Phunware Inc

Previous wording

The following table sets forth our backlog and deferred revenue:

Current wording

The follow table sets forth our deferred revenue and backlog:

Previous wording

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We also use certain non-GAAP financial measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit, adjusted gross margin and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") (our "non-GAAP financial measures"). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.

Current wording

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We also use certain non-GAAP financial measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit (derived from the GAAP measure of gross profit), adjusted gross margin (derived from the GAAP measure of gross margin) and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) (derived from the GAAP measure of net loss from continuing operations) (our “non-GAAP financial measures”). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.

Previous wording

The following table sets forth the non-GAAP financial measures we monitor.

Current wording

The following tables set forth the most comparable GAAP financial measures from which our non-GAAP financial measures are derived as well as the non-GAAP financial measures we monitor.

Previous wording

We also generate revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads. Fees from advertisers are commonly based on the number of ads delivered or views or clicks by users on mobile advertisements delivered, and we recognize revenue at the time the user views or clicks on the ad. We sell our ads by cost per thousand impressions and cost per click. In 2021, we commenced PhunToken sales. PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest. We recognize revenue related to PhunToken at time of delivery to a customer's ethereum-based wallet.

Current wording

We also generate revenue by charging advertisers to deliver advertisements (ads) to users of digitally connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue when the ad loads onto the device of a user. We generally sell our ads by cost per thousand impressions and generally, an impression results when the user has the potential to see the ad.

Previous wording

Application transaction gross profit is equal to application transaction revenue less cost of revenue associated with application transactions. Application transaction gross profit is impacted by the cost of advertising traffic we pay to our suppliers and amount of traffic which we can purchase from those suppliers and ethereum blockchain fees paid to deliver PhunToken. As a result, our application transaction gross profit may fluctuate from period to period due to variable costs of advertising traffic.

Current wording

Application transaction gross profit is equal to application transaction revenue less cost of revenue associated with application transactions. Application transaction gross profit is impacted by the cost of advertising traffic we pay to our suppliers and amount of traffic which we can purchase from those suppliers. As a result, our application transaction gross profit may fluctuate from period to period due to variable costs of advertising traffic.

Previous wording

Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. Our sales and marketing expense may increase in absolute dollars as we increase our sales and marketing organizations as we plan to increase revenue but may fluctuate as a percentage of our total revenue from period to period.

Current wording

Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. In order to grow revenues, we may increase the size and spend of our sales and marketing organization. As a result, our sales and marketing expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Previous wording

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative function to support the growth of our business. As a result, our general and administrative expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Current wording

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect, over time, to increase the size of our general and administrative function to support the growth of our business. As a result, our general and administrative expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Previous wording

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, our research and development expenses may increase in absolute dollars as our business grows but may fluctuate as a percentage of revenue from period to period.

Current wording

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, our research and development expenses may increase in absolute dollars but may fluctuate as a percentage of revenue from period to period.

Previous wording

We also may seek additional debt financings to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

Current wording

We also may seek additional debt financing to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

Previous wording

Application transaction revenue increased $0.3 million, or 148.4%, for the three months ended March 31, 2024 compared to the corresponding period in 2023, due to the timing of advertising campaigns.

Current wording

Net revenues decreased $0.3 million, or (21.9)%, for the three months ended June 30, 2024 compared to the corresponding period in 2023, as a result of additional development fees recognized in 2023 and timing of advertising campaigns.

Previous wording

Platform revenue decreased $0.7 million, or (60.7)%, for the three months ended March 31, 2024 compared to the corresponding period in 2023, primarily due to $0.3 million related to a customer contract termination, which occurred in 2023 and $0.2 million decrease in customer reimbursable expenses.

Current wording

Net revenues decreased $0.7 million, or (26.8)%, for the six months ended June 30, 2024 compared to the corresponding period in 2023, primarily due to $0.3 million due to a specific customer contract termination, $0.2 million in revenue recognized in 2023 related to a customer onboarding and $0.1 million for customers who were customers in 2023, but are no longer customers in 2024.

Previous wording

Sales and marketing expense decreased $0.4 million, or (48.2)%, for the three months ended March 31, 2024 compared to the corresponding period of 2023, primarily due to a decrease in payroll and related expenses as a result of lower headcount.

Current wording

Sales and marketing expense decreased $0.5 million, or (46.7)% and $0.9 million, or (47.3)%, for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods of 2023, primarily due to a decrease in payroll and related expenses as a result of lower headcount.

Previous wording

General and administrative expense decreased $1.7 million, or 40.3%, for the three months ended March 31, 2024 compared to the corresponding period of 2023, due to a $0.9 million decrease in payroll and related expenses as a result of lower headcount, $0.4 million decrease in consulting expenses and $0.3 million decrease in stock-based compensation expense.

Current wording

General and administrative expense decreased $1.9 million, or (46.1)%, for the three months ended June 30, 2024 compared to the corresponding period of 2023, due to a $0.5 million decrease in payroll and related expenses as a result of lower headcount, $0.7 million decrease in professional expenses, mainly related to legal fees and $0.7 million decrease in stock-based compensation expense.

Previous wording

Research and development expense decreased $1.3 million, or (72.6)%, for the three months ended March 31, 2024 compared to the corresponding period of 2023, primarily due to a decrease in payroll and related expenses as a result of lower headcount.

Current wording

Research and development expense decreased $0.7 million, or (59.1)%, and $2.0 million, or (67.1)%, for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods of 2023, primarily as a result of decrease in payroll and related expenses as a result of lower headcount.

Previous wording

During the three months ended March 31, 2023, we recorded other income of $3.0 million primarily as a result of gains on sales of our digital asset holdings.

Current wording

During the three months ended June 30, 2024, we recorded other income of $0.3 million, primarily as a result of interest income from cash on-hand. During the three months ended June 30, 2023, we recorded other income of approximately $1.7 million, primarily as a result of gains on sales of our digital asset holdings. This was partially offset due to interest expense related to the 2022 Promissory Note, as amended.

Previous wording

During the three months ended March 31, 2024, we recorded other income of $0.6 million primarily as a result of a gain on the extinguishment of our 2022 Promissory Note.

Current wording

During the six months ended June 30, 2024, we recorded other income of $0.9 million, primarily as a result of interest income and a recognized gain on the extinguishment of the 2022 Promissory Note. During the six months ended June 30, 2023, we recorded other income of $4.7 million, primarily as a result of gains on sales of our digital asset holdings. This was partially offset due to interest expense related to the 2022 Promissory Note, as amended.

Previous wording

As of March 31, 2024, we held total cash of $21.6 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

Current wording

As of June 30, 2024, we held total cash of $20.4 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

Previous wording

On February 1, 2022, we filed a Form S-3, which was subsequently declared effective by the SEC on February 9, 2022, pursuant to which we may issue up to $200 million in common stock, preferred stock, warrants and units. Contained therein, was a prospectus supplement pursuant to which we may sell up to $100 million of our common stock in an “at the market offering” pursuant to an At Market Issuance Sales Agreement (the "ATM Agreement") we entered into with H.C. Wainwright & Co., LLC on January 31, 2022. During the three-month period ended March 31, 2024, the Company sold approximately 245,009 share pursuant to the ATM Agreement at an average price of approximately $10.35 per share, resulting in approximately $2.5 million of net proceeds to the Company after deducting commissions and other offering expenses. As of the date of this Report, shares of our common stock with a maximum aggregate offering price of up to $85.5 million may be sold pursuant to the sales agreement.

Current wording

On February 1, 2022, we filed a Form S-3, which was subsequently declared effective by the SEC on February 9, 2022, pursuant to which we could issue up to $200 million in common stock, preferred stock, warrants and units. Contained therein, was a prospectus supplement pursuant to which we could sell up to $100 million of our common stock in an “at the market offering” pursuant to an At Market Issuance Sales Agreement we entered into with H.C. Wainwright & Co., LLC (“Wainwright”) on January 31, 2022. We terminated our agreement with Wainwright effective June 3, 2024.

Previous wording

On August 22, 2023, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $30.0 million in value of shares of our common stock from time to time over the 24-month term of the purchase agreement. Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Lincoln Park pursuant to which the Company agreed to register the sale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the purchase agreement pursuant to the Company’s existing shelf registration statement on Form S-3. During the three-month period ended March 31, 2024, we did not sell any shares to Lincoln Park. As of the date of this Report, $29.0 million in value of shares of our common stock remains issuable pursuant to the purchase agreement with Lincoln Park.

Current wording

On August 22, 2023, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $30.0 million in value of shares of our common stock from time to time over the 24-month term of the purchase agreement. Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Lincoln Park pursuant to which the Company agreed to register the sale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the purchase agreement pursuant to the Company’s existing shelf registration statement on Form S-3. During the six-month period ended June 30, 2024, we did not sell any shares to Lincoln Park. As of the date of this Report, $29.0 million in value of shares of our common stock remains issuable pursuant to the purchase agreement with Lincoln Park.

Previous wording

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financings, or issue securities under our effective registration statement described above. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be adversely affected.

Current wording

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financing, or issue securities under our effective registration statement described above. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be adversely affected.

Previous wording

We utilized $5.5 million of cash from operating activities during the three months ended March 31, 2024, resulting in a net loss of $2.3 million. The net loss included non-cash charges of $0.4 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $3.5 million, primarily relating to a decrease in accounts payable and accrued expenses.

Current wording

We utilized $8.2 million of cash from operating activities during the six months ended June 30, 2024, resulting in a net loss of $4.9 million. The net loss included non-cash charges of $1.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $4.5 million, primarily relating to a decrease in accounts payable and accrued expenses.

Previous wording

We utilized $7.4 million of cash from operating activities during the three months ended March 31, 2023, resulting in a net loss of $4.3 million. The net loss included a gain on the sale of digital assets of $3.2 million and non-cash charges of $1.8 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decreases of $1.7 million, primarily relating to a decrease in deferred revenue.

Current wording

We utilized $12.6 million of cash from operating activities during the six months ended June 30, 2023, resulting in a net loss from continuing operations of $8.1 million. The net loss included a gain on the sale of digital assets of $5.3 million and other non-cash charges of approximately $3.8 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $1.5 million, primarily relating to a decrease in deferred revenue. Further cash decreases were the result of $1.4 million from the discontinued operations of Lyte.

Previous wording

Investing activities for the three months ended March 31, 2023 consisted mainly of the sales of our digital asset holdings.

Current wording

Investing activities for the six months ended June 30, 2023 consisted mainly of the sales of our digital asset holdings.

Previous wording

Our financing activities during the three months ended March 31, 2024 consisted of various sales of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information.

Current wording

Our financing activities during the six months ended June 30, 2024 consisted of various sales of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information.

Previous wording

Our financing activities during the three months ended March 31, 2023 consisted of payments on our 2022 Promissory Note of $4.3 million and $0.5 million for repurchases of shares of our common stock.

Current wording

Our financing activities during the six months ended June 30, 2023 consisted of payments on our 2022 Promissory Note of $4.3 million, $0.5 million for repurchases of shares of our common stock and $1.0 million in proceeds from the sale of our common stock.