Phunware Closes Acquisition of High Performance Computer Provider Lyte Technology

Revenue Guidance for Fourth Quarter Fiscal 2021 Expected to Exceed $5M

Phunware, Inc. (the “Company”), a fully-integrated enterprise cloud platform for mobile that provides products, solutions, data and services for brands worldwide, announced it has formally closed the acquisition of privately-held Lyte Technology, Inc. (“Lyte”), a fast-growing provider of high performance computer systems. The Company financed the closing consideration of $3.32 million with cash on-hand and unsecured, non-dilutive debt.

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Lyte Technology Overview

Founded in 2018, Lyte is a profitable, rapidly-growing system integrator that specializes in marketing and distributing custom, high-end computer systems off-the-shelf with advanced graphic processing units for gaming, streaming and cryptocurrency mining. Currently located in Illinois, Lyte employs over 25 people and ships thousands of computer systems per quarter to a unique customer network that has largely grown through word-of-mouth.

Acquisition Summary and Rationale (Unaudited)

• The total consideration for the acquisition consisted of cash and Company common stock valued at up to approximately $10.98 million, a portion of which is characterized as an earn-out payment contingent upon Lyte generating at least $12.00 million in net revenues for the one-year period post-closing.
• No Company common stock was issued at closing.
• Lyte enables Phunware to enter the high performance personal computer market, which JPR estimates is a $32 billion USD market that is expected to grow at a 20.4% CAGR over the next five years.
• Complementary and synergistic go-to-market strategies exist, with no overlap in the companies’ relevant partner or customer bases.
• Lyte’s customers represent gamers, developers, content creators and crypto enthusiasts who will support the adoption, scale and infrastructure required for Phunware to deploy its decentralized data economy powered by PhunCoin and PhunToken.
• For the fourth quarter of fiscal 2021, Phunware expects to report net revenues exceeding $5.00 million.

“Pre-acquisition, Q3 organic net revenues are expected to exceed 50% quarter-over-quarter growth sequentially when formally announced in mid-November, so this accretive inorganic acquisition puts us in a great position to not only continue that organic momentum in Q4, but also leverage a brand new, strategic distribution network for our recently announced blockchain initiatives,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. “Software exists at the pleasure of hardware, so much like Amazon invested in the resources necessary to deliver a global on-demand economy, Phunware is investing in the resources necessary to deliver a decentralized global data economy.”

“Since inception, our demand has always outpaced our supply, so I am excited to better resource and scale Lyte within an innovative public company that has a strategic focus on decentralizing data,” said Caleb Borgstrom, Founder and CEO of Lyte Technology. “I expect Lyte to materially contribute to Phunware’s operational and financial success rolling forward, while delivering a worldwide distributed network of high performance computing platforms to serve as decentralized oracles, validators and nodes that efficiently bridge the gap between external data on the existing web and blockchain-based applications on mobile.”

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Financing Terms

Phunware financed the acquisition with a combination of existing cash on-hand and unsecured debt. Phunware issued a Promissory Note (the “Note”) to Streeterville Capital, LLC, borrowing $5.22 million at 0% interest with a 12-month maturity date. Beginning in January 2022, the Company will make equal monthly payments on the outstanding principal. Monthly payments will be made in cash and are subject to a 10% payment premium. In conjunction with closing the Note, the Company received net cash proceeds of $4.74 million. Joseph Gunnar & Co., LLC, served as placement agent for the transaction.