What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-03-15 compared with 2023-03-31 · 40 added, 71 removed, 163 unchanged (41% of the section changed)

Phunware, Inc.

and its subsidiaries (the “Company”, "we", "us", or "our") offers a fully integrated software platform that equips companies with the products, services and solutions necessary to engage, manage and monetize their mobile application portfolios globally at scale.

Our Multiscreen-as-a-Service ("MaaS") platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship.

Our MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions.

Through our integrated mobile advertising platform of publishers and advertisers, we provide in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization.

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

PhunToken is an innovative digital asset, which is intended to be used or consumed within our Token Ecosystem to help drive engagement between or among Phunware, its customers and business partners and consumers by unlocking features and capabilities of our MaaS platform (the "Token Ecosystem").

PhunToken is also designed to reward consumers for their activity within our Token Ecosystem, such as watching branded videos, completing surveys and visiting points of interest.

In October 2021, we acquired Lyte Technology, Inc.

("Lyte"), a provider of high-performance personal computer systems which we market and sell to individual consumers.

and its subsidiaries (the "Company," "we," "us," or "our") offers a fully integrated cloud platform for mobile that provides companies the products, services and solutions necessary to engage, manage and monetize their mobile application portfolios and audiences at scale.

Our mission is to foster an ecosystem where digital interactions enable a more engaged, interactive, and valuable experience for all stakeholders.

We are redefining connectivity by ensuring the widespread adoption of our technologies amongst brands, mobile consumers, partners, digital asset holders, and market participants.

Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.

Overview of Business

Our MaaS platform is a fully integrated cloud platform for mobile that provides companies the products, services and solutions necessary to engage, manage and monetize their mobile application portfolios and audiences at scale.

In November 2023, we announced our Phunware 3.0 strategy with three pillars:

• continued sales of our cloud-based platform offerings to hospitality, healthcare, connected workplace, luxury residential and other markets;

• monetization of our patent portfolio in ways other than embedding it in our software;

• a digital asset strategy that capitalizes on PhunCoin, PhunToken and those assets' ability to return control of their data and use to consumers.

According to eMarketer, adults in the U.S.

spend more than four hours daily on mobile internet, of which approximately 90% of that time is spent in mobile apps (versus mobile web).

Given this reality, we believe brands must establish a strong identity on mobile, especially on devices and platforms specific to the Apple iOS and Google Android operating systems and ecosystems.

spend more than four hours daily on mobile internet;

90% of that time in mobile apps (versus mobile web).

We believe brands must establish a strong identity on mobile, especially on devices and platforms specific to the Apple iOS and Google Android operating systems and ecosystems.

Phunware helps brands define, create, launch, promote, monetize and scale their mobile identities as a means to anchor the consumer journey and improve brand interactions.

Our MaaS platform provides the entire mobile lifecycle of applications through one procurement relationship.

Our MaaS platform allows for the licensing and creation of category-defining mobile experiences for customers and their application users worldwide.

Since our founding in 2009, we have amassed a database of proprietary Phunware IDs.

Phunware IDs are unique identifiers assigned to a mobile device when it becomes first visible across our network of mobile application portfolios.

We measure and accumulate Phunware IDs through queries that count unique devices that access our mobile application portfolio across our network of mobile applications that we have developed and/or support.

Through our subsidiary Lyte, we also derive revenue by manufacturing and selling custom and pre-packaged personal computer systems.

Our platform allows for the licensing and creation of category-defining mobile experiences for customers and their application users worldwide.

Business Model

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• Engage, Monetize and Optimize — We help brands activate, monetize and optimize their mobile application portfolios.

Our product and service offerings include cloud-based recurring software license subscriptions, with terms ranging from one to three years, application development and support services and application transaction-based media.

majority of our product and service offerings have been sold utilizing an internal sales team, we have also sold our product and service offerings through various sales partners.

Our product and service offerings include cloud-based recurring software license subscriptions, most of which are multi-year, application development and support services and application transaction-based media.

Although a majority of our product and service offerings have been sold utilizing an internal sales team, we have also sold our product and service offerings through various sales partners, including value added resellers and systems integrators.

We continue to invest in these relationships.

Lyte Technology, Inc.

In October 2021, we acquired Lyte Technology, Inc., a provider of high-performance computer systems to individual consumers.

Lyte derives its revenue by manufacturing and selling custom and pre-packaged personal computer systems.

Total consideration for the acquisition consisted of cash and common stock of the Company valued at approximately $10.5 million.

During second quarter of 2022, we relocated Lyte from Gurnee, Illinois to Round Rock, Texas.

Our acquisition of Lyte enabled us to enter the personal computer hardware market.

We will continue to pursue a direct to consumer selling strategy.

During 2022, we began selling Lyte computers in Canada.

We intend to grow Lyte revenue and its customer base by expanding its business to offer laptops and selling into additional international markets.

We believe our acquisition of Lyte will also leverage a new distribution network for our blockchain initiatives, which are more fully described below.

In conjunction with the acquisition, we also entered into a note purchase agreement with an original principal amount of $5.22 million in a private placement that closed on October 18, 2021.

This note was paid in full in 2022.

In October 2021, we acquired Lyte Technology, Inc.

(“Lyte”), a provider of high-performance computer systems to individual consumers.

On November 1, 2023, we committed to a plan to discontinue and wind down, either by sale or closing, operations of Lyte.

We generally completed such plan as of December 31, 2023.

Our Products and Services

Our mobile software subscriptions and services, application transaction solutions and hardware product offerings include the following:

• Cloud-based mobile software licenses in software development kits (“SDKs”) form utilized inside mobile applications for the following:

Our mobile software subscriptions and services and application transaction solutions offerings include the following:

• Integration of our software development kit (“SDK”) licenses into existing applications maintained by our customers, including:

• Analytics (SDK that provides data related to application use and engagement);

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• Location-Based Services (module that include mapping, navigation, wayfinding, workflow, asset management and policy enforcement);

• Integration of our SDK licenses into existing applications maintained by our customers, as well as custom application development and support services;

• Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application portfolios, solutions and services that address:

• Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application solutions that address:

the patient experience for healthcare, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate, the luxury guest experience for hospitality, the student experience for education and the generic user experience for all other verticals and applications;

• Application transactions, including re-occurring and one-time transactional media purchases for application discovery, user acquisition and audience building, audience engagement and audience monetization.

• Pre-packaged and custom high-end personal computer systems for gaming, streaming and cryptocurrency mining enthusiasts.

Competitive Strengths

Fully integrated and comprehensive solutions:

Our comprehensive solutions can be used across mobile application experience definition, application portfolio creation, user discovery, user acquisition, user engagement and user monetization.

Data from application analytics and our database of over one petabyte can be used to inform business decisions related to mobile strategy, marketing, operations and more.

Our solutions can be used across mobile application experience definition, application portfolio creation, user discovery, user acquisition, user engagement and user monetization.

Data from application analytics and our analysis of over one petabyte of user data tied to the anonymous Phunware ID can be used to inform business decisions related to mobile strategy, marketing, operations and more.

Built to be mobile-first, native-first, cloud-based:

Phunware was built from the ground up to focus on native mobile development, while other companies in the mobile space have attempted to create shortcuts with “write once, run anywhere” software.

The result is almost a decade of platform-specific mobile expertise, a major competitive differentiator.

The result is over a decade of platform-specific mobile expertise, which we believe to be a major competitive differentiator.

Results-driven culture :

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Intellectual property portfolio development and world-class engineering resources :

Through our world-class in-house technical and engineering organization, we have focused developing our patents and other intellectual property, including methods of accessing wireless account information, rendering content on a wireless device, indoor and outdoor navigation with a mobile device and more.

Through our world-class in-house technical and engineering organization, we have focused on developing our patents and other intellectual property, which includes methods of accessing wireless account information, rendering content on a wireless device, indoor and outdoor navigation with a mobile device and more.

We are developing creative solutions to solve complex technical problems and create competitive advantages for our customers.

We hold eighteen issued patents and six pending patents in various areas including content management, location services and cryptocurrency.

Our Growth Strategy

Key elements of our growth strategy include:

Expansion of Lyte customer base and footprint .

We plan to grow our Lyte operations, both domestically and internationally, as the gaming and cryptocurrency market expands.

We may also offer different technology offerings and computer-builds that keep up with changing demand.

Expansion of mobile products and services.

Mobile applications and in-application advertising media are among the fastest-growing and complex technology markets.

We have made significant investments in research and development and plan to continue extending the functionality and breadth of our applications in the future, including, but not limited to, our healthcare and luxury hospitality solutions.

We have made significant investments in research and development and plan to continue extending the functionality and breadth of our applications in the future.

Deepening of existing customer relationships.

We believe that we are well positioned to identify new opportunities or enhance existing services and solutions within and provide additional products and services to our existing customer base.

We expect to create cross and upsell opportunities as our customers seek to deepen their approach to mobile application lifecycle management.

We have historically created and expect to continue to create cross and upsell opportunities as our customers seek to deepen their approach to mobile application lifecycle management.

Development of new relationships to expand our customer base.

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We believe the multi-year nature of our software and managed services projects, agreements and related recurring revenues provides revenue visibility.

confidentiality, indemnification obligations and limitation of liability, among other provisions.

Our subscription and services agreements with our customers consist of terms relating to length of agreement (for subscriptions and application support), payment, performance, cancellation and termination, confidentiality, indemnification obligations and limitation of liability, among other provisions.

All of these agreements contain terms of service that are generally consistent across our customers.

Our subscription and services agreements generally do not impose obligation upon us, such as exclusivity or other terms.

Our subscription and services agreements generally do not impose obligations of exclusivity or other limiting terms upon us.

Our application transaction agreements, also known as insertion orders, are, for the most part, governed by the standard terms and conditions from the Interactive Advertising Bureau’s (“IAB”) Standard Terms and Conditions for Internet Advertising for Media Buys One Year or Less ("IAB Terms").

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We view the agreements as contracts that ordinarily accompany the business conducted by Phunware and, because of the lack of any commitments to provide a certain amount of business, we are not substantially dependent on the agreements.

We sell our Lyte computer systems directly to individual consumers with a focus on for gaming, streaming and cryptocurrency mining enthusiasts.

Lyte customers purchase their systems via Lyte's website.

Purchasers of Lyte game systems agree to terms and conditions governing the purchase during the online check-out process.

Concentration of Major Customers

Due to the nature of our business, we have in the past and may, at times, in the future have a material concentration of our revenue with a small number of customers.

However, with the acquisition of Lyte and sales of PhunToken, we expect this to be less frequent.

For the year ended December 31, 2022, no individual customer represented greater than 10% of our net revenue.

For the year ended December 31, 2023, three customers collectively represented 35% of our net revenues.

Sales and Marketing

Our internal salesforce is focused on direct sales opportunities for our platform subscription and services and application transaction product lines.

Our salesforce is focused on direct sales opportunities for our platform subscription and services and application transaction product lines.

They are experienced across all verticals in which we serve and can assist small, mid-sized and large organizations.

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Our sales cycle is typically short for direct to business customers, whereby it may be longer when partnering with agencies.

Our marketing efforts for our Lyte operations currently consist of purchasing advertisements on various social media platforms.

We do not maintain an internal salesforce, as sales are e-commerce based and derived from Lyte's website.

We also maintain a customer service and success function for our Lyte computer customers.

Research and Development

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In 2018, we began offering rights to future issuances of PhunCoin, and in 2019 we expanded to a dual token structure by creating PhunToken.

PhunCoin is intended to be the “Value of Data” that empowers consumers to take control of and be compensated for their data and will allow holders to participate in the economics of the Token Ecosystem.

The dual-token ecosystem is designed to both empower consumers and brands to engage with each other and other audiences by creating a blockchain-enabled data and engagement exchange that recognizes the value of data and engagement, which we refer to herein as our "Token Ecosystem." PhunCoin is intended to be the “Value of Data” that empowers consumers to take control of and be compensated for their data and will allow holders to participate in the economics of the Token Ecosystem.

PhunToken is intended to be the “Value of Engagement” that empowers consumers to monetize their data and to use PhunToken to engage with brands and others in the Token Ecosystem.

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To date, we have recorded the rights purchases as a liability in our consolidated balance sheets as of December 31, 2023 and 2022, as we have yet to issue any PhunCoin pursuant to our rights offerings.

Although we currently do not anticipate the selling of additional PhunCoin rights, we may generate additional funding from sales of PhunCoin in the future.

A multidisciplinary team (design, engineering, quality assurance, crypto, product and legal) is actively developing all aspects of the Token Ecosystem for iOS and Android.

PhunCoin security features and compliance protocols have been and continue to be implemented.

We may generate additional funding from sales of PhunCoin in the future.

We are planning for future enhancements of the Token Ecosystem in 2024;

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Proposition 24 took effect January 1, 2023 for personal data collected after January 1, 2022.

Following California's lead, Colorado, Connecticut, Utah and Virginia have been or will be enforcing new laws around data privacy and protection in 2023.

Following California's lead, Colorado, Connecticut, Utah and Virginia have been or will be enforcing new laws around data privacy and protection.

Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our business, such as digital assets.

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We protect our intellectual property through trade secrets law, patents, copyrights, trademarks and contracts.

In some cases, we partner with law firms and others to seek enforcement of our rights under the patents we hold and to recover damages for any finding of infringement thereof.

We have established business procedures designed to maintain the confidentiality of our proprietary information such as the use of our license agreements with customers and our use of our confidentiality agreements and intellectual property assignment agreements with our employees, consultants, business partners and advisors where appropriate.

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We cannot provide assurance that any of our patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims.

Furthermore, even if a patent is issued, we cannot assure that such patent will be adequate to protect our business.

Furthermore, even if a patent is issued, we cannot provide assurance that such patent will be adequate to protect our business.

We also license software from third parties for integration into our solutions, including open source software and other software available on commercially reasonable terms.

Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses and confidentiality agreements, unauthorized parties may still copy or otherwise obtain and use our software and other technology.

In addition, if we expand international operations, an effective patent, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.

In addition, if we expand international operations, effective patent, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.

Our industry is characterized by the existence of a large number of patents and claims and related litigation regarding patent and other intellectual property rights.

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As of December 31, 2023, we had 25 full-time employees.

including 50 software developers, engineers, QA engineers and product managers;

a sales and marketing force of approximately 20 professionals and 19 employees at Lyte.

In addition, we have a team of 11 individuals responsible for the assembly of Lyte computers.

None of our employees are currently covered under any collective bargaining agreements.

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Our website address is https://www.phunware.com.

The information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K.

The information on, or that can be accessed through, our

website is not part of this Annual Report on Form 10-K.

We have included our website address as an inactive textual reference only.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act are available free of charge on the investor relations section of our website, which we post as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act are available free of charge on the investor relations section of our website, located at https://www.phunware.com, which we post as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The SEC also maintains an Internet website that contains reports and other information regarding issuers, such as Phunware, that can be filed electronically with the SEC.

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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 1. Business