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, 2021 ☐ 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 | | | --- | --- | --- | --- | --- | | ...

Phunware, Inc. (NASDAQ:PHUN) Q1 2021 Earnings Conference Call May 13, 2021 5:00 PM ET Company Participants Alan Knitowski – President, Chief Executive Officer and Co-Founder Matt Aune – Chief Financial Officer Randall Crowder – Chief Operating Officer Conference Call Participants Darren Aftahi – ROTH Capital Partners Howard Halpern – Taglich Brothers Ed Woo – Ascendiant Capital Operator Good afternoon, ladies and gentlemen. Welcome to Phunware’s First Quarter 2021 Investor Conference Call. Currently, all pa ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ 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 | | --- | --- ...

Phunware, Inc. (NASDAQ:PHUN) Q4 2020 Earnings Conference Call March 25, 2021 5:00 PM ET Company Participants Alan Knitowski - Co-Founder, President, CEO & Director Matt Aune - CFO Randall Crowder - COO, Secretary & Director Conference Call Participants Howard Halpern - Taglich Brothers Ed Woo - Ascendiant Capital Operator Good afternoon, ladies and gentlemen, and welcome to Phunware's 2020 Investor Conference Call. [Operator Instructions]. Joining me today are Alan Knitowski, President, Chief Executive Offi ...

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Financials reveal declining revenue, a widening net loss, increased liabilities, and a going concern warning [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in liabilities, leading to a stockholders' deficit of $4.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $2,758 | $2,315 | | **Total Assets** | $29,351 | $29,052 | | **Total Current Liabilities** | $26,913 | $19,833 | | Accrued legal settlement | $4,500 | $0 | | **Total Liabilities** | $34,162 | $25,026 | | **Total Stockholders' Equity (Deficit)** | $(4,811) | $4,026 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q3 2020 revenue declined 44.5% year-over-year, with a legal settlement driving a significant increase in net loss Q3 and Nine Months Performance Comparison (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | $3,130 | $5,637 | $7,983 | $16,462 | | **Gross Profit** | $2,232 | $3,219 | $5,226 | $8,705 | | **Operating Loss** | $(7,499) | $(2,292) | $(14,331) | $(8,526) | | Legal Settlement | $4,500 | $0 | $4,500 | $0 | | **Net Loss** | $(8,567) | $(2,426) | $(16,041) | $(8,987) | | **Net Loss per Share** | $(0.19) | $(0.06) | $(0.38) | $(0.25) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Negative operating cash flow was offset by financing activities, resulting in a net cash increase for the period Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,515) | $(5,899) | | Net cash provided by investing activities | $0 | $70 | | Net cash provided by (used in) financing activities | $7,417 | $(409) | | **Net increase (decrease) in cash** | **$872** | **$(6,276)** | | **Cash and restricted cash at end of period** | **$1,234** | **$68** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes disclose a going concern warning, high revenue concentration, increased debt, and a major legal settlement - Management has concluded there is **substantial doubt about the Company's ability to continue as a going concern** for one year from the issuance of the financial statements, due to a history of operating losses and negative cash flows[36](index=36&type=chunk)[38](index=38&type=chunk) - In Q3 2020, Customer A and Customer C accounted for **26% and 21% of net revenues**, respectively, a shift from Q3 2019 when Fox Networks Group accounted for 55% of revenue[32](index=32&type=chunk) - The company settled litigation with Uber Technologies, Inc, agreeing to pay a total of **$4.5 million** in installments through September 2021[103](index=103&type=chunk) Debt Summary (in thousands) | Debt Instrument | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Series A & B Notes | $4,214 | $0 | | Paycheck Protection Program Loan | $2,850 | $0 | | Convertible notes | $250 | $250 | | Promissory notes | $905 | $855 | | **Total Debt** | **$8,646** | **$1,105** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue decline to a completed contract and discusses COVID-19 impacts and liquidity challenges - The COVID-19 pandemic led the company to **furlough 37 people, approximately 42% of its workforce**, effective March 27, 2020[144](index=144&type=chunk) - The company received a **$2.85 million loan** under the Paycheck Protection Program (PPP) on April 10, 2020[145](index=145&type=chunk) - A significant driver of the **44.5% revenue decrease in Q3 2020** was the completion of work with Fox Networks Group, which contributed approximately $3.1 million in revenue in Q3 2019[178](index=178&type=chunk) - The company's total **backlog and deferred revenue decreased from $12.6 million to $8.6 million** as of September 30, 2020[152](index=152&type=chunk) - The company raised net cash proceeds of approximately **$2.4 million in March 2020 and $1.75 million in July 2020** through Senior Convertible Notes[198](index=198&type=chunk)[200](index=200&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the current reporting period - The company states that this item is not applicable[215](index=215&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The Certifying Officers concluded that the company's **disclosure controls and procedures were effective** as of the end of the period covered by the report[216](index=216&type=chunk) - There were **no changes in internal control over financial reporting** during the third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[218](index=218&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company details its legal proceedings, highlighting a significant $4.5 million settlement with Uber - The company refers to Note 7 for details on legal proceedings, which includes the **settlement with Uber** and other ongoing lawsuits[103](index=103&type=chunk)[221](index=221&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) Key risks include the COVID-19 pandemic's impact, PPP loan forgiveness, shareholder dilution, and debt covenants - The **COVID-19 pandemic could materially and adversely affect business**, results of operations, cash flow, and financial condition[223](index=223&type=chunk)[225](index=225&type=chunk) - The company's **PPP loan of approximately $2.85 million may not be forgiven** and its eligibility could be challenged, potentially leading to penalties[227](index=227&type=chunk)[230](index=230&type=chunk) - The 2020 Convertible Notes and a related warrant could cause **significant dilution** and a decline in stock price[231](index=231&type=chunk) - The 2020 Convertible Notes contain **restrictive covenants**, including maintaining a minimum cash balance of $500,000, which could limit operational flexibility[236](index=236&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None reported for the period[238](index=238&type=chunk) [Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None reported for the period[239](index=239&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[240](index=240&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information) This section refers to the 'Key Events and Recent Developments' in the MD&A - Refers to the 'Key Events and Recent Developments' section in Item 2 for other information[241](index=241&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including key agreements and officer certifications - Lists exhibits filed with the report, including debt agreements, the Uber settlement agreement, and required officer certifications[244](index=244&type=chunk)

Phunware, Inc. (NASDAQ:PHUN) Q3 2020 Earnings Conference Call November 9, 2020 5:00 PM ET Company Participants Alan Knitowski - Co-Founder, Chief Executive Officer & President Randall Crowder - Chief Operating Officer Matt Aune - Chief Financial Officer Conference Call Participants Austin Moldow - Canaccord Howard Halpern - Taglich Brothers Ed Woo - Ascendiant Capital Operator Good afternoon, ladies and gentlemen, and welcome to the Phunware’s Third Quarter 2020 Investor Conference Call. Currently, all part ...

PART I—FINANCIAL INFORMATION This section presents Phunware, Inc.'s unaudited condensed consolidated financial statements and management's discussion for the quarter and six months ended June 30, 2020 [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Phunware, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2020, along with detailed notes explaining accounting policies, debt, and subsequent events [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202020%20and%20December%2031%2C%202019) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2020, and December 31, 2019 **Condensed Consolidated Balance Sheet (in thousands):** | Metric | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | **Assets** | | | | Total current assets | $1,642 | $2,315 | | Total assets | $28,221 | $29,052 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $20,030 | $19,833 | | Total liabilities | $27,707 | $25,026 | | Total stockholders' equity | $514 | $4,026 | - Total assets decreased by **$831 thousand (2.86%)** from December 31, 2019, to June 30, 2020, primarily due to a decrease in current assets[15](index=15&type=chunk) - Total stockholders' equity significantly decreased by **$3,512 thousand (87.24%)** from December 31, 2019, to June 30, 2020, indicating a substantial reduction in equity[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) This section presents the Company's financial performance, including net revenues, gross profit, operating loss, and net loss for the three and six months ended June 30, 2020 and 2019 **Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):** | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net revenues | $2,213 | $5,510 | $4,853 | $10,825 | | Gross profit | $1,445 | $2,788 | $2,994 | $5,486 | | Operating loss | $(2,970) | $(2,924) | $(6,832) | $(6,234) | | Net loss | $(3,511) | $(3,067) | $(7,474) | $(6,561) | | Net loss per common share, basic and diluted | $(0.08) | $(0.08) | $(0.18) | $(0.19) | - Net revenues decreased by **59.8%** for the three months ended June 30, 2020, and by **55.2%** for the six months ended June 30, 2020, compared to the prior year periods[18](index=18&type=chunk) - Net loss increased by **14.5%** for the three months ended June 30, 2020, and by **13.9%** for the six months ended June 30, 2020, year-over-year[18](index=18&type=chunk) [Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) This section details changes in the Company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the periods ended June 30, 2020 and 2019 **Changes in Stockholders' Equity (in thousands):** | Metric | Balance - Dec 31, 2019 | Balance - June 30, 2020 | | :----------------------------------- | :--------------------- | :-------------------- | | Common Stock (shares) | 39,811 | 43,555 | | Common Stock (amount) | $4 | $4 | | Additional Paid-in Capital | $128,008 | $132,045 | | Accumulated Deficit | $(123,604) | $(131,078) | | Total Stockholders' Equity | $4,026 | $514 | - Common stock shares outstanding increased from **39,811 thousand** at December 31, 2019, to **43,555 thousand** at June 30, 2020, primarily due to the issuance of common stock for legal fees, earned bonuses, board fees, and partial conversions of the Senior Convertible Note[20](index=20&type=chunk) - Accumulated deficit increased by **$7,474 thousand** from December 31, 2019, to June 30, 2020, reflecting the net loss incurred during the period[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202020%20and%202019) This section outlines the Company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2020 and 2019 **Condensed Consolidated Statements of Cash Flows (in thousands):** | Activity | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(4,750) | $(5,866) | | Net cash provided by investing activities | $0 | $88 | | Net cash provided by (used in) financing activities | $4,712 | $(314) | | Net increase (decrease) in cash and restricted cash | $(117) | $(6,096) | | Cash and restricted cash at end of period | $245 | $248 | - Net cash used in operating activities decreased by **$1,116 thousand (19.0%)** for the six months ended June 30, 2020, compared to the prior year, primarily due to adjustments for non-cash items and changes in operating assets and liabilities[24](index=24&type=chunk) - Net cash provided by financing activities significantly increased to **$4,712 thousand** for the six months ended June 30, 2020, from a net use of **$(314) thousand** in the prior year, driven by proceeds from new debt borrowings, including the PPP loan and related-party bridge loans[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the Company's accounting policies, revenue recognition, debt, commitments, and subsequent events, supporting the financial statements [1. The Company and Basis of Presentation](index=12&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) This note describes Phunware's business, financial statement presentation, and raises substantial doubt about the Company's ability to continue as a going concern - Phunware, Inc. offers a fully integrated software platform (MaaS) for mobile application portfolios, providing products, solutions, and services for mobile lifecycle management, advertising, and data[27](index=27&type=chunk)[139](index=139&type=chunk) **Concentration of Revenue Sources (% of total net revenues):** | Customer | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Fox Networks Group | 0% | 57% | 0% | 59% | | American Made Media Consultants, LLC | 36% | 0% | 33% | 0% | | Houston Methodist | 13% | 8% | 12% | 11% | | World Wide Technology, Inc. | 11% | 4% | 10% | 4% | - The Company has a history of operating losses and negative operating cash flows, leading management to conclude there is substantial doubt about its ability to continue as a going concern for one year from the financial statement issuance date[37](index=37&type=chunk)[38](index=38&type=chunk) [2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the Company's significant accounting policies, including estimates, debt accounting, loss per share, and recently adopted and unadopted accounting pronouncements - The Company adopted ASU 2017-04 (simplifying goodwill impairment test) on January 1, 2020, with no material impact on financial statements[45](index=45&type=chunk)[46](index=46&type=chunk) - The Company plans to implement ASU 2016-02 (Leases) in Q1 2021, which is expected to have a material impact on the consolidated balance sheet but not on results of operations[47](index=47&type=chunk) - Basic and diluted loss per common share are the same for all periods presented due to the anti-dilutive effect of potential common shares from outstanding warrants and stock equity plans[43](index=43&type=chunk) [3. Revenue](index=16&type=section&id=3.%20Revenue) This note disaggregates net revenues by source and geography, detailing deferred revenue balances and remaining performance obligations **Net Revenues (in thousands):** | Revenue Type | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Platform subscriptions and services | $2,023 | $5,092 | $4,414 | $9,913 | | Application transaction | $190 | $418 | $439 | $912 | | Total Net Revenues | $2,213 | $5,510 | $4,853 | $10,825 | - For the six months ended June 30, 2020, **94% of net revenues** were derived from within the United States, with **6% from outside**, compared to **99% from the U.S.** in the prior year[50](index=50&type=chunk) **Deferred Revenue (in thousands):** | Type | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Current deferred revenue | $2,980 | $3,360 | | Non-current deferred revenue | $2,876 | $3,764 | | Total deferred revenue | $5,856 | $7,124 | [4. Cash, Cash Equivalents, and Restricted Cash](index=17&type=section&id=4.%20Cash%2C%20Cash%20Equivalents%2C%20and%20Restricted%20Cash) This note provides a breakdown of the Company's cash and restricted cash balances, noting the absence of cash equivalents **Cash and Restricted Cash (in thousands):** | Metric | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Cash | $154 | $276 | | Restricted cash | $91 | $86 | | Total cash and restricted cash | $245 | $362 | - Total cash and restricted cash decreased by **$117 thousand** from December 31, 2019, to June 30, 2020[55](index=55&type=chunk) [5. Factoring Agreement](index=19&type=section&id=5.%20Factoring%20Agreement) This note details the Company's factoring agreement for selling accounts receivable with recourse, including outstanding balances and associated expenses - The Company has a factoring agreement with Bay View, selling select accounts receivable with recourse, collateralized by a general security agreement over all personal property[57](index=57&type=chunk)[58](index=58&type=chunk) **Factoring Agreement Metrics (in thousands):** | Metric | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Factored receivables outstanding | $363 | $1,077 | | Available for future advances | $2,637 | $1,923 | **Factor Expense (in thousands):** | Period | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Factor expense | $44 | $146 | $97 | $332 | [6. Debt](index=19&type=section&id=6.%20Debt) This note summarizes the Company's debt obligations, including the PPP Loan, Senior Convertible Note, and related-party loans, detailing their terms and balances **Total Debt Obligations (in thousands):** | Debt Type | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Paycheck Protection Program Loan | $2,850 | $0 | | Senior convertible note | $1,258 | $0 | | Convertible notes | $250 | $250 | | Promissory notes | $905 | $855 | | Related-party bridge loans | $360 | $0 | | Note payable | $75 | $0 | | Total debt | $5,698 | $1,105 | - The Company received a **$2,850 thousand PPP loan** in April 2020, maturing in April 2022 with a **0.98% interest rate**, and anticipates a portion to be forgiven[62](index=62&type=chunk)[63](index=63&type=chunk) - A Senior Convertible Note with an initial principal of **$3,000 thousand** was issued in March 2020, bearing **7% interest**, with monthly payments and accelerated conversions made in common stock[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [7. Commitments and Contingencies](index=21&type=section&id=7.%20Commitments%20and%20Contingencies) This note outlines the Company's operating lease obligations and various legal contingencies, including significant litigation and potential material impacts **Future Minimum Annual Lease Payments (in thousands):** | Year | Lease Obligations | | :----------------------------------- | :---------------- | | 2020 (Remainder) | $411 | | 2021 | $858 | | 2022 | $725 | | 2023 | $622 | | 2024 | $609 | | Thereafter | $209 | | Total | $3,434 | - The Company is involved in a breach of contract lawsuit against Uber, which has escalated to Uber filing a cross-complaint alleging fraud and RICO violations, seeking approximately **$17,000 thousand in damages**[82](index=82&type=chunk) - A court order on August 12, 2020, struck Phunware's complaint and answer in the Uber lawsuit, leading to a default judgment against the Company, which it intends to vigorously contest and appeal[82](index=82&type=chunk) [8. PhunCoin & PhunToken](index=24&type=section&id=8.%20PhunCoin%20%26%20PhunToken) This note describes Phunware's digital currency initiatives, PhunCoin and PhunToken, detailing their offerings, proceeds, and ecosystem launch status - PhunCoin, offered through Reg D and Reg CF, has received **$1,207 thousand** in aggregate cash proceeds as of June 30, 2020, for rights to acquire approximately **577.9 million PhunCoin**[90](index=90&type=chunk) - The launch of the Token Ecosystem, where PhunCoin will be usable, has been impacted by the COVID-19 pandemic, leading to reduced human capital resources allocated to its development, with no assurance on future resource allocation or launch timing[89](index=89&type=chunk) - PhunToken, a separate token for exchange within the Token Ecosystem, is available only to persons outside the U.S. and Canada, and no sales have occurred as of June 30, 2020[91](index=91&type=chunk) [9. Stockholders' Equity](index=25&type=section&id=9.%20Stockholders%27%20Equity) This note details the Company's common stock and warrant activity, including authorized shares, outstanding shares, and various warrant types with exercise prices - As of June 30, 2020, the Company had **43,562,804 shares of common stock outstanding**, including **1,485 restricted shares**[92](index=92&type=chunk) **Warrants Outstanding:** | Warrant Type | Cash Exercise Price per share | Warrants Outstanding Dec 31, 2019 | Warrants Outstanding June 30, 2020 | | :----------------------------------- | :---------------------------- | :-------------------------------- | :-------------------------------- | | Common stock warrant (Series D-1) | $5.54 | 14,866 | 14,866 | | Common stock warrants (Series F) | $9.22 | 377,402 | 377,402 | | Public Warrants (PHUNW) | $11.50 | 1,761,291 | 1,761,291 | | Private Placement Warrants | $11.50 | 1,658,381 | 1,658,381 | | Unit Purchase Option Warrants | $11.50 | 24,172 | 24,172 | | Total | | 3,836,112 | 3,836,112 | [10. Stock-Based Compensation](index=25&type=section&id=10.%20Stock-Based%20Compensation) This note outlines the Company's stock-based compensation plans, detailing restricted stock unit and stock option activity, and total compensation expense recognized - The 2018 Equity Incentive Plan allows for annual increases in available shares, equal to the lesser of **10% of post-closing outstanding common stock** or **5% of outstanding common stock** on the last day of the preceding fiscal year[96](index=96&type=chunk)[97](index=97&type=chunk) **Restricted Stock Unit Activity (2018 Plan):** | Metric | Shares | Weighted Average Grant Date Fair Value | | :----------------------------------- | :------- | :------------------------------------- | | Outstanding as of December 31, 2019 | 2,436,968 | $3.15 | | Granted | 2,335,603 | $0.98 | | Released | (1,827,375) | $1.70 | | Forfeited | (298,954) | $3.16 | | Outstanding as of June 30, 2020 | 2,646,242 | $2.23 | **Total Stock-Based Compensation Expense (in thousands):** | Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenues | $62 | $24 | $113 | $38 | | Sales and marketing | $22 | $9 | $29 | $(16) | | General and administrative | $1,039 | $349 | $1,638 | $372 | | Research and development | $(8) | $34 | $(30) | $33 | | Total stock-based compensation | $1,115 | $416 | $1,750 | $427 | [11. Domestic and Foreign Operations](index=28&type=section&id=11.%20Domestic%20and%20Foreign%20Operations) This note confirms that all of the Company's identifiable long-lived assets are located within the United States - All identifiable long-lived assets of the Company were located in the United States as of June 30, 2020, and December 31, 2019[110](index=110&type=chunk) [12. Related-Party Transactions](index=28&type=section&id=12.%20Related-Party%20Transactions) This note discloses related-party transactions, including accounts payable and debt obligations with affiliates, the CEO, and CTO - As of June 30, 2020, and December 31, 2019, **$255 thousand** was recorded in accounts payable due to Nautilus Energy Management Corporation, an affiliate of a current/former board member[111](index=111&type=chunk) - The Company has Related-Party Bridge Loans (RPBLs) totaling **$560 thousand** from various related parties, including entities owned by the CEO and CTO, bearing **10% interest per annum** and maturing on November 14, 2024[71](index=71&type=chunk)[112](index=112&type=chunk) [13. Subsequent Events](index=28&type=section&id=13.%20Subsequent%20Events) This note details significant events after June 30, 2020, primarily the issuance of new 2020 Convertible Notes to redeem prior debt and their associated terms - On July 15, 2020, the Company issued Series A and Series B Senior Convertible Notes (2020 Convertible Notes) with initial principal amounts of **$4,320 thousand** and **$17,280 thousand**, respectively, to an institutional investor[114](index=114&type=chunk)[115](index=115&type=chunk) - The Series A Note and outstanding balance on the Series B Note bear **7% interest per annum**, with monthly cash amortization payments starting July 31, 2020, at a **107% redemption price**[118](index=118&type=chunk)[119](index=119&type=chunk) - The 2020 Convertible Notes are convertible into common stock at **$3.00 per share**, subject to anti-dilution protection, and the Company also issued a warrant exercisable for up to **2,160,000 shares** at **$4.00 per share**[125](index=125&type=chunk)[129](index=129&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Phunware's financial condition and operational results, discussing COVID-19 impacts, key metrics, non-GAAP measures, and liquidity [Key Events and Recent Developments](index=31&type=section&id=Key%20Events%20and%20Recent%20Developments) This section highlights the impact of the COVID-19 pandemic on business operations, workforce adjustments, and the receipt of a PPP loan - The COVID-19 pandemic has caused business disruption, including mandated closings and event cancellations, impacting the Company's application transaction business and creating uncertainty for its platform software and services business[136](index=136&type=chunk) - In response to COVID-19, the Company implemented a work-from-home policy and furloughed approximately **42% of its workforce (37 persons)** to reduce operating expenses[137](index=137&type=chunk) - The Company received a **$2.85 million PPP loan** in April 2020 under the CARES Act, with a portion potentially subject to forgiveness for qualifying expenses[138](index=138&type=chunk) [Overview](index=31&type=section&id=Overview) This section describes Phunware's Multiscreen-as-a-Service (MaaS) platform and its strategy for market expansion and product development, with no near-term profitability expected - Phunware offers a fully integrated Multiscreen-as-a-Service (MaaS) platform, providing enterprise mobile software, application transactions, and data for mobile audience building, engagement, and monetization[139](index=139&type=chunk) - The Company plans to continue investing in expanding its global market reach and developing new products and services, and does not expect to be profitable in the near future[140](index=140&type=chunk) [Key Business Metrics](index=32&type=section&id=Key%20Business%20Metrics) This section presents key business metrics, including backlog and deferred revenue, providing insight into future revenue streams [Backlog and Deferred Revenue](index=32&type=section&id=Backlog%20and%20Deferred%20Revenue) This section defines backlog as future unbilled amounts under current agreements and deferred revenue as invoiced but unrecognized amounts. Together, these metrics provide visibility into future revenue streams, and the Company reports a decrease in both from December 31, 2019, to June 30, 2020 - Backlog represents future amounts to be invoiced under current agreements, while deferred revenue consists of invoiced but unrecognized amounts[142](index=142&type=chunk)[143](index=143&type=chunk) **Backlog and Deferred Revenue (in thousands):** | Metric | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Backlog | $3,719 | $5,496 | | Deferred revenue | $5,856 | $7,124 | | Total backlog and deferred revenue | $9,575 | $12,620 | - Total backlog and deferred revenue decreased by **$3,045 thousand (24.1%)** from December 31, 2019, to June 30, 2020[144](index=144&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) This section introduces and reconciles non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA, used for performance evaluation [Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA](index=32&type=section&id=Adjusted%20Gross%20Profit%2C%20Adjusted%20Gross%20Margin%20and%20Adjusted%20EBITDA) This section defines Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA as non-GAAP measures used by management for performance comparison and planning - Management uses non-GAAP measures (Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA) to compare operating performance, calculate incentive compensation, and for planning purposes[145](index=145&type=chunk) - Adjusted gross profit excludes one-time revenue adjustments, stock-based compensation, and amortization of intangible assets[150](index=150&type=chunk) - Adjusted EBITDA excludes interest expense, income tax expense, depreciation, amortization, one-time adjustments, and stock-based compensation expense from net loss[150](index=150&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=33&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides a reconciliation of the Company's non-GAAP financial measures (Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA) to their most directly comparable GAAP counterparts (Gross Profit and Net Loss) for the three and six months ended June 30, 2020 and 2019 **Reconciliation of Adjusted Gross Profit (in thousands):** | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Gross profit | $1,445 | $2,788 | $2,994 | $5,486 | | Add back: Amortization of intangibles | $6 | $10 | $13 | $21 | | Add back: Stock-based compensation | $62 | $24 | $113 | $38 | | Adjusted gross profit | $1,513 | $2,822 | $3,120 | $5,545 | | Adjusted gross margin | 68.4% | 51.2% | 64.3% | 51.2% | **Reconciliation of Adjusted EBITDA (in thousands):** | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(3,511) | $(3,067) | $(7,474) | $(6,561) | | Add back: Depreciation and amortization | $38 | $84 | $88 | $175 | | Add back: Interest expense | $460 | $151 | $561 | $339 | | Add back: Income tax expense | $0 | $5 | $0 | $5 | | EBITDA | $(3,013) | $(2,827) | $(6,825) | $(6,042) | | Add Back: Stock-based compensation | $1,115 | $416 | $1,750 | $427 | | Add Back: Loss on extinguishment of debt | $81 | $0 | $81 | $0 | | Adjusted EBITDA | $(1,817) | $(2,411) | $(4,994) | $(5,615) | [Components of Results of Operations](index=34&type=section&id=Components%20of%20Results%20of%20Operations) This section details the components of the Company's revenue, gross profit, and operating expenses [Revenue and Gross Profit](index=34&type=section&id=Revenue%20and%20Gross%20Profit) This section analyzes the components of revenue from platform subscriptions and services, and application transactions, along with factors influencing gross profit - Platform subscriptions and services revenue is derived from SDK licenses, application development services, and support fees, with costs including personnel, consultants, and allocated overhead[155](index=155&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk) - Application transaction revenue is generated by charging advertisers for delivering ads to mobile users, based on views, clicks, or actions, and also includes in-app purchases[159](index=159&type=chunk) - Gross margin is affected by the mix of subscriptions and services versus application transactions, and fluctuates due to variable activity of mobile users and associated costs[160](index=160&type=chunk)[161](index=161&type=chunk) [Operating Expenses](index=35&type=section&id=Operating%20Expenses) This section describes the components of operating expenses, including sales and marketing, general and administrative, and research and development, with personnel costs as a key driver - Operating expenses consist of sales and marketing, general and administrative, and research and development, with personnel costs (salaries, benefits, bonuses, stock-based compensation, commissions) being the most significant component[162](index=162&type=chunk) - Sales and marketing expenses are expected to increase in absolute dollars with growth in sales and marketing organizations[163](index=163&type=chunk) - General and administrative expenses are expected to increase due to public company compliance costs and business growth, while research and development expenses will also increase with continued investment in the platform[164](index=164&type=chunk)[165](index=165&type=chunk) [Interest Expense](index=35&type=section&id=Interest%20Expense) This section explains interest expense, including costs related to outstanding debt, amortization, and factoring fees, noting potential impacts from future financings - Interest expense includes interest on outstanding debt, amortization of debt discounts and deferred financing costs, and factoring fees[166](index=166&type=chunk) - The Company's board has authorized up to **$20 million** in each of two different debt offerings, and it has also entered into related-party bridge loans and a senior convertible note[166](index=166&type=chunk) - Additional debt financings for business expansion or strategic acquisitions in the future may impact interest expense[168](index=168&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's net revenues, cost of revenues, gross profit, operating expenses, and other expenses for the reporting periods [Net Revenues](index=36&type=section&id=Net%20Revenues) This section analyzes the significant decrease in net revenues for both the three and six months ended June 30, 2020, compared to the prior year. The decline was primarily driven by the completion of a statement of work with Fox Networks Group and decreased mobile advertising campaigns **Net Revenues (in thousands):** | Revenue Type | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Platform subscriptions and services | $2,023 | $5,092 | $(3,069) | (60.3)% | | Application transaction | $190 | $418 | $(228) | (54.5)% | | Total Net Revenues | $2,213 | $5,510 | $(3,297) | (59.8)% | **Net Revenues (in thousands):** | Revenue Type | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Platform subscriptions and services | $4,414 | $9,913 | $(5,499) | (55.5)% | | Application transaction | $439 | $912 | $(473) | (51.9)% | | Total Net Revenues | $4,853 | $10,825 | $(5,972) | (55.2)% | - The decrease in platform subscriptions and services revenue was primarily due to the completion of the statement of work with Fox Networks Group, which contributed approximately **$3.1 million** and **$6.4 million** in revenue for the three and six months ended June 30, 2019, respectively[169](index=169&type=chunk)[171](index=171&type=chunk) [Cost of Revenues, Gross Profit and Gross Margin](index=37&type=section&id=Cost%20of%20Revenues%2C%20Gross%20Profit%20and%20Gross%20Margin) This section details the changes in cost of revenues, gross profit, and gross margin for the three and six months ended June 30, 2020. Total gross profit decreased significantly due to the decline in revenues, partially offset by lower application transaction costs **Cost of Revenues (in thousands):** | Cost Type | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Platform subscriptions and services | $749 | $2,600 | $(1,851) | (71.2)% | | Application transaction | $19 | $122 | $(103) | (84.4)% | | Total cost of revenues | $768 | $2,722 | $(1,954) | (71.8)% | **Gross Profit and Margin (in thousands):** | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Total gross profit | $1,445 | $2,788 | $(1,343) | (48.2)% | | Total gross margin | 65.3% | 50.6% | | | | | | | | | | Total gross profit (6 months) | $2,994 | $5,486 | $(2,492) | (45.4)% | | Total gross margin (6 months) | 61.7% | 50.7% | | | - Total gross profit decreased by **$1.3 million (48.2%)** for the three months and **$2.5 million (45.4%)** for the six months ended June 30, 2020, primarily due to decreased revenues, partially offset by lower application transaction costs[173](index=173&type=chunk) [Operating Expenses](index=38&type=section&id=Operating%20Expenses) This section analyzes the changes in sales and marketing, general and administrative, and research and development expenses, primarily driven by reduced headcount and professional fees [Sales and Marketing](index=38&type=section&id=Sales%20and%20Marketing) Sales and marketing expense decreased for both the three and six months ended June 30, 2020, primarily due to reduced employee compensation costs from lower headcount and decreased marketing, software, and contractor spend **Sales and Marketing Expense (in thousands):** | Period | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Sales and marketing | $277 | $665 | $(388) | (58.3)% | | | | | | | | Sales and marketing (6 months) | $882 | $1,389 | $(507) | (36.5)% | - The decrease in sales and marketing expense for the three months was driven by a **$0.2 million** reduction in employee compensation and **$0.2 million** in marketing, software, and contractor spend[175](index=175&type=chunk) [General and Administrative](index=38&type=section&id=General%20and%20Administrative) General and administrative expense decreased for both the three and six months ended June 30, 2020. The three-month decrease was due to lower payroll, professional fees, and bad debt, partially offset by reduced stock-based compensation. The six-month decrease was driven by lower professional fees and other expenses, partially offset by increased stock-based compensation **General and Administrative Expense (in thousands):** | Period | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | General and administrative | $3,760 | $3,970 | $(210) | (5.3)% | | | | | | | | General and administrative (6 months) | $7,705 | $7,945 | $(240) | (3.0)% | - For the three months, decreases of **$0.3 million** in payroll, **$0.5 million** in professional fees/IT costs, and **$0.1 million** in bad debt were partially offset by a **$0.7 million** reduction in stock-based compensation expense[177](index=177&type=chunk) - For the six months, decreases of **$1 million** in professional fees/software and **$0.5 million** in other expenses were partially offset by a **$1.3 million** increase in stock-based compensation expense[178](index=178&type=chunk) [Research and Development](index=38&type=section&id=Research%20and%20Development) Research and development expense decreased significantly for both the three and six months ended June 30, 2020, primarily due to reduced employee compensation costs resulting from lower headcount **Research and Development Expense (in thousands):** | Period | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Research and development | $378 | $1,077 | $(699) | (64.9)% | | | | | | | | Research and development (6 months) | $1,239 | $2,386 | $(1,147) | (48.1)% | - The decrease in research and development expense was primarily due to reduced employee compensation costs resulting from lower headcount[179](index=179&type=chunk) [Other expense](index=39&type=section&id=Other%20expense) Other expense increased for both the three and six months ended June 30, 2020, primarily due to a significant rise in interest expense related to new debt borrowings, partially offset by lower financing usage under the factoring agreement **Other Expense (in thousands):** | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Interest expense | $(460) | $(151) | $(309) | 204.6% | | Loss on extinguishment of debt | $(81) | $0 | $(81) | —% | | Other income (expense) | $0 | $13 | $(13) | (100.0)% | | Total other expense | $(541) | $(138) | $(403) | 292.0% | **Other Expense (in thousands):** | Metric | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Interest expense | $(561) | $(339) | $(222) | 65.5% | | Loss on extinguishment of debt | $(81) | $0 | $(81) | —% | | Other income (expense) | $0 | $17 | $(17) | (100.0)% | | Total other expense | $(642) | $(322) | $(320) | 99.4% | - The increase in other expense was primarily due to a significant rise in interest expense related to new debt borrowings, partially offset by lower financing used under the factoring agreement[180](index=180&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's liquidity, capital resources, and going concern status, analyzing cash flows from operating, investing, and financing activities [Going Concern](index=41&type=section&id=Going%20Concern) The Company reiterates substantial doubt about its ability to continue as a going concern due to ongoing operating losses and negative cash flows, requiring additional capital - The Company has a history of operating losses and negative operating cash flows, which are expected to continue, raising substantial doubt about its ability to continue as a going concern[189](index=189&type=chunk) - To address liquidity, the Company will need to raise additional capital through debt or equity financings and/or reduce operating expenses, but these sources of working capital are not currently assured[189](index=189&type=chunk) [Operating Activities](index=41&type=section&id=Operating%20Activities) This section analyzes net cash used in operating activities, influenced by net loss and changes in working capital, for the six months ended June 30, 2020 **Net Cash Used in Operating Activities (in thousands):** | Period | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Net cash used in operating activities | $(4,750) | $(5,866) | $1,116 | (19.0)% | - For the six months ended June 30, 2020, **$4.8 million cash** was used in operating activities, primarily due to a **$7.5 million net loss**, partially offset by **$1.8 million** in stock-based compensation and other adjustments[192](index=192&type=chunk) - Changes in operating assets and liabilities for the six months ended June 30, 2020, included cash increases from accounts payable and accrued expenses, and cash decreases from deferred revenue and prepaid/other assets[193](index=193&type=chunk) [Investing Activities](index=43&type=section&id=Investing%20Activities) This section notes the absence of investing activities for the six months ended June 30, 2020, compared to prior year proceeds from digital currency sales - Net cash provided by investing activities was **$0** for the six months ended June 30, 2020, compared to **$88 thousand** in the prior year, which was from the sale of digital currencies[190](index=190&type=chunk)[195](index=195&type=chunk) [Financing Activities](index=43&type=section&id=Financing%20Activities) This section highlights a significant increase in cash provided by financing activities due to new debt issuances, contrasting with prior year cash utilization from preferred stock redemptions **Net Cash Provided by (Used in) Financing Activities (in thousands):** | Period | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change Amount | Change % | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Net cash provided by (used in) financing activities | $4,712 | $(314) | $5,026 | (1,600.6)% | - For the six months ended June 30, 2020, financing activities provided **$4.7 million** in cash, primarily from **$6.0 million** in new debt issuances (including **$0.6 million** from related parties), offset by **$0.7 million** in debt payments and **$0.7 million** in factoring agreement repayments[196](index=196&type=chunk) - For the six months ended June 30, 2019, financing activities utilized **$0.3 million** in cash, mainly due to **$6.2 million** in Series A convertible preferred stock redemptions and dividends, offset by **$6.1 million** from warrant exercises[197](index=197&type=chunk) [Off-Balance Sheet Arrangements](index=43&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the Company had no off-balance sheet arrangements as of June 30, 2020, and December 31, 2019 - The Company did not have any off-balance sheet arrangements as of June 30, 2020, and December 31, 2019[198](index=198&type=chunk) [Indemnification Agreements](index=43&type=section&id=Indemnification%20Agreements) The Company provides indemnifications to customers, vendors, lessors, business partners, and other parties for losses arising from breach of agreements, solutions, or intellectual property infringement claims - The Company provides indemnifications to customers, vendors, lessors, business partners, and other parties for losses arising from breach of agreements, solutions, or intellectual property infringement claims[199](index=199&type=chunk) - Indemnification agreements are also in place with directors and certain current and former officers and employees for liabilities related to their service[199](index=199&type=chunk) [Recent Accounting Pronouncements](index=43&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for an analysis of recent accounting pronouncements applicable to the Company's business - The Company refers to Note 2, 'Significant Accounting Policies,' for analysis of recent accounting pronouncements applicable to its business[200](index=200&type=chunk) [Summary of Significant Accounting Policies](index=43&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section confirms financial statements adhere to GAAP, requiring management estimates, with no material changes to critical accounting policies except as noted in Note 2 - The financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts[201](index=201&type=chunk) - No material changes to critical accounting policies and estimates occurred, except for those related to the Senior Convertible Note issuance and ASU 2017-04 adoption, as detailed in Note 2[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the Company for the reporting period - The Company has no applicable quantitative and qualitative disclosures about market risk for this reporting period[205](index=205&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2020, by the Chief Executive Officer and Chief Financial Officer[206](index=206&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the three months ended June 30, 2020[208](index=208&type=chunk) - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance of achieving desired objectives due to resource constraints and judgment application[209](index=209&type=chunk) PART II—OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference detailed information on legal proceedings from Note 7, 'Commitments and Contingencies' - Information regarding legal proceedings is incorporated by reference from Note 7, 'Commitments and Contingencies,' in the financial statements section[212](index=212&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section highlights important risk factors, including the adverse impacts of the COVID-19 pandemic and potential challenges related to the Paycheck Protection Program loan [The COVID-19 pandemic could adversely affect our business, operating results, cash flow and financial condition.](index=46&type=section&id=The%20COVID-19%20pandemic%20could%20adversely%20af%20ect%20our%20business%2C%20operating%20results%2C%20cash%20flow%20and%20financial%20condition.) The COVID-19 pandemic poses significant risks, including business disruptions, strain on continuity plans, and adverse impacts on customer demand and financial condition - The COVID-19 pandemic has caused significant volatility, uncertainty, and economic disruption, potentially preventing the Company from operating at full capacity due to disease spread or government mandates[214](index=214&type=chunk)[215](index=215&type=chunk) - An extended period of remote work could strain business continuity, introduce cybersecurity risks, hinder customer expansion, delay contract delivery, and impair effective business management[215](index=215&type=chunk) - Economic downturns from COVID-19 may impact demand, leading customers to delay, decrease, or cancel purchases, or be unable to pay amounts owed, and could restrict access to capital markets[216](index=216&type=chunk)[217](index=217&type=chunk) [Our loans under the Paycheck Protection Program ("PPP") may not be forgiven or may subject us to challenges and investigations regarding qualification for the loan.](index=46&type=section&id=Our%20loans%20under%20the%20Paycheck%20Protection%20Program%20%28%22PPP%22%29%20may%20not%20be%20forgiven%20or%20may%20subject%20us%20to%20challenges%20and%20investigations%20regarding%20qualification%20for%20the%20loan.) The PPP loan may not be fully forgiven due to evolving guidance, and the Company faces risks of challenges or investigations into its eligibility, potentially leading to penalties - Forgiveness of the PPP loan is uncertain due to evolving guidance from the Small Business Administration (SBA) and the Company's projected ability to use proceeds for qualifying expenses[219](index=219&type=chunk)[220](index=220&type=chunk) - The Company's certification of economic necessity for the PPP loan is subject to interpretation and potential challenges, especially for public companies, which could lead to penalties under the False Claims Act[221](index=221&type=chunk) - Any review or audit by governmental entities or claims under the False Claims Act could consume significant financial and management resources and harm the Company's business and reputation[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report[222](index=222&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[223](index=223&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[224](index=224&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) This section incorporates by reference the 'Key Events and Recent Developments' subheading from Management's Discussion and Analysis - Information under the 'Key Events and Recent Developments' subheading in Management's Discussion and Analysis is incorporated by reference[225](index=225&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed or incorporated by reference as part of the Quarterly Report on Form 10-Q, including organizational documents, debt agreements, and certifications - The Exhibit Index lists various documents filed or incorporated by reference, including the Amended and Restated Certificate of Incorporation, Bylaws, and several debt agreements (e.g., PPP Loan, Senior Convertible Note, 2020 Convertible Notes)[228](index=228&type=chunk) - Certifications of the Principal Executive Officer and Principal Financial Officer are included as Exhibits 31.1, 31.2, and 32.1[228](index=228&type=chunk)[229](index=229&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the filing of the Quarterly Report - The report was signed on August 14, 2020, by Alan S. Knitowski, Chief Executive Officer, and Matt Aune, Chief Financial Officer[232](index=232&type=chunk)[233](index=233&type=chunk)

Table of Contents 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, 2020 ☐ 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 | | 26-4413774 | | | | --- | --- | - ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | (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: For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transit ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Phunware, Inc. as of September 30, 2019, for three and nine-month periods Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $3,946 | $4,722 | | Goodwill | $25,786 | $25,821 | | **Total Assets** | **$30,425** | **$36,881** | | **Total Current Liabilities** | $19,457 | $19,974 | | **Total Liabilities** | **$23,944** | **$25,677** | | **Total Stockholders' Equity** | **$6,481** | **$5,827** | Condensed Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $5,637 | $5,215 | $16,462 | $24,380 | | Gross Profit | $3,219 | $2,508 | $8,705 | $15,737 | | Operating Loss | $(2,292) | $(3,341) | $(8,526) | $(5,269) | | **Net Loss** | **$(2,426)** | **$(3,520)** | **$(8,987)** | **$(6,212)** | | Net Loss Per Share | $(0.06) | $(0.14) | $(0.25) | $(0.24) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,899) | $(5,500) | | Net cash provided by investing activities | $70 | $451 | | Net cash (used in) provided by financing activities | $(409) | $4,903 | | **Net decrease in cash and restricted cash** | **$(6,276)** | **$(186)** | | Cash and restricted cash at end of period | $68 | $122 | - The company has a history of operating losses and negative cash flows, and management has concluded there is substantial doubt about its ability to continue as a going concern through one year from the financial statement issuance date. The financial statements do not include any adjustments related to this uncertainty[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2019 net revenue up 8.1% YoY, nine-month down 32.5%, and addresses critical liquidity and going concern Key Business Metrics (in thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Backlog | $6,564 | $16,730 | | Deferred revenue | $7,335 | $8,251 | | **Total backlog and deferred revenue** | **$13,899** | **$24,981** | - The dollar-based revenue retention rate for platform subscriptions and services remained stable at **97%** for the periods ended September 30, 2019 and 2018[170](index=170&type=chunk) Net Revenues Breakdown (in thousands) | Revenue Type | Three Months Ended Sep 30, 2019 | Change vs. 2018 | Nine Months Ended Sep 30, 2019 | Change vs. 2018 | | :--- | :--- | :--- | :--- | :--- | | Platform subscriptions and services | $5,152 | +18.5% | $15,065 | +1.8% | | Application transaction | $485 | -44.0% | $1,397 | -85.4% | | **Total Net Revenues** | **$5,637** | **+8.1%** | **$16,462** | **-32.5%** | - The company's contractual obligations with its key customer, Fox Networks Group, were completed as of September 30, 2019. Fox accounted for **55%** and **58%** of net revenues for the three and nine months ended September 30, 2019, respectively[201](index=201&type=chunk) - The company has a history of operating losses and negative cash flows, which raises substantial doubt about its ability to continue as a 'going concern'. Management is exploring additional capital raising through debt or equity but notes these sources are not assured[226](index=226&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that this section is not applicable - The company has determined that quantitative and qualitative disclosures about market risk are not applicable for this reporting period[232](index=232&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, noting new controls for ASC 606 adoption during the period - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[235](index=235&type=chunk) - During the nine months ended September 30, 2019, the company implemented new controls to prepare financial statements under the new revenue standard, ASC 606. No other material changes to internal control over financial reporting were identified[237](index=237&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) Details ongoing litigation with Uber, involving Phunware's $3M claim and Uber's $17M cross-complaint for fraud - Phunware is in a legal dispute with Uber Technologies, Inc. Phunware is seeking **~$3 million** for unpaid invoices, while Uber has filed a cross-complaint[240](index=240&type=chunk) - Uber's cross-complaint alleges fraud and civil RICO violations against Phunware and certain current and former employees, claiming it was fraudulently billed for approximately **$17 million** and is seeking treble damages, punitive damages, and attorneys' fees[240](index=240&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) Outlines significant risks: Fox contract completion, digital asset uncertainties, goodwill impairment, and capital needs - A major risk is the concentration of sales with Fox Networks Group, whose statement of work was completed on September 30, 2019. Fox represented **55%** of total revenue for Q3 2019, and the loss of this revenue could have a material adverse effect[247](index=247&type=chunk) - The company faces significant uncertainty regarding the financial accounting and regulatory regime for its digital assets, PhunCoin and Phun, which could negatively impact its business and financial statements[248](index=248&type=chunk)[258](index=258&type=chunk) - Goodwill comprises a significant portion of total assets (**$25.8 million**, or **85%** of total assets as of September 30, 2019). A decline in stock price or weakening economic conditions could lead to a material, non-cash impairment charge[262](index=262&type=chunk)[264](index=264&type=chunk) - The company requires significant additional capital to fund operations as it has a history of operating losses and negative working capital. Failure to secure financing could force it to delay, reduce, or cease operations[268](index=268&type=chunk)[269](index=269&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities related to employee benefit plans during the quarter - The company reported no unregistered sales of equity securities related to employee benefit plans during the quarter[278](index=278&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company states that this section is not applicable - The company reports no defaults upon senior securities[279](index=279&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company states that this section is not applicable - The company reports that mine safety disclosures are not applicable[280](index=280&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) The company states that this section is not applicable - The company reports no other information for this period[281](index=281&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including lease amendments and officer certifications - The report includes several exhibits, such as amendments to lease agreements for office space in Austin, TX and San Diego, CA, and certifications by the Principal Executive Officer and Principal Financial Officer[283](index=283&type=chunk)