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 June 30, 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 August 5, 2024, 11,339,155 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 June 30, 2024 (unaudited) and December 31, 2023	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 (unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2024 and 2023 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (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	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

	Signatures	30

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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Phunware, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share information)

	June 30,			December 31,
	2024			2023
		*(Unaudited)*
Assets:
Current assets:
Cash	$	20,369		$	3,934
Accounts receivable, net of allowance for doubtful accounts of $86 at June 30, 2024 and December 31, 2023		972			550
Digital currencies		19			75
Prepaid expenses and other current assets		293			374
Current assets of discontinued operation		—			28
Total current assets		21,653			4,961
Property and equipment, net		31			40
Right-of-use asset		1,108			1,451
Other assets		276			276
Total assets	$	23,068		$	6,728

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable		4,787			7,836
Accrued expenses		293			437
Lease liability		429			629
Deferred revenue		975			1,258
PhunCoin subscription payable		1,202			1,202
Debt		—			4,936
Current liabilities of discontinued operation		—			205
Total current liabilities		7,686			16,503

Deferred revenue		512			651
Lease liability		780			1,031
Total liabilities		8,978			18,185

Commitments and contingencies (see Note 7)		-			-

Stockholders’ equity (deficit)
Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 8,620,380 shares issued and 8,610,250 shares outstanding as of June 30, 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 as of June 30, 2024 and December 31, 2023		(502	)		(502	)
Additional paid-in capital		322,936			292,467
Accumulated other comprehensive loss		(418	)		(418	)
Accumulated deficit		(307,927	)		(303,004	)
Total stockholders’ equity (deficit)		14,090			(11,457	)
Total liabilities and stockholders’ equity (deficit)	$	23,068		$	6,728

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

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Phunware, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share information)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023

Net revenues	$	1,011		$	1,295		$	1,932		$	2,640
Cost of revenues		541			760			938			2,030
Gross profit		470			535			994			610

Operating expenses:
Sales and marketing		609			1,142			1,052			1,998
General and administrative		2,299			4,268			4,770			8,412
Research and development		496			1,212			980			2,981
Total operating expenses		3,404			6,622			6,802			13,391
Operating loss		(2,934	)		(6,087	)		(5,808	)		(12,781	)

Other income (expense):
Interest expense		(8	)		(553	)		(116	)		(1,090	)
Interest income		239			—			379			—
Gain on extinguishment of debt		—			—			535			—
Gain on sale of digital currencies		—			2,096			—			5,310
Other income		72			130			87			435
Total other income		303			1,673			885			4,655
Loss before taxes		(2,631	)		(4,414	)		(4,923	)		(8,126	)
Income tax benefit (expense)		—			—			—			—
Net loss from continuing operations		(2,631	)		(4,414	)		(4,923	)		(8,126	)
Net loss from discontinued operation		—			(2,110	)		—			(2,667	)
Net loss		(2,631	)		(6,524	)		(4,923	)		(10,793	)
Other comprehensive income
Cumulative translation adjustment		—			23			—			46
Comprehensive loss	$	(2,631	)	$	(6,501	)	$	(4,923	)	$	(10,747	)

Net loss from continuing operations per share, basic and diluted	$	(0.32	)	$	(2.10	)	$	(0.65	)	$	(3.90	)
Net loss from discontinued operations per share, basic and diluted	$	—		$	(1.00	)	$	—		$	(1.28	)

Weighted-average shares used to compute net loss per share, basic and diluted		8,299,323			2,102,051			7,581,774			2,082,715

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

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Phunware, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands, except share information)

(Unaudited)

																			Total
											Additional					Other			Stockholders’
	Common Stock				Treasury stock						Paid-in		Accumulated			Comprehensive			Equity
	Shares		Amount		Shares			Amount			Capital		Deficit			Loss			(Deficit)
Balances as of March 31, 2024		8,282,221	$	1		(10,130	)	$	(502	)	$	320,840	$	(305,296	)	$	(418	)	$	14,625
Release of restricted stock		83,117		-		-			-			-		-			-			-
Sale of common stock, net of issuance costs		255,042		-		-			-			1,436		-			-			1,436
Stock-based compensation expense		-		-		-			-			660		-			-			660
Net loss		-		-		-			-			-		(2,631	)		-			(2,631	)
Balances as of June 30, 2024		8,620,380	$	1		(10,130	)	$	(502	)	$	322,936	$	(307,927	)	$	(418	)	$	14,090

Balances as of December 31, 2023		3,861,578	$	-		(10,130	)	$	(502	)	$	292,467	$	(303,004	)	$	(418	)	$	(11,457	)
Release of restricted stock		99,117		-		-			-			-		-			-			-
Issuance of common stock in lieu of cash bonus and 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		4,170,051		1		-			-			24,639		-			-			24,640
Fractional share issuances as a result of reverse stock split		141,631		-		-			-			-		-			-			-
Stock-based compensation expense		-		-		-			-			1,290		-			-			1,290
Net loss		-		-		-			-			-		(4,923	)		-			(4,923	)
Balances as of June 30, 2024		8,620,380	$	1		(10,130	)	$	(502	)	$	322,936	$	(307,927	)	$	(418	)	$	14,090

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Phunware, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands, except share information)

(Unaudited)

											Additional					Other			Total
	Common Stock				Treasury stock						Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares			Amount			Capital		Deficit			Loss			Equity

Balances as of March 31, 2023		2,089,400	$	-		(9,230	)	$	(475	)	$	277,313	$	(254,488	)	$	(449	)	$	21,901
Release of restricted stock		25,747		-		-			-			-		-			-			-
Issuance of common stock under the 2018 employee stock purchase plan		1,859		-		-			-			48		-			-			48
Sale of common stock, net of issuance costs		34,303		-		-			-			995		-			-			995
Stock-based compensation expense		-		-		-			-			1,492		-			-			1,492
Cumulative translation adjustment		-		-		-			-			-		-			23			23
Treasury stock repurchase		-		-		(900	)		(27	)		-		-			-			(27	)
Net loss		-		-		-			-			-		(6,524	)		-			(6,524	)
Balances as of June 30, 2023		2,151,309	$	-		(10,130	)	$	(502	)	$	279,848	$	(261,012	)	$	(426	)	$	17,908

Balances as of December 31, 2022		2,063,074	$	-		-		$	-		$	275,572	$	(250,219	)	$	(472	)	$	24,881
Exercise of stock options, net of vesting of restricted shares		1,895		-		-			-			58		-			-			58
Release of restricted stock		42,724		-		-			-			-		-			-			-
Issuance of common stock under the 2018 employee stock purchase plan		1,859		-		-			-			48		-			-			48
Issuance of common stock in lieu of cash bonus and consulting fees		7,454		-		-			-			347		-			-			347
Sales of common stock, net of issuance costs		34,303		-		-			-			995		-			-			995
Stock-based compensation expense		-		-		-			-			2,828		-			-			2,828
Cumulative translation adjustment		-		-		-			-			-		-			46			46
Treasury stock repurchase		-		-		(10,130	)		(502	)		-		-			-			(502	)
Net loss		-		-		-			-			-		(10,793	)		-			(10,793	)
Balances as of June 30, 2023		2,151,309	$	-		(10,130	)	$	(502	)	$	279,848	$	(261,012	)	$	(426	)	$	17,908

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

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Phunware, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	2024			2023
	Six Months Ended
	June 30,
	2024			2023
Operating activities
Net loss	$	(4,923	)	$	(10,793	)
Net loss from discontinued operation		-			(2,667	)
Net loss from continuing operations		(4,923	)		(8,126	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of digital assets		-			(5,310	)
Gain on extinguishment of debt		(535	)		-
Stock based compensation		1,290			2,824
Other adjustments		434			952
Changes in operating assets and liabilities:
Accounts receivable		(422	)		(28	)
Prepaid expenses and other assets		81			19
Accounts payable and accrued expenses		(3,158	)		(252	)
Lease liability payments		(373	)		(527	)
Deferred revenue		(422	)		(687	)
Net cash used in operating activities from continued operations		(8,028	)		(11,135	)
Net cash used in operating activities from discontinued operation		(177	)		(1,425	)
Net cash used in operating activities		(8,205	)		(12,560	)
Investing activities
Proceeds received from sale of digital currencies		—			15,390
Net cash provided by investing activities - continuing operations		—			15,390
Net cash used in investing activities - discontinued operations		—			(9	)
Net cash used in investing activities		—			15,381
Financing activities
Payments on borrowings		—			(4,270	)
Proceeds from sales of common stock		24,640			995
Proceeds from exercise of options to purchase common stock		—			58
Payments on stock repurchases		—			(502	)
Net cash provided by (used in) financing activities		24,640			(3,719	)

Effect of exchange rate on cash		—			48
Net increase (decrease) in cash		16,435			(850	)
Cash at the beginning of the period		3,934			1,955
Cash at the end of the period	$	20,369		$	1,105

Supplemental disclosure of cash flow information
Interest paid	$	12		$	438
Income taxes paid	$	40		$	—
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
Non-cash exchange of digital assets	$	—		$	557
Issuance of common stock under the 2018 Employee Stock Purchase Plan, previously accrued	$	—		$	47

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

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Phunware, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share information)

(Unaudited)

1. The Company and Basis of Presentation

The Company

Phunware, Inc. and its subsidiaries (the “Company”, “we”, “us”, or “our”) offers a fully integrated software platform that enables brands to engage, manage and monetize their anytime, anywhere users worldwide. Our mobile experience platform guides users through the entire customer journey. Our location-based technology offers brands mobile engagement, content management and analytics to best interact with their customers. 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. Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the Company’s accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The balance sheet as of December 31, 2023 was derived from our audited consolidated financial statements, but these interim condensed consolidated financial statements do not include all the annual disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2023, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited financial statements, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state our financial position as of June 30, 2024 and the results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim period.

Certain reclassifications to prior year presentation have been made to our condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of cash flows. We have displayed individual lines items that we previously considered to be immaterial and combined individual line items that we considered to be immaterial to conform to current year presentation. The reclassifications had no impact on previously reported net loss, and operating, investing or financing activities.

The accompanying condensed 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.

Discontinued Operations

On November 1, 2023, we committed to a plan to discontinue and wind down the operations of Lyte Technology, Inc. (“Lyte”), which the Company determined met the criteria for classification as a discontinued operation in accordance with Accounting Standards Codification (“ASC”) Topic 205-20, Discontinued Operations. Prior periods were recast such that the basis of presentation is consistent with current year presentation. For additional information, see Note 3.

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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 value of our 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 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 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 the 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.

2. Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023, except as set forth below.

Recently Adopted Accounting Pronouncements

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 on an entity’s own equity. We adopted ASU 2020-06 on January 1, 2024. The adoption of ASU 2020-06 did not have a material impact on our condensed consolidated financial statements and disclosures.

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Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, (“ASU 2023-09”). ASU 2023-09 requires entities to disclose specific tax rate reconciliation categories, as well as income taxes paid disaggregated by jurisdiction, amongst other disclosure enhancements. For public entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the disclosure requirements related to the new standard.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material.

3. Supplemental Information

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable.

Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits.

Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value. The following table sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts.

	June 30, 2024			December 31, 2023
Customer A		0	%		43	%
Customer B		12	%		16	%
Customer C		3	%		12	%
Customer D		36	%		0	%
Customer E		17	%		0	%
Concentration risk percentage		17	%		0	%

Discontinued Operation

On November 1, 2023, the Company made the strategic decision to wind down and discontinue the operations of its Lyte reporting segment. We generally completed the wind down of the Lyte operations as of December 31, 2023.

A summary of the Lyte discontinued operation in the condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2023 is set forth below:

Schedule of Discontinued Operation

	Three			Six
	Months Ended June 30, 2023			Months Ended June 30, 2023
Net revenues	$	2,192		$	5,594
Cost of revenues		2,272			5,386
Gross profit		(80	)		208

Operating expenses:
Sales and marketing		331			603
General and administrative		496			1,069
Impairment of goodwill		1,203			1,203
Total operating expenses		2,030			2,875
Operating loss	$	(2,110	)	$	(2,667	)

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Loss per Common Share

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:

	2024		2023
	June 30,
	2024		2023
Warrants		-		125,103
Options		8,323		18,091
Restricted stock units		70,223		96,878
Total		78,546		240,072

4. Revenue

Subscriptions and services revenue consist of platform license subscriptions and application development services. Application transaction revenue is comprised of in-app advertising. Refer to our revenue recognition policy under the subheading, Revenue Recognition, in Note 2, “Summary of Significant Accounting Policies,” in our Annual Report on Form 10-K filed with the SEC on March 15, 2024.

Disaggregation of Revenue

The following table sets forth our net revenues by category:

Schedule of Disaggregation of Revenue

	2024		2023		2024		2023
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Subscriptions and services revenue	$	516	$	748	$	970	$	1,742
Application transaction		495		547		962		898
Net revenues	$	1,011	$	1,295	$	1,932	$	2,640

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

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Customer A		0	%		6	%		16	%		6	%
Customer C		3	%		3	%		4	%		16	%
Customer D		35	%		0	%		18	%		0	%
Customer F		12	%		15	%		13	%		12	%
Concentration risk percentage		12	%		15	%		13	%		12	%

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity. We derived over 99% of our net revenues from within the United States for the three and six months ended June 30, 2024 and 2023.

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Deferred Revenue

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers. We recognize deferred revenue as revenue only when revenue recognition criteria are met. During the six months ended June 30, 2024, we recognized revenue of $849 that was included in our deferred revenue balance as of December 31, 2023.

Remaining Performance Obligations

Remaining performance obligations were $5,189 as of June 30, 2024, of which we expect to recognize approximately 33% as revenue over the next 12 months and the remainder thereafter.

5. Debt

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. 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 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, were satisfied. In the event we exercised 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 were required to make monthly amortization payments of at least $800 commencing on August 31, 2023 until the 2022 Promissory Note was 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 were 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 elected to convert pursuant to the limited conversion option, such conversions would reduce the current month’s monthly amortization payment. Any conversions in any given month in excess of the $800 monthly payment would 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 was to accrue interest at a rate of 8% beginning on August 1, 2023, and payment deferrals were no longer permitted.

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.

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During the first quarter of 2024, we issued 336,500 shares of our common stock to the holder of the 2022 Promissory Note, which amounted to aggregate principal and interest payments in the amount of $4,505. These conversions were made pursuant to the terms of the amended 2022 Promissory Note. In addition, conversions were made in connection with the Company granting the holder additional conversion rights. As a result, the noteholder agreed to waive an aggregate of $535 in principal and accrued interest. As a result of the conversions, the 2022 Promissory Note has been paid-in-full.

Interest Expense

Interest expense amounted to $8 and $553 for the three months ended June 30, 2024 and 2023, respectively. Interest expense was $116 and $1,090 for the six months ended June 30, 2024 and 2023, respectively.

6. Leases

Further information regarding our other office leases and accounting thereof are located in Note 2, “Summary of Significant Accounting Policies,” and Note 9, “Leases,” in our Annual Report on Form 10-K filed with the SEC on March 15, 2024.

We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive loss. Lease expense for the three months ended June 30, 2024 and 2023 was $174 and $324, respectively. Lease expense for the six months ended June 30, 2024 and 2023 was $344 and $649, respectively. The weighted-average remaining lease term for operating leases as of June 30, 2024 was 2.93 years.

Future minimum lease obligations are set forth below:

Future minimum lease obligations years ending December 31,	Lease Obligations
2024 (Remainder)	$	310
2025		360
2026		370
2027		284
Total lease payment	$	1,324
Less: Portion representing interest		(115	)
Operating lease liabilities	$	1,209

7. Commitments and Contingencies

Litigation

On March 30, 2021, Phunware filed an action against its former counsel Wilson Sonsini Goodrich & Rosati, PC (“WSGR”), which is styled Phunware, Inc., v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No. 21CV381517, in the Superior Court of the State of California for the County of Santa Clara. On July 30, 2021, Phunware filed a second action against WSGR in the Superior Court of the State of California for the County of Santa Clara, which is styled Phunware, Inc., v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No. 21CV386411. The two actions were then removed to arbitration. Phunware sought affirmative relief in these actions, as stated in the complaints, for damages according to proof, interest and costs of suit. WSGR filed crossclaims against Phunware in these actions related to services provided by WSGR to Phunware and sought to recover fees related to the services at issue in these actions and interest. In March 2024, WSGR and Phunware settled their claims in the arbitration proceeding relating to Case No. 21CV381517 and Phunware paid approximately $2,194 of the outstanding amount alleged to be owed by Phunware to WSGR in that proceeding. The Phunware and WSGR claims related to Case No. 21CV386411 remain pending in arbitration and the remaining balance of the payables amount alleged to be owed by Phunware will continue to be arbitrated. The outcome of this proceeding and the related Phunware and WSGR claims is uncertain. There is $2,159 and $4,321 in accounts payable in our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively, relating to these WSGR claims.

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On February 18, 2022, certain stockholders filed a lawsuit against Phunware and certain of its prior and then existing individual officers and directors. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al., was filed in the Court of Chancery of the State of Delaware (Cause No. 2022-0168-LWW). Plaintiffs allege that they invested in Phunware through various early rounds of financing while the Company was private and that following completion of the business combination transactions resulting in Phunware becoming a public company these stockholders received new shares of Phunware common stock and Phunware warrants that were but should not have been subjected to a 180-day “lock up” period. Plaintiffs also allege that Phunware’s stock price dropped significantly during the lock up period and seek damages, costs and professional fees. We filed a motion to dismiss Plaintiffs’ complaint on May 27, 2022, and on July 15, 2022 Plaintiffs filed their answering brief in opposition to the motion to dismiss and a motion for partial summary judgment. The 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 claims and denied both the motion to dismiss and motion for partial summary judgment on the Delaware law claims.

The parties engaged in mediation in July 2023 but were unable to reach a settlement, and settlement discussions continue. A trial date has been set for March 2025. We intend to vigorously defend against this lawsuit and any appeals. We have not recorded a liability related to this matter because any potential loss is not currently probable or possible to reasonably estimate. Additionally, we cannot presently estimate the range of loss, if any, that may result from this lawsuit. It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.

From time to time, we are and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

8. Stockholders’ Equity

Common Stock

Total common stock authorized to be issued as of June 30, 2024, was 1,000,000,000 shares, with a par value of $0.0001 per share. As of June 30, 2024 and December 31, 2023, there were 8,610,250 and 3,851,448 shares of our common stock outstanding, respectively.

On January 31, 2022, we entered into an At Market Issuance Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell, from time to time, shares of our common stock, par value $0.0001 per share, for aggregate gross proceeds of up to $100 million, through or to Wainwright, as agent or principal. We terminated our agreement with Wainwright effective June 3, 2024.

On June 4, 2024, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”), as representative of certain agents, 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 $120 million, through the agents.

During the six months ended June 30, 2024, we sold an aggregate of 500,051 shares of our common stock under our sales agreement with Wainwright and equity distribution agreement with Canaccord for aggregate gross cash proceeds of $4,155. Transaction costs were $235. As of June 30, 2024, $118.4 million of shares of our common stock remains issuable pursuant to the Equity Distribution Agreement with Canaccord.

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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. We did not sell any shares of our common stock to Lincoln Park during the six months ended June 30, 2024.

In a series of offerings during the first quarter of 2024, 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 aggregate gross proceeds from the offerings were $22,600. Aggregate transaction costs, including placement agent fees, were approximately $1,880. The holders of the pre-funded warrants exercised their rights to purchase all 974,000 shares of our common stock.

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 million. The stock repurchase plan may be amended or terminated at any time, in the sole discretion of our board of directors. 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. During 2023, we repurchased an aggregate 10,130 shares of our common stock at an aggregate repurchase price of $502.

9. Stock-Based Compensation

There have been no material changes to the terms of our various equity incentive plans since the filing of our Annual Report on Form 10-K. Refer to Note 13, “Stock-Based Compensation,” in our Annual Report on Form 10-K filed with the SEC on March 15, 2024 for more information.

Stock-Based Compensation

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

Schedule of Stock Based Compensation

Stock-based compensation	2024	2023	2024	2023
	Three Months Ended June 30,		Six Months Ended June 30,
Stock-based compensation	2024

SEC Form 10-Q filed by Phunware Inc.