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Phunware Miscalculates Share Count, Understates Net Loss by $1.43 Million
Mobile application platform discloses control deficiency after not counting millions of shares.
November 12, 2021
For months, Phunware (PHUN), a mobile application platform, had no idea what its share count was. In its latest 10-Q, Phunware revealed it inaccurately accounted for an adjustment to certain terms of an outstanding warrant issued in conjunction with its 2020 Convertible Notes and as a result:
“While we accurately accounted for the decrease in the exercise price (from $4.00 per share to $2.25 per share), we did not account for the increase in the number of shares available for exercise under the warrant, from 2,160,000 shares to 3,840,000 shares.”
The error resulted in Phunware understating its net loss in the quarter ending March 31,2021 by $1.9 million or 15.6% of the previously stated loss. The error also resulted in Phunware overstating its net loss in the quarter ending June 30, 2021 by $517k, or 6.2% of the previously reported loss.
Though Phunware says the misstatement wasn’t material, it did conclude the error qualifies as a material weakness in our internal control over financial reporting.
Related: DWAC, APP, APPS
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