on which advertisers are charged for each ad clicked or touched on by a user;

cost per click, on which advertisers are billed monthly for each ad clicked or touched on by a user;

and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app.

In addition, during 2020, we generated application transaction revenue thru in-app purchases from an application on our platform.

In the normal course of business, we may act as an intermediary in executing transactions with third parties.

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During 2021, we announced the commencement of the selling of PhunToken to consumers, developers and brands.

PhunToken is an innovative cryptocurrency utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our MaaS platform.

PhunToken is an innovative digital asset utilized within our token ecosystem to help drive engagement by

unlocking features and capabilities of our MaaS platform.

We follow the guidance of ASC 606 in determination the revenue recognition of our PhunToken sales.

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We recognize revenue related to PhunToken at the time of delivery of PhunToken to a customer's ethereum-based digital wallet.

Computer Hardware Revenue

Hardware Revenue

We acquired Lyte Technology in October 2021.

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A majority of Lyte's customers pay us via credit card payments, which are managed through a third party processor.

We recognize computer hardware revenue at the time a completed unit ships from our facility.

We recognize computer hardware revenue, including shipping, at the time a completed unit ships from our facility.

Deferred Commissions

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Changes in deferred commissions for the years ended December 31, 2022 and 2021 are as follows:

Balance, beginning of the period $ 210 $ 309

Balance, beginning of the year $ 148 $ 210

Deferral of commissions earned 55 73

Recognition of commission expense ( 67 ) ( 135 )

Balance, end of the period $ 148 $ 210

Balance, end of the year $ 136 $ 148

Business Combination

We account for business combinations using the acquisition method of accounting as prescribed in ASC 805, " Business Combinations (Topic 805) ." We record the assets acquired, liabilities assumed and acquisition-related contingent consideration at fair value on the date of acquisition.

The difference between the purchase price, including any contingent consideration, and the fair value of net assets acquired is recorded as goodwill.

We may adjust the preliminary purchase price and purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as we obtain more information as to facts and circumstances that impact the determination of fair value at the acquisition date.

Any change in fair value of acquisition-related contingent consideration resulting from events after the acquisition date is recognized in earnings.

Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

Concentrations of Credit Risk

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We consider all investments with a maturity of three months or less from the date of acquisition to be cash equivalents.

The Company had no cash equivalents at December 31, 2021 or 2020.

As a result of certain debt financings, we were required to maintain restricted balances.

We had $ 91 in restricted cash as of December 31, 2020.

The Company had no cash equivalents or restricted cash at December 31, 2022 or 2021.

Accounts Receivable and Reserves

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Changes in the allowance for doubtful accounts are as follows:

Balance, beginning of period $ 356 $ 3,179

(Recovery) allowances for bad debt ( 286 ) 205

Issuance of credit memos and write offs ( 60 ) ( 3,028 )

Balance, end of period $ 10 $ 356

Balance, beginning of year $ 10 $ 356

Provision for doubtful accounts, net of recoveries 198 ( 286 )

Write offs ( 10 ) ( 60 )

Balance, end of year $ 198 $ 10

Our inventory consists of computer hardware materials and finished computers available-for-sale and are stated at the lower of cost or net realizable value, determined using the first-in first-out (“FIFO”) method.

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Digital Assets

During the year ended December 31, 2021, we purchased an aggregate of $ 41,284 in digital assets, and we were paid $ 680 in digital assets by various customers.

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.

We have ownership of and control over our digital assets and we may use third-party custodial services or self-custody solutions to secure them.

The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.

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 and ethereum (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.

In determining if an impairment has occurred, we consider the lowest intra-day market price quoted on an active exchange since acquiring the respective digital asset.

If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value.

The fair value of our digital asset holdings at December 31, 2022 is $ 10,808 .

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value.

Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held.

In determining the gain or loss to be recognized

upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

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 $ 9,383 for the year ended December 31, 2021 and we did not sell any digital assets during the year ended December 31, 2021.

The following tables set forth changes in our bitcoin and ethereum holdings:

Bitcoin Digital Asset Original

Cost Basis Digital Asset Impairment

Losses Digital Asset Carrying

Balance as of December 31, 2020 $ — $ — $ —

Purchases 36,806 36,806

Received from customers 157 157

Impairment loss ( 8,554 ) ( 8,554 )

Balance as of December 31, 2021 $ 36,963 $ ( 8,554 ) $ 28,409

Ethereum Digital Asset Original

Cost Basis Digital Asset Impairment

Losses Digital Asset Carrying

Balance as of December 31, 2020 $ — $ — $ —

Purchases 4,191 4,191

Received from customers 523 523

Impairment loss ( 670 ) ( 670 )

Balance as of December 31, 2021 $ 4,714 $ ( 670 ) $ 4,044

Other digital assets purchased during the year ended December 31, 2021 was $ 287 and we recorded an impairment losses of $ 159 related to those purchases.

Impairment loss was $ 22,911 and $ 9,383 for the years ended December 31, 2022 and 2021, respectively.

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

Asset Gross Carrying Amount Accumulated Digital Asset Impairment Digital Asset Carrying

Bitcoin $ 34,994 $ ( 25,534 ) $ 9,460

Ether 1,506 ( 1,156 ) 350

Other 1,237 ( 910 ) 327

Total $ 37,737 $ ( 27,600 ) $ 10,137

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

Bitcoin $ 36,963 $ ( 8,554 ) $ 28,409

Ethereum 4,714 ( 670 ) 4,044

Other 287 ( 159 ) 128

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

Gross carrying amount and accumulated digital asset impairment noted above represent carrying amount and impairment, respectively, on the remaining cost lots as of the respective dates.

Changes in our digital asset holdings for the year ended December 31, 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 37 378 44 459

Purchases of digital assets 923 — — 923

Exchanges of digital assets — ( 906 ) 906 —

Disposal proceeds ( 796 ) ( 486 ) — ( 1,282 )

Gain on sale of digital assets 69 298 — 367

Impairment expense ( 19,182 ) ( 2,978 ) ( 751 ) ( 22,911 )

Net balance at December 31, 2022 $ 9,460 $ 350 $ 327 $ 10,137

Goodwill and Intangible Assets

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In accordance with ASC 350, Intangibles — Goodwill and Other , we do not amortize goodwill or intangible assets with indefinite lives but rather assesses their carrying value for indications of impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired.

We adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , on January 1, 2020, which states an entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

We derived the fair value from the market capitalization approach, whereby we utilize the historical market price of our common stock traded on the Nasdaq to estimate the fair value of our reporting unit.

The determination of whether goodwill has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the reporting unit.

Changes in our strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill.

Our business is classified into two reporting units:

Phunware and Lyte.

In testing goodwill for impairment, we have the option to begin with a qualitative assessment, commonly referred to as “Step 0,” to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.

This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, entity-specific financial performance and other events, such as changes in our management, strategy and primary user base.

If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative goodwill impairment analysis by comparing the carrying amount to the fair value of the reporting unit.

If the carrying amount exceeds the fair value, goodwill will be written down to the fair value and recorded as impairment expense in the consolidated statements of operations.

We perform our impairment testing annually and when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The Company performed its annual impairment assessment of goodwill as of October 1, 2022 and concluded that goodwill was impaired.

Refer to Note 6, Goodwill , for further discussion on our goodwill impairment.

Identifiable intangible assets consist of acquired trade names, customer lists, technology, in-process research and development and order backlog associated with the acquired businesses.

Amortization of finite-lived intangible assets is calculated using either the straight-line or accelerated amortization model based on our best estimate of the distribution of the economic value of the identifiable intangible assets.

We did not recognize any goodwill or intangible impairment losses in the years ended December 31, 2021 or 2020.

Long-Lived Assets

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We did not recognize any impairment losses relating to our long-lived assets during the years ended December 31, 2022 or 2021.

Convertible Debt

In March 2020, we issued a 7 % convertible note with a principal amount of $ 3,000 for gross proceeds at closing of $ 2,371 .

In accounting for the issuance, we separated the note into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the par value of the note.

The difference represents the debt discount, recorded as a reduction of the senior convertible note on our consolidated balance sheet, and is amortized to interest expense over the term of the note using the effective interest rate method.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the note, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values.

Issuance costs attributable to the liability component were amortized using the effective interest rate method to interest expense over the term of the note.

The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital.

In July 2020, we issued a convertible note with an initial principal amount of $ 4,320 .

After the payoff of convertible note issued in March 2020 and deducting transaction costs, aggregate net cash proceeds to the Company was $ 1,751 .

In accordance with ASC Topic 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock , we evaluated all of the convertible note's financial instruments, including warrants to purchase common stock issued in conjunction with convertible debt, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statement of operations and comprehensive loss.

We use a Black-Scholes option-pricing model to value the warrants at inception and subsequent valuation dates.

Refer to Fair Value of Financial Instruments below.

Direct costs incurred to issue non-revolving debt instruments are recognized as a reduction to the related debt balance in the accompanying consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method.

We adopted the new lease accounting standard, ASU 2016-02 using the modified retrospective basis for all agreements existing as of January 1, 2021 as described further above Recently Adopted Accounting Pronouncements .

The Company recognizes a right-of-use asset and lease liability for all operating leases with terms greater than twelve months.

Debt Issuance Costs and Discount

Debt discounts and direct costs incurred to issue non-revolving debt instruments are recognized as a reduction to the related debt balance in the accompanying consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method.

Derivative Liabilities

When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the consolidated balance sheet.

In accordance with ASC 815-40, Derivatives and Hedging - Contracts in the Entity’s Own Equity (“ASC 815-40”), we classify a warrant as equity if it is indexed to our equity and several specific conditions for equity classification are met.

A warrant is not considered indexed to our equity, in general, when it contains certain types of exercise contingencies or adjustments to exercise price.

If a warrant is not indexed to our equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity , or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations.

As of December 31, 2022 and 2021, we had a warrant that was classified as a liability and other warrants that were classified as equity.

We used a Black-Scholes option-pricing model to value the warrant classified as a liability at inception and subsequent valuation dates.

The initial and subsequent valuations of the warrant require significant judgment.

We adopted ASU 2016-02, Leases (Topic 842), as of January 1, 2021, in which we recognize a right-of-use asset and lease liability for all operating leases with terms greater than twelve months.

The lease liability is measured based on the present value of the lease payments not yet paid.

The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease.

Short-term leases, or leases that have a lease term of 12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

We have elected certain practical expedients permitted under the guidance.

We have elected to apply the short-term lease exception for all leases, which we will not recognize right-of-use assets or lease liabilities for leases that, at the commencement date, have a term of twelve (12) months or less.

We have also elected not to separate non-lease components from lease components.

Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.

We lease our corporate offices under operating leases and determine if an arrangement is or contains a lease at inception.

The initial terms of our real property lease agreements are generally five years and typically allow for renewals in five-year increments.

We may, at times, negotiate a shorter lease renewal term.

We generally do not account for any renewals at the lease adoption date.

We did not enter into any financing leases for the year ended December 31, 2022.

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Forfeitures of all stock-based awards are accounted for when they occur.

Research and Development Expense

Research and development expenses consist primarily of personnel costs for our engineering, product, design and quality assurance teams, including stock-based compensation for individuals dedicated to our research and development function.

Additionally, research and development expenses include contractor fees and allocated overhead costs.

Research and development costs are expensed as incurred.

Retirement Plan

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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:

Convertible notes — 5,733,712

Warrants 6,632,561 5,636,801

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Restricted stock units 2,957,995 3,576,270

Restricted shares — 574

Total 10,552,335 10,138,538

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 basis.

Fair Value Measurements

We follow the guidance in ASC 820, Fair Value Measurement , to measure certain assets and liabilities on a recurring and nonrecurring basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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Determining which category an asset or liability falls within the hierarchy requires significant judgment.

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

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

Level 1 Level 2 Level 3 Total

Digital assets $ 32,581 $ — $ — $ 32,581

Total $ 32,581 $ — $ — $ 32,581

Warrant liability $ — $ 256 $ — $ 256

Total $ — $ 256 $ — $ 256

Our financial instruments measured at fair value as of December 31, 2020 are set forth below:

Our assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 are set forth below:

Level 1 Level 2 Level 3 Total

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The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust our liability and record additional expenses.

Subsequent Events

In accordance with U.S.

GAAP, we have evaluated events that have occurred after the date of the financial statements through the date the financial statements are issued to determine if events or transactions occurring after the date of the financial statements require potential adjustment to or disclosure in the financial statements.

See Note 18 for additional discussion on our subsequent events.

Smaller Reporting Company

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Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosures.

We did not have any convertible debt outstanding as of December 31, 2022;

accordingly, we do not expect the adoption of ASU 2020-06 to have a material impact on our consolidated financial statements and disclosures.

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).

On October 18, 2021, we consummated the acquisition of 100 % of the outstanding equity shares of Lyte, in which we paid to the seller of Lyte consideration in the form of cash and shares of our common stock valued at approximately $ 10.5 million.

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 following table summarizes the consideration paid for Lyte and the estimated fair values of the aggregate assets and liabilities acquired, at the acquisition date:

Assets acquired

The following table summarizes our current allocation of the October 18, 2021 purchase price:

Initial Allocation

Adjustments Final Allocation

Cash $ 4 $ — $ 4

Inventory 1,687 — 1,687

Intangible assets 3,340 — 3,340

Total assets acquired 5,031

Liabilities assumed

Accrued expenses — ( 436 ) ( 436 )

Deferred revenue ( 1,369 ) ( 35 ) ( 1,404 )

Total liabilities assumed 1,369

Net assets acquired 3,662

Consideration:

Acquisition and earn-out payable (subject to fair value adjustments) 6,619

Total consideration 10,599

Goodwill 6,937 35 6,972

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.

Total purchase price 10,599 ( 436 ) 10,163

Fair value adjustments 382 — 382

Total consideration paid $ 10,981 $ ( 436 ) $ 10,545

The initial 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 trade name represents the rights to the " Lyte Technology, Inc.

" brand name which is well known in the marketplace.

" brand name, which we believe is well known in the marketplace.

The useful life of the identified amortizable intangible assets acquired is five years .

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The amount of goodwill expected to be deductible for federal and state income tax purposes is $ 437 .

Consideration paid to the seller included $ 382 of fair value adjustments, which were recorded in Other expense in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

Expenses we incurred as a result of the acquisition of Lyte were not material and recorded in general and administrative expenses in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

Pursuant to terms of the stock purchase agreement, the future 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 quarter 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 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.

During 2021 and 2022, we paid to the seller of Lyte cash and stock consideration at various dates, including a final payment for an earn-out provision in October 2022 for the achievement of certain revenue milestones in the first year following closing, as provided in the stock purchase agreement.

For the year ended December 31, 2021, we generated computer hardware revenue of $ 3,095 and an operating loss of $ 609 , since the acquisition closing date.

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Year Ended December 31,

Platform subscriptions and services $ 5,308 $ 9,108

Computer hardware 3,095 —

Application transaction 2,240 893

Platform revenue $ 6,521 $ 7,548

Hardware revenue 15,273 3,095

Net revenues $ 21,794 $ 10,643

For the year ended December 31, 2021, we sold $ 1,063 of PhunToken for which we received both cash and digital assets from customers.

Revenue from sales of PhunToken is recorded within application transaction revenue in the table above.

For the years ended December 31, 2022 and 2021, we sold $ 1,535 and $ 1,063 , respectively, of PhunToken for which we received both cash and digital assets from customers.

Revenue from sales of PhunToken is recorded within platform revenue in the table above.

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity.

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Net revenues $ 21,794 $ 10,643

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

Year Ended December 31,

Customer D — % 32 %

Customer E 7 % 12 %

Deferred Revenue

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Current deferred revenue

Computer hardware $ 2,149 $ —

Platform subscriptions and services revenue 1,744 2,317

Application transaction revenue 80 80

Platform revenue $ 1,531 $ 1,824

Hardware revenue $ 1,373 $ 2,149

Total current deferred revenue $ 2,904 $ 3,973

Non-current deferred revenue

Platform subscriptions and services revenue $ 1,299 $ 2,678

Platform revenue $ 1,274 $ 1,299

Total non-current deferred revenue $ 1,274 $ 1,299

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Remaining Performance Obligations

Remaining performance obligations consist of gross deferred revenue and backlog.

Remaining performance obligations were $ 8,002 as of December 31, 2022, of which we expect to recognize 47 % as revenue over the next 12 months and the remainder thereafter.

Cash, Cash Equivalents, and Restricted Cash

We had no cash equivalents as of December 31, 2021 and 2020.

The following table sets forth our cash and restricted cash:

Cash $ 23,137 $ 3,940

Restricted cash — 91

Total cash and restricted cash $ 23,137 $ 4,031

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.

For the years ended December 31, 2022 and 2021, we recognized revenue from PhunToken sales of $ 1,535 and $ 1,063 , respectively, 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 would have been transferred to employees over a time-based delivery schedule ranging from one to four years .

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 December 31, 2022 and 2021, issued PhunToken were 377.2 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:

December 31, 2022 December 31, 2021

Raw materials $ 2,968 $ 2,075

Work-in-process — 207

Finished goods 50 138

Inventory reserve ( 268 ) —

Total inventory $ 2,780 $ 2,636

Goodwill and Other Intangible Assets

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Foreign currency translation ( 121 ) ( 14 )

Impairment of goodwill ( 2,061 ) —

Balance, end of period $ 31,113 $ 33,260

We test goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value.

We performed quantitative testing on our Lyte reporting unit as of October 1, 2022, using a combination of the discounted cash flow (income approach) utilizing Level 3 unobservable inputs and the Guideline Public Company Method (market approach).

Based on the analysis performed, we concluded that the carrying amount of the reporting unit exceeded its fair value resulting in a non-cash goodwill impairment charge of $ 2,061 included in Impairment of goodwill in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

Higher than expected losses during our first full year of operations of Lyte resulted in the impairment.

We also performed quantitative testing on our Phunware reporting unit as of October 1, 2022, and determined that no further goodwill impairments existed.

The goodwill impairment analysis referenced above used the discounted cash flow model (income approach) utilizing Level 3 unobservable inputs.

Significant assumptions in this analysis included, but were not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate and the tax rate.

Estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies.

These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns.

Future cash flow estimates are, by their nature, subjective and actual results may differ materially from estimates.

If the Company’s ongoing estimates of future cash flows are not met or if discount rates change, the Company may have to record additional impairment charges in future periods.

We also used the Guideline Public Company Method (market approach).

The significant assumptions used in this analysis include, but are not limited to, the derived multiples from comparable market transactions and other market data.

The selection of comparable businesses is based on the markets in which the reporting unit operates giving consideration to risk profiles, size, geography, and diversity of products.

We applied an overall probability-weighting to the income and market approaches to determine the concluded fair value of the reporting unit.

We believe the current assumptions and estimates utilized in the income and market approaches are both reasonable and appropriate.

Intangible Assets

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Amortization expense for the years ended December 31, 2022 and 2021, was approximately $ 689 and $ 238 , respectively.

Expected future annual amortization expense for finite-lived intangible assets as of December 31, 2021, is as follows:

Expected future annual amortization expense for finite-lived intangible assets is as follows:

Future amortization expense for the years ending December 31, Amortization

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Payroll related expenses 899 2,801

Accounts payable settlement (see Note 11)

Other 584 449

Interest payable 618 203

Accounts payable settlement 231 446

Taxes 457 259

Other 690 381

Total accrued expenses $ 2,895 $ 9,621

Factoring Agreement

On June 15, 2016, we entered into a factoring agreement with CSNK Working Capital Finance Corp.

(d/b/a Bay View Funding) (“Bay View”) whereby we sold select accounts receivable with recourse.

Under the terms of the agreement, Bay View would advance us amounts representing up to 80 % of the net amount of eligible accounts receivable.

The factor facility was collateralized by a general security agreement over all the Company’s personal property and interests.

Fees paid to Bay View for factored receivables were 1.80 % for the first 30 days and 0.65 % for every ten days thereafter, to a maximum of 90 days total outstanding.

We bore the risk of credit loss on the receivables.

These receivables were accounted for as a secured borrowing arrangement and not as a sale of financial assets.

We terminated our factoring agreement with Bay View effective March 22, 2021.

Interest expense related to our Bay View factoring agreement was $ 75 and $ 175 for the years ended December 31, 2021 and 2020, respectively.

The following table sets forth our various debt obligations:

2022 Promissory Note

Series A Note (principal amount) — 2,481

Series B Note (principal amount) — 3,585

Paycheck Protection Program Loan — 2,850

Convertible Notes — 250

Promissory Notes — 905

Total debt $ 5,220 $ 10,071

Debt discount - warrants (2021 Promissory Note) ( 316 ) —

Debt discount - warrants (2020 Convertible Notes) — ( 1,029 )

Debt discount - issuance costs (2020 Convertible Notes) — ( 650 )

current maturities of long-term debt ( 4,904 ) ( 4,435 )

long-term related-party debt — ( 195 )

Long-term debt $ — $ 3,762

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 effective interest rate of the 2022 Promissory Note is 15.34 %.

The 2022 Promissory Note had a principal balance of $ 9,962 and debt discount of $ 295 as of December 31, 2022.

On March 15, 2023, we entered into a waiver agreement with the noteholder.

See Note 17 below for further discussion.

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 with an original principal amount of $ 5,220 in a private placement that closed on October 18, 2021.

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 promissory note was sold with an original issue discount of $ 200 and we paid at closing issuance costs totaling $ 280 .

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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 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 $ 5,220 and debt discount $ 316 as of December 31, 2021.

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

2020 Convertible Notes

On July 15, 2020, we issued a Series A Senior Convertible Note (a “Series A Note”) to an institutional investor with an initial principal amount of $ 4,320 (reflecting an original issue discount of $ 320 ) in a private placement.

We repaid in full the outstanding principal balance, accrued and unpaid interest and make-whole amount on a separate senior convertible note issued on March 20, 2020 to the same investor.

After the payoff of the senior convertible note and deducting transaction costs, net cash proceeds to the Company were $ 1,751 .

On the same date, we issued a Series B Senior Secured Convertible Note (a “Series B Note,” and together with the Series A Note, the “2020 Convertible Notes”) to the same investor with an initial principal amount of $ 17,280 (reflecting an original issue discount of $ 1,280 ).

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Upon repayment of the Investor Note, an equal amount of the Series B Note became "unrestricted" and recorded as debt in our consolidated balance sheets.

During 2020, we exercised our right under the Investor Note to require a mandatory prepayment of the Investor Note of $ 1,000 and the noteholder voluntarily prepaid an aggregate of $ 4,750 pursuant to the terms of the Investor Note, for aggregate cash proceeds to us $ 5,750 .

As a result, $ 5,750 in principal and $ 460 of original issue discount became "unrestricted".

As of December 31, 2020, the restricted balance of the Series B Note was $ 11,070 (including original issue discount).

The Series A Note and outstanding unrestricted principal balance on the Series B Note each bore interest at a rate of 7 % per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021.

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The 2020 Convertible Notes were scheduled to mature on December 31, 2021.

For the year ended December 31, 2020, we recorded a loss on extinguishment of debt in the amount of $ 1,343 as a result of monthly installment payments and optional redemption payments elected by the noteholder related to our various capital raises, as more fully described below.

As a result of multiple offerings of sales of shares of our common stock during the first quarter of 2021, as more fully described Note 13 below, the investor elected to require us to use forty percent ( 40 %) of the net proceeds from those offerings to satisfy obligations under the 2020 Convertible Notes.

As a result of multiple offerings of sales of shares of our common stock in 2021, the investor elected to require us to use forty percent ( 40 %) of the net proceeds from those offerings to satisfy obligations under the 2020 Convertible Notes.

During the first quarter of 2021, we paid approximately $ 11,507 , of which $ 5,717 was recorded as a loss on extinguishment of debt.

We also recorded a loss on extinguishment of debt of $ 51 related to monthly installment payments made to the investor during the same time period.

In March 2021, the investor voluntarily prepaid an aggregate of $ 10,250 pursuant to the terms of the Investor Note.

As a result, we received cash proceeds of $ 10,250 and this amount of principal of the Series B Note, along with $ 820 of original issue discount became "unrestricted" and outstanding.

After the aggregate payments pursuant to the Investor Note by the investor to us, there was no balance outstanding under the Investor Note and no restricted balance under the Series B Note.

On March 25, 2021, we delivered a Company Optional Redemption Notice (as defined in the Series B Note) to the holder of our Series B Note exercising our right to redeem and fully satisfy all obligations under the Series B Note on April 5, 2021.

On April 5, 2021, we paid $ 13,902 in cash to the noteholder of our 2020 Convertible Notes in full satisfaction of all obligations under our Series B Note, which amounted to $ 11,718 of principal, interest and make-whole and $ 2,184 for the loss on extinguishment of debt.

During the year ended December 31, 2021, we also recorded a loss on extinguishment of debt of $ 51 related to monthly installment payments made to the investor.

In addition to the 2020 Convertible Notes, 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.

As a result of our underwritten public offering in February 2021, the exercise price of each share decreased to $ 2.25 per share, while the number of shares for which the warrant is exercisable increased proportionately such that the total exercise price remained unchanged.

In October 2021, we issued shares to the seller of Lyte as purchase consideration at a price of $ 1.4246 per share, and as a result, the exercise price of the warrant adjusted accordingly and the number of shares exercisable thereunder increased to 2,811,315 .

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 February 2022, we filed a registration statement registering 250 % of additional warrant shares as result of the adjustment noted above.

In February 2022, we filed a registration statement registering an additional 4,200,000 warrant shares.

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.

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A summary of the change in fair value of the warrant liability is set forth below:

Balance, beginning of period $ 1,614 $ —

Balance, beginning of year $ 3,605 $ 1,614

Warrant issued — —

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Change in fair value of warrant liability ( 3,349 ) 18,139

Balance, end of period $ 3,605 $ 1,614

Balance, end of year $ 256 $ 3,605

Participation Rights

In addition, the Company granted the 2020 Convertible Notes investor participation rights in future equity and equity-linked offerings of securities, subject to certain limited exceptions, during the two years after the later of (a) the closing or (b) the date the 2020 Convertible Notes no longer remain outstanding, in an amount of up to 30 % of the securities being sold in such offerings.

This same investor has an additional 30 % participation right that expired on March 20, 2022 pursuant to a separate Securities Purchase Agreement relating to the Senior Convertible Note, which is more fully discussed below.

Paycheck Protection Program ("PPP") Loan

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We recorded a gain on the forgiveness of the PPP loan and related interest for the year ended December 31, 2021.

Senior Convertible Note

In March 2020, we issued a Senior Convertible Note to an institutional investor with an initial principal amount of $ 3,000 (the “Senior Convertible Note”) for cash proceeds of $ 2,760 (reflecting an original issue discount of $ 240 ) in a private placement.

After deducting the placement agent fee and other estimated expenses, net cash proceeds at the closing were approximately $ 2,371 .

The Senior Convertible Note bore an interest at a rate of 7 % per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021.

Monthly Payments and Conversion

Starting on April 30, 2020 and on the last trading day of the month and on the maturity date, we were required to make monthly payments on the Senior Convertible Note.

On each payment date, we were required to settle a principal repayment of approximately $ 143 plus interest thereon (the “Payment Amount”) which were to be satisfied in shares of our common stock at 100 % of the Payment Amount, or at our election, in whole or in part, in cash, at 105 % of the Payment Amount.

Installment payments made in common stock were subject to customary equity conditions (including minimum floor price and volume thresholds), and were calculated on a conversion price equal to the lower of (x) the conversion price then in effect and (y) the greater of the Floor Price (as defined in the Senior Convertible Note) and 85 % of the lowest volume weighted average price in the 10 days prior to the payment date.

In addition to the monthly payments described above, during the second quarter of 2020, the noteholder elected an acceleration of payments of monthly principal, interest and make-whole payments pursuant to certain provisions of the Senior Convertible Note.

These accelerated payments were made in the form of shares of our common stock at the rate then in effect in accordance with the Senior Convertible Note.

As a result, we issued an aggregate of 1,763,675 shares for principal, interest and make-whole payments to the noteholder.

In accounting for the accelerated conversions, the Company followed the guidance as prescribed in ASC 470 in accounting for derecognition (or conversion) of convertible debt with a cash conversion feature.

We determined the fair value of the debt immediately prior to derecognition, with the difference between the consideration transferred to the noteholder and the fair value of the debt representing the reacquisition of the embedded conversion option.

A loss on extinguishment of $ 81 was recorded based on the difference between the calculated fair value of the debt immediately prior to derecognition and the carrying amount of the debt component, including any unamortized debt discount or issuance costs.

Upon the issuance of the 2020 Convertible Notes, we redeemed the Senior Convertible Note in July 2020 at a price equal to 110 % of the outstanding principal accrued and unpaid interest and make-whole interest.

The payoff to the noteholder to satisfy the Senior Convertible Note was in the amount $ 2,084 .

The redemption of the Senior Convertible Note resulted in a loss on extinguishment of $ 734 in 2020.

Related-Party Bridge Loans

During the first quarter of 2020, various related parties loaned us $ 560 .

The Related-Party Bridge Loans ("RPBLs") bore interest at 10 % per annum and had a stated maturity date of November 14, 2024.

The RPBLs and amounts thereof were made by the following related parties:

(i) $ 204 by Cane Capital, LLC, an entity owned in part by our Chief Executive Officer;

(ii) $ 151 by Curo Capital Appreciation Fund, LLC, an entity in which our Chief Executive Officer and Chief Technology Officer serve as co-presidents;

(iii) $ 155 by various individuals associated by familiar relationship with our Chief Executive Officer;

and (iv) $ 50 by Luan Dang, our Chief Technology Officer.

Transaction costs related to the RPBLs were not significant.

As of December 31, 2020, the RPBLs have been paid in full with no early payment penalty.

Convertible Notes

In April 2019, our board of directors authorized the issuance of $ 20,000 of convertible promissory notes (the “Convertible Notes”), which may be paid by investors in the form of cash or, in our discretion, cryptocurrency, such as bitcoin or ethereum.

The Convertible Notes were sold in reliance on an exemption from registration.

We may not issue Convertible Notes under the Purchase Agreement in excess of $ 20,000 , in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Convertible Notes.

Transaction costs related to the issuance of the Convertible Note were immaterial.

The Convertible Notes are convertible into shares of the Company’s common stock at a price of $ 11.50 per share.

The Convertible Notes bore ordinary interest at a rate of 7 % per annum.

Interest under the Convertible Notes is payable quarterly beginning on September 30, 2019, and interest and principal under the Convertible Notes is payable monthly beginning on June 30, 2021.

However, at the holder’s election, interest payments could have been deferred until the earlier of (i) repayment in full of all remaining unpaid principal and (ii) conversion.

The Convertible Notes were originally scheduled to mature on June 3, 2024.

On October 27, 2021, we paid $ 222 in cash in full satisfaction of all obligations under the Convertible Notes.

Promissory Notes

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During 2019, the Company issued a Note in the principal amount of $ 195 , in exchange for cash consideration, to Cane Capital, LLC, an entity owned in part by Alan S.

Knitowski, our Chief Executive Officer and a member of its board of directors.

Knitowski, who at the time of issuance of the Note was our Chief Executive Officer and a member of its board of directors.

Interest expense recognized for this Note was not significant.

On October 27, 2021, we paid $ 905 in cash to each Note holder in full satisfaction of all obligations under the Notes.

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Year Ended December 31,

2022 Promissory Note $ 903 $ —

2021 Promissory Note 318 203

2020 Convertible Notes — 1,111

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Accretion of debt discount - warrants — 1,029

2021 Promissory Note

Senior Convertible Note — 197

Factoring financing agreement 75 175

All other debt and financing obligations 151 225

Total $ 2,406 $ 4,481

As described in Note 2, we adopted ASU 2016-02, Leases (Topic 842) , as of January 1, 2021.

We lease our corporate offices under operating leases and determine if an arrangement is or contains a lease at inception.

The initial terms of our real property lease agreements are generally five years and typically allow for renewals in five-year increments.

We may, at times, negotiate a shorter lease renewal term.

We generally do not account for any renewals at the lease adoption date.

We maintain four corporate offices located in Austin, Texas;

We lease four corporate offices located in Austin, Texas;

Irvine, California;

San Diego, California;

and Miami, Florida.

Our Lyte operations are currently located in Gurnee, Illinois.

We lease office and warehouse space for Lyte under a month-to-month lease.

Excluding our month-to-month lease, as of December 31, 2021, the earliest lease agreement currently ends in March 2022 with the latest terminating in June 2025.

Some of our leases include both lease and non-lease components, which we have elected not to account for separately.

Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.

The weighted-average remaining lease term for our operating leases as of December 31, 2021 was 3.14 years.

and Miami, Florida and a warehouse facility in Round Rock, Texas for our Lyte operations.

As of December 31, 2022, the earliest lease agreement currently ends in June 2023 with the latest terminating in September 2027.

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 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 lease commenced on June 10, 2022 and has a term of sixty-four ( 64 ) months, with an option to renew the lease for an additional five-year term at the conclusion of the initial term.

The lease provides for rent abatement until September 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.

The weighted-average remaining lease term for our operating leases as of December 31, 2022 and 2021 was 3.98 years and 3.14 years, respectively.

As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying a rate to each lease.

We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of January 1, 2021 to initially measure our lease liability.

The weighted average incremental borrowing rate used to measure our lease liability was 19.13 %.

This approach requires significant judgment.

We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis at the time we enter into the lease to initially measure our lease liability.

The weighted average

incremental borrowing rate used to measure our lease liability was 9.80 % and 19.13 % at December 31, 2022 and 2021, respectively.

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.

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Portion representing interest $ ( 725 )

On March 16, 2021, we entered into a sublease agreement pursuant to which we will sublease our existing office space in Irvine, California.

The term of the sublease commenced on April 1, 2021 and terminates on March 31, 2025.

The subtenant will pay us initial base rent of approximately $ 17 per month, which is subject to certain discounts throughout the sublease, as well as rent escalations.

We recognized an impairment of our right-to-use asset related to the sublease of $ 77 , which is recorded as a component of other income, net in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

We recognized $ 154 of sublease income related to our Irvine, California lease for the year ended December 31, 2021.

On December 21, 2021, we entered into a sublease agreement pursuant to which we will sublease our existing office space in Miami, Florida.

The term of the sublease commenced on January 18, 2022 and terminates on June 30, 2023.

The subtenant will pay us initial base rent of approximately $ 8 per month, which is subject to rent escalations throughout the term.

We recognized an impairment of our right-to-use asset related to the sublease of $ 51 , which is recorded as a component of other income, net in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

In 2021, we entered into two sublease agreements for our Miami, Florida and Irvine, California office spaces, in which the subtenants will pay us monthly base rent, subject to escalations throughout the term of the sublease.

The sublease agreements terminate on June 30, 2023 and March 31, 2025, respectively.

We recognized an impairment of our right-of-use assets related to the subleases of $ 77 and $ 51 in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022 and 2021, respectively.

We recognized sublease income of $ 300 and $ 154 for the year ended December 31, 2022 and December 31, 2021, respectively.

Commitments and Contingencies

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The two actions are pending in arbitration.

Both cases are in the early stages of litigation;

The outcome is not certain.

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WSGR seeks to recover fees related to the services at issue in Phunware’s actions against WSGR, of which $ 4,321 is recorded in accounts payable in our consolidated balance sheets as of December 31, 2022 and 2021.

On December 17, 2019, certain stockholders filed a lawsuit against Phunware and its individual officers and directors.

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.

Phunware, Inc., et al., was filed in the 126th Judicial District Court of Travis County, Texas (Cause No.

D-1-GN-19-008846).

Phunware, Inc., et al., was filed 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.

On June 23, 2021, defendants filed a motion to dismiss the petition based on the mandatory forum-selection clause in Phunware’s Articles of Incorporation, which require plaintiffs’ claims to be filed in Delaware Chancery Court.

On November 17, 2021, the court granted our motion to dismiss with prejudice to refiling in the State of Texas.

On December 17, 2021, plaintiffs filed a notice of appeal to the Court of Appeals, Third District of Texas, Case No.

03-21-*00665-CV.

On February 18, 2022, the plaintiffs filed a complaint in the Court of Chancery of the state of Delaware containing the same allegations.

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.

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

The Court of Chancery has scheduled a hearing on the motions for April 4, 2023.

We intend to vigorously defend against this lawsuit and any appeals.

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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.

In 2017, we filed a breach of contract complaint against Uber Technologies, Inc.

("Uber") seeking payment for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017.

The case, captioned Phunware, Inc.

Uber Technologies, Inc., Case No.

CGC-17-561546 was filed in the Superior Court of the State of California, County of San Francisco.

Uber generally denied the allegations in our complaint and also filed a cross-complaint against Phunware and Fetch Media, Ltd., the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017, asserting numerous fraud and contract-based claims.

In 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants, Alan S.

Knitowski, the Company's Chief Executive Officer and member of our board of directors and former Phunware employees D.

Borotsik, and A.

Cook, (collectively, the "Individual Defendants") alleging civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware.

Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $ 17,000 from Uber, and claimed treble damages, general and punitive damages, and attorneys’ fees and costs.

On October 9, 2020, we entered into a settlement agreement with Uber and certain other parties related to our complaint against Uber, Uber's cross-complaint against us and Uber's amended cross-complaint against us and the Individual Defendants.

As provided in the settlement agreement, both parties have agreed to fully and finally settle, compromise, and resolve all disputes, differences and disagreements that have existed, now exist, or may exist between them that fall within the subject matter lawsuit.

Furthermore, each party denies engaging in any wrongdoing whatsoever and specifically denies each and every allegation of wrongdoing alleged in the lawsuit.

The settlement agreement provided that Phunware and its insurance carriers pay a total sum of $ 6,000 to Uber, of which our insurance carrier paid $ 1,500 to settle Uber's claims against the Individual Defendants while we paid a total of $ 4,500 to Uber in a series of installments that ended in September 2021.

We recorded a charge of $ 4,500 for our portion of the settlement in legal settlement in our consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

The settlement agreement further provided that we and the Individual Defendants fully release claims against Uber.

On November 5, 2020, Uber filed a request for dismissal with prejudice of claims against the Individual Defendants.

As a result of us remitting the final installment payment to Uber, on October 13, 2021, Uber's complaint against the Company was dismissed with prejudice.

On March 9, 2020, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against us.

The complaint, captioned Ellenoff Grossman & Schole LLP versus Stellar Acquisition III, Corp a/k/a Stellar Acquisition III, Inc.

("Stellar") n/k/a Phunware, Inc., was filed in the Supreme Court of the State of New York, New York County (Case No.

152585/2020).

to the complaint, EGS sought monetary damages in the amount of $ 690 for alleged unpaid invoices related to legal services rendered for Stellar in conjunction with the reverse merger with Phunware, plus legal and court costs.

On September 29, 2020, we entered into a settlement agreement with EGS.

The settlement agreement provides that we pay a total sum of $ 600 to EGS in a series of installments beginning no later than October 15, 2020, and ending no later than October 15, 2023.

There is no penalty for prepayments.

Pursuant to the terms of the settlement, on September 30, 2020, EGS filed a Stipulation of Voluntary Discontinuance with Prejudice with the court.

In conjunction with the execution of the settlement agreement, we also signed an Affidavit of Confession of Judgment ("Confession of Judgment"), which provides that should we default in any payment obligations under the settlement agreement, EGS shall be entitled to enter the Confession of Judgment with the court against us for $ 690 less any payments already made under the settlement.

We reclassified $ 690 from accounts payable to accrued expenses in the consolidated balance sheet as of December 31, 2020 related to the settlement.

In accordance with authoritative guidance, we will defer any settlement gain, if any, until we have fulfilled our payment obligations under the settlement.

On April 24, 2020, Sha-Poppin Gourmet Popcorn, LLC, individually and on behalf of a class of similarly situated parties (the “Popcorn Company”), filed a lawsuit against certain defendants, including Phunware.

The case captioned, Sha-Poppin Gourmet Popcorn, LLC v.

JPMorgan Chase Bank, N.A., RCSH Operations, LLC, RCSH Operations, Inc.

(together d/b/a Ruth’s Chris Steakhouse) and Phunware, Inc., was filed in the Northern District of Illinois, Eastern Division.

The Popcorn Company alleges that we were unjustly enriched by JPMorgan Chase for our loan made pursuant to the PPP under the CARES Act.

(See Note 9 for discussion related to our PPP loan).

We filed a motion to dismiss the single claim against us and dispute the court's jurisdiction and the basis of the claim.

On March 5, 2021, the trial court dismissed all of the Popcorn Company's claims for lack of subject matter jurisdiction.

From time to time, we are and may become involved in various legal proceedings in the ordinary course of business.

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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 June 2018, we launched an offering pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of rights (the “Rights”) to acquire the PhunCoin token.

In 2019, we commenced an offering of Rights pursuant of Regulation CF, which closed May 1, 2019.

For both offerings, we accepted payment in the form of cash and digital assets for purchases of the Rights.

In June 2018, we launched an offering pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of rights to acquire PhunCoin (the "Rights).

In 2019, we commenced an offering of additional Rights to acquire PhunCoin pursuant to Regulation CF promulgated under the Securities Act, which closed May 1, 2019.

For both offerings of Rights, we accepted payment in the form of cash and digital assets.

The amount of PhunCoin to be issued to the purchaser is equal to the dollar amount paid by the purchaser divided by the price of the PhunCoin at the time of issuance of the PhunCoin during the launch of the Token Ecosystem (as defined below) before taking into consideration any applicable discount rate, which is based on the time of the purchase.

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Proceeds from the Rights are recorded as PhunCoin deposits in the consolidated balance sheet as of December 31, 2022 and 2021.

We currently do not plan to raise additional material proceeds under the PhunCoin Rights offerings.

We currently do not plan to raise additional material proceeds through the sales of PhunCoin Rights.

Issuance of PhunCoin

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Proceeds from the Rights offerings are generally not refundable if the Token Generation Event is not consummated.

In 2021, we notified holders of the PhunCoin Rights to request they complete additional information needed for issuance and we currently anticipate that PhunCoin will be issued to the holders of the Rights in 2022.

Holders of the Rights may be issued PhunCoin even if the Token Ecosystem is not yet operational.

PhunCoin may not have usefulness until the Token Ecosystem is operational.

There can be no assurance as to when (or if) we will be able to successfully launch the Token Ecosystem.

The Company is currently developing multiple aspects of the Token Ecosystem, as well as coordinating with trading platforms to support the compliant trading of PhunCoin.

The final software readiness date of the Token Ecosystem may be adjusted based on user feedback, additional aspects of the Token Ecosystem currently under development and the ability to meet compliance requirements;

therefore, a specific launch date is difficult to determine at this time, as it is based on many external factors outside of our control.

In 2021, we notified holders of the PhunCoin Rights to request they complete additional information needed for issuance and we currently anticipate that PhunCoin will be transferred to the holders of the Rights in 2023.

Holders of the Rights may be transferred PhunCoin even if the Token Ecosystem is not yet fully developed.

PhunCoin may not be able to be fully utilized until the Token Ecosystem is fully developed.

There can be no assurance as to when (or if) we will be able to successfully issue PhunCoin or complete the development of the Token Ecosystem.

The Company is currently developing multiple aspects of the Token Ecosystem, as well as coordinating with trading platforms to support compliant transfer and trading of PhunCoin.

The continued adjustment of dates to complete the development of the Token Ecosystem have been and may be adjusted based on user feedback, additional aspects of the Token Ecosystem currently under development and the ability to meet evolving applicable requirements;

therefore, a specific development completion date for the Token Ecosystem is difficult to determine at this time, as it is based on many external factors outside of our control.

Termination of the Token Rights Agreement

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Upon termination of the Token Rights Agreement, we have no further obligation to the Rights holder.

While the Token Rights Agreement has terminated in accordance with its terms (with respect to all Rights holders), as of the date of this Annual Report, we have determined to continue our obligations under the Token Rights Agreement.

Dissolution Event

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Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware or any subsidiaries of the Company.

However, PhunCoin holders will be provided fractional interests in the Token Ecosystem, including ongoing monthly PhunCoin dividends to PhunCoin holders, based on their respective pro rata ownership percentage of PhunCoin, totaling 2.5 % of the monthly credits purchased by Phunware customers.

PhunCoin Warrant

However, PhunCoin holders will be provided fractional economic interests in the Token Ecosystem, including monthly PhunCoin or other distributions to PhunCoin holders, based on

their respective ownership percentage of and other elections with respect to PhunCoin, totaling 2.5 % or more of certain Token Ecosystem revenues.

PhunCoin Warrants

In 2018, we issued warrants to receive PhunCoin to sixty-eight ( 68 ) stockholders.

At the time of issuance, we determined there should be no value assigned to the warrants of PhunCoin issued to the stockholders, for the following reasons:

(i) the warrants (x) lacked characteristics of financial instruments and derivatives, and (y) did not obligate us to achieve the Token Generation Event or launch and distribute PhunCoin to the warrantholders and (ii) there was not a market for PhunCoin and they did not exist.

Should we complete a Token Generation Event, the stockholders would receive their requisite amount of PhunCoin.

At the time of issuance, we determined there should be no value assigned to the rights to receive PhunCoin under these warrants issued to the stockholders, for the following reasons:

(i) the PhunCoin-related rights in these warrants (x) lacked characteristics of financial instruments and derivatives, and (y) did not obligate us to achieve the Token Generation Event or launch and distribute PhunCoin to the warrant holders and (ii) there was not a market for PhunCoin and they did not exist.

Should we complete a Token Generation Event, the warrant holders would receive their requisite amount of PhunCoin.

Stockholders’ Equity

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At December 31, 2022 and 2021, there were 103,153,337 and 96,751,610 shares outstanding, respectively.

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.

The Company and Wainwright may each terminate the sales agreement at any time with five days prior written notice.

As of December 31, 2022, 2,623,460 shares of our common stock have been sold for aggregate cash proceeds of $ 4,562 , net of transaction costs of $ 101 .

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

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.

On August 14, 2020, we entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”), as sales agent, pursuant to which the Company would offer and sell, from time to time, through Ascendiant shares of our common stock for an aggregate offering price of up to $ 15,000 .

During the year ended December 31, 2020, we sold 11,629,160 shares of common stock for gross proceeds of $ 9,578 .

Offering costs totaled $ 401 .

In January 2021, 2,670,121 shares of our common stock were sold for aggregate net cash proceeds of $ 5,058 .

During 2021, 2,670,121 shares of our common stock were sold for aggregate net cash proceeds of $ 5,058 .

Transaction costs were $ 156 .

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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 December 31, 2021, 20,951,043 shares of our common stock had been sold and we had received aggregate net cash proceeds of $ 65,210 .

During 2021, 20,951,043 shares of our common stock had been sold and we had received aggregate net cash proceeds of $ 65,210 .

Transaction costs were $ 2,017 .

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During 2021, the holder of our 2020 Convertible Notes partially exercised its warrant for 2,060,000 shares of common stock with an exercise price of $ 2.25 per share for net proceeds of $ 4,635 .

In 2012, we issued a warrant to initially purchase an aggregate of 14,866 shares of the Company’s common stock with an initial exercise price of $ 5.54 per share to a banking institution with which we previously had a revolving line of credit.

In 2012, we issued a Series D-1 warrant to initially purchase an aggregate of 14,866 shares of the Company’s common stock with an initial exercise price of $ 5.54 per share to a banking institution with which we previously had a revolving line of credit.

The term of the warrant is the earlier of (i) the tenth anniversary of the date of issuance, (ii) the closing of the initial registered public offering of the Company’s common stock, or (iii) the closing of an acquisition (as defined in the warrant) where the consideration consisting of cash or publicly traded securities payable in connection with the acquisition for each share is at least three (3) times the exercise price.

The reverse merger with Stellar did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above.

The warrant is fully vested.

The warrant expired December 21, 2022.

In 2018, but prior to our reverse merger with Stellar, we issued warrants (Series F above) to purchase an aggregate of 1,085,059 shares of common stock with an exercise price of $ 9.22 per share.

The term of the warrants is the earlier of (i) the fifth anniversary of the date of issuance, (ii) an acquisition, merger, or consolidation of the Company or a sale, lease or other disposition of all or substantially all of the assets of Phunware and its subsidiaries, except (a) any sale of stock for capital raising purposes, (b) purpose of changing the Company’s state of incorporation, and (c) where the stockholders of Phunware immediately before such transaction retain at least a majority of the voting power immediately following such transaction;

The term of the warrants is the earlier of (i)

June 5, 2023, (ii) an acquisition, merger, or consolidation of the Company or a sale, lease or other disposition of all or substantially all of the assets of Phunware and its subsidiaries, except (a) any sale of stock for capital raising purposes, (b) purpose of changing the Company’s state of incorporation, and (c) where the stockholders of Phunware immediately before such transaction retain at least a majority of the voting power immediately following such transaction;

or (iii) immediately prior to an initial public offering.

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2018 Equity Incentive Plan

In 2018, our board of directors adopted, and our stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”).

In 2018, our board of directors adopted, and our stockholders approved, the 2018 Equity Incentive Plan, as amended (the “2018 Plan”).

The purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to employees, directors and consultants who perform services for the Company, and to promote the success of our business.

These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

Upon vesting of restricted stock units, shares will be delivered electronically to the holder shortly after vest date.

Upon exercise of stock options, shares will be delivered electronically to the holder pursuant to an effective registration statement.

The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of:

(i) 2,729,416 shares of common stock;

(ii) 5 % of the outstanding shares of common stock on the last day of the immediately preceding fiscal year;

or (iii) such other amount as our board of directors may determine.

Shares will be delivered electronically to the holder shortly after exercise or vest date pursuant to an effective registration statement.

The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of 5 % of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or such other amount as our board of directors may determine.

In addition, the 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 Equity Incentive Plan (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.

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Outstanding as of December 31, 2022 2,957,995 $ 1.75

During the first quarter of 2020, we granted 123,084 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.25 per share in lieu of cash compensation board fees for services provided.

The awards vested immediately.

We also granted 125,523 restricted stock units to non-employee directors, with a grant date fair value of $ 1.25 per share.

The awards vest in four equal installments on March 26, 2020, June 26, 2020, September 18, 2020, and December 25, 2020, respectively, and are subject to service conditions.

We also granted 746,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.25 per share.

The awards granted to team members vest over an average of 42 months with various installment and vesting dates, and are subject to service conditions.

We also granted 630,000 restricted stock units to a non-employee service provider that were for the satisfaction of legal fees owed and other consulting fees.

The awards granted to the legal service provider vested immediately and had an average grant date fair value $ 0.88 .

During the second quarter of 2020, we granted 85,996 restricted stock units to non-employee directors, each with a grant date fair value of $ 0.71 per share in lieu of cash compensation board fees for services provided.

The awards vested immediately.

We also granted 375,000 restricted stock unit awards to team members with an average grant date fair value of $ 0.67 per share.

The awards granted to team members vest over 4 years with 25 % vesting May 18, 2021, then equal quarterly installments thereafter until the final vesting period of May 18, 2024 and are subject to service conditions.

We also granted

250,000 restricted stock units to a non-employee service provider that were for the satisfaction of legal fees owed.

The awards granted to the legal service provider vested immediately and had an average grant date fair value $ 0.67 .

During the third quarter of 2020, we granted 39,426 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.28 per share in lieu of cash compensation board fees for services provided.

The awards vested immediately.

We also granted 12,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.68 per share.

We also granted 155,000 restricted stock units to non-employee service providers that were for the satisfaction of legal and professional fees.

The awards granted to the service providers have various vesting dates and had an average grant date fair value $ 1.52 .

During the fourth quarter of 2020, we granted 30,000 restricted stock units to team members and 50,000 restricted stock units to non-employees directors with an average grant date fair value of $ 0.85 per share.

The awards granted to team members vest over 4 years with 25 % vesting November 18, 2021, then equal quarterly installments thereafter until the final vesting period of November 18, 2024 and are subject to service conditions.

The restricted stock units granted to the non-employee service provider were for satisfaction of legal fees owed.

The awards granted to the legal service provider vested immediately.

During the first quarter of 2021, we granted 3,488,262 restricted stock unit awards to team members with an average grant date fair value of $ 2.03 per share.

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We also granted 652,170 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.22 .

The awards vest in four equal installments on March 4, 2021, June 4, 2021, September 4, 2021, and December 4, 2021, respectively, and are subject to service conditions.

The awards vest in four equal installments on March 4, 2021, June 4, 2021, September 4, 2021, and December 4, 2021, and are subject to service conditions.

We also granted 97,744 restricted stock units to non-employee directors, with a grant date fair value of $ 1.22 per share in lieu of cash compensation board fees for services provided.

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During the fourth quarter of 2021, we granted 170,000 restricted stock unit awards to team members with an average grant date fair value of $ 3.97 per share.

The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.

The awards granted to team members vest over a range of 47 months with various

installment and vesting dates, and are subject to service conditions.

We also granted 368,672 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.35 .

The awards vest in four equal installments throughout 2022 and are subject to service conditions.

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 a non-employee consultant with a grant date fair value of $ 1.70 .

The award vests on March 31, 2023 and is subject to service conditions.

During the fourth quarter of 2022, we granted 39,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.52 per share.

The awards granted to team members vest over a range of 48 months with various installment and vesting dates, and are subject to service conditions.

We also granted 397,598 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.48 .

The awards granted to non-employee directors generally vest quarterly over 12 months, and are subject to service conditions.

The restricted stock unit grants were valued based on the fair value of our common stock on the date of grant.

Pursuant to an agreement entered into by us with our former Chief Executive Officer, we modified the remaining vesting schedule related to the unvested portion of the individual's outstanding equity awards as of December 2022.

The original equity awards were made at multiple occurrences, each of which contained various vesting share amounts on various dates, with the last vesting period originally scheduled to occur in May 2025.

As additional compensation under the agreement, we modified the vesting schedule with respect to the unvested portion of restricted stock units under the individual's awards, such that 39,438 restricted stock units will vest on each of the last day of each month from January 2023 through November 2023 and 39,445 restricted stock units will vest on December 31, 2023.

Incremental costs associated with this modification was not significant for the year ended December 31, 2022.

Stock Options

During third quarter of 2021, we granted 50,000 stock options to a non-employee consultant at an exercise price of $ 1.08 per share.

The stock options vest over one year in twelve equal monthly installments.

As of December 31, 2021, 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 December 31, 2022 87,500 $ 1.43 5.6 $ —

Exercisable as of December 31, 2022 87,500 $ 1.43 5.6 $ —

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 vested in various increments with the final vesting date occurring on December 30, 2022.

The weighted average grant date fair value of options granted during 2022 and 2021 was $ 0.54 and $ 0.51 , respectively.

The total fair value for options vested during the years ended December 31, 2022 and 2021 was $ 42 and $ 11 , respectively.

Stock based compensation related to this grant was not significant.

2018 Employee Stock Purchase Plan

Also, in 2018, our board of directors adopted, and our stockholders approved, the 2018 Employee Stock Purchase Plan (the “2018 ESPP”).

The total shares of common stock initially reserved under the 2018 ESPP was limited to 272,942 shares.

The purpose of the 2018 ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock at a discount through accumulated contributions generally in the form of payroll deductions of up to 15 % of eligible compensation, subject to caps of $ 25 in any calendar year and 4,000 shares on any purchase date.

The 2018 ESPP provides for 24 -month offering periods, generally beginning in June and December of each year, and each offering period consists of four six-month purchase periods.

The initial offering period began on June 1, 2021 and will end in May 2023.

The 2018 ESPP provides for 24 -month offering periods, generally beginning in June and December of each year, and each offering period

consists of four six-month purchase periods.

The first purchase under the 2018 ESPP was in December 2021.

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If the price per share of our common stock on any purchase date in the offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period.

Purchased shares will be delivered electronically to the participant shortly after the purchase date pursuant to an effective registration statement.

Shares will be delivered electronically to the participant shortly after the purchase date pursuant to an effective registration statement.

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 year ended December 31, 2021 was not significant.

Stock-based compensation expense related to our 2018 ESPP for the years ended December 31, 2022 and 2021 was not significant.

The number of shares of common stock that may be made available for sale under the 2018 ESPP also includes an annual increase on the first day of each fiscal year beginning for the fiscal year following the fiscal year in which the first enrollment date (if any) occurs equal to the lesser of (i) 818,825 shares of common stock;

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The term of each option is no more than ten years from the date of the grant.

The 2009 Plan allows for options to be immediately exercisable, subject to the Company’s right of repurchase for unvested shares at the original exercise price.

The total amount received in exchange for these shares has been included in accrued expenses on the accompanying consolidated balance sheets and is reclassified to equity as the shares vest.

As of December 31, 2020, there were 574 unvested shares outstanding amounting to $ 1 in accrued expenses.

There were no unvested shares outstanding as of December 31, 2021.

The 2009 Plan allowed for options to be immediately exercisable, subject to the Company’s right of repurchase for unvested shares at the original exercise price.

There were no unvested shares subject to repurchase provisions outstanding as of December 31, 2022 and 2021.

Upon exercise, shares will be delivered electronically to the holder pursuant to an effective registration statement.

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Outstanding as of December 31, 2022 874,279 $ 0.80 4.22 $ 130

Exercised ( 260,451 ) 0.69

Cancelled/Expired ( 22,822 ) 2.01

Outstanding as of December 31, 2021 925,467 $ 0.80 5.59 $ 1,692

Exercisable as of December 31, 2022 873,627 $ 0.80 4.22 $ 130

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Foreign income taxes at different rate ( 310 ) ( 201 )

Income tax (benefit) expense $ ( 426 ) $ 2

Income tax expense (benefit) $ 4 $ ( 426 )

Effective tax rate ( 0.01 ) % 0.79 %

The provision expense for income taxes consists of the following:

The provision expense (benefit) for income taxes consist of the following:

Year Ended December 31,

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Loss before taxes $ ( 47,482 ) $ ( 5,469 ) $ ( 50,890 )

As of or for the year ended December 31, 2021

Phunware Lyte Consolidated

Goodwill $ 25,887 $ 7,373 $ 33,260

Total assets $ 85,970 $ 12,046 $ 98,016

Net revenues $ 7,548 $ 3,095 $ 10,643

Loss before taxes $ ( 53,339 ) $ ( 609 ) $ ( 53,948 )

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.

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On December 29, 2021, we paid $ 171 in full satisfaction of the outstanding payable.

As more fully discussed in Note 9, Debt , the Company entered into a Note and RPBLs (both defined above) with certain related parties.

We repaid the Note and RPBLs in full during 2021 and 2020, respectively.

As more fully discussed in Note 8, Debt , the Company entered into a Note (defined above) with a certain related party.

In 2021, we repaid the Note in full.

Subsequent Events

The Company has evaluated subsequent events through the date the financial statements were issued.

On January 31, 2022, we entered into an At Market Issuance Sales Agreement with H.C.

We are not obligated to sell shares of our common stock under the sales agreement with Wainwright.

As of the date noted above, we have not sold any shares of common stock pursuant to the sales agreement with Wainwright.

On March 15, 2022, we entered into a lease agreement, in which we will lease approximately 21,830 square feet for a term of five years , which we intend to use as manufacturing and warehouse space for our Lyte computer division.

The term of the lease commences on the earliest of (a) the date we occupy any portion of the Premise 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 expense according to provisions of the lease.

2022 Inducement Plan

Our board of directors adopted the Phunware, Inc.

2022 Inducement Plan (the "Plan") in January 2023.

As permitted by Nasdaq Stock Market rules, our stockholders were not required to approve the Plan.

The plan provides of up to 1,470,588 shares of our common stock under awards granted to newly-hired employees.

An "award" is any right to receive common stock of the Company consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards or restricted stock units.

In January 2023, we made an inducement grant to a newly-hired employee of 1,470,588 restricted stock units under the Plan with a grant date fair value of $ 0.87 per share.

One-third, or 490,196 , of the restricted stock units will vest on December 28, 2023 and the remainder will vest in equal installments over eight quarterly periods beginning on March 31, 2024 with the final vesting date occurring on December 28, 2025, subject to the employee's continued service on such vesting date.

Shares will be delivered electronically to the holder shortly after vest date.

Stock Repurchase Plan

On January 5, 2023, our board of directors authorized and approved a stock repurchase program for the repurchase of outstanding shares of our common stock with an aggregate value of up to $ 5,000 .

The authorization permits us to repurchase shares of our common stock from time-to-time through open market repurchases at prevailing market prices, in accordance with federal securities laws.

The stock repurchase plan is expected to be completed over the next twelve (12) months and may be amended or terminated at any time, in the sole discretion of the board.

The exact means, number and timing of stock repurchases will depend on market conditions, applicable legal requirements and other factors, and will be funded through the liquidation of our bitcoin holdings.

As of the date of this report we have repurchased 461,500 shares of our common stock at an aggregate repurchase price of $ 475 .

2022 Promissory Note Waiver Agreement

On March 15, 2023, we entered into a waiver agreement with the holder of our 2022 Promissory Note, waiving the Payment Deferral Conditions, as defined in the 2022 Promissory Note.

For agreeing to waive the Payment Deferral Conditions, we agreed to compensate the noteholder an amount equal to 5 % of the outstanding balance immediately before entering into the waiver agreement.

In connection therewith, we elected to defer the monthly payments under the 2022 Promissory Note for the months of April, May, June and July 2023.

As a result of our election to defer the monthly payments, the outstanding balance of the 2022 Promissory Note will be increased by 1.85 % on the first day of each month beginning on April 1, 2023 and concluding on July 1, 2023.

The waiver fee and the additional principal will be paid in connection with our monthly installment payments once the deferral period concludes.

Beginning on August 1, 2023 and on the same day of each month thereafter, we will be required to pay to the noteholder the new monthly amortization payment in the amount of $ 1,769 until the new maturity date of November 1, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data