Phunware, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Digital Assets

Digital Assets

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum. We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services or self-custody solutions to secure them. The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.

We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is the principal market for bitcoin, ethereum and other digital asset holdings (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest intraday market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value. The fair value of our digital asset holdings at March 31, 2023 is $4,708.

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain or loss to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other income (expense) in our condensed consolidated statements of operations and comprehensive loss. Impairment loss was $50 and $9,353 for the three months ended March 31, 2023 and 2022, respectively.

The following table set forth our digital asset holdings as of March 31, 2023:


Asset	Gross Carrying Amount		Accumulated Digital Asset Impairment		Digital Asset Carrying Value
Bitcoin	$	6,177	$	(4,267)	$	1,910
Ether	1,391		(1,060)		$	331
Other	1,249		(960)		$	289
Total	$	8,817	$	(6,287)	$	2,530

The following table sets forth our digital asset holdings as of December 31, 2022:


Asset	Gross Carrying Amount		Accumulated Digital Asset Impairment		Digital Asset Carrying Value
Bitcoin	$	34,994	$	(25,534)	$	9,460
Ether	1,506		(1,156)		350
Other	1,237		(910)		327
Total	$	37,737	$	(27,600)	$	10,137

Gross carrying amount and accumulated digital asset impairment noted above represent carrying amount and impairment, respectively, on the remaining cost lots as of the respective dates. Changes in our digital asset holdings for three months ended March 31, 2023 were as follows:


	Bitcoin		Ethereum		Other		Total
Net balance at December 31, 2022	$	9,460	$	350	$	327	$	10,137
Received from customers, net of expenses	—		—		19		19

Exchanges of digital assets	—		7		(7)		—
Disposal proceeds	(10,739)		(51)		—		(10,790)
Gain on sale of digital assets	3,189		25		—		3,214
Impairment expense	—		—		(50)		(50)
Net balance at March 31, 2023	$	1,910	$	331	$	289	$	2,530