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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 June 30, 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)
Delaware26-4413774
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)

7800 Shoal Creek BlvdSuite 230-SAustinTX78757
(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 sharePHUN
The NASDAQ Capital Market
Warrants to purchase one share of Common StockPHUNW
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 filerAccelerated filer
Non-accelerated filerSmaller 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 12, 2020, 43,623,404 shares of common stock, par value $0.0001 per share, were issued and outstanding. 



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TABLE OF CONTENTS
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Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes forward-looking statements. 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.
ii

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Phunware, Inc.
Condensed Consolidated Balance Sheet
(In thousands, except per share information)
June 30,
2020
December 31,
2019
(Unaudited)
Assets
Current assets:
Cash$154  $276  
Accounts receivable, net of allowance for doubtful accounts of $3,190 and $3,179 at June 30, 2020 and December 31, 2019, respectively
928  1,671  
Prepaid expenses and other current assets560  368  
Total current assets1,642  2,315  
Property and equipment, net15  24  
Goodwill25,781  25,857  
Intangible assets, net175  253  
Deferred tax asset241  241  
Restricted cash91  86  
Other assets276  276  
Total assets$28,221  $29,052  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$9,737  $10,159  
Accrued expenses4,415  4,035  
Deferred revenue2,980  3,360  
PhunCoin deposits1,202  1,202  
Factored receivables payable363  1,077  
Current maturities of long-term debt, net1,333    
Total current liabilities20,030  19,833  
Long-term debt3,810  910  
Long-term debt - related party555  195  
Deferred tax liability241  241  
Deferred revenue2,876  3,764  
Deferred rent195  83  
Total liabilities27,707  25,026  
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value
4  4  
Additional paid-in capital132,045  128,008  
Accumulated other comprehensive loss(457) (382) 
Accumulated deficit(131,078) (123,604) 
Total stockholders’ equity514  4,026  
Total liabilities and stockholders’ equity$28,221  $29,052  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
Phunware, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share information)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net revenues$2,213  $5,510  $4,853  $10,825  
Cost of revenues768  2,722  1,859  5,339  
Gross profit1,445  2,788  2,994  5,486  
Operating expenses:
Sales and marketing277  665  882  1,389  
General and administrative3,760  3,970  7,705  7,945  
Research and development378  1,077  1,239  2,386  
Total operating expenses4,415  5,712  9,826  11,720  
Operating loss(2,970) (2,924) (6,832) (6,234) 
Other income (expense):
Interest expense(460) (151) (561) (339) 
Loss on extinguishment of debt(81)   (81)   
Other income  13    17  
Total other expense(541) (138) (642) (322) 
Loss before taxes(3,511) (3,062) (7,474) (6,556) 
Income tax expense  (5)   (5) 
Net loss(3,511) (3,067) (7,474) (6,561) 
Other comprehensive loss:
Cumulative translation adjustment(3) (30) (75) (3) 
Comprehensive loss$(3,514) $(3,097) $(7,549) $(6,564) 
Net loss per common share, basic and diluted$(0.08) $(0.08) $(0.18) $(0.19) 
Weighted-average common shares used to compute net loss per share, basic and diluted41,869  38,810  40,982  34,537  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
Phunware, Inc.
Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity
(In thousands)
(Unaudited)

Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance - March 31, 2020    40,693  $4  $129,370  $(127,567) $(454) $1,353  
Exercise of stock options, net of vesting of restricted shares—  —  120  —  70  —  —  70  
Vesting of restricted stock units—  —  578  —  —  —  
Issuance of common stock for payment of legal, earned bonus, and board of director fees —  —  400  —  523  —  —  523  
Stock-based compensation expense—  —  —  —  1,115  —  —  1,115  
Issuance of common stock upon partial conversions of Senior Convertible Note—  —  1,764  —  2,266  —  —  2,266  
Reacquisition of equity component of Senior Convertible Note—  —  —  —  (1,299) —  —  (1,299) 
Cumulative translation adjustment—  —  —  —  —  —  (3) (3) 
Net loss—  —  —  —  —  (3,511) —  (3,511) 
Balance - June 30, 2020    43,555  $4  $132,045  $(131,078) $(457) $514  

Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance - December 31, 2019    39,811  $4  $128,008  $(123,604) $(382) $4,026  
Exercise of stock options, net of vesting of restricted shares—  —  153  —  87  —  —  87  
Vesting of restricted stock units—  —  694  —  —  —  —  —  
Issuance of common stock for payment of legal, earned bonus, and board of director fees  —  —  1,133  —  1,014  —  1,014  
Stock-based compensation expense—  —  1,750  —  —  1,750  
Issuance of common stock upon partial conversions of Senior Convertible Note—  —  1,764  —  2,266  —  —  2,266  
Reacquisition of equity component of Senior Convertible Notes—  —  —  —  (1,299) —  —  (1,299)
Equity classified cash conversion feature of Senior Convertible Notes—  —  —  —  219  —  —  219
Cumulative translation adjustment—  —  —  —  —  (75) (75)
Net loss—  —  —  —  —  (7,474) (7,474)
Balance - June 30, 2020    43,555  $4  $132,045  $(131,078) $(457) $514  

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Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitOther Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance - March 31, 2019    38,331  $4  $125,421  $(114,227) $(391) $10,807  
Exercise of stock options, net of vesting of restricted shares—  —  58  —  17  —  —  17  
Exercise of common stock warrants pursuant to cashless provisions—  —  513  —  —  —  —  —  
Stock-based compensation expense—  —  —  —  416  —  —  416  
Cumulative translation adjustment—  —  —  —  —  —  (30) (30) 
Net loss—  —  —  —  —  (3,067) —  (3,067) 
Balance - June 30, 2019    38,902  $4  $125,854  $(117,294) $(421) $8,143  

Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitOther Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance - December 31, 20186  5,377  27,253  $3  $118,062  $(111,820) $(418) $5,827  
Exercise of stock options, net of vesting of restricted shares—  —  119  —  52  —  —  52  
Exercise of common stock warrants for cash—  —  617  —  6,184  —  —  6,184  
Exercise of common stock warrants pursuant to cashless provisions—  —  10,913  1  (1) —  —    
Series A convertible preferred stock redeemed for cash(6) (5,377) —  —  (863) —  —  (863) 
Waiver of sponsor promissory note originally issued in conjunction with Reverse Merger and Recapitalization—  —  —  —  1,993  —  —  1,993  
Stock-based compensation expense—  —  —  —  427  —  —  427  
Cumulative-effect adjustment resulting from the adoption of ASU 2014-09—  —  —  —  —  1,087  —  1,087  
Cumulative translation adjustment—  —  —  —  —  —  (3) (3) 
Net loss—  —  —  —  —  (6,561) —  (6,561) 
Balance - June 30, 2019    38,902  $4  $125,854  $(117,294) $(421) $8,143  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Phunware, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
20202019
Operating activities
Net loss$(7,474) $(6,561) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation9  30  
Amortization of acquired intangibles78  143  
Amortization of debt discount and deferred financing costs227    
Loss on sale of digital currencies  4  
Loss on extinguishment of debt81    
Non-cash interest expense55    
Bad debt (recovery) expense(63) 132  
Stock-based compensation1,750  427  
Changes in operating assets and liabilities:
Accounts receivable815  (71) 
Prepaid expenses and other assets(193) (99) 
Accounts payable356  (807) 
Accrued expenses877  330  
Deferred revenue(1,268) 606  
Net cash used in operating activities(4,750) (5,866) 
Investing activities
Proceeds received from sale of digital currencies  88  
Net cash provided by investing activities  88  
Financing activities
Proceeds from borrowings, net of issuance costs5,436  250  
Proceeds from related party bridge loans560    
Payments on senior convertible note(455)   
Payments on related party notes(200)   
Net repayments on factoring agreement(714) (659) 
Proceeds from PhunCoin deposits  191  
Proceeds from warrant exercises  6,092  
Proceeds from exercise of options to purchase common stock85  52  
Series A convertible preferred stock redemptions and dividend payments  (6,240) 
Net cash provided by (used in) financing activities4,712  (314) 
Effect of exchange rate on cash and restricted cash(79) (4) 
Net increase (decrease) in cash and restricted cash(117) (6,096) 
Cash and restricted cash at the beginning of the period362  6,344  
Cash and restricted cash at the end of the period$245  $248  


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Supplemental disclosure of cash flow information:
Interest paid$328  $361  
Income taxes paid$  $  
Supplemental disclosures of non-cash financing activities:
Issuance of common stock for payment of legal, earned bonus and board of director fees$1,014  $  
Issuance of common stock upon partial conversions of Senior Convertible Note$2,266  $  
Reacquisition of equity component of Senior Convertible Note$(1,299) $  
Equity classified cash conversion feature of Senior Convertible Note$219  $  
The accompanying notes are an integral part of these 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. (the “Company”) offers a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios globally at scale. Phunware’s Multiscreen-as-a-Service ("MaaS") platform provides the entire mobile lifecycle of applications, media and data in one login through one procurement relationship. The Company’s MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions. Through its integrated mobile advertising platform of publishers and advertisers, the Company provides in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. Founded in 2009, the Company is 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 at December 31, 2019 was derived from the Company’s 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 the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2019, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019, 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 the Company’s financial position as of June 30, 2020 and the results of operations for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim period.
Reclassifications of Prior Year Presentation
Certain amounts in the financial statements of prior periods have been reclassified to conform to the current period financial statement presentation. This reclassification had no effect on the Company's reported results of operations. A reclassification was made to the condensed consolidated balance sheet as of December 31, 2019 to identify related parties for debt issuances.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable. Although the Company limits its exposure to credit loss by depositing its cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, its deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable, and the Company believes the carrying value approximates fair value.


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The following table sets forth the Company's concentration of revenue sources as a percentage of total net revenues.
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Fox Networks Group %57 % %59 %
American Made Media Consultants, LLC36 % %33 % %
Houston Methodist13 %8 %12 %11 %
World Wide Technology, Inc.11 %4 %10 %4 %

The Company completed its contractual obligations under its statement of work with Fox Networks Group ("Fox") as of September 30, 2019. While the underlying master services agreement with Fox (setting forth general terms and conditions) remains in place, the Company does not have any active statements of work with Fox.
The following table sets forth the Company's concentration of accounts receivable, net of specific allowances for doubtful accounts.
June 30, 2020December 31, 2019
Houston Methodist22 % %
Wynn Las Vegas, LLC12 % %
Carrier Corporation (UTC)11 % %
HID Global (through Bluvision Inc.) %23 %
American Made Media Consultants, LLC