phun-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37862

PHUNWARE, INC.

(Exact name of registrant as specified in its charter)


Delaware						30-1205798
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1002 West Avenue, Austin, Texas

78701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 512-693-4199

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol(s)

Name of each exchange on which registered:

Common Stock, par value $0.0001 per share

PHUN

The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 7, 2024, 8,272,091 shares of common stock, par value $0.0001 per share, were outstanding.

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 202 4 (unaudited) and December 31, 20 23	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 202 4 and 202 3 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2024 and 2023 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 202 4 and 202 3 (unaudited)	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

PART II	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32

	Signatures	33

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report (the “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.


	March 31, 2024		December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	21,567	$	3,934
Accounts receivable, net of allowance for doubtful accounts of $86 at March 31, 2024 and December 31, 2023	637		550
Digital assets	19		75
Prepaid expenses and other current assets	385		374
Current assets of discontinued operation	28		28
Total current assets	22,636		4,961
Property and equipment, net	35		40




Right-of-use asset	1,325		1,451
Other assets	276		276
Total assets	$	24,272	$	6,728
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	5,070	$	7,836
Accrued expenses	239		437

Lease liability	656		629
Deferred revenue	1,012		1,258
PhunCoin deposits	1,202		1,202

Current maturities of long-term debt, net	—		4,936
Current liabilities of discontinued operation	—		205
Total current liabilities	8,179		16,503



Deferred revenue	611		651
Lease liability	857		1,031

Total liabilities	9,647		18,185
Commitments and contingencies (Note 7)
Stockholders’ equity (deficit)
Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 8,282,221 shares issued and 8,272,091 shares outstanding as of March 31, 2024; and 3,861,578 shares issued and 3,851,448 shares outstanding as of December 31, 2023	1		—
Treasury stock at cost; 10,130 shares at March 31, 2024 and December 31, 2023	(502)		(502)
Additional paid-in capital	320,840		292,467
Accumulated other comprehensive loss	(418)		(418)
Accumulated deficit	(305,296)		(303,004)
Total stockholders’ equity (deficit)	14,625		(11,457)
Total liabilities and stockholders’ equity (deficit)	$	24,272	$	6,728


	Three Months Ended March 31,
	2024		2023
Net revenues	$	921	$	1,344
Cost of revenues	397		1,271
Gross profit	524		73

Operating expenses:
Sales and marketing	443		856
General and administrative	2,471		4,142
Research and development	484		1,769

Total operating expenses	3,398		6,767
Operating loss	(2,874)		(6,694)

Other income (expense):
Interest expense	(108)		(537)
Gain on extinguishment of debt	535		—
Impairment of digital assets	(56)		(50)
Fair value adjustment of warrant liability	—		253

Gain on sale of digital assets	—		3,214
Other income, net	211		102
Total other income	582		2,982
Loss before taxes	(2,292)		(3,712)
Income tax expense	—		—
Net loss from continuing operations	(2,292)		(3,712)
Net loss from discontinued operation, net of $0 tax	—		(557)
Net loss	(2,292)		(4,269)
Other comprehensive income:
Cumulative translation adjustment	—		23
Comprehensive loss	$	(2,292)	$	(4,246)

Net loss per share from continuing operations, basic and diluted	$	(0.33)	$	(1.80)
Net loss per share from discontinued operations, basic and diluted	$	—	$	(0.27)

Weighted-average common shares used to compute loss per share, basic and diluted	6,864,226		2,063,379


	Common Stock			Treasury stock			Additional Paid-in Capital		Accumulated Deficit		Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balances as of December 31, 2023	3,861,578	$	—	(10,130)	$	(502)	$	292,467	$	(303,004)	$	(418)	$	(11,457)

Release of restricted stock	16,000	—		—	—		—		—		—		—

Issuance of common stock in lieu of consulting fees	11,453	—		—	—		35		—		—		35
Common stock issued upon conversion of 2022 Promissory Note	336,550	—		—	—		4,505		—		—		4,505
Sale of common stock & exercise of prefunded warrants, net of issuance costs	3,915,009	1		—	—		23,203		—		—		23,204
Fractional share issuances as a result of reverse stock split	141,631	—		—	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		630		—		—		630

Net loss	—	—		—	—		—		(2,292)		—		(2,292)
Balances as of March 31, 2024	8,282,221	$	1	(10,130)	$	(502)	$	320,840	$	(305,296)	$	(418)	$	14,625


Supplemental disclosure of cash flow information
Interest paid	$	4	$	434
Income taxes paid	$	26	$	—
Supplemental disclosures of non-cash financing activities:
Issuance of common stock upon conversion of the 2022 Promissory Note	$	4,505	$	—
Issuance of common stock for payment of bonuses and consulting fees	$	35	$	347


	March 31, 2024		December 31, 2023
Customer A	36	%	43	%
Customer B	14	%	16	%
Customer C	4	%	12	%


Net revenues	$	3,403
Cost of revenues	3,115
Gross profit	288

Operating expenses:
Sales and marketing	272
General and administrative	570
Research and development	3

Total operating expenses	845
Operating loss	$	(557)


	Three Months Ended March 31,
	2024	2023

Warrants	—	132,651
Options	13,011	17,341
Restricted stock units	78,387	109,605

Total	91,398	259,597


Future minimum lease obligations years ending December 31,	Lease Obligations
2024 (Remainder)	$	566
2025	463
2026	370
2027	284


	$	1,683
Less: Portion representing interest	(170)
	$	1,513


	Three Months Ended March 31,
Stock-based compensation	2024		2023
Cost of revenues	$	45	$	253
Sales and marketing	14		97
General and administrative	556		859
Research and development	15		153
Total stock-based compensation	$	630	$	1,362


	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2023	96,808	$	25.21
Granted	9,032	4.13
Released	(27,453)	17.25
Forfeited	—	—
Outstanding as of March 31, 2024	78,387	$	25.58


			•Enterprise mobile software development kits (SDKs) including content management, location-based services, marketing automation, business intelligence and analytics, alerts, notifications and messaging, audience engagement and audience monetization;
			•Integration of our SDK licenses into existing applications maintained by our customers;
			•Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application portfolios, solutions and services that address: the patient experience for healthcare, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate, the luxury guest experience for hospitality, the student experience for education and the generic user experience for all other verticals and applications; and
			•Application transactions for mobile audience building, user acquisition, application discovery, audience engagement and monetization, including our engagement-driven digital asset PhunToken.


	March 31, 2024		December 31, 2023
(in thousands)
Backlog	$	2,803	$	2,750
Deferred revenue	1,623		1,909
Total backlog and deferred revenue	$	4,426	$	4,659


			•Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;
			•Our non-GAAP financial measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and
			•Other companies in our industry may calculate our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.


	Three Months Ended March 31,
(in thousands, except percentages)	2024			2023
Adjusted gross profit (1)	$	569		$	326
Adjusted gross margin (1)	61.8		%	24.3		%
Adjusted EBITDA (2)	$	(2,028)		$	(5,217)


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2023	2,500	$	56.89	4.2	$	—
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding as of March 31, 2024	2,500	$	56.89	3.9	$	—
Exercisable as of March 31, 2024	2,500	$	56.89	3.9	$	—


	Three Months Ended March 31,						Change
(in thousands, except percentages)	2024			2023			Amount		%
Net Revenues
Subscriptions and services revenue	$	454		$	1,156		$	(702)	(60.7)	%
Application transaction	$	467		$	188		279		148.4	%
Net revenues	$	921		$	1,344		$	(423)	(31.5)	%
Subscriptions and services revenue as percentage of total revenue	49.3		%	86.0		%
Application transaction as percentage of total revenue	50.7		%	14.0		%


Exhibit No.						Description
3.1						Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
3.2						Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on November 4, 2022).
3.3						Certificate of Amendment to the Certificate of Incorporation filed February 23, 2024 (Inccorporated by reference to Exhibit 3.1 of the Registrant's Form 8-K (File No. 00-37862) filed with the SEC on February 28, 2024.)
4.1						Description of Securities (Incorporated by reference to Exhibit 4.15 of the Registrant's Form 10-K (File No. 001-37862), filed with the SEC on March 31, 2021).
10.1						Form of Securities Purchase Agreement dated as of January 16, 2024 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on January 18, 2024).
10.2						Placement Agency Agreement dated January 16, 2024, by and between Phunware, Inc. and Roth Capital Partners, LLC (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on January 18, 2024).
10.3						Form of Securities Purchase Agreement dated as of January 18, 2024 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on January 23, 2024).
10.4						Placement Agency Agreement dated January 18, 2024, by and between Phunware, Inc. and Roth Capital Partners, LLC (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on January 23, 2024).
10.5						Form of Securities Purchase Agreement dated as of February 7, 2024 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on February 9, 2024).
10.6						Placement Agency Agreement dated February 7, 2024, by and between Phunware, Inc. and Roth Capital Partners, LLC (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K (File No. 001-37862), filed with the SEC on February 9, 2024).
31.1*						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2*						Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1(1)						Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
101.INS						XBRL Instance Document*
101.SCH						XBRL Taxonomy Extension Schema*
101.CAL						XBRL Taxonomy Calculation Linkbase*
101.LAB						XBRL Taxonomy Label Linkbase*
101.PRE						XBRL Definition Linkbase Document*
101.DEF						XBRL Definition Linkbase Document*
104						Cover Page Interactive Data File*


May 13, 2024	Phunware, Inc.

	By:	/s/ Michael Snavely
		Name:	Michael Snavely
		Title:	Chief Executive Officer
			(Principal Executive Officer)


May 13, 2024	By:	/s/ Troy Reisner
		Name:	Troy Reisner
		Title:	Chief Financial Officer
			(Principal Accounting and Financial Officer)

SEC Form 10-Q filed by Phunware Inc.