What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-15 compared with 2023-03-31 · 390 added, 502 removed, 700 unchanged (56% of the section changed)

14 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, 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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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(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 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 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.

For the year ended December 31, 2022, the Company generated revenue of $1.5 million from the sale of PhunToken for which they received both cash and digital currency from customers.

The Company’s management has exercised significant judgment in their determination of how existing accounting principles generally accepted in the United States of America (“GAAP”) should be applied to the accounting for digital assets held, the associated financial statement presentation and accompanying footnote disclosures.

We identified the accounting for and disclosures of digital assets held and sold as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the valuation, existence and rights and obligations of digital assets held and sold.

The nature and extent of audit effort required to address the matter included significant involvement of more experienced engagement team members and subject matter experts related to the matter.

How We Addressed the Matter in Our Audit

Our audit procedures included, amongst others:

• We obtained an understanding of management’s process with regards to the methodology used, and the factors considered in determining the appropriate accounting for and disclosure of its digital assets held;

• Evaluated management’s rationale for the application of Accounting Standards Codification (“ASC”) 350 to account for its digital assets held, including management’s processes for evaluating its digital assets for impairment;

• 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, including risks related to PhunToken in the notes to the financial statements;

• 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, tested the fair value of the assets received and determined that the sales transactions were in accordance with ASC 606;

• 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.

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

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

We determined that there were no critical audit matters.

/s/ Marcum LLP

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Accounts receivable, net of allowance for doubtful accounts of $ 86 and $ 10 at December 31, 2023 and 2022, respectively

Inventory 2,780 2,636

Digital assets 75 10,137

Prepaid expenses and other current assets 374 608

Current assets of discontinued operation 28 3,328

Total current assets 4,961 16,863

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Goodwill — 25,766

Intangible assets, net 2,524 3,213

Right-of-use asset 1,451 2,301

Other assets 276 325

Non-current assets of discontinued operation — 9,388

Total assets $ 6,728 $ 54,835

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Warrant liability — 256

Current liabilities of discontinued operation 205 2,206

Total current liabilities 16,503 25,577

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Lease liability 1,031 1,928

Non-current liabilities of discontinued operation — 1,175

Total liabilities 18,185 29,954

Commitments and contingencies (Note 10)

Stockholders’ equity

Stockholders’ (deficit) equity

Common stock, $ 0.0001 par value;

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3,851,448 and 2,063,074 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Treasury stock at cost;

10,130 and 0 shares at December 31, 2023 and 2022, respectively

Additional paid-in capital 292,467 275,572

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Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share information)

(In thousands, except share and per share information)

Year Ended December 31,

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Fair value adjustment for warrant liabilities 256 3,349

Gain on forgiveness of Paycheck Protection Program ("PPP") loan — 2,850

Gain on sale of digital currencies 5,310 367

Other income, net 230 211

Total other expense ( 21,388 ) ( 37,104 )

Total other income (expense) 3,776 ( 21,390 )

Loss before taxes ( 41,915 ) ( 45,421 )

Income tax (expense) benefit ( 4 ) 426

Income tax expense ( 29 ) ( 4 )

Net loss from continuing operations ( 41,944 ) ( 45,425 )

Net loss from discontinued operation, net of $ 0 taxes

( 10,841 ) ( 5,469 )

Net loss ( 52,785 ) ( 50,894 )

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Comprehensive loss $ ( 52,731 ) $ ( 51,014 )

Loss per share, basic and diluted $ ( 0.51 ) $ ( 0.71 )

Net loss from continuing operations per share, basic and diluted $ ( 17.62 ) $ ( 22.95 )

Net loss from discontinued operations per share, basic and diluted $ ( 4.56 ) $ ( 2.76 )

Weighted-average common shares used to compute loss per share, basic and diluted 2,379,972 1,979,634

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Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands)

(In thousands, except share information)

Capital Accumulated Deficit Other

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Equity (Deficit)

Shares Amount

Common Stock Treasury Stock

Shares Amount Shares Amount

Balances as of December 31, 2021 1,935,040 $ — — $ — $ 264,954 $ ( 199,325 ) $ ( 352 ) $ 65,277

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Issuance of common stock under the 2018 employee stock purchase plan 4,103 — — — 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.

34,484 — — — 3,064 — — 3,064

Sales of common stock, net of issuance costs 52,469 — — — 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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Issuance of common stock under the 2018 employee stock purchase plan 2,019 — — — 48 — — 48

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

1,724 — 3,064 — — 3,064

Issuance of common stock in lieu of cash bonus and consulting fees 20,089 — — — 434 — — 434

Common Stock issued upon conversion of 2022 Promissory Note 208,453 — — — 1,800 — — 1,800

Sales of common stock, net of issuance costs 1,466,147 — — — 10,476 — — 10,476

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Cumulative translation adjustment — — — — — — 54 54

Treasury stock repurchase — — ( 10,130 ) ( 502 ) — — — ( 502 )

Net loss — — — — — ( 52,785 ) — ( 52,785 )

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Operating activities

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

Net loss from continuing operations $ ( 41,944 ) $ ( 45,425 )

Net loss from discontinued operation ( 10,841 ) ( 5,469 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Accretion of debt discount and amortization of deferred financing costs 1,136 1,034

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

Loss on extinguishment of debt — 7,952

Gain on change in fair value of warrant liability ( 256 ) ( 3,349 )

Gain on sales of digital currencies ( 5,310 ) ( 367 )

Impairment of digital assets 50 22,911

Impairment of goodwill 2,061 —

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

Impairment of goodwill and other long lived assets 25,887 —

Stock-based compensation 4,071 3,009

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Accounts receivable 235 2

Inventory ( 412 ) ( 949 )

Prepaid expenses and other assets 283 26

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Accrued expenses ( 1,246 ) ( 987 )

Accrued legal settlement — ( 3,000 )

Lease liability payments ( 959 ) ( 794 )

Deferred revenue ( 896 ) ( 318 )

Cash flows from operating activities - continuing operations ( 27,947 ) ( 28,560 )

Cash flows from operating activities - discontinued operation 9,512 1,704

Net cash used by operating activities ( 18,435 ) ( 26,856 )

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Purchases of digital assets — ( 923 )

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

Capital expenditures — ( 242 )

Cash flows used in investing activities - continuing operations 15,390 117

Cash flows used in investing activities - discontinued operation ( 8 ) ( 2,375 )

Net cash used in investing activities 15,382 ( 2,258 )

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Proceeds from sales of common stock, net of issuance costs 10,476 4,298

Proceeds from warrant exercises — 4,635

Treasury stock repurchases ( 502 ) —

Proceeds from exercise of stock options 58 28

Net cash provided by financing activities 8,055 88,019

Net cash provided by financing activities - continuing operations 4,975 8,055

Effect of exchange rate on cash and restricted cash 57 ( 123 )

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Cash and restricted cash at the end of the period $ 3,934 $ 1,955

Supplemental disclosure of cash flow information

Interest paid $ 957 $ 1,364

Income taxes paid $ — $ —

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

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Year Ended December 31,

Supplemental disclosure of cash flow information

Interest paid $ 1,215 $ 957

Income taxes paid $ — $ —

Supplemental disclosure of non-cash information

Issuance of common stock for payment on 2022 Promissory Note $ 1,800 $ —

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

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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

Issuance of common stock for payment of legal, earned bonus and board of director fees $ — $ 66

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

Issuance of common stock under the 2018 employee stock purchase plan previously accrued $ 48 $ 214

Issuance of common stock for payment of earned bonus and consulting fees $ 434 $ —

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

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Phunware, Inc.

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

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

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

Our location-based software-as-a-service platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship.

Our technology is available in Software Development Kit ("SDK") form for organizations developing their own application, via customized development services and prepackaged solutions.

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

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

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

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

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

In October 2021, we acquired Lyte Technology, Inc.

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

On November 1, 2023, we discontinued the operations of Lyte.

See Note 3 for further discussion.

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

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All intercompany transactions and balances have been eliminated in consolidation.

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.

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.

Discontinued Operation

On November 1, 2023, we committed to a plan to discontinue and wind down the operations of Lyte, which the Company determined meets the criteria for classification as a discontinued operation in accordance with Accounting Standards Codification ("ASC") Topic 205-20, Discontinued Operations .

Prior periods were recast so that the basis of presentation is consistent.

For additional information, see Note 3, Discontinued Operation .

Reverse Stock Split

On February 26, 2024, the Company effected a reverse stock split of its common stock at a ratio of one-for-fifty (the "Reverse Stock Split").

The number of authorized shares and par values of the common stock were not adjusted as a result of the Reverse Stock Split.

The accompanying financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented.

All issued and outstanding common stock, options, restricted stock units and warrants exercisable for common stock and per share amounts have been retrospectively adjusted.

Nasdaq listing

On April 13, 2023, we received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”) because the bid price of the Company’s common stock on the Nasdaq Capital Market had closed below $1.00 per share for the previous 30 consecutive business days.

The notice from Nasdaq stated that, under Nasdaq Listing Rule 5810(c)(3)(A), we had been provided a period of 180 calendar days, or until October 10, 2023, to regain compliance with the Bid Price Requirement.

On October 10, 2023, we submitted a request to Nasdaq for an additional 180-day extension to regain compliance with the Bid Price Requirement.

On October 12, 2023, the Company received a letter from Nasdaq advising that the Company had been granted a 180-day extension to April 8, 2024, to regain compliance with the Bid Price Requirement, in accordance with Nasdaq Listing Rule 5810(c)(3)(A).

On December 21, 2023, the Company received a letter from Nasdaq notifying the Company that, as of December 20, 2023, the Company's common stock had a closing bid price of $0.10 or less for ten consecutive trading days and that, consistent with Nasdaq Listing Rule 5810(c)(3)(A)(iii), the Nasdaq had determined to delist the Company's common stock from the Nasdaq Capital Market.

The notice provided that the Company an opportunity to appeal the Nasdaq's decision to delist the Company's common stock.

On December 22, 2023, we submitted a request for a hearing before the Nasdaq Hearings Panel (the "Panel") to appeal the Nasdaq's delisting determination.

As noted above, we have effected a reverse stock split in order to regain compliance with the Bid Price Requirement, and on March 12, 2024, we received a letter from Nasdaq notifying us that we demonstrated compliance with the requirements to remain listed on the Nasdaq Capital Market, as required by the Panel.

The letter also informed the Company that pursuant to Listing Rule 5815(d)(4)(B), the Company will be subject to a mandatory Panel monitor for a period of one year from the date of this letter.

If, within that one-year monitoring period, the staff finds the Company again out of compliance with the requirement that was the subject of the exception, notwithstanding Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the Company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3).

Instead, the Nasdaq will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened hearings panel if the initial Panel is unavailable.

The Company will have the opportunity to respond/present to the hearings panel as provided by Listing Rule 5815(d)(4)(C).

There can be no assurance the Company will maintain compliance with the above or any other Nasdaq Listing Rules.

Going Concern

Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern , requires management to evaluate whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued.

As required by this standard, management’s initial evaluation shall not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.

We have a history of losses since inception.

For the year ended, December 31, 2023, we incurred a net loss of $ 52,785 , used $ 18,435 in cash for operations and had a working capital deficiency.

However, subsequent to December 31, 2023, through a series of offerings of our common stock, we raised aggregate net proceeds of approximately $ 20.8 million.

In addition, the holder of our 2022 Promissory Note, as amended, elected to convert the balance of the 2022 Promissory Note and the 2022 Promissory Note is paid in full.

See Note 16 for further discussion on financing activities that occurred subsequent to December 31, 2023.

Our assessment included a review of the Company’s cash forecast taking into account the financing activities described above.

As a result of the review of our assessment, 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 continue to focus on growing our revenues.

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

Furthermore, we 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.

The Company may utilize debt or sell newly issued equity securities through public or private transactions, or through the use of an at-the-market facility.

We currently have an effective "shelf" registration statement on Form S-3 we may utilize for additional financing for the issuance of our common stock, preferred stock, warrants or units.

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.

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.

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.

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, 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.

Some of the more significant estimates and assumptions made by management 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, the recoverability or impairment of tangible and intangible assets, including goodwill, reserves and certain accrued liabilities, the benefit period of deferred commissions, the incremental borrowing rate used in accounting for leases 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.

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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.

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.

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 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.

Our 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;

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

application development service revenue from the development of customer applications, or apps, which are built and delivered to customers;

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License fees are typically billed annually in advance.

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

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

In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

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

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

unlocking features and capabilities of our MaaS platform.

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

Hardware Revenue

We acquired Lyte Technology in October 2021.

Revenue from Lyte is primarily derived from the sale of high-performance personal computers.

Lyte computers are sold with a variety of pre-packaged solutions, as well as customizable solutions selected by our customers.

Customers pay us in advance of shipment of their computer via the Lyte website.

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, including shipping, at the time a completed unit ships from our facility.

Deferred Commissions

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Balance, end of the year $ 96 $ 136

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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As a result, any incorrectly executed transactions could adversely our financial condition.

The aggregate cost basis of our digital asset holdings is $ 37,737 at December 31, 2022.

Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value.

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Customer C 16 % 6 %

Customer D 12 % 8 %

Cash, Cash Equivalents, and Restricted Cash

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Balance, end of year $ 86 $ 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.

We purchase inventory from suppliers both domestically and internationally.

We believe that our products are generally available from more than one supplier and seek to maintain multiple sources for materials, both internationally and domestically.

We may, at times, purchase products in bulk quantities to take advantage of quantity discounts and to ensure inventory availability.

We recognize provisions for obsolete and slow-moving inventory primarily based on judgments about expected disposition of inventory, generally, through sales, or liquidations of obsolete inventory, and expected recoverable values based on currently available or historical information.

Digital Assets

Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum.

We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other .

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

We currently account for all digital assets (primarily bitcoin and ethereum) held 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 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, ethereum and other digital asset holdings (Level 1 inputs).

We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired.

We perform an analysis each reporting period 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 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.

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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 $ 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

Goodwill arises from purchase business combinations and is measured as the excess of the cost of the business acquired over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed.

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.

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.

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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.

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, 2023, and updated it during the fourth quarter of 2023, 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.

Long-Lived Assets

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If the total of undiscounted future cash flows is less than the carrying amount of an asset, an impairment would be recognized for the amount by which the carrying amount of the asset exceeds its fair value.

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

Identifiable long-lived assets attributed to the United States and international geographies are based upon the country in which the asset is located or owned.

As of December 31, 2023 and 2022, all of our identifiable long-lived assets were in the United States.

We recorded an impairment loss on long-lived assets in the amount of $ 68 for the year ended December 31, 2023.

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

Debt Issuance Costs and Discount

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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.

As of December 31, 2022, 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.

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Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Restricted shares subject to repurchase provisions relating to early exercises under our 2009 Equity Incentive Plan were excluded from basic shares outstanding.

Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the extent dilutive.

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Total $ — $ 256 $ — $ 256

The following table sets forth the assumptions used and calculated aggregated fair values of the liability classified warrant:

December 31, 2023 December 31, 2022

Strike price per share N/A $ 1.42

Closing price per share N/A $ 0.77

Term (years) N/A 0.53

Volatility N/A 102 %

Risk-free rate N/A 4.70 %

Dividend Yield — —

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

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We regularly evaluate current information available to us to determine whether an accrual is required, an accrual should be adjusted or a range of possible loss should be disclosed.

Legal costs incurred in connection with loss contingencies are expensed as incurred.

From time to time, we are involved in disputes, litigation and other legal actions.

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Smaller reporting company status is determined on an annual basis.

Recent Accounting Pronouncements Not Yet Adopted

Segment Reporting

Our chief operating decision maker is our Chief Executive Officer ("CEO").

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

As a result of the shutdown of our Lyte operating segment, as of December 31, 2023,we have determined that the Company operates in a single reporting segment.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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In addition, for available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

As a smaller reporting company, the standard is currently effective for us for annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2019.

We currently intend to adopt this new standard effective January 1, 2023.

We currently do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements and disclosures.

We adopted this new standard effective January 1, 2023.

The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements and disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) (“ASU 2020-06”).

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

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

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 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 our current allocation of the October 18, 2021 purchase price:

Initial Allocation

Adjustments Final Allocation

Cash $ 4 $ — $ 4

We plan to implement ASU 2020-06 on January 1, 2024.

Discontinued Operation

On November 1, 2023, the Company made the strategic decision to wind down and discontinue the operations of its Lyte reporting segment.

The assets and liabilities classified as a discontinued operation of Lyte are presented separately in the consolidated balance sheets and consolidated statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022 are presented as a discontinued operation.

We generally completed the wind down of the Lyte operations as of December 31, 2023.

Therefore, there was no gain or loss on disposal.

Assets and liabilities of the Lyte discontinued operation included the following:

2023 December 31,

Accounts receivable, net $ 28 $ 123

Inventory — 2,780

Intangible assets 3,340 — 3,340

Prepaid expenses and other current assets — 425

Current assets of discontinued operation 28 3,328

Property and equipment, net — 29

Goodwill — 5,347

Intangible assets, net — 2,524

Right-of-use asset — 1,411

Other assets — 77

Non-current assets of discontinued operation — 9,388

Accounts payable 183 421

Accrued expenses 22 154

Deferred revenue — 1,373

Goodwill 6,937 35 6,972

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 we believe is well known in the marketplace.

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

Goodwill was recorded to reflect the excess purchase consideration over net assets acquired and primarily consists of the future economic benefits that we expect to receive as a result of the acquisition.

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.

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.

The following table summarizes the unaudited pro forma condensed financial information of Phunware, Inc for the year ended December 31, 2021 as if the acquisition of Lyte had occurred on January 1, 2021:

Lease liability — 258

Current liabilities of discontinued operation 205 2,206

Lease liability — 1,175

Non-current liability of discontinued operation $ — $ 1,175

A breakdown of the Lyte discontinued operation in the consolidated statements of operations and comprehensive loss are set forth:

Year Ended December 31,

(in thousands) (unaudited)

Net revenues $ 7,567 $ 15,273

Net loss ( 53,935 )

Cost of revenues 8,470 13,706

Gross profit ( 903 ) 1,567

Operating expenses:

Sales and marketing 812 2,700

General and administrative 1,867 2,277

Impairment of goodwill and intangible asset 7,371 2,061

Total operating expenses 10,050 7,038

Operating loss ( 10,953 ) ( 5,471 )

Other expense (income) — 2

Total other expense — 2

Net loss from discontinued operation $ ( 10,953 ) $ ( 5,469 )

On March 15, 2022, we entered into a lease agreement, in which we lease approximately 21,830 square feet in Round Rock, Texas.

The term of the lease was five years and commenced in July 2022.

The lease provided for initial base rent payments of approximately $ 27 per month, subject to escalations.

In addition, we were responsible for payments equal to our proportionate share of operating expenses.

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

In connection with the wind down of Lyte, we entered into a lease termination agreement in which the landlord agreed to terminate the lease for our Lyte facility effective November 30, 2023.

We agreed to forfeit our security deposit of approximately $ 77 and we paid, on November 9, 2023, a termination fee of approximately $ 120 .

For the years ended December 31, 2023 and 2022, we recorded rent expense of $ 352 and $ 176 , respectively, related to the Lyte warehouse facility, which is included in discontinued operations in the consolidated statement of operations and comprehensive loss.

Disaggregation of Revenue

The following table sets forth our net revenues by category:

Year Ended December 31,

Platform revenue $ 6,521 $ 7,548

Hardware revenue 15,273 3,095

Net revenues $ 21,794 $ 10,643

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 $ 4,832 $ 6,521

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

Year Ended December 31,

Customer A 14 % 1 %

Customer B 11 % 1 %

Customer D 10 % 4 %

Customer E 6 % 11 %

Deferred Revenue

Our deferred revenue balance consisted of the following:

Current deferred revenue

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 revenue $ 1,274 $ 1,299

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

Total deferred revenue $ 4,178 $ 5,272

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under arrangements with customers.

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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.

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 platform.

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

Revenue from PhunToken for the year ended December 31, 2023 was not significant.

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 .

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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.

As of December 31, 2023 and 2022, issued PhunToken were 377.2 million.

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

Changes in the Company’s goodwill balance for the years ended December 31, 2022 and 2021, are summarized in the table below:

Balance, beginning of period $ 33,260 $ 25,900

Acquisition of Lyte 35 7,374

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.

Digital Assets

Changes in our digital asset holdings for the year ended December 31, 2023 were as follows:

Bitcoin Ethereum Other Total

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

Digital assets received 3 — 65 68

Purchases of digital assets — — — —

Exchanges of digital assets — 557 ( 557 ) —

Disposal proceeds ( 14,154 ) ( 1,236 ) — ( 15,390 )

Gain on sale of digital assets 4,708 381 221 5,310

Impairment expense — — ( 50 ) ( 50 )

Net balance at December 31, 2023 $ 17 $ 52 $ 6 $ 75

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

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

The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the estimating the fair value of each reporting unit.

Subsequent to the shutdown of Lyte, the Company concluded it operated in one reporting unit.

During the fourth quarter of 2023, sufficient impairment indicators were identified by the Company that it was more-likely-than-not that goodwill was impaired, and a quantitative interim goodwill impairment test was performed.

These impairment indicators included a sustained decline in the Company's stock price and volume of shares traded during the fourth quarter of 2023, which hindered fundraising.

As a result of our 2023 testing, we concluded goodwill was impaired.

We recorded a goodwill impairment charge of $ 25,820 .

As a result of this impairment charge, the Company's goodwill balance was completely written off as of December 31, 2023.

The impairment was driven by deterioration of cash flows, as well as higher costs.

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

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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

Our intangible assets, excluding goodwill, consist of intangible assets acquired in business combinations and were recorded at their estimated fair values on the date of acquisition.

The finite-lived intangible assets that are being amortized are summarized in the table below:

Weighted Average Useful Life

December 31, 2022 December 31, 2021

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Trade name 5.0 $ 3,986 $ ( 1,462 ) $ 2,524 $ 3,990 $ ( 799 ) $ 3,191

Acquired technology 5.1 4,828 ( 4,828 ) — 4,828 ( 4,828 ) —

In-process research and development 5.0 94 ( 94 ) — 94 ( 94 ) —

Customer relationships 5.7 4,535 ( 4,535 ) — 4,626 ( 4,604 ) 22

Order backlog 1.5 329 ( 329 ) — 329 ( 329 ) —

$ 13,772 $ ( 11,248 ) $ 2,524 $ 13,867 $ ( 10,654 ) $ 3,213

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 is as follows:

Future amortization expense for the years ending December 31, Amortization

Total $ 2,524

We believe the current assumptions and estimates utilized are both reasonable and appropriate.

Accrued Expenses

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2022 Promissory Note

On July 6, 2022, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the "2022 Promissory Note") with an original principal amount of $ 12,809 in a private placement with the same investor of our 2021 Promissory Note, discussed further below.

The 2022 Promissory Note was sold with an original issue discount of $ 492 and we paid at closing issuance costs totaling $ 522 .

After deducting all transaction fees paid by us at closing, net cash proceeds to the Company at closing were $ 11,795 .

No interest will accrue on the 2022 Promissory Note unless and until the occurrence of an event of default, as defined in the 2022 Promissory Note.

Beginning on November 1, 2022 and on the same day of each month thereafter until the 2022 Promissory Note is paid in full, we are required to make a monthly amortization payments in the amount of $ 1,566 until the maturity date of July 1, 2023, which is subject to adjustment for any payment deferrals we elect.

We have the right to defer any monthly payment by one month up to twelve times so long as certain conditions, as defined in the 2022 Promissory Note, are satisfied.

In the event we exercise the deferral right for any given month:

(i) the outstanding balance will automatically increase by 1.85 %;

(ii) we will not be obligated to make the monthly payment for such month;

and (iii) the maturity date will be extended for one month.

We may prepay any or all outstanding balance of the 2022 Promissory Note earlier than it is due with a prepayment premium of 110 %.

The prepayment premium also applies to the monthly amortization payments.

The 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.

No interest was to accrue on the 2022 Promissory Note.

Beginning on November 1, 2022, our monthly amortization payment was approximately $ 1,566 , which includes a 10 % premium, until the original maturity date of July 1, 2023.

We had 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 the outstanding balance would automatically increase by 1.85 %

On March 15, 2023, we elected to defer monthly payment obligations for April, May, June and July 2023, as permitted, at the time, by the 2022 Promissory Note.

In connection therewith, we entered into a waiver agreement with the holder waiving the Payment Deferral Conditions, as defined in the 2022 Promissory Note.

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

We evaluated the modification in accordance with the guidance as in ASC 470 - Debt , and we concluded that the modification was not an extinguishment of the original debt;

therefore, no gain or loss was recognized upon modification.

On August 14, 2023, we entered into an amendment to the 2022 Promissory Note with the noteholder.

The amendment extended the maturity date to May 31, 2024 and provided that effective August 1, 2023, we are required to make monthly amortization payments of at least $ 800 commencing on August 31, 2023 until the 2022 Promissory Note is paid-in-full.

Furthermore, the amendment removed the required payment due on August 1, 2023.

We also granted the holder certain limited conversion rights, subject to advance payment and volume conditions.

Conversions into shares of our common stock made pursuant to the limited conversion rights will be calculated on a conversion price equal to 90 % of the lower of (i) the closing trading price of our common stock on the trading day immediately preceding the date for such conversion or (ii) the average closing trading price of our common stock for the five trading days immediately preceding the date for such conversion.

If the holder elects to convert pursuant to the limited conversion option, such conversions will reduce the current month’s monthly amortization payment.

Any conversions in any given month in excess of the $ 800 monthly payment will be applied to reduce the following month's required monthly amortization payment.

In connection with the amendment, we agreed to pay an extension fee equal to approximately $ 708 .

The amendment also provided that the outstanding balance shall accrue interest at a rate of 8 % beginning on August 1, 2023, and payment deferrals are no longer permitted.

We evaluated the amendment in accordance with ASC 470 - Debt , and we concluded that the modification was an extinguishment of the original debt.

Accordingly, we recorded a loss on extinguishment of debt of $ 237 for the year ended December 31, 2023.

In accounting for the amendment, we reviewed other applicable guidance and determined the amendment met the criteria to be accounted for as share-settled debt pursuant to ASC 480-10-25-14(a) as the settlement amount is based on a fixed monetary amount settled in a variable number of shares.

Effective December 6, 2023, the Company entered into an acknowledgement and agreement with the noteholder to which the parties (a) memorialized the noteholder's waiver of the Company’s obligations to satisfy minimum balance reduction

requirements in cash for each of October 2023 and November 2023 and the minimum balance reduction requirement for December 2023.

As consideration for the acknowledgement and agreement, we agreed to pay the noteholder a fee in an aggregate amount equal to 7.5 %, or approximately $ 347 , of the outstanding balance of the 2022 Promissory Note.

The fee was added to the outstanding balance of the 2022 Promissory Note.

We evaluated the modification in accordance with the guidance as in ASC 470 - Debt , and we concluded that the modification was not an extinguishment of the original debt;

therefore, no gain or loss was recognized upon modification.

During 2023, we issued 208,453 shares of our common stock to the noteholder pursuant to conversions elected by the noteholder, which amounted to payment of $ 1,800 of principle and accrued interest thereunder.

The 2022 Promissory Note had a balance of $ 5,011 and debt discount of $ 75 as of December 31, 2023.

The noteholder subsequently converted the outstanding balance of the 2022 Promissory Note into shares of our common stock.

See Note 16 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 (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 .

After deducting all transaction costs, net cash proceeds to the Company were $ 4,740 .

No interest will accrue on the 2021 Promissory Note unless and until the occurrence of an event of default, as defined in the 2021 Promissory Note.

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 %.

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.

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.

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 ).

The investor paid for the Series B Note by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $ 16,000 .

We received cash under the Series B Note only upon cash repayment of the corresponding Investor Note.

The investor, at its option and at any time, had the right to voluntarily prepay the Investor Note, in whole or in part.

Until the Investor Note was repaid, the principal (and related original issue discount) of the Series B Note was considered to be "restricted." The Series B Note and the Investor Note were subject to the terms of a Master Netting Agreement between us and the investor.

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.

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.

The restricted principal of the Series B Note bore interest at a rate of 3 % per annum.

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

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.

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.

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, 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 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.

As more fully discussed in Note 12, the holder partially exercised its warrant during 2021.

The following table sets forth the assumptions used and calculated aggregated fair values of the liability classified warrants:

December 31, 2022 December 31, 2021

Strike price per share $ 1.42 $ 2.25

Closing price per share $ 0.77 $ 2.63

Term (years) 0.53 1.53

Volatility 102 % 186 %

Risk-free rate 4.70 % 0.56 %

Dividend Yield — —

Upon issuance of the warrant, we recorded a warrant liability as a discount to the 2020 Convertible Notes of $ 2,486 .

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

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

Warrant issued — —

Warrant Exercised — ( 16,148 )

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

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.

Paycheck Protection Program ("PPP") Loan

On April 10, 2020, we received loan proceeds in the amount of $ 2,850 from JPMorgan Chase, N.A.

pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted on March 27, 2020.

The loan, which was in the form of a note dated April 9, 2020, was originally scheduled to mature on April 9, 2022 and bore interest at a rate of 0.98 % per annum.

The Paycheck Protection Flexibility Act of 2020, extended the deferral period for loan payments to either (i) the date that the U.S.

Small Business Administration ("SBA") remits the borrower’s loan forgiveness amount to the lender or (ii) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period.

The note may be prepaid by us at any time prior to the maturity with no prepayment penalties.

The principal amount of our PPP loan was subject to forgiveness under the PPP.

On July 7, 2021, we submitted our request to the SBA to forgive the full principal amount of the loan and on August 16, 2021, we received notification that the SBA approved our PPP loan forgiveness application.

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

Promissory Notes

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

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

We may prepay the Notes at any time without penalty.

We may not issue 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 Notes.

Transaction costs related to the issuance of the Notes were immaterial.

The Notes bore ordinary interest at a rate of 10 % per annum.

Interest under the Notes was payable monthly beginning on November 30, 2019.

During the term of the Notes, we were required to maintain a restricted bank account with a minimum balance of one year of interest payments on the aggregate principal balance of all Notes, which will be available for use exclusively to satisfy any payments owed by us under the Notes.

The principal and unpaid accrued interest on the Notes were due and payable on demand by the majority Note holders on or after the date that is 60 months following November 15, 2019.

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, 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.

Interest Expense

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

Year Ended December 31,

2022 Promissory Note $ 903 $ —

2021 Promissory Note 318 203

2020 Convertible Notes — 1,111

Accretion of debt discount - issuance costs 1,034 1,913

Accretion of debt discount - warrants — 1,029

All other debt and financing obligations 151 225

Total $ 2,406 $ 4,481

We lease four corporate offices located in Austin, Texas;

Irvine, California;

San Diego, California;

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 .

Interest expense amounted to $ 1,733 and $ 2,406 for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we lease two corporate offices located in Austin, Texas and Irvine, California, with the earliest lease agreement currently terminating in March 2025 with the latest terminating in September 2027.

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.

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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.

On October 4, 2023, we entered into a lease termination agreement with the landlord of our office space in San Diego, California, in which the landlord and us agreed to terminate our lease effective October 31, 2023.

We agreed to forfeit our security deposit of approximately $ 14 and pay an early termination fee in the amount of approximately $ 68 on October 31, 2023.

The lease was originally scheduled to conclude on June 30, 2025.

The weighted-average remaining lease term for our operating leases as of December 31, 2023 and 2022 was 3.1 years and 4.0 years, respectively.

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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.

The weighted average incremental borrowing rate used to measure our lease liability was 9.63 % and 9.80 % at December 31, 2023 and 2022, 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.

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

Rent expense under operating leases totaled $ 1,102 and $ 809 for the years ended December 31, 2022 and 2021, respectively.

Rent expense for continuing operations under operating leases totaled $ 827 and $ 926 for the years ended December 31, 2023 and 2022, respectively.

Future minimum annual lease payments under the Company’s operating leases are as follows:

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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.

The Miami sublease agreement terminated on June 30, 2023, while the Irvine, California sublease agreement terminates on March 31, 2025.

We recognized sublease income of $ 254 and $ 300 for the year ended December 31, 2023 and December 31, 2022, respectively.

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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, 2023 and 2022.

In March 2023, we partially settled WSGR's claims against us and paid approximately $ 2.2 million of the outstanding invoice amount owed to them.

The claims related to the remaining balance of the payables amount owed continue to be litigated.

On February 18, 2022, certain stockholders filed a lawsuit against Phunware and its individual officers and directors.

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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.

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

Both parties argued their positions before the Court of Chancery during a hearing on April 4, 2023.

On June 16, 2023, the Court ruled on the motions without filing a written opinion.

From the bench, Vice Chancellor Cook granted Phunware’s motion to dismiss on the Texas law-based claims and denied both the motion to dismiss and partial motion for summary judgment on the Delaware law claims.

The parties engaged in mediation in July 2023, but have been unable to reach a settlement, although discussions continue.

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

We have not recorded an expense related to this matter because any potential loss is not currently probable or reasonably estimable.

We have not recorded a liability related to this matter because any potential loss is not currently probable or reasonably estimable.

Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter.

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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.

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

During 2023, we sold 368,707 shares of our common stock under our sales agreement with Wainwright for aggregate gross cash proceeds of $ 7,393 .

Transaction costs were $ 217 .

We terminated the Sales Agreement with Ascendiant effective as of March 28, 2021.

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

and Roth Capital Partners, LLC, relating to an underwritten public offering to which we issued 11,761,111 shares of our common stock at an offering price of $ 2.25 per share.

Aggregate cash proceeds at closing, net of transaction costs of $ 1,740 , totaled $ 24,722 .

We incurred additional transaction costs paid outside of closing of $ 75 .

On April 7, 2021, we entered into an At Market Issuance Sales Agreement with B.

Riley Securities, Inc.

Riley"), pursuant to which we offered and sold, from time to time, shares of our common stock through or to B.

Riley a commission of 3 % of the gross proceeds of the sales price per share for sales of our common stock sold through or to B.

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

During 2022, we sold 52,469 shares of our common stock under our sales agreement with Wainwright for aggregate gross cash proceeds of $ 4,562 .

Transaction costs were $ 101 .

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

We terminated the sales agreement with B.

Riley on February 4, 2022, with an effective date of February 9, 2022.

Sales of shares of our common stock sold under the sales agreement will be made pursuant to an effective shelf registration statement on Form S-3 in the amount of $ 200 million filed with the SEC on February 1, 2022.

On August 22, 2023, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $ 30 million in value of shares of our common stock from time to time over the 24 -month term of the purchase agreement.

On any business day selected by us, we may direct Lincoln Park to purchase up to 5,000 shares of our common stock subject to adjustment as set forth below, on such business day (or the purchase date), which we refer to as a "Regular Purchase," provided, however, that (i) a Regular Purchase may be increased to up to 7,000 shares if the closing sale price of our common stock on the Nasdaq is not below $ 10.00 on the applicable purchase date;

(ii) a Regular Purchase may be increased to up to 9,000 shares if the closing sale price of our common stock on Nasdaq is not below $ 15.00 on the applicable purchase date;

(iii) a Regular Purchase may be increased to up to 11,000 shares if the closing sale price of our common stock on Nasdaq is not below $ 25.00 on the applicable purchase date;

and (iv) a Regular Purchase may be increased to up to 13,000 shares if the closing sale price of our common stock on Nasdaq is not below $ 37.50 on the applicable purchase date, provided, however, that if such Regular Purchase would not equal or exceed $ 100 thousand, then the number of shares that may be sold pursuant to such Regular Purchase is the maximum number of shares that would enable us to sell to Lincoln Park a Regular Purchase amount equal to, or as closely approximating without exceeding, $ 100 thousand.

Lincoln Park’s committed obligation under any single Regular Purchase, subject to certain exceptions, cannot exceed $ 1 million.

We may direct Lincoln Park to purchase shares in Regular Purchases as often as every business day, so long as the closing sale price of our common stock on such business day is not less than the floor price of $ 5.00 per share.

Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Lincoln Park pursuant to which the Company agreed to register the sale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the purchase agreement pursuant to the Company’s existing shelf registration statement on Form S-3.

During 2023, we sold 164,106 shares of our common stock, including certain commitment shares issued to Lincoln Park in connection with the transaction, for aggregate gross cash proceeds of $ 978 .

Transaction costs were $ 97 .

On December 11, 2023, we consummated a registered public offering of an aggregate of 664,307 shares of our common stock and pre-funded warrants to purchase up to 269,027 shares of our common stock pursuant to a securities purchase agreement dated December 7, 2023.

The pre-funded warrants issued had an exercise price of $ 0.05 and were immediately exercisable any time after their original issuance until such pre-funded warrants are exercised in full.

The shares were offered at a public offering price of $ 3.00 per share and the pre-funded warrants were offered at a public offering price of $ 2.95 per pre-funded warrant.

The gross proceeds from the offering, before deducting the placement agent's fees and other offering expenses

payable by the Company, were approximately $ 2,800 .

Transaction costs were approximately $ 389 .

The holders of pre-funded warrants exercised their rights to purchase 269,027 shares of common stock in December 2023.

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 depend on market conditions, applicable legal requirements and other factors, and have been funded through the liquidation of our bitcoin holdings.

During 2023, we repurchased 10,130 shares of our common stock at an aggregate repurchase price of $ 502 .

Dividends are paid on a when-and-if-declared basis.

We did not declare any dividends during 2023 or 2022.

We have various warrants outstanding.

A summary of our outstanding warrants is set forth below:

December 31, 2022 December 31, 2021

As of December 31, 2023, we had no warrants outstanding.

A summary of our outstanding warrants as of December 31, 2022 is set forth below:

Warrant Type Cash Exercise

share Number of warrants Cash Exercise

share Number of warrants

share December 31, 2023

December 31, 2022

2020 Convertible Notes warrant $ 71.23 — 56,226

Common stock warrant (Series D-1) $ — — $ 2.25 35,555

Common stock warrants (Series F) $ 461.00 — 7,548

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Total — 132,651

Refer to Note 8, Debt , for details of our warrant issued in connection with our 2020 Convertible Notes.

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 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.

In connection with the issuance of certain convertible notes, in 2020, we issued a warrant exercisable for three ( 3 ) years for the purchase, initially, of up to an aggregate of 43,200 shares of the Company's common stock at an initial exercise price of $ 200 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 $ 112.50 per share, and the number of shares for which the warrant is exercisable increased to 76,800 shares.

The warrant expired December 21, 2022.

Furthermore, in October 2021, we issued shares to the seller of Lyte as purchase consideration at a price of $ 71.23 per share, and as a result, the exercise price of the warrant adjusted accordingly and the number of shares exercisable thereunder increased to 56,226 .

The holder also partially exercised the warrant in 2021.

The warrant expired July 15, 2023.

In 2018, but prior to our reverse merger with Stellar, we issued warrants (Series F above) to purchase an aggregate of 21,701 shares of common stock with an exercise price of $ 461 per share.

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These warrants are fully vested.

We have common stock warrants trading under the Nasdaq ticker symbol PHUNW (the “Public Warrants”).

Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $ 11.50 per share and are fully exercisable by the holder.

No fractional shares will be issued upon exercise of the Public Warrants.

We may redeem the outstanding Public Warrants in whole and not in part at a price of $ 0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of shares of our common stock equals or exceeds $ 21.00 per share for any 20 trading days within the 30 -trading day period ending on the third trading day before the Company sends the notice of redemption to the Public Warrant holders.

The Public Warrants will expire December 26, 2023 or earlier upon redemption or liquidation.

The Private Placement Warrants entitle the holder to purchase one share of common stock at an exercise price of $ 11.50 per share and are fully exercisable by the holder.

The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option and will not be redeemable in each case so long as they are still held by the initial purchasers or their affiliates.

The Private Placement Warrants will expire December 26, 2023.

The Unit Purchase Option Warrants noted in the table above have the same terms as the Private Placement Warrants as described above.

As of December 31, 2023, the warrants had expired.

The Company had public warrants trading under the Nasdaq ticker symbol "PHUNW," private placement warrants and unit purchase option warrants.

Each of these classes of warrants entitled the holder to purchase one share of common stock at an exercise price of $ 575 per share.

Each of these warrants expired on December 26, 2023.

Stock-Based Compensation

A summary of our various equity incentive plans is set forth below:

2023 Inducement Plans

During 2023, our board of directors adopted two inducement plans;

the Phunware, Inc.

2023B Inducement Plan and the 2023 Inducement Plan (collectively, the "2023 Inducement Plans").

As permitted by Nasdaq Stock Market rules, our stockholders were not required to approve the 2023 Inducement Plans.

The plans provide of up to 24,000 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.

On June 30, 2023, we made an inducement grant to a newly hired officer of the Company of 12,000 restricted stock units under the 2023 Inducement Plan with a grant date fair value of $ 27.00 per share.

One-third of the restricted stock units will vest on June 3, 2024 and the remainder will vest in equal installments over two annual periods beginning on June 2, 2025 and concluding on June 1, 2026, subject to the employee's continued service on such vesting date.

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

On November 10, 2023, we made an inducement grant to a newly hired officer of the Company of 12,000 restricted stock units under the 2023B Inducement Plan with a grant date fair value of $ 7.30 per share.

The restricted stock units vested on February 23, 2024 and were delivered electronically to the holder shortly after the vest date.

2022 Inducement Plan

Our board of directors adopted the Phunware, Inc.

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

As permitted by Nasdaq Stock Market rules, our stockholders were not required to approve the 2022 Inducement Plan.

The plan provides of up to 29,412 shares of our common stock under awards granted to newly hired employees.

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

In January 2023, we made an inducement grant to a newly hired officer of the Company of 29,412 restricted stock units under the 2022 Inducement Plan with a grant date fair value of $ 43.50 per share.

One-third, or 9,804 , of the restricted stock units was scheduled to vest on December 28, 2023 and the remainder in equal installments over eight quarterly periods beginning on March 31, 2024 with the final vesting date occurring on December 28, 2025.

On October 25, 2023, we entered into a separation agreement with the executive, pursuant to which the vesting of this grant was modified such that 10,000 restricted stock units vested on October 25, 2023 and 10,000 restricted stock units will vest on November 30, 2023.

The balance, 9,412 unvested restricted stock units, were terminated and returned to the plan to be made available for future grants.

2018 Equity Incentive Plan

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Not including the maximum number of shares from the 2009 Plan that may be added to the 2018 Plan, the 2018 Plan had 77,426 and 87,653 shares of common stock reserved for future issuances as of December 31, 2023 and December 31, 2022, respectively.

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

Participation ends automatically upon termination of employment with the Company.

On each purchase date, participating employees will purchase shares of our common stock at price per share equal to 85 % of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period.

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.

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 years ended December 31, 2023 and 2022 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) 16,377 shares of common stock;

(ii) 1.5 % of the outstanding shares of common stock on the last day of the immediately preceding fiscal year;

or such other amount as the administrator may determine.

The 2018 ESPP had 30,415 and 16,058 shares of common stock available for sale and reserved for issuance as of December 31, 2023 and 2022, respectively.

2009 Equity Incentive Plan

In 2009, we adopted the 2009 Plan, which allowed for the granting of incentive and non-statutory stock options, as defined by the Internal Revenue Code, to employees, directors and consultants.

The exercise price of the options granted was generally equal to the value of our common stock on the date of grant, as determined by our board of directors.

The awards are exercisable and vested, generally over four years , in accordance with each option agreement.

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

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, 2023 and 2022.

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

Effective with the adoption of the 2018 Plan, no additional grants will be made under the 2009 Plan.

Restricted Stock Units

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Outstanding as of December 31, 2023 96,808 $ 25.21

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.

The awards granted to team members vest over a range of 10 to 51 months with various installment and vesting dates, and are subject to service conditions.

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, 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.

These awards vested immediately.

During the second quarter of 2021, we granted 54,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.23 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.

During the third quarter of 2022, we granted 25,340 restricted stock unit awards to team members with an average grant date fair value of $ 78.50 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.

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.

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 .

We also granted 500 restricted stock units to a non-employee consultant with a grant date fair value of $ 85.00 per share.

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

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

During the first quarter of 2023, we granted 38,420 restricted stock unit awards to team members with an average grant date fair value of $ 46.00 per share.

The vesting provisions were generally such that one-third of the awards vested immediately with the remaining vesting at various dates through November 2024.

We also granted 7,454 restricted stock unit awards to members of our team in lieu of cash bonus earned during 2022 with a grant date fair value of $ 46.50 .

These awards vested immediately.

During the second quarter of 2023, we granted 6,460 restricted stock unit awards to team members with an average grant date fair value of $ 30.00 per share.

The vesting of these awards occurs at various dates through May 2027.

During the third quarter of 2023, we granted 70,660 restricted stock unit awards to team members with an average grant date fair value of $ 14.00 per share.

The vesting of these awards occurs at three equal installments on August 1, 2023, August 1, 2024 and August 1, 2025.

We also granted 1,234 restricted stock units to a consultant.

Those restricted stock units vested in full at August 31, 2023.

During the fourth quarter of 2023, we granted 18,000 restricted stock units to an executive officer with a grant date fair value of $ 7.315 per share.

The vesting of this award was such that 10,000 restricted stock units vested upon grant, 4,000 restricted stock units vested each of November 30, 2023 and January 12, 2024.

We also granted 13,320 restricted stock units to a consultant and board member in lieu of cash payments with an average grant date fair value of $ 6.85 per share.

Those restricted stock units vested immediately.

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

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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.

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 789 restricted stock units will vest on each of the last day of each month from January 2023 through December 2023.

Incremental costs associated with this modification was not significant for the year ended December 31, 2023.

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Exercisable as of December 31, 2023 2,500 $ 56.89 4.19 $ —

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 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.

Participation ends automatically upon termination of employment with the Company.

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 years ended December 31, 2022 and 2021 was not significant.

(ii) 1.5 % of the outstanding shares of common stock on the last day of the immediately preceding fiscal year;

or such other amount as the administrator may determine.

The 2018 ESPP had 802,893 and 189,215 shares of common stock available for sale and reserved for issuance as of December 31, 2022 and 2021, respectively.

2009 Equity Incentive Plan

In 2009, we adopted the 2009 Plan, which allowed for the granting of incentive and non-statutory stock options, as defined by the Internal Revenue Code, to employees, directors and consultants.

The exercise price of the options granted was generally equal to the value of our common stock on the date of grant, as determined by our board of directors.

The awards are exercisable and vest, generally over four years, in accordance with each option agreement.

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

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.

Effective with the adoption of the 2018 Plan, no additional grants will be made under the 2009 Plan.

A summary of our stock option activity under the 2009 Plan and related information is set forth below:

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Exercisable as of December 31, 2023 14,625 $ 39.67 2.94 $ —

The Company did not grant any options under the 2009 Plan during the year ended December 31, 2022 or 2021.

During 2022, we granted options to purchase 1,000 shares of our common stock to two non-employee consultants with an exercise price of $ 85.00 per share.

The options vested in various increments with the final vest date occurring on December 30, 2022.

During 2023, we granted an option to purchase 1,500 shares of our common stock to a non-employee consultant with an exercise price of $ 38.00 per share.

As of December 31, 2023, the option had fully vested.

We have historically used the Black-Scholes option pricing model to estimate the fair value of our stock option awards.

Stock based compensation related to this grant was not significant.

The weighted average grant date fair value of options granted during 2023 and 2022 was $ 38.15 and $ 27.00 , respectively.

The total fair value for options vested during the years ended December 31, 2023 and 2022 was $ 6 and $ 42 , respectively.

The aggregate intrinsic value is based on our stock price trading price on the Nasdaq Capital Market.

The aggregate intrinsic value of options exercised was $ 16 and $ 50 for the years ended December 31, 2023 and 2022, respectively, and is calculated based on the difference between the estimated fair value of our common stock at the date of exercise and the exercise price.

The total fair value for options vested during the years ended December 31, 2022 and 2021 was $ 17 and $ 66 , respectively.

Stock-Based Compensation

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Total stock-based compensation $ 4,071 $ 3,009

As of December 31, 2022, there was approximately $ 4,680 , $ 349 and $ 1 of total unrecognized compensation cost related to the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively.

These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.2 years, 1.9 years and 0.7 years for the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively.

As of December 31, 2023, there was approximately $ 2,131 total unrecognized compensation cost related to our stock benefit plans.

These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.0 years.

Deferred income taxes are recognized for the tax consequences in future years for differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

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Income tax expense is the combination of the tax payable for the year and the change during the year in deferred tax assets and liabilities.

For the years ended December 31, 2022 and 2021, we had net losses before income taxes of $ 50,890 and $ 53,948 , respectively.

For the years ended December 31, 2023 and 2022, we had net losses from continuing operations before income taxes of $ 41,915 and $ 45,421 , respectively.

We had net losses from a discontinued operation of $ 10,841 and $ 5,469 for the years ended December 31, 2023 and 2022, respectively.

Net losses relating to U.S.

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Year Ended December 31,

Income tax (benefit) at statutory rate $ ( 10,685 ) $ ( 11,330 )

Income tax (benefit) at statutory rate (continuing operations) $ ( 8,800 ) $ ( 9,537 )

Income tax (benefit) at statutory rate (discontinued operation) ( 2,277 ) ( 1,148 )

Valuation allowance 6,319 12,894

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Business tax credit net of reserves 91 ( 575 )

Non-deductible expenses 794 2,210

Business combination — ( 437 )

Non-deductible expenses (continuing operations) 4,840 360

Non-deductible expenses (discontinued operation) 1,123 434

Foreign income taxes at different rate 22 ( 310 )

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Total current 29 4

Federal — ( 416 )

State — ( 21 )

Total deferred — —

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The Act did not have a material impact on our financial results for the year ended December 31, 2023 and 2022.

Segment and Geographic Information

Our chief operating decision maker is our Chief Executive Officer ("CEO").

Our CEO reviews operating segment information for purposes of allocating resources and evaluating financial performance.

We have determined that the Company operates in a two reporting segments:

Phunware and Lyte.

In 2021, but prior to the acquisition of Lyte, our CEO reviewed the financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

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

As of or for the year ended December 31, 2022

Phunware Lyte Consolidated

Goodwill $ 25,765 $ 5,348 $ 31,113

Total assets $ 42,349 $ 12,486 $ 54,835

Net revenues $ 6,521 $ 15,273 $ 21,794

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.

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

Related-Party Transactions

In connection with the reverse merger with Stellar, in 2018, we assumed $ 255 in payables for Nautilus Energy Management Corporation, an affiliate of two former members our board of directors, one of whom served on our board of directors until December 2, 2021.

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

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.

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.

Additional Equity Financings

In a series of equity financings, we sold an aggregate of 2,696,000 shares of our common stock and issued pre-funded warrants to purchase up to 974,000 shares of our common stock.

The gross proceeds from the offering, before deducting the placement agent's fees and other offering expenses payable by the Company, were approximately $ 22.6 million.

Placement agent transaction costs were approximately $ 1.8 million.

The holders of the pre-funded warrants exercised their rights to purchase 974,000 shares of common stock.

2022 Promissory Note

In January and February 2024, we issued 336,550 shares of our common stock to the holder of our 2022 Promissory Note, which amounted to aggregate principal and interest payments in the amount of $ 4,505 .

These conversions were made pursuant the terms of the amended 2022 Promissory Note, as well as, the Company granting the noteholder permission for certain additional conversions.

In connection with the Company granting the holder additional conversion rights, the noteholder agreed to waive an aggregate of $ 535 .

As a result of the conversions, the 2022 Promissory Note is paid-in-full.

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