Phunware(PHUN) - 2022 Q1 - Quarterly Report

Form 10-Q Filing Information This section presents administrative details of the Form 10-Q, including filing period, registrant, and registered securities - This is a Quarterly Report (Form 10-Q) for the period ended March 31, 2022[2] - The registrant is PHUNWARE, INC., a Delaware corporation headquartered in Austin, Texas[3][4][25] Securities Registered | 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 | | Warrants to purchase one share of Common Stock | PHUNW | The NASDAQ Capital Market | - The registrant is classified as a Non-accelerated filer and a Smaller reporting company[5] - As of May 9, 2022, 97,834,795 shares of common stock were issued and outstanding[5] Special Note Regarding Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, with no obligation to update them - Forward-looking statements are identified by specific terminology (e.g., 'anticipate,' 'expect,' 'plan') and are based on current expectations and beliefs[9] - These statements involve risks, uncertainties, and assumptions, which may cause actual results or performance to differ materially[10] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by applicable securities laws[10] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion Item 1. Financial Statements This section presents Phunware's unaudited condensed consolidated financial statements and related notes Condensed Consolidated Balance Sheets Total assets, liabilities, and stockholders' equity decreased, driven by reduced cash and digital assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change | | :--------------------------- | :------------- | :---------------- | :----- | | Cash | $10,815 | $23,137 | $(12,322) | | Digital assets | $24,244 | $32,581 | $(8,337) | | Total current assets | $42,271 | $60,007 | $(17,736) | | Total assets | $81,423 | $99,294 | $(17,871) | | Total current liabilities | $26,124 | $30,293 | $(4,169) | | Total liabilities | $29,433 | $34,017 | $(4,584) | | Total stockholders' equity | $51,990 | $65,277 | $(13,287) | Condensed Consolidated Statements of Operations and Comprehensive Loss Net revenues increased significantly, but operating and net losses were impacted by digital asset impairment Condensed Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Net revenues | $6,778 | $1,646 | $5,132 | | Gross profit | $1,771 | $954 | $817 | | Operating loss | $(5,022) | $(3,412) | $(1,610) | | Impairment of digital assets | $(9,353) | — | $(9,353) | | Net loss | $(14,917) | $(14,307) | $(610) | | Loss per share, basic and diluted | $(0.15) | $(0.22) | $0.07 | Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Stockholders' equity decreased due to net loss, partially offset by acquisition capital and stock-based compensation Changes in Stockholders' Equity (in thousands) | Item | Balance - December 31, 2021 | Change (3 months ended March 31, 2022) | Balance - March 31, 2022 | | :------------------------------------------ | :-------------------------- | :------------------------------------- | :----------------------- | | Total Stockholders' Equity | $65,277 | $(13,287) | $51,990 | | Net loss | N/A | $(14,917) | N/A | | Issuance of common stock (Lyte acquisition) | N/A | $1,125 | N/A | | Stock-based compensation expense | N/A | $521 | N/A | Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash, primarily from operating and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(10,171) | $(7,299) | $(2,872) | | Net cash used in investing activities | $(569) | $(1,098) | $529 | | Net cash (used) provided by financing activities | $(1,550) | $27,916 | $(29,466) | | Net (decrease) increase in cash and restricted cash | $(12,322) | $19,529 | $(31,851) | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the financial statements Note 1. The Company and Basis of Presentation Phunware offers MaaS, digital assets, and computer systems, with GAAP financials and a corrected warrant error - Phunware, Inc. offers a Multiscreen-as-a-Service (MaaS) platform, mobile advertising, and PhunToken, an innovative digital asset[25] - In October 2021, the company acquired Lyte Technology, Inc., a provider of high-performance computer systems[25] - A prior accounting error related to a warrant resulted in an understatement of net loss by $1,944 thousand for the three months ended March 31, 2021, which has been corrected[29][31] - Management believes there is no substantial doubt about the company's ability to continue as a going concern for one year, based on sufficient cash on-hand[33] Note 2. Summary of Significant Accounting Policies This note outlines significant accounting policies, including estimates, digital asset risks, and fair value measurements - Financial statement preparation requires management estimates and assumptions for digital asset transactions, stock-based compensation, and fair value measurements[36] - Regulation governing blockchain technologies, cryptocurrencies, and digital assets is uncertain and evolving, posing potential adverse effects on token value[37] - Digital assets (primarily bitcoin and ethereum) are accounted for as indefinite-lived intangible assets, recorded at cost and remeasured for impairment losses[43][46] Digital Asset Impairment Loss (Three Months Ended March 31, 2022, in thousands) | Digital Asset | Impairment Losses | | :------------ | :------------------ | | Bitcoin | $7,633 | | Ethereum | $1,658 | | Other | $62 | | Total | $9,353 | Fair Value of Financial Instruments (March 31, 2022, in thousands) | Instrument | Level 1 | Level 2 | Level 3 | Total | | :--------------- | :------ | :------ | :------ | :---- | | Digital assets | $24,244 | $— | $— | $24,244 | | Warrant liability | $— | $3,818 | $— | $3,818 | Note 3. Business Combination Phunware acquired Lyte Technology, Inc. for approximately $11.0 million, subject to an earn-out provision - Phunware acquired Lyte Technology, Inc. on October 18, 2021, for an