10-Q

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, 2019

☐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)

Delaware	26-4413774
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

7800 Shoal Creek Blvd, Suite 230-S Austin, TX	78757
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 512-693-4199

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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 ☒

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 share	PHUN	The NASDAQ Capital Market
Warrants to purchase one share of Common Stock	PHUNW	The NASDAQ Capital Market

As of August 8, 2019, 38,966,575 shares of common stock, par value $0.0001 per share, were issued and outstanding. 

EXPLANATORY NOTE

On December 26, 2018, Stellar Acquisition III, Inc., a Republic of the Marshall Islands corporation incorporated in December 2015 (“Stellar”), deregistered as a corporation in the Republic of the Marshall Islands and domesticated as a corporation incorporated under the laws of the State of Delaware upon the filing with and acceptance by the Secretary of State of Delaware of the certificate of domestication in accordance with Section 388 of the Delaware General Corporation Law (the “Domestication”). Upon the effectiveness of the Domestication, Stellar became a Delaware corporation and, upon the consummation of the Business Combination (as defined below), Stellar changed its corporate name to “Phunware, Inc.” (the “Successor” or the “Company”) and all outstanding securities of Stellar were deemed to constitute outstanding securities of the Successor. Also on December 26, 2018, STLR Merger Subsidiary Inc., a wholly-owned subsidiary of Stellar (“Merger Sub”), merged with and into Phunware, Inc. (“Phunware”), a corporation incorporated in Delaware in February 2009, with Phunware surviving the merger (the “Merger”) and becoming a wholly-owned subsidiary of the Successor (the “Business Combination” or “Reverse Merger and Recapitalization”). Upon the consummation of the Business Combination, Phunware changed its corporate name to “Phunware OpCo, Inc.” As of the open of trading on December 28, 2018, the common stock and warrants of the registrant began trading on the Nasdaq Capital Market as “PHUN” and “PHUNW,” respectively.

In connection with the consummation of the Business Combination, on December 26, 2018, the board of directors of the Successor approved a change of its fiscal year end from November 30 to a calendar year ending December 31, effective immediately. Accordingly, the new fiscal year will begin on January 1 and end on December 31.

TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018	2
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
	Signatures	44

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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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Phunware, Inc.

Condensed Consolidated Balance Sheet

(In thousands, except per share information)

	June 30, 2019			December 31, 2018
	(Unaudited)
Assets:
Current assets:
Cash	$	248		$	844
Accounts receivable, net	3,546			3,606
Prepaid expenses and other current assets	740			272
Total current assets	4,534			4,722
Property and equipment, net	36			66
Goodwill	25,817			25,821
Intangible assets, net	378			521
Deferred tax asset – long term	64			64
Restricted Cash	—			5,500
Other assets	187			187
Total assets	$	31,016		$	36,881
Liabilities, redeemable convertible preferred stock, and stockholders’ equity
Current liabilities:
Accounts payable	$	9,083		$	9,890
Accrued expenses	3,357			3,028
Deferred revenue	2,101			2,629
PhunCoin deposits	1,181			—
Factored receivables payable	1,775			2,434
Short term notes payable - related party	—			1,993
Total current liabilities	17,497			19,974
Convertible note payable (see Note 5)	250			—
Deferred tax liability	64			64
Deferred revenue	5,048			5,622
Deferred rent	14			17
Total liabilities	22,873			25,677
Commitments and contingencies (see Note 6)	—			—
Redeemable convertible preferred stock, $0.0001 par value (see Note 8)	—			5,377
Stockholders’ equity
Common stock, $0.0001 par value (see Note 9)	4			3
Additional paid in capital	125,854			118,062
Accumulated other comprehensive loss	(421		)	(418		)
Accumulated deficit	(117,294		)	(111,820		)
Total stockholders’ equity	8,143			5,827
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity	$	31,016		$	36,881

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Phunware, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share information)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net revenues	$	5,510		$	14,185		$	10,825		$	19,165
Cost of revenues	2,722			3,069			5,339			5,936
Gross profit	2,788			11,116			5,486			13,229
Operating expenses:
Sales and marketing	665			1,414			1,389			3,332
General and administrative	3,970			3,318			7,945			7,807
Research and development	1,077			1,718			2,386			4,018
Total operating expenses	5,712			6,450			11,720			15,157
Operating (loss) income	(2,924		)	4,666			(6,234		)	(1,928		)
Other income (expense):
Interest expense	(151		)	(183		)	(339		)	(385		)
Fair value adjustment for warrant liabilities	—			—			—			(54		)
Impairment of digital currencies	—			(21		)	—			(334		)
Other income	13			10			17			9
Total other expense	(138		)	(194		)	(322		)	(764		)
(Loss) income before taxes	(3,062		)	4,472			(6,556		)	(2,692		)
Income tax expense	(5		)	—			(5		)	—
Net (loss) income	(3,067		)	4,472			(6,561		)	(2,692		)
Other comprehensive loss
Cumulative translation adjustment	(30		)	(81		)	(3		)	(27		)
Comprehensive (loss) income	$	(3,097	)	$	4,391		$	(6,564	)	$	(2,719	)
Net (loss) income per share, basic	$	(0.08	)	$	0.18		$	(0.19	)	$	(0.11	)
Net (loss) income per share, diluted	$	(0.08	)	$	0.17		$	(0.19	)	$	(0.11	)
Weighted-average shares used to compute net (loss) income per share, basic	38,810			25,396			34,537			25,174
Weighted-average shares used to compute net (loss) income per share, diluted	38,810			26,164			34,537			25,174

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Phunware, Inc.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity

(In thousands)

(Unaudited)

	Preferred Stock				Common Stock			Additional Paid-in Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount		Shares	Amount
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
Balance - December 31, 2018	6		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 (Note 2)	—		—		—	—		—			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

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	Preferred Stock		Common Stock			Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
	Shares	Amount	Shares	Amount
Balance - March 31, 2018	—	—	25,135	$	3	$	115,243	$	(109,181	)	$	(293	)	$	5,772
Exercise of stock options, net of vesting of restricted shares	—		193			102		—			—			102
Issuance of common stock, net of issuance costs	—	—	543	—		4,770		—			—			4,770
Stock-based compensation expense	—	—	—	—		62		—			—			62
Cumulative translation adjustment	—	—	—	—		—		—			(81		)	(81		)
Net income	—	—	—	—		—		4,472			—			4,472
Balance - June 30, 2018	—	—	25,871	$	3	$	120,177	$	(104,709	)	$	(374	)	$	15,097
Balance - December 31, 2017	—	—	24,559	$	3	$	110,265	$	(102,017	)	$	(347	)	$	7,904
Exercise of stock options, net of vesting of restricted shares	—	—	226	—		127		—			—			127
Issuance of common stock, net of issuance costs	—	—	1,086	—		9,574		—			—			9,574
Stock-based compensation expense	—	—	—	—		211		—			—			211
Cumulative translation adjustment	—	—	—	—		—		—			(27		)	(27		)
Net loss	—	—	—	—		—		(2,692		)	—			(2,692)
Balance - June 30, 2018	—	—	25,871	$	3	$	120,177	$	(104,709	)	$	(374	)	$	15,097

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,
	2019			2018
Operating activities
Net loss	$	(6,561	)	$	(2,692	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	30			32
Loss (gain) on sale of digital currencies	4			(10		)
Bad debt expense	132			68
Amortization of acquired intangibles	143			211
Change in fair value of warrants	—			54
Impairment of digital currencies	—			334
Stock-based compensation	427			211
Changes in operating assets and liabilities:
Accounts receivable	(71		)	1,505
Prepaid expenses and other assets	(99		)	118
Deferred merger costs	—			(857		)
Accounts payable	(807		)	2,067
Accrued expenses	330			(6,504		)
Warrant liability	—			450
Deferred revenue	606			(1,006		)
Net cash used in operating activities	(5,866		)	(6,019		)
Investing activities
Proceeds received from sale of digital currencies	88			175
Payments for note receivable	—			(325		)
Net cash provided by (used in) investing activities	88			(150		)
Financing activities
Proceeds from convertible note	250			—
Proceeds from PhunCoin deposits	191			—
Net (repayments) proceeds from factoring agreement	(659		)	521
Proceeds from common stock subscriptions, net of issuance costs	—			5,459
Proceeds from warrant exercises	6,092			—
Proceeds from exercise of options to purchase common stock	52			128
Series A convertible preferred stock redemptions and dividend payments	(6,240		)	—
Net cash (used in) provided by financing activities	(314		)	6,108
Effect of exchange rate on cash and restricted cash	(4		)	(26		)
Net decrease in cash and restricted cash	(6,096		)	(87		)
Cash and restricted cash at the beginning of the period	6,344			308
Cash and restricted cash at the end of the period	$	248		$	221
Supplemental disclosure of cash flow information
Interest paid	$	361		$	370
Common stock issuances from subscription payable, net of fair value convertible stock warrants issued	$	—		$	9,604

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”) is a provider of Multiscreen as a Service (MaaS) solutions, an integrated customer engagement platform that enables organizations to develop customized, immersive, branded mobile applications. The Company sells its services in vertical markets, including health care, retail, hospitality, transportation, sports, and entertainment. The Company enables brands to engage, manage, and monetize their anytime-anywhere mobile users. 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 developers, the Company also maximizes mobile monetization through an advertising product suite including real-time bidding, publisher mediation and yield optimization, cross-platform ad creation, and dynamic ad serving. Founded in 2009, the Company is a Delaware corporation headquartered in Austin, Texas.

Business Combination

On February 27, 2018, Phunware entered into an Agreement and Plan of Merger, as amended (collectively, the “Merger Agreement”) with Stellar Acquisition III, Inc. (“Stellar”). On December 26, 2018, the Company consummated the transaction contemplated by the Merger Agreement (the “Reverse Merger and Recapitalization”). In connection with the closing of the Reverse Merger and Recapitalization, the registrant changed its name from Stellar Acquisition III, Inc. to Phunware, Inc. (“Successor”). Furthermore, the holders of Phunware’s preferred stock converted all of their issued and outstanding shares of preferred stock into shares of Phunware common stock at a conversion ratio of one share of common stock for each share of preferred stock (the “Preferred Stock Exchange”). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Reverse Merger and Recapitalization (the “Effective Time”): (i) all shares of Phunware common stock and preferred stock (the “Phunware Stock”) issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Exchange) converted into the right to receive the Stockholder Merger Consideration (as defined below); (ii) each outstanding warrant to acquire shares of Phunware Stock was cancelled, retired and terminated in exchange for the right to receive from the Successor a new warrant for shares of Successor common stock with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration, but with terms otherwise the same as the Phunware warrant (each, a “Replacement Warrant”); and (iii) each outstanding option to acquire Phunware Stock (whether vested or unvested) was assumed by the Successor and automatically converted into an option to acquire shares of Successor common stock, with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration (each, an “Assumed Option”). The shares of Successor common stock and the Transferred Sponsor Warrants (as defined in Amendment No. 5 to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission ("SEC") on November 13, 2018) transferred to Phunware stockholders are collectively referred to as “Stockholder Merger Consideration”. The per share Merger Consideration paid to Phunware Stockholders was 0.459 shares of Successor stock for each share of Phunware Stock.

Unless otherwise noted, the financial statements, footnotes, and basic and dilutive net (loss) income per share presented give retroactive effect of the Reverse Merger and Recapitalization.

Basis of Presentation

The 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, 2018 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, 2018, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018, 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 SEC for interim financial

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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, 2019 and the results of operations for the three and six months ended June 30, 2019 and 2018, and cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any future interim period.

Going Concern

Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (ASC 205-40) requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. Under ASC 205-40, management has the responsibility to evaluate whether conditions and/or events raise substantial doubt about the Company’s ability to meet future financial obligations as they become due within one year after the date the financial statements are issued. As required by this standard, management’s evaluation shall initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.

The Company has a history of operating losses and negative operating cash flows. Although the Company continues to focus on growing its revenues, it expects these trends to continue into the foreseeable future.

The Company’s assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. Future plans may include utilizing existing credit lines and/or obtaining new credit lines, expanding credit lines, issuing additional equity securities, including the exercise of warrants, issuing convertible notes payable or other debt instruments and reducing overhead expenses. Despite a history of successfully implementing similar plans to alleviate the adverse financial conditions, these sources of working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above. There can be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s capital needs and support its growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, its operations would be materially negatively impacted. The Company has concluded there is substantial doubt about its ability to continue as a going concern through one year from the issuance of these financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

2. Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K filed with the SEC on March 20, 2019 for the year ended December 31, 2018, other than those described below.

Changes in Accounting Policies

On January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as amended (“ASU 2014-09” or "ASC 606"), and have revised certain related accounting policies in connection with revenue recognition and deferred costs, as follows:

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct, distinct within the context of the contract, and accounted for as separate performance obligations.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus

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together may require significant judgment. Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time.

Platform Subscriptions and Services Revenue

The Company derives subscription revenue from software license fees, which comprise subscription fees from customers licensing the Company’s Software Development Kits (SDKs), which includes accessing the MaaS platform and/or MaaS platform data; application development service revenue from the development of customer applications, or apps, which are built and delivered to customers; and support fees. The Company’s contract terms generally range from 6 to 60 months.

Subscription revenue from SDK licenses gives the customer the right to access the Company’s MaaS platform. In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. The Company plans to recognize application development revenue upon the transfer of control of the completed application or application development services.

Support and maintenance revenue comprises support fees for customer applications, software updates, and technical support for application development services for a support term. Support revenue is recognized ratably over the support term.

From time to time, the Company also provides professional services by outsourcing employees’ time and materials to customers. Such amounts are typically recorded as the services are delivered.

Application Transaction Revenue

The Company also generates revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, the Company generally recognizes 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, clicks, or actions by users on mobile advertisements delivered, and the Company recognizes revenue at the time the user views, clicks, or otherwise acts on the ad. The Company sells ads through several offerings: cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers; cost per click, on which advertisers are charged for each ad clicked or touched on by a user; and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app. In addition, the Company generates application transaction revenue thru in-app purchases from an application on our platform.

In the normal course of business, the Company acts as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in its transactions with advertisers. Control is a determining factor in assessing principal versus agent relation. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. ASC 606 provides indicators of when an entity controls specified goods or services and is therefore acting as a principal. Based on the indicators of control, the Company has determined that it is the principal in all advertising arrangements because it is responsible for fulfilling the promise to provide the specified advertisements to advertising agencies or companies; establishing the selling prices of the advertisements sold; and credit risk with its advertising traffic providers. Accordingly, the Company acts as the principal in all advertising arrangements and therefore reports revenue earned and costs incurred related to these transactions on a gross basis.

The Company records deferred revenue when it receives cash payments from advertiser clients in advance of when the services are performed under the arrangements with the customer. The Company recognizes deferred revenue as revenue only when revenue recognition criteria are met.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Items subject to the use of estimates include revenue recognition for contract completion, useful lives of long-lived assets including intangibles, valuation of intangible assets acquired in business combinations, reserves and certain accrued liabilities, determination of the provision for income taxes, and fair value of equity instruments.

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Earnings (Loss) per Common Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Restricted shares subject to repurchase provisions relating to early exercises under the Company’s 2009 Equity Incentive Plan were excluded from basic shares outstanding.

For the three months ended June 30, 2018, diluted earnings per share was computed by giving effect to all potential shares of common stock, including those related to the Company’s outstanding warrants and options, to the extent dilutive. For all other periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for those periods.

Fair Value of Financial Instruments

Authoritative guidance on fair value measurements defines fair value, establishes a consistent framework for measuring fair value, and expands disclosures for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets.

Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying value of accounts receivable, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

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.

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,
	2019		2018		2019		2018
Fox Networks Group	57	%	22	%	59	%	33	%
Fetch Media, Ltd.	—	%	45	%	—	%	33	%
Houston Methodist	8	%	—	%	11	%	—	%
Cisco	—	%	12	%	—	%	9	%

The following table sets forth the Company's concentration of accounts receivable, net of specific allowances for doubtful accounts.

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	June 30, 2019		December 31, 2018
Fox Networks Group	46	%	66	%
American Made Media	15	%	—	%

Cash, Cash Equivalents, and Restricted Cash

The Company considers all investments with a maturity of three months or less from the date of acquisition to be cash equivalents. The Company had no cash equivalents at June 30, 2019.

As a result of the Series A Financing (defined and discussed further below), the Company had $5,500 in restricted cash as of December 31, 2018. The Company did not have any restricted cash as of June 30, 2019. 

Accounts Receivable and Reserves

Accounts receivable are presented net of allowances. The Company considers receivables past due based on the contractual payment terms. The Company makes judgments as to its ability to collect outstanding receivables and records a bad debt allowance for receivables when collection becomes doubtful. The allowances are based upon historical loss patterns, current and prior trends in its aged receivables, credit memo activity, and specific circumstances of individual receivable balances.

Accounts receivable consisted of the following:

	June 30, 2019			December 31, 2018
Accounts receivable	$	6,882		$	6,882
Less allowances for doubtful accounts	(3,336		)	(3,276		)
Balance	$	3,546		$	3,606

Allowance for doubtful accounts related to the Company’s litigation with Uber was $3,089 as of June 30, 2019 and December 31, 2018. (See Note 6 for more discussion on the Uber litigation.)

Long-Lived Assets

In accordance with authoritative guidance, the Company periodically re-evaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of all of its long-lived assets, including property and equipment. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the asset to the Company’s business objective. The Company did not recognize any impairment losses during the three and six months ended June 30, 2019 or 2018, respectively.

Deferred Revenue

The Company’s deferred revenue balance consisted of the following:

	June 30, 2019		December 31, 2018
Current deferred revenue
Platform subscriptions and services revenue	$	2,008	$	1,506
Application transaction revenue	93		133
PhunCoin deposits	—		990
Total current deferred revenue	$	2,101	$	2,629
Non-current deferred revenue
Platform subscriptions and services revenue	$	5,048	$	5,622
Total non-current deferred revenue	$	5,048	$	5,622
Total deferred revenue	$	7,149	$	8,251

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During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, in addition to its current token, PhunCoin. As a result of this expanded dual token structure, the Company believes the economic substance and business characteristics of all previously issued PhunCoin Rights changed such that PhunCoin would be the investment vehicle in the Company's blockchain-enabled data exchange. As a result, the Company has reclassified all PhunCoin deposits from deferred revenue to a separate line item, "PhunCoin deposits," on its condensed consolidated balance sheet as of June 30, 2019.

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Recently Adopted Accounting Policies

In May 2014, the FASB and the International Accounting Standards Board jointly issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current authoritative guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

The Company elected to take advantage of the extended transition period provided in Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards. As a result, we adopted the ASU and related guidance as of January 1, 2019 using the modified retrospective method.

The most significant impact of the standard relates to the elimination of the requirement to have vendor specific objective evidence, or VSOE, of fair value to separate and recognize revenue for products and services in a contract. The elimination of the VSOE requirement causes a significant change to the timing of revenue recognition for multiple-element arrangements with our MaaS subscriptions, application development services and related support and maintenance on the development services that lacked VSOE of fair value. Under ASC 606, we recognize the application development services at the time of delivery to our customer and recognize the license subscription and support services ratably over the term of the subscription agreements. Under ASC 605, we recognized all revenue from those arrangements ratably over the term of the subscription or support agreements. Due to the complexity of our revenue contracts, the actual revenue recognition treatment required under the new standard depends on contract-specific terms and in some instances may vary from recognition at the time of delivery. The timing of revenue recognized from professional services for our MaaS licenses, professional services, support and maintenance and hardware remains substantially unchanged.

In addition, Accounting Standards Codification Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, or ASC 340, requires us to recognize an asset for the incremental costs of obtaining a contract with a customer if our sales incentive programs meet the requirements for capitalization. Previously we recorded these incremental costs of obtaining a contract as commission expense when we booked a sales transaction; whereas under ASC 340, we record an asset for the incremental cost to obtain a contract and recognize the cost over the period commensurate with revenue recognition.

When implementing ASC 606, the Company applied the practical expedient to reflect the aggregate effect of all contracts that were not completed as of January 1, 2019 when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

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The following table sets forth the cumulative impact of the adoption of the new revenue standard for select condensed consolidated balance sheet line items:

	Balance at December 31, 2018			Adjustments due to ASU 2014-09			Balance at January 1, 2019
Assets:
Prepaid expenses and other current assets	$	272		$	369		$	641
Liabilities:
Deferred revenue short-term	$	2,629		$	(465	)	$	2,164
Deferred revenue long-term	$	5,622		$	(253	)	$	5,369
Stockholders’ deficit:
Accumulated deficit	$	(111,820	)	$	1,087		$	(110,733	)

The following tables summarize the significant impacts of adopting ASC 606 on our financial statements as of and for the three and six months ended June 30, 2019:

Condensed Consolidated Balance Sheet

	June 30, 2019
	As reported			Impact of Adoption			Balances Without Adoption of ASC 606
Assets:
Prepaid expenses and other current assets	$	740		$	(374	)	$	366
Liabilities:
Deferred revenue short-term	$	2,101		$	218		$	2,319
Deferred revenue long-term	$	5,048		$	209		$	5,257
Stockholders’ deficit:
Accumulated deficit	$	(117,294	)	$	(801	)	$	(118,095	)

Condensed Consolidated Statement of Operations

	Three Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	5,510		$	109	$	5,619
Sales and marketing	$	665		$	50	$	715
Net loss	$	(3,067	)	$	59	$	(3,008	)
Net loss per share, basic and diluted	$	(0.08	)	$	—	$	(0.08	)

	Six Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	10,825		$	291	$	11,116
Sales and marketing	$	1,389		$	5	$	1,394
Net loss	$	(6,561	)	$	286	$	(6,275	)
Net loss per share, basic and diluted	$	(0.19	)	$	0.01	$	(0.18	)

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In connection with our adoption of ASC 606 on January 1, 2019, there was an increase to the Company’s deferred income tax liabilities and an offsetting reduction in the valuation allowance recorded against deferred tax assets.  No income tax impact was recorded to retained earnings upon adoption as a result of the full valuation allowance on United States deferred tax assets. During the three and six months ended June 30, 2019, there is no income tax expense or benefit recorded as a result of the adoption of the ASC 606.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18), which provides amendments to current guidance to address the classification and presentation of changes in restricted cash in the statement of cash flows. We adopted ASU 2016-18 effective January 1, 2019 on a retrospective basis. The adoption of this guidance changed the presentation of restricted cash on the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2019. There was no impact to the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2018.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company adopted this disclosure beginning with its quarterly report on Form 10-Q for the quarter ended March 31, 2019.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Under current U.S. GAAP, the Company recognizes rent expense on a straight-line basis for all operating leases, taking into account fixed accelerations, as well as reasonably assured renewal periods. The accounting applied by a lessor is largely unchanged from that applied under previous generally accepted accounting principles. This ASU is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Earlier application is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.

In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a new framework for entities to determine whether a set of assets and activities (together referred to as “a set”) is a business. The amendments in the ASU will assist entities when they evaluate whether transactions should be accounted for as acquisitions (or disposals) either of businesses or of assets. This distinction is important since there are significant differences between the accounting for business combinations and the accounting for acquisitions of assets. Public business entities should apply the amendments to Topic 805 to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. As the Company is an emerging growth company, it has elected to defer implementation. The Company does not believe there will be a material impact to the consolidated financial statements upon adoption.

In January 2017, the FASB issued ASU 2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step; comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Public business entities that are SEC filers should adopt the amendments in this ASU for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 improves the effectiveness of disclosures about fair value measurements required under ASC 820. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact this ASU has on its consolidated financial statements.

3. Reverse Merger

On February 27, 2018, Phunware entered into an Agreement and Plan of Merger, as amended (collectively, the “Merger Agreement”) with Stellar Acquisition III, Inc. (“Stellar”). On December 26, 2018, the Company consummated the transaction contemplated by the Merger Agreement (the “Reverse Merger and Recapitalization”). In connection with the closing of the Reverse Merger and Recapitalization, the registrant changed its name from Stellar Acquisition III, Inc. to Phunware, Inc. (“Successor”). Furthermore, the holders of Phunware’s preferred stock converted all of their issued and outstanding shares of preferred stock into shares of Phunware common stock at a conversion ratio of one share of common stock for each share of preferred stock (the “Preferred Stock Exchange”). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Reverse Merger and Recapitalization (the “Effective Time”): (i) all shares of Phunware common stock and preferred stock (the “Phunware Stock”) issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Exchange) converted into the right to receive the Stockholder Merger Consideration (as defined below); (ii) each outstanding warrant to acquire shares of Phunware Stock was cancelled, retired and terminated in exchange for the right to receive from the Successor a new warrant for shares of Successor common stock with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration, but with terms otherwise the same as the Phunware warrant (each, a “Replacement Warrant”); and (iii) each outstanding option to acquire Phunware Stock (whether vested or unvested) was assumed by the Successor and automatically converted into an option to acquire shares of Successor common stock, with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration (each, an “Assumed Option”). The shares of Successor common stock and the Transferred Sponsor Warrants transferred to Phunware stockholders are collectively referred to as “Stockholder Merger Consideration”. The aggregate merger consideration paid pursuant to the Merger Agreement to Phunware stockholders amounted to approximately $301 million plus adjustments for cash on-hand as of the date of Closing. The merger consideration paid to Phunware stockholders was paid in the form of shares of Successor common stock. In addition, each holder of Phunware common and convertible preferred stock was entitled to elect to receive such holder’s pro rata share of up to an aggregate of 3,985,244 warrants (the “Transfer Sponsor Warrants”) to purchase shares of Successor common stock that were held by certain shareholders of Stellar. The Transfer Sponsor Warrants have the same terms as the Private Placement Warrants described in more detail in Note 9 below. The per share Merger Consideration paid to Phunware Stockholders was 0.459 shares of Successor stock for each share of Phunware Stock.

As consideration for the Transfer Sponsor Warrants transferred to Phunware shareholders, a promissory note was issued to the Sponsors (the “Transfer Sponsor Warrant Note”). The amount of the note was approximately $1,993, which represented $0.50 per warrant transferred to former stockholders of Phunware. The Transfer Sponsor Warrant Note bore no interest and was to mature on December 26, 2019. Shareholders of Phunware forfeited 187,188 shares to receive 3,985,244 Transfer Sponsor Warrants. On January 15, 2019, the Transfer Sponsor Warrant Note was waived and forgiven by the noteholders.

The Company issued 2,211,572 Private Placement Warrants to the Sponsors as repayment in full for certain promissory notes (not the Transfer Sponsor Warrant Note) at the closing of the Reverse Merger and Recapitalization. In connection with the consummation of the Reverse Merger and Recapitalization, certain holders of shares of Stellar common stock sold in its initial public offering (“Public Shares”) exercised their right to redeem their Public Shares for cash. As a result of these redemptions, the cash proceeds to the Company as a result of the Reverse Merger and Recapitalization was $0.4 million before transaction costs.

In addition, 6,000 shares for aggregate cash proceeds of $6.0 million from the Series A 8% convertible preferred stock financing (“Series A Financing”) were issued in conjunction with the Reverse Merger and Recapitalization. In connection with the Series A Financing, certain Stellar shareholders transferred an aggregate of 250,000 shares of Stellar common stock and 250,000 warrants to purchase shares of Stellar common stock to the Series A Financing investor, and 181,391 shares to certain service providers. See Note 8 for additional discussion on the Series A Financing.

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The Sponsors are Astra Maritime Inc. and Dominium Investments Inc., affiliated with the Company’s Chairman of the board of directors and Magellan Investments Corp. and Firmus Investments Inc., affiliated with a member of our board of directors.

4. Factoring Agreement

On June 15, 2016 the Company entered into a factoring agreement with CSNK Working Capital Finance Corp. (d/b/a Bay View Funding) (“Bay View”) whereby it sells select accounts receivable with recourse.

Under the terms of the agreement, Bay View may make advances to the Company of amounts representing up to 80% of the net amount of eligible accounts receivable. The factor facility is collateralized by a general security agreement over all the Company’s personal property and interests. Fees paid to Bay View for factored receivables are 1.80% for the first 30 days and 0.65% for every ten days thereafter, to a maximum of 90 days total outstanding. The Company bears the risk of credit loss on the receivables. These receivables are accounted for as a secured borrowing arrangement and not as a sale of financial assets.

The Company's factor expense is recorded as interest expense in the condensed consolidated statement of net income (loss). Factor expense totaled $146 and $332 for the three and six months ended June 30, 2019, respectively, and $179 and $380 for the three and six months ended June 30, 2018, respectively.

The amount of factored receivables outstanding was $1,775 and $2,434 as of June 30, 2019 and December 31, 2018, respectively. There was $1,225 and $566 available for future advances as of June 30, 2019 and December 31, 2018, respectively.

5. Convertible Notes

During the second quarter of 2019, the Company’s board of directors authorized the issuance of $20 million of convertible promissory notes (the “Notes”), which may be paid by investors in the form of cash or, in the Company’s sole discretion, cryptocurrency, such as Bitcoin or Ethereum. The Notes will be sold and issued only to accredited investors, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder.

The Notes bear ordinary interest at a rate of 7% per annum. Interest under the Notes is payable quarterly beginning on September 30, 2019, and interest and principal under the Notes is payable monthly beginning on June 30, 2021. However, at the holder’s election, interest payments may be deferred until the earlier of (i) repayment in full of all remaining unpaid principal, and (ii) conversion. The notes mature on June 3, 2024.

The Notes are convertible into shares of the Company’s common stock at a price of $11.50 per share. Each Note will convert voluntarily upon a holder’s election, or automatically upon the occurrence of the following events: (a) the closing sale price of the Company’s common stock equals or exceeds $17.25 per share for 20 out of 30 consecutive trading days, and (b) a registration statement is then in effect covering the disposition of the converted shares.

On June 3, 2019, the Company entered into a Note Purchase Agreement with an investor for the sale of a Note. The sale of this Note constituted an initial closing on June 3, 2019, and the Company issued a Note in the principal amount of $250. The Company may hold subsequent closings until June 2, 2020. The Company may not issue Notes under the Purchase Agreement in excess of $20 million, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Notes.

The balance of outstanding Notes is $250 as of June 30, 2019. Interest expense related to the Note for the three and six months ended June 30, 2019, and interest payable under the Note as of June 30, 2019 is immaterial.

6. Commitments and Contingencies

Leases

The Company has operating office space leases in Austin, Texas; Newport Beach (Orange County), California; San Diego, California; and Miami, Florida. Rent expense under operating leases totaled $166 and $331 for the three and six months ended June 30, 2019, respectively, and $153 and $305 for the three and six months ended June 30, 2018, respectively.

Future minimum annual lease payments as of June 30, 2019 under the Company’s operating leases are set forth as follows:

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Future minimum lease obligations years ended December 31,	Lease Obligations
2019 (Remainder)	$	242
2020	164
2021	119
2022	119
2023	59
Thereafter	—
Total	$	703

Litigation

On September 26, 2017, we filed a breach of contract complaint against Uber Technologies, Inc. seeking approximately $3 million (plus interest) for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017. The case, captioned Phunware, Inc. v. Uber Technologies, Inc., Case No. CGC-17-561546 was filed in the Superior Court of the State of California County of San Francisco. On November 13, 2017, Uber generally denied the allegations in our complaint and also filed a cross-complaint against us and Fetch - the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017 (the “Fetch Campaign”), asserting numerous fraud and contract-based claims. All the claims stem from Uber’s allegation that Fetch and/or we (and/or other-as-yet-unidentified ad networks and publishers) are liable for the Fetch Campaign, under which Uber allegedly overpaid Fetch and mobile advertising providers due to allegedly fraudulent attribution for installments of the Uber application. Uber did not allege any specific dollar amount that it is seeking in damages against either of the named cross-defendants (Fetch and Phunware). We filed a motion to dismiss the cross-complaint, which was heard on February 7, 2018. The motion was granted in part and denied in part by the Court. On April 16, 2018, the action was designated complex, and the matter was assigned for all purposes to Judge Wiss of the Superior Court of California, San Francisco County (Department 305). In March 2019, Uber and Fetch settled Uber’s claims against Fetch on terms that have not been disclosed to Phunware at this time. On May 7, 2019, we retained new counsel. In June 2019, the Court set a new trial date of April 20, 2020. Discovery is continuing. On June 26, 2019, the case was reassigned for all purposes to Judge Jackson of the Superior Court of California, San Francisco County (Department 613). On July 12, 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants (Phunware Chief Executive Officer Alan S. Knitowski, and former Phunware employees D. Stasiuk, M. Borotsik, and A. Cook) accused of civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware. Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $17 million from Uber, and claims treble damages, general and punitive damages, and attorneys’ fees and costs. We maintain that our claims against Uber are meritorious and that Uber’s claims against us are not. However, we make no predictions on the likelihood of success of prevailing on our contract action against Uber or on the likelihood of defeating Uber’s claims against us.

From time to time, the Company is and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

7. PhunCoin & PhunToken

PhunCoin

In June 2018, PhunCoin, Inc., the Company’s wholly-owned subsidiary, launched an offering pursuant to Rule 506(c) of Regulation D (the "Reg D Offering") as promulgated under the Securities Act of rights (the “Rights”) to acquire a security token denominated as "PhunCoin". In addition, in 2019, we commenced an offering of Rights pursuant to Regulation CF (the "Reg CF Offering").

PhunCoin, Inc. accepts payment in the form of cash and digital currencies for purchases of the Rights. PhunCoin, Inc. plans to sell between $10 million and $100 million of the Rights, which will entitle the Rights holders to receive between approximately 8 billion and 30.5 billion of PhunCoin. The amount of PhunCoin to be issued to the purchaser is equal to the dollar amount paid by the purchaser divided by the price of PhunCoin at the time of issuance of the PhunCoin during the Token Generation Event (as defined below) before taking into consideration an applicable discount rate, which is based on the time of the purchase (early purchasers will receive a larger discount rate).

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As of June 30, 2019, the Company has received aggregate cash proceeds from the Reg D Offering and Reg CF Offering of $1.2 million, pursuant to which the holders of the Rights will receive an aggregate of approximately 577.9 million PhunCoin if the Token Generation Event occurs. The Reg CF Offering closed May 1, 2019, while the Reg D Offering is ongoing.

The rights, privileges, and obligations of Rights holders are set forth as follows:

Issuance of PhunCoin

PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch (the "Token Generation Event") of PhunCoin, Inc.’s blockchain technology enabled data exchange (the “Token Ecosystem”), or (ii) the date PhunCoin, Inc. determines that it has the ability to enforce resale restrictions with respect to PhunCoin pursuant to applicable federal securities laws. Proceeds from the Rights offering are generally not refundable if the Token Generation Event is not consummated; however, the Company believes PhunCoin, Inc. has a contractual obligation to use good faith efforts to issue PhunCoin to Rights holders under the Token Rights Agreement.

The Company currently anticipates that PhunCoin will be issued to the holders of the Rights after the one year period from when the earliest Rights were acquired by the holders (which was June 2018). Holders of the Rights may be issued PhunCoin even if the Token Ecosystem is not yet operational. PhunCoin will have no usefulness until the Token Ecosystem is operational because PhunCoin is expected to only be useable on the Token Ecosystem.

There can be no assurance as to when (or if) the Company will be able to successfully launch the Token Ecosystem. The Company is currently developing multiple aspects of the Token Ecosystem and expects that a review (beta) period will likely conclude during the third quarter of 2019. The final software readiness date of the Token Ecosystem may be adjusted based on user feedback provided in the review (beta) period and thus a specific launch date is difficult to determine at this time, as it is based on many external factors outside of our control.

Termination of the Token Rights Agreement

Termination of the Token Rights Agreement occurs on the earlier of (i) PhunCoin being issued to the Rights holder pursuant to the provisions noted above, (ii) the payment, or setting aside of payment with respect to a dissolution event (as described below), or (iii) twelve months from the date of the Token Rights Agreement with the Rights holder, which PhunCoin, Inc. may extend at its sole discretion if a Token Generation Event has not occurred. Upon termination of the Token Rights Agreement, PhunCoin, Inc. has no further obligation to the Rights holder. PhunCoin, Inc. has extended the termination date of the Token Rights Agreement.

Dissolution Event

A dissolution event occurs if there has been (i) a voluntary termination of PhunCoin, Inc.’s operations, (ii) a general assignment for the benefit of PhunCoin, Inc.’s creditors, (iii) a change of U.S. laws that makes the use or issuance of PhunCoin or the Token Generation Event impractical or unfeasible, or (iv) any other liquidation, dissolution or winding up of PhunCoin, Inc.

In the event a dissolution event occurs prior to the termination of the Token Rights Agreement, if there are any remaining proceeds from the Rights offering that have not been utilized by PhunCoin, Inc. in its operations or for the development of the PhunCoin Ecosystem, such remaining proceeds would be distributed pro rata to purchasers in the Rights offering following any distributions to holders of PhunCoin, Inc.’s capital stock or debt, if any.

No Voting Rights or Profit Share

Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware, PhunCoin, Inc. or any subsidiaries of the Company. However, PhunCoin holders will be provided fractional interests in the Token Ecosystem, including ongoing monthly PhunCoin dividends to PhunCoin holders, based on their respective pro rata ownership percentage of PhunCoin, totaling 2.5% of the monthly credits purchased by Phunware customers.

PhunToken ("Phun")

During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, which is meant to act as a medium of exchange within the Token Ecosystem. Phun will be issued through a separate, wholly-owned subsidiary, Phun Token International, available initially only to persons outside of the United States and Canada. Consumers may receive Phun

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for actively engaging in marketing campaigns; developers and publishers may receive Phun for utilizing Phunware’s loyalty software development kit in order to better engage, manage and monetize their consumers; and brands will gain access to more relevant, verifiable data by accessing Phunware’s data exchange and using Phun for their own loyalty programs. As of June 30, 2019, the Company has not sold any Phun.

8. Series A Convertible Preferred Stock

In connection with the consummation of the Reverse Merger and Recapitalization, Phunware issued 6,000 shares to a single investor for aggregate cash proceeds of $6.0 million from the Series A 8% convertible preferred stock financing (“Series A Financing”) with stated value of $1,000 per share. The Company deposited $5.5 million of the $6 million proceeds into a restricted escrow account in accordance with the securities purchase agreement entered into with the investor.

The shares were mandatorily redeemable in cash at the following schedule; (i) 104% of the aggregate value of three thousand (3,000) shares on the 30 day anniversary of the issuance; (ii) 104% of the aggregate value of two thousand five hundred (2,500) shares on the 60th anniversary of the original issue; and (iii) 104% of the aggregate value of five hundred (500) shares of the 90th anniversary of the original issue.

The Preferred Stock was also convertible into shares of the Company’s common stock at the option of the holder at a price of $11.50 per share, subject to adjustments for stock dividends, stock splits and other recapitalization type events and antidilutive events which would include subsequent issuances of equity or equity linked securities at prices more favorable than the conversion price of these preferred shares. Generally, the Preferred Stock does not have voting rights. The holder did not convert any of the Series A convertible preferred stock prior to the redemption dates.

On the 30-day, 60-day, and 90-day anniversaries of the issuance, the holder redeemed an aggregate of 6,000 shares of the Series A convertible preferred stock for total proceeds of $6,240, representing $6,000 original issue price and $240 of dividends. Of the proceeds paid to the holder,$5.5 million was paid from the restricted cash account, and $740 from the Company’s operating account.

In the event of liquidation, dissolution or winding up of the Company the Preferred Stock would be entitled to receive assets ahead of the Company’s common stockholders. Total preferred stock authorized to be issued as of June 30, 2019 was 100,000,000, with a par value of $0.0001 per share. There were 0 and 6,000 shares of preferred stock outstanding as of June 30, 2019 and December 31, 2018, respectively.

9. Stockholders’ Equity

Common Stock

Total common stock authorized to be issued as of June 30, 2019 was 1,000,000,000, with a par value of $0.0001 per share. At June 30, 2019 and December 31, 2018, there were 38,927,776 and 27,294,164 shares outstanding, inclusive of 25,230 and 40,707 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity plans, respectively.

During fiscal year 2018, the Company completed several closings of stock financings resulting in the issuance of 1,085,096 shares for aggregate cash proceeds of $9,565, net of issuance costs.

During 2019, the Company issued an aggregate of 11,530,442 shares of common stock related to various cash and cashless (net) exercises of warrants for common stock. Cash exercises for warrants for 617,296 shares of common stock resulted in aggregate gross proceeds of approximately $6,184, of which $6,092 was received in cash, $92 was received in digital currencies. Furthermore, there were 13,975,359 warrants exercised under cashless (net) provisions resulting in the issuance of 10,913,146 shares of common stock. See further discussion regarding details of the Company’s various warrants below.

Dividends

Dividends are paid on a when-and-if-declared basis. The Company has not declared any dividends through June 30, 2019.

Warrants

A summary of the Company’s warrant activity by warrant type is as follows:

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Warrant Type	Cash Exercise Price per share		Warrants/UPO's Outstanding December 31, 2018	Warrants issued for UPO exercises	Warrants/UPO’s Exercised				Warrants Outstanding June 30, 2019
					Cash		Cashless
Common stock warrant (Series D-1)	$	5.54	14,866	—	—		—		14,866
Common stock warrants (Series F)	$	9.22	1,085,059	—	(400,740	)	(306,917	)	377,402
Public Warrants (PHUNW)	$	11.50	6,900,610	—	—		(5,139,319	)	1,761,291
Private Placement Warrants	$	11.50	10,182,060	—	(216,556	)	(8,307,123	)	1,658,381
Unit Purchase Options (UPOs)	$	11.50	130,000	—	—		(130,000	)	—
Unit Purchase Option Warrants	$	11.50		116,172	—		(92,000	)	24,172
Total			18,312,595	116,172	(617,296	)	(13,975,359	)	3,836,112

In 2012, the Company issued a warrant to purchase an aggregate of 14,866 shares of the Company’s common stock with an exercise price of $5.54 per share to a banking institution with which the Company previously had a revolving line of credit. The term of the warrant is the earlier of (i) the tenth anniversary of the date of issuance, (ii) the closing of the initial registered public offering of the Company’s common stock, or (iii) the closing of an acquisition (as defined in the warrant) where the consideration consisting of cash or publicly traded securities payable in connection with the acquisition for each share is at least three (3)times the exercise price. The Reverse Merger and Recapitalization did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above. The warrant is fully vested.

In 2018, but prior to the Reverse Merger and Recapitalization, the Company issued warrants to purchase an aggregate of 1,085,059 shares of the Company’s common stock with an exercise price of $9.22 per share. The term of the warrants is the earlier of (i) the fifth anniversary of the date of issuance, (ii) an acquisition, merger, or consolidation of the Company or a sale, lease or other disposition of all or substantially all of the assets of Phunware and its subsidiaries, except (a) any sale of stock for capital raising purposes, (b) purpose of changing the Company’s state of incorporation, and (c) where the shareholders of Phunware immediately before such transaction retain at least a majority of the voting power immediately following such transaction; or (iii) immediately prior to an initial public offering. The Reverse Merger and Recapitalization did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above. These warrants are fully vested.

The Company has common stock warrants trading under the Nasdaq ticker symbol PHUNW (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants became exercisable for cash 30 days after the completion of the Reverse Merger and Recapitalization.  In addition, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants was not filed with the SEC and declared effective within 90 days from the consummation the Reverse Merger and Recapitalization, holders were entitled to exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The Company was unable to have the registration statement declared effective by the 90-day deadline, although it was declared effective on May 14, 2019. As of June 30, 2019, 5,139,319 Public Warrants have been exercised on a cashless basis that resulted in the issuance of 2,951,741 shares. The Public Warrants will expire five years after the completion of the Reverse Merger and Recapitalization or earlier upon redemption or liquidation.

The Company also has Private Placement Warrants outstanding (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The Private Placement Warrants became exercisable 30 days after the completion of the Reverse Merger and Recapitalization. The Private Placement Warrants are exercisable for cash (even if a registration statement covering the common stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option and will not be redeemable in each case so long as they are still held by the initial purchasers or their affiliates.

Unit Purchase Option ("UPOs")

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The Company sold to the underwriters for its initial public offering in 2016 an option to purchase up to a total of 130,000 units, at an exercise price of $11.50 per unit. The units are comprised of one share of common stock and one warrant to purchase common stock. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the closing of the Reverse Merger and Recapitalization and terminating on the fifth anniversary of the Reverse Merger and Recapitalization. The units issuable upon exercise of this option are identical to those offered in the Company’s initial public offering in 2016. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the UPO and underlying ordinary shares) to exercise the unit purchase option without the payment of cash. As of June 30, 2019, all UPOs had been exercised, and 24,172 warrants related to the UPO exercise remained outstanding.

PhunCoin Warrant

In 2018, the Company issued warrants to to sixty-eight (68) stockholders to receive an aggregate of approximately 27.4 billion PhunCoin. Should the Company complete a Token Generation Event, the stockholders would receive their requisite amount of PhunCoin. The Company believes there is no traditional “exercise period” or ‘term” as with other typical embedded features, and the PhunCoin warrants were originally issued in conjunction with the Company’s Series F Preferred Stock financing. The PhunCoin warrants lack characteristics of financial instruments and derivatives. In addition, the PhunCoin warrants do not obligate the Company to achieve the Token Generation Event or launch and distribute PhunCoin to the warrantholders.  At the time of the PhunCoin warrant issuance, there was no market for PhunCoin, and they did not exist. Accordingly, the Company determined there was no value assigned to the PhunCoin warrants issued to the stockholders. As of June 30, 2019, no PhunCoin had been issued to the PhunCoin warrantholders.

10. Stock-Based Compensation

2018 Equity Incentive Plan

In connection with the consummation of the Reverse Merger and Recapitalization, our board of directors adopted, and our stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”). The purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to employees, directors and consultants who perform services to the Company, and to promote the success of our business. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of: (i) 10% of the post-closing outstanding shares of common stock; (ii) 5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year; or (iii) such other amount as our board of directors may determine.

In addition, the shares of common stock reserved for issuance under the 2018 Plan also will include any shares of common stock subject to stock options, restricted stock units or similar awards granted under the 2009 Equity Incentive Plan (the “2009 Plan”), that, on or after the Reverse Merger and Recapitalization, are assumed in connection with the Reverse Merger and Recapitalization, expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that, on or after the Reverse Merger and Recapitalization, are forfeited to or repurchased by us. As of June 30, 2019, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing equals 1,954,306.

During the second quarter of 2019, we granted 620,363 restricted stock units to employees and 45,000 restricted stock units to non-employee directors, each with a grant date fair value of $7.34 per share. The awards granted to team members vest over eighteen months in three equal installments on May 18, 2020, August 18, 2020, and November 18, 2020, respectively, and are subject to service conditions. The awards granted to non-employee directors vest in two equal installments on July 1, 2019 and December 26, 2019, respectively, and are subject to service conditions.

A summary of the Company’s restricted stock unit activity under the 2018 Plan is set forth below:

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	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2018	—	$	—
Granted	665,363	7.34
Released	—	—
Forfeited	—	—
Outstanding as of June 30, 2019	665,363	$	7.34

The 2018 Plan had 2,403,321 and 2,729,416 shares of common stock reserved for issuance as of June 30, 2019 and December 31, 2018, respectively.

2018 Employee Stock Purchase Plan

Also, in connection with the consummation of the Reverse Merger and Recapitalization, our board of directors adopted, and our stockholders approved, the 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The 2018 ESPP will be administered by our board of directors or a committee appointed by the board (the “administrator”). The purpose of the 2018 ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock through accumulated contributions. The 2018 ESPP permits participants to purchase shares of common stock through contributions (generally in the form of payroll deductions) of up to an amount of their eligible compensation determined by the administrator. Subject to certain other limitations or unless otherwise determined by the administrator, a participant may purchase a maximum of 2,000 shares of common stock during a purchase period. The offering periods under the 2018 ESPP will begin on such date as determined by the administrator and expire on the earliest to occur of (a) the completion of the purchase of shares on the last exercise date occurring within 27 months of the applicable enrollment date of the offering period on which the purchase right was granted, or (b) a shorter period established by the administrator prior to an enrollment date for all options to be granted on such enrollment date. Amounts deducted and accumulated by the participant are used to purchase shares of common stock on each exercise date. The purchase price of the shares will be determined by the administrator but in no event will be less than 85% of the lower of the fair market value of common stock on the enrollment date or on the exercise date. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment with the Company.

The number of shares of common stock that may be made available for sale under the 2018 ESPP also includes an annual increase on the first day of each fiscal year beginning for the fiscal year following the fiscal year in which the first enrollment date (if any) occurs equal to the lesser of (i) 3% of the expected post-closing outstanding shares of common stock; (ii)1.5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year; or such other amount as the administrator may determine.

As of June 30, 2019, the Company has not consummated an enrollment or offering period related to the 2018 ESPP. The 2018 ESPP had 272,942 shares of common stock available for sale and reserved for issuance as of June 30, 2019 and December 31, 2018.

2009 Equity Incentive Plan

In 2009, the Company adopted its 2009 Equity Incentive Plan (the “Plan”), which allowed for the granting of incentive and non-statutory stock options, as defined by the Internal Revenue Code, to employees, directors, and consultants. The exercise price of the options granted was generally equal to the value of the Company’s common stock on the date of grant, as determined by the Company’s board of directors. The awards are exercisable and vest, generally over four years, in accordance with each option agreement. The term of each option is no more than ten years from the date of the grant. The Plan allows for options to be immediately exercisable, subject to the Company’s right of repurchase for unvested shares at the original exercise price. The total amount received in exchange for these shares has been included in accrued expenses on the accompanying consolidated balance sheets and is reclassified to equity as the shares vest. As of June 30, 2019 and December 31, 2018, 25,230 and 40,707 shares were unvested amounting to $17 and $34 in accrued expenses, respectively. Effective with the Reverse Merger and Recapitalization, no additional grants will be made under the Plan.

A summary of the Company’s stock option activity under the Plan and related information is as follows:

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	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2018	2,364,823		$	0.90	8.12	$	71,332
Granted	—		—
Released	(106,397	)	0.68
Forfeited	(329,350	)	1.69
Outstanding as of June 30, 2019	1,929,076		$	0.78	7.07	$	4,492
Exercisable as of June 30, 2019	1,258,784		$	0.67	6.31	$	3,067

For the six months ended June 30, 2019, the aggregate intrinsic value of options exercised was $7,324 and the total fair value of options vested was $229.

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table sets forth information relating to stock options granted:

	Three Months Ended June 30, 2018	Six Months Ended June 30, 2018
Weighted average risk-free rate	2.75%	2.51%
Expected dividend yield	—	—
Weighted average expected life (years)	6.08	6.08
Weighted average volatility	56.87%	56.87%

The Company did not grant any options during the three and six months ended June 30, 2019.

Stock-Based Compensation

Compensation costs that have been included on the Company’s consolidated statements of operations and comprehensive income (loss) for all stock-based compensation arrangements are detailed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
Stock-based compensation	2019		2018		2019			2018
Cost of revenues	$	24	$	14	$	38		$	18
Sales and marketing	9		13		(16		)	15
General and administrative	349		27		372			151
Research and development	34		8		33			27
Total stock-based compensation	$	416	$	62	$	427		$	211

The Company recognizes forfeitures as they occur. As of June 30, 2019, the unamortized fair value of the restricted stock units under the 2018 Plan was approximately $4.5 million. The weighted-average remaining recognition period over which these costs will be amortized was approximately 1.3 years. Unrecognized stock compensation expense for options granted under the 2009 Plan was $334, as of June 30, 2019.

11. Domestic and Foreign Operations

Identifiable long-lived assets attributed to the United States and international geographies are based upon the country in which the asset is located or owned. As of June 30, 2019 and December 31, 2018, all of the Company’s identifiable long-lived assets were in the United States.

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We derived over 99% of our net revenues from within the United States for the three and six months ended June 30, 2019. During the three and six months ended June 30, 2018, the Company derived 45% and 33% of its net revenues from outside the United States, respectively.

12. Related-Party Transactions

As consideration for the Transfer Sponsor Warrants transferred to Phunware shareholders, a promissory note was issued to the Sponsors (the “Transfer Sponsor Warrant Note”). The amount of the note was approximately $1,993, which represented $0.50 per warrant transferred to former stockholders of Phunware. The Transfer Sponsor Warrant Note bore no interest. The Transfer Sponsor Warrants have an exercise price of $11.50 per share. The Transfer Sponsor Warrant Note was to mature on December 26, 2019. The Transfer Sponsor Warrant Note was waived and forgiven by the noteholders on January 15, 2019. 

With the Reverse Merger and Recapitalization, the Company assumed $255 in payables from Stellar to Nautilus Energy Management Corporation, an affiliate of two members of the Company’s board of directors. This balance remains outstanding and is recorded in accounts payable as of June 30, 2019.

13. Subsequent Events

The Company has evaluated subsequent events through August 8, 2019.

On July 16, 2019, the Company entered into a lease agreement with BRE CA Office Owner, LLC for new office space in Irvine, California, for the lease of approximately 8,687 rentable square feet located at 16845 Von Karman Avenue (the “Lease”). The Lease commences on November 1, 2019, and terminates on March 31, 2025, subject to one five-year renewal option. Under the Lease, the Company will pay monthly rent of approximately $354 per year for the first year, with such rent increasing by a specified amount every year thereafter. The Lease also obligates the Company to pay its proportionate share of certain cost increases incurred by the landlord. The Company may receive certain abatements subject to the terms and conditions of the Lease. The Company is also obligated to pay a security deposit of approximately $118.

Future minimum annual lease payments under the Lease are as follows:

Future minimum lease obligation under the Lease for the years ended December 31,	Lease Obligation
2019	$	30
2020	326
2021	336
2022	346
2023	356
Thereafter	502
Total	$	1,896

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this section to “we,” “us,” "our," or “the Company” refer to Phunware. References to “management” or “management team” refer to Phunware’s officers and directors.

The following discussion and analysis of Phunware’s financial condition and results of operations should be read in conjunction with Phunware’s consolidated financial statements and the related notes to those statements presented in “Part I – Item 1. Financial Statements.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Phunware’s actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled “Risk Factors” and elsewhere in this Report.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded

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figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Overview

Phunware, Inc. 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. Its offerings include:

• Enterprise mobile software including content management, location-based services, marketing automation, business intelligence and analytics, alerts, notifications and messaging, audience engagement, audience monetization, vertical solutions and cryptonetworking, MaaS software application framework that pre-integrates all of our MaaS software ingredients for use within mobile application portfolios, solutions and services;

• Application transactions for mobile audience building, user acquisition, application discovery, audience engagement, audience monetization; and

• Data for data enrichment expanding connections and attributes of a Phunware ID and building custom audience for use in mobile media campaigns.

Additionally, we plan to launch PhunCoin and Phun, blockchain-powered tokens, and our associated Token Ecosystem which will enable consumers, brands and application developers to transact directly and create a value-based and voluntary data exchange.

We intend to continue investing for long-term growth. We have invested and expect to continue investing in expanding our ability to market, sell and provide our current and future products and services to customers globally. We also expect to continue investing in the development and improvement of new and existing products and services to address customers' needs. We currently do not expect to be profitable in the near future.

Key Business Metrics

Our management regularly monitors certain financial measures to track the progress of its business against internal goals and targets. We believe that the most important of these measures include backlog and deferred revenue and dollar-based revenue retention rate.

Backlog and Deferred Revenue. Backlog represents future amounts to be invoiced under our current agreements. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenues, deferred revenue, accounts receivable or elsewhere in our consolidated financial statements, and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals.

In addition, our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenues as of the end of a reporting period. Together, the sum of deferred revenue and backlog represents the total billed and unbilled contract value yet to be recognized in revenues, and provides visibility into future revenue streams.

The following table sets forth the backlog and deferred revenue:

	Period Ended
	June 30, 2019		December 31, 2018
	(in thousands)
Backlog	$	11,352	$	16,730
Deferred revenue	7,149		8,251
Total backlog and deferred revenue	$	18,501	$	24,981

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Dollar-based Revenue Retention Rate, based on platform subscriptions and services revenue. Phunware calculated dollar-based revenue retention rate, based on platform subscriptions and services revenue, expressed as a percentage, by dividing total revenue in the current 12-month period from those customers who were customers during the prior 12-month period by total revenue from the customers in the prior 12-month period. Phunware believes that our ability to retain our customers and expand their use of our solutions over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships. Our revenue retention rate provides insight into the impact on current period revenue of the number of new customers acquired during the prior 12-month period, the timing of our implementation of those new customers, growth in the usage of our solutions by our existing customers and customer attrition. If our revenue retention rate for a period exceeds 100%, this means that the revenue retained during the period including expansion and upsells more than offset the revenue that we lost from customers that did not renew their contracts during the period. Our revenue retention rate may decline or fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with our platform, pricing, economic conditions or overall reductions in our customers’ spending levels.

The following table sets forth the dollar-based revenue retention rates:

	Period Ended June 30,
	2019		2018
Dollar-based revenue retention rate	89	%	132	%

Non-GAAP Financial Measures

Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA

Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA are non-GAAP financial measures. Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for its employees, (iii) for planning purposes including the preparation of its internal annual operating budget, and (iv) to evaluate the performance and effectiveness of operational strategies. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating performance in the same manner as management.

For more information about Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA and a reconciliation of net revenues, gross profit and net income (loss), the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), to Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA, see the section titled “Use of Non-GAAP Financial Measures.”

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)						(in thousands)
Adjusted net revenues (1)	$	5,510		$	5,757		$	10,825		$	10,737
Adjusted gross profit (2)	2,822			2,715			5,545			4,847
Adjusted gross margin (2)	51.2		%	47.2		%	51.2		%	45.1		%
Adjusted EBITDA (3)	$	(2,411	)	$	(3,593	)	$	(5,615	)	$	(10,282	)

(1) Adjusted Net Revenues is a non-GAAP financial measure. We believe that Adjusted Net Revenues provides helpful information for management and investors regarding past performance and future results. We define Adjusted Net Revenues by excluding items from net revenues that are one-time in nature including, but not limited to, forfeited customer deposits and contract settlements.

(2) Adjusted Gross Profit and Adjusted Gross Margin are non-GAAP financial measures. We believe that Adjusted Gross Profit and Adjusted Gross Margin provide supplemental information with respect to gross profit and gross margin regarding ongoing performance. We define Adjusted Gross Profit as net revenues less cost of revenue, adjusted to exclude one-time revenue adjustments, stock-based compensation and amortization of intangible assets. We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of Adjusted Net Revenues.

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(3) Adjusted EBITDA is a non-GAAP financial measure. We believe Adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define Adjusted EBITDA as net income (loss) plus (i) interest expense, (ii) income tax expense, (iii) depreciation, (iv) amortization, and further adjusted for (v) one-time revenue adjustments, and (vi) stock-based compensation expense.

The following tables present a reconciliation of Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA to net revenues, gross profit and net income (loss), the most directly comparable financial measures calculated in accordance with GAAP:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(in thousands)					(in thousands)
Net revenues	$	5,510	$	14,185		$	10,825	$	19,165
Less: One-time revenue adjustments	—		(8,428		)	—		(8,428		)
Adjusted net revenues	$	5,510	$	5,757		$	10,825	$	10,737

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)						(in thousands)
Gross profit	$	2,788		$	11,116		$	5,486		$	13,229
Less: One-time revenue adjustments	—			(8,428		)	—			(8,428		)
Add back:  Amortization of intangibles	10			13			21			28
Add back:  Stock-based compensation	24			14			38			18
Adjusted gross profit	$	2,822		$	2,715		$	5,545		$	4,847
Adjusted gross margin	51.2		%	47.2		%	51.2		%	45.1		%

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)						(in thousands)
Net (loss) income	$	(3,067	)	$	4,472		$	(6,561	)	$	(2,692	)
Add back:  Depreciation and amortization	84			118			175			242
Add back:  Interest expense	151			183			339			385
Add back:  Income tax expense	5			—			5			—
EBITDA	(2,827		)	4,773			(6,042		)	(2,065		)
Less: One-time revenue adjustments	—			(8,428		)	—			(8,428		)
Add Back:  Stock-based compensation	416			62			427			211
Adjusted EBITDA	$	(2,411	)	$	(3,593	)	$	(5,615	)	$	(10,282	)

Use of Non-GAAP Financial Measures

Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to net revenue or net income (loss), as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin

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and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include:

• Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating its ongoing operating performance for a particular period;

• Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations, and;

• other companies in our industry may calculate Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations to Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA by relying primarily on GAAP results and using Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA only for supplemental purposes. Adjusted Net Revenues, Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA include adjustments for items that may not occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other peer companies over time. For example, it is useful to exclude non-cash, stock-based compensation expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly across periods due to timing of new stock-based awards. We may also exclude certain discrete, unusual, one-time, or non-cash costs, including transaction costs and the income tax impact of adjustments in order to facilitate a more useful period-over-period comparison of our financial performance. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

Components of Results of Operations

There are a number of factors that impact the revenue and margin profile of the services and technology offerings we provide, including, but not limited to, solution and technology complexity, technical expertise requiring the combination of products and types of services provided, as well as other elements that may be specific to a particular client solution.

Revenue and Gross Profit

Platform Subscriptions and Services Revenue. Subscription revenue is derived from software license fees, which comprise subscription fees from customers licensing the Company’s Software Development Kits (SDKs), which includes accessing the MaaS platform and/or MaaS platform data; application development service revenue from the development of customer applications, or apps, which are built and delivered to customers; and support fees.

Subscription revenue from SDK licenses gives the customer the right to access the Company’s MaaS platform. Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. Support revenue comprises of support and maintenance fees of customer applications, software updates, and technical support for application development services for a support term.

From time to time, the Company also provides professional services by outsourcing employees’ time and materials to customers.

Platform subscriptions and services gross profit is equal to subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to platform subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of Phunware’s MaaS platform are expensed in research and development. As a result, platform subscriptions and services gross profit may fluctuate from period to period.

Application Transaction Revenue. 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

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ads delivered or views, clicks, or actions by users on mobile advertisements delivered, and we recognize revenue at the time the user views, clicks, or otherwise acts on the ad. We sell ads through several offerings: cost per thousand impressions, cost per click, and cost per action. In addition, we generate application transaction revenue thru in-app purchases from application on our platform.

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 direct premium, performance and network cost as well as based on the activity of mobile users viewing ads and marketing engagements through mobile applications. As a result, our application transaction gross profit may fluctuate from period to period due to variable activity of mobile users.

Gross Margin

Gross margin measures gross profit as a percentage of revenue. Gross margin is generally impacted by the same factors that affect changes in the mix of subscriptions and services and application transactions.

Operating Expenses

Our operating expenses include sales and marketing expenses, general and administrative expenses, research and development expenses and amortization of acquired intangible assets.

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 share based compensation and expenses related to marketing programs and promotional activities.

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and share-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We expect to incur additional 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, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

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. We expect our research and development expenses will increase as our business grows.

Interest and Other Expense

Interest expense and other income (expense) include interest expense associated with our factoring financing arrangement. We also may seek financing arrangements (including our convertible notes) in the future with the proceeds from additional debt incurrences, which may have an impact on our interest expense.

Income Tax Benefit

We are subject to U.S. federal income taxes, state income taxes net of federal income tax effect and nondeductible expenses. Our effective tax rate will vary depending on permanent non-deductible expenses and other factors.

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Results of Operations (In thousands, except per share information)

The following tables set forth our condensed consolidated financial data in dollar amounts and as a percentage of total revenue.

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net revenues	$	5,510		$	14,185		$	10,825		$	19,165
Cost of revenues	2,722			3,069			5,339			5,936
Gross profit	2,788			11,116			5,486			13,229
Operating expenses:
Sales and marketing	665			1,414			1,389			3,332
General and administrative	3,970			3,318			7,945			7,807
Research and development	1,077			1,718			2,386			4,018
Total operating expenses	5,712			6,450			11,720			15,157
Operating (loss) income	(2,924		)	4,666			(6,234		)	(1,928		)
Other income (expense):
Interest expense	(151		)	(183		)	(339		)	(385		)
Fair value adjustment for warrant liabilities	—			—			—			(54		)
Impairment of digital currencies	—			(21		)	—			(334		)
Other income	13			10			17			9
Total other expense	(138		)	(194		)	(322		)	(764		)
(Loss) income before taxes	(3,062		)	4,472			(6,556		)	(2,692		)
Income tax expense	(5		)	—			(5		)	—
Net (loss) income	(3,067		)	4,472			(6,561		)	(2,692		)
Other comprehensive (loss) income
Cumulative translation adjustment	(30		)	(81		)	(3		)	(27		)
Comprehensive (loss) income	$	(3,097	)	$	4,391		$	(6,564	)	$	(2,719	)
Net (loss) income per share, basic	$	(0.08	)	$	0.18		$	(0.19	)	$	(0.11	)
Net (loss) income per share, diluted	$	(0.08	)	$	0.17		$	(0.19	)	$	(0.11	)
Weighted-average shares used to compute net (loss) income per share, basic	38,810			25,396			34,537			25,174
Weighted-average shares used to compute net (loss) income per share, diluted	38,810			26,164			34,537			25,174

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Comparison of three and six months ended June 30, 2019 and 2018

Net Revenues

	Three Months Ended June 30,						Change
	2019			2018			Amount			%
	(in thousands)
Net Revenues
Platform subscriptions and services	$	5,092		$	6,448		$	(1,356	)	(21.0	)%
Application transaction	418			7,737			(7,319		)	(94.6	)%
Net revenues	$	5,510		$	14,185		$	(8,675	)	(61.2	)%
Platform subscriptions and services as a percentage of net revenues	92.4		%	45.5		%
Application transactions as a percentage of net revenues	7.6		%	54.5		%

	Six Months Ended June 30,						Change
	2019			2018			Amount			%
	(in thousands)
Net Revenues
Platform subscriptions and services	$	9,913		$	10,452		$	(539	)	(5.2	)%
Application transaction	912			8,713			(7,801		)	(89.5	)%
Net revenues	$	10,825		$	19,165		$	(8,340	)	(43.5	)%
Platform subscriptions and services as a percentage of net revenues	91.6		%	54.5		%
Application transactions as a percentage of net revenues	8.4		%	45.5		%

Net revenues decreased $8.7 million, or (61.2)%, for the three months ended June 30, 2019 compared to the corresponding period in 2018. Platform subscriptions and services revenue decreased $1.4 million, or (21.0)%, primarily because the Company recorded revenue in the corresponding period of 2018 related to two one-time items: $1.6 million related to a partner arrangement, and $0.5 million related to a customer contract settlement. The decrease was partially offset by the fulfillment of contracts related to new and existing customers. Application transaction revenue decreased $7.3 million, or (94.6)%, for the three months ended June 30, 2019, compared to the corresponding period in 2018, primarily because in the corresponding period in 2018, an application transaction partner released the Company from a liability of $6.3 million (which the Company then recorded as revenue), and various decreased or ceased advertising campaigns.

Net revenues decreased $8.3 million, or (43.5)%, for the six months ended June 30, 2019 compared to the corresponding period in 2018 . Platform subscriptions and services revenue decreased $0.5 million, or (5.2)%, primarily because, as discussed above, the Company recorded revenue in the corresponding period in 2018 related to two one-time items: $1.6 million related to a partner arrangement, and $0.5 million related to a customer contract settlement. The decreases for the six months ended June 30, 2019 were mostly offset by an increase of $1.6 million related to the fulfillment of contracts related to new and existing customers. Application transaction revenue decreased $7.8 million, or (89.5)%, six months ended June 30, 2019, compared to the corresponding period in 2018, primarily because in the corresponding period in 2018, an application transaction partner released the Company from a liability of $6.3 million (which the Company then recorded as revenue), and various decreased or ceased advertising campaigns.

The Company has a concentration of net revenues with key customers. See Note 2, the section titled, "Concentrations of Credit Risk."

Cost of Revenues, Gross Profit and Gross Margin

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	Three Months Ended June 30,						Change
	2019			2018			Amount			%
	(in thousands)
Cost of Revenues
Platform subscriptions and services	$	2,600		$	2,369		$	231		9.8	%
Application transaction	122			700			(578		)	(82.6	)%
Total cost of revenues	$	2,722		$	3,069		$	(347	)	(11.3	)%
Gross Profit
Platform subscriptions and services	2,492			$	4,079		$	(1,587	)	(38.9	)%
Application transaction	296			7,037			(6,741		)	(95.8	)%
Total gross profit	$	2,788		$	11,116		$	(8,328	)	(74.9	)%
Gross Margin
Platform subscriptions and services	48.9		%	63.3		%
Application transaction	70.8		%	91.0		%
Total gross margin	50.6		%	78.4		%

	Six Months Ended June 30,						Change
	2019			2018			Amount			%
	(in thousands)
Cost of Revenues
Platform subscriptions and services	$	5,108		$	4,768		$	340		7.1	%
Application transaction	231			1,168			(937		)	(80.2	)%
Total cost of revenues	$	5,339		$	5,936		$	(597	)	(10.1	)%
Gross Profit
Platform subscriptions and services	$	4,805		$	5,684		$	(879	)	(15.5	)%
Application transaction	681			7,545			(6,864		)	(91.0	)%
Total gross profit	$	5,486		$	13,229		$	(7,743	)	(58.5	)%
Gross Margin
Platform subscriptions and services	48.5		%	54.4		%
Application transaction	74.7		%	86.6		%
Total gross margin	50.7		%	69.0		%

Total gross profit decreased $8.3 million, or (74.9)%, for the three months ended June 30, 2019 compared to the corresponding period of 2018, primarily due to the one-time revenue items described above.

Total gross profit decreased $7.7 million, or (58.5)%, for the six months ended June 30, 2019 compared to the corresponding period of 2018, primarily due to the one-time revenue items described above, offset by a decrease in cost of media related to ceased or decreased advertising campaigns.

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Operating Expenses

	Three Months Ended June 30,				Change
	2019		2018		Amount			%
	(in thousands)
Operating expenses
Sales and marketing	$	665	$	1,414	$	(749	)	(53.0	)%
General and administrative	3,970		3,318		652			19.7	%
Research and development	1,077		1,718		(641		)	(37.3	)%
Total operating expenses	$	5,712	$	6,450	$	(738	)	(11.4	)%

	Six Months Ended June 30,				Change
	2019		2018		Amount			%
	(in thousands)
Operating expenses
Sales and marketing	$	1,389	$	3,332	$	(1,943	)	(58.3	)%
General and administrative	7,945		7,807		138			1.8	%
Research and development	2,386		4,018		(1,632		)	(40.6	)%
Total operating expenses	$	11,720	$	15,157	$	(3,437	)	(22.7	)%

Sales and Marketing

Sales and marketing expense decreased $0.7 million, or (53.0)% and $1.9 million, or (58.3)% for the three and six months ended June 30, 2019, respectively, compared to the corresponding period of 2018, primarily due to reduced employee compensation costs due to lower headcount.

General and Administrative

General and administrative expense increased $0.7 million, or 19.7% and $0.1 million, or 1.8% for the three and six months ended June 30, 2019, respectively, compared to the corresponding period of 2018, primarily due to increase in stock-based compensation expense from awards granted during 2019 and other professional costs of going public such as auditing, legal and insurance.

Research and Development

Research and development expense decreased $0.6 million, or (37.3)% and $1.6 million, or (40.6)% for the three and six months ended June 30, 2019, respectively, compared to the corresponding period of 2018, primarily due to reduced employee compensation costs due to lower headcount.

Other expense

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	Three Months Ended June 30,						Change
	2019			2018			Amount		%
	(in thousands)
Other expense
Interest expense	$	(151	)	$	(183	)	$	32	(17.5	)%
Fair value adjustment for warrant liabilities	—			—			—		—	%
Impairment of digital currencies	—			(21		)	21		(100.0	)%
Other income	13			10			3		30.0	%
Total other expense	$	(138	)	$	(194	)	$	56	(28.9	)%

	Six Months Ended June 30,						Change
	2019			2018			Amount		%
	(in thousands)
Other expense
Interest expense	$	(339	)	$	(385	)	$	46	(11.9	)%
Fair value adjustment for warrant liabilities	—			(54		)	54		(100.0	)%
Impairment of digital currencies	—			(334		)	334		(100.0	)%
Other income	17			9			8		88.9	%
Total other expense	$	(322	)	$	(764	)	$	442	(57.9	)%

Other expense decreased $56 thousand for the three months ended June 30, 2019 compared to the corresponding period of 2018 primarily due to a decrease in factoring expense. Other expense decreased $442 thousand for the six months ended June 30, 2019 compared to the corresponding period of 2018, primarily due to expenses related to the impairment of digital currencies. As of June 30, 2019, the Company did not hold any digital currencies.

Liquidity and Capital Resources

The following table summarizes our cash flows for the periods presented:

	Six Months Ended June 30,						Change
(in thousands, except percentages)	2019			2018			Amount			%
Consolidated statement of cash flows
Net cash used in operating activities	$	(5,866	)	$	(6,019	)	$	153		(2.5	)%
Net cash provided by (used in) investing activities	88			(150		)	238			(158.7	)%
Net cash (used in) provided by financing activities	(314		)	6,108			(6,422		)	(105.1	)%

Operating Activities

The primary source of cash from operating activities is receipts from the sale of platform subscriptions and services and application transactions to customers. The primary uses of cash from operating activities are payments to employees for compensation and related expenses, publishers and other vendors for the purchase of digital media inventory and related costs, sales and marketing expenses and general operating expenses.

The Company utilized $5.9 million of cash from operating activities during the six months ended June 30, 2019, primarily resulting from a net loss of $6.6 million, as adjusted $0.1 million for depreciation and amortization, $0.1 million for allowance for doubtful receivables and $0.4 million for stock-based compensation. In addition, certain changes in our operating

33

assets and liabilities resulted in significant cash increases (decreases) as follows: $(0.8) million from a decrease in accounts payable, $0.3 million from an increase in accrued expenses, and $0.6 million from an increase in deferred revenue. 

The Company utilized $6.0 million of cash from operating activities during the six months ended June 30, 2018, primarily resulting from a net loss of $2.7 million, as adjusted for non-cash charges related to the impairment of digital currencies of $0.3 million, $0.2 million for depreciation and amortization, $0.1 million for change in fair value of warrants, $0.2 million for stock-based compensation and $0.1 million for allowance for doubtful receivables. In addition, certain changes in our operating assets and liabilities resulted in significant cash increases (decreases) as follows: $2.1 million from an increase in accounts payable and $(6.5) million from a decrease in accrued expenses, $1.5 million from an increase in accounts receivable, $(1.0) million from a decrease in deferred revenue, $0.5 million from an increase in warrant liability, $0.1 million from an increase in prepaid expenses and other assets and $(0.9) million from a decrease of deferred merger cost.

Investing Activities

Investing activities for the six months ended June 30, 2019 consisted of the sale of digital currencies received for warrant exercises. Investing activities for the six months ended June 30, 2018 consisted of an issuance of a note receivable and sale of digital currencies.

Financing Activities

Financing activities during the six months ended June 30, 2019 consisted primarily of the proceeds from warrant exercises, and utilizations of the Company’s financing factoring agreement, as well as redemptions and dividends of the Series A convertible preferred stock. The Company utilized $0.3 million of cash from financing activities, primarily as follows: $(6.2) million from redemptions and dividend payments of Series A convertible preferred stock, $(0.7) million of repayments from the Company’s factoring financing agreement; offset by $6.1 million provided by warrant exercise, $0.3 million provided from convertible notes borrowings and $0.2 million from PhunCoin deposits.

Financing activities during the six months ended June 30, 2018 consisted primarily of the proceeds from common stock subscriptions and the Company’s financing factoring agreement. The Company acquired $6.1 million of cash from financing activities, primarily as follows: $5.5 million provided by common stock subscriptions, $0.5 million provided by net proceeds from the Company’s factoring financing agreement, and $0.1 million provided from exercises of stock options.

The Company has a history of operating losses and negative operating cash flows. Although the Company continues to focus on growing its revenues, it expects these trends to continue into the foreseeable future. We will be required to raise additional capital through debt or equity financings or reduce operating expenses. Despite a history of successfully implementing similar plans to alleviate adverse financial conditions, these sources of working capital are not currently assured. There can be no assurance that we will be able to consummate such financings on favorable terms or at all. These conditions raise substantial doubt about our ability to continue as a “going concern”.

Off-Balance Sheet Arrangements

During the periods ended June 30, 2019 and December 31, 2018, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Indemnification Agreements

In the ordinary course of business, the Company provides indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, solutions to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

Recent Accounting Pronouncements

Refer to Note 2, “Significant Accounting Policies” in the notes to our condensed consolidated financial statements for analysis of recent accounting pronouncements that are applicable to our business.

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Summary of Significant Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

With the exception of changes described within Note 2, “Significant Accounting Policies” due to the adoption of ASU No. 2014-09, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K filed with the SEC on March 20, 2019 for the year ended December 31, 2018.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the six months ended covered by this Report on Form 10-Q, we implemented new controls which enabled us to prepare our financial statements under ASC 606 on a modified retrospective basis effective for us on January 1, 2019. There were no other changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On September 26, 2017, we filed a breach of contract complaint against Uber Technologies, Inc. seeking approximately $3 million (plus interest) for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017. The case, captioned Phunware, Inc. v. Uber Technologies, Inc., Case No. CGC-17-561546 was filed in the Superior Court of the State of California County of San Francisco. On November 13, 2017, Uber generally denied the allegations in our complaint and also filed a cross-complaint against us and Fetch - the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017 (the “Fetch Campaign”), asserting numerous fraud and contract-based claims. All the claims stem from Uber’s allegation that Fetch and/or we (and/or other-as-yet-unidentified ad networks and publishers) are liable for the Fetch Campaign, under which Uber allegedly overpaid Fetch and mobile advertising providers due to allegedly fraudulent attribution for installments of the Uber application. Uber did not allege any specific dollar amount that it is seeking in damages against either of the named cross-defendants (Fetch and Phunware). We filed a motion to dismiss the cross-complaint, which was heard on February 7, 2018. The motion was granted in part and denied in part by the Court. On April 16, 2018, the action was designated complex, and the matter was assigned for all purposes to Judge Wiss of the Superior Court of California, San Francisco County (Department 305). In March 2019, Uber and Fetch settled Uber’s claims against Fetch on terms that have not been disclosed to Phunware at this time. On May 7, 2019, we retained new counsel. In June 2019, the Court set a new trial date of April 20, 2020. Discovery is continuing. On June 26, 2019, the case was reassigned for all purposes to Judge Jackson of the Superior Court of California, San Francisco County (Department 613). On July 12, 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants (Phunware Chief Executive Officer Alan S. Knitowski, and former Phunware employees D. Stasiuk, M. Borotsik, and A. Cook) accused of civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware. Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $17 million from Uber, and claims treble damages, general and punitive damages, and attorneys’ fees and costs. We maintain that our claims against Uber are meritorious and that Uber’s claims against us are not. However, we make no predictions on the likelihood of success of prevailing on our contract action against Uber or on the likelihood of defeating Uber’s claims against us.

From time to time, the Company is and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

Item 1A. Risk Factors

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 20, 2019 for the year ended December 31, 2018, as supplemented by the "Risk Factors" section in our prospectus filed with the SEC on May 14, 2019 and the information set forth below. An investment in our securities involves a high degree of risk. The risks and uncertainties described below and within our Form 10-K for the year ended December 31, 2018 and the prospectus are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

Our financial results may be adversely affected by changes in accounting principles applicable to us.

U.S. generally accepted accounting principles (“GAAP”) is subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. For example, in May 2014, the FASB issued Accounting Standards Update No. (“ASU”) No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. We implemented this guidance in the first quarter of our fiscal year 2019. The most significant impact relates to our accounting for subscriptions to our MaaS licenses and application development services, which may potentially make revenue more volatile and difficult to predict. In addition, accounting for commissions is impacted significantly as we have to capitalize and amortize most commissions under the new standard instead of expensing commissions as incurred. Due to the complexity of certain of our contracts, the revenue recognition treatment required under the new standard is dependent on contract-specific terms.

To adopt the new standards, we may have to implement new modules in our accounting system, hire consultants and increase our spending on audit fees, thereby increasing our general and administrative expense. Increased spending related to

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the new revenue standard will continue through at least the first half of 2019 and will likely increase our audit fees on an ongoing basis thereafter. Any difficulties in implementing changes in accounting pronouncements or adequately accounting after adoption could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly operating results have fluctuated in the past and we expect them to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful. In addition to the other risks described herein, factors that may affect our quarterly operating results include, without limitation:

• changes in spending on subscriptions, services and application transactions media offerings and services by our current or prospective customers;

• pricing our technology offerings and services effectively so that we are able to attract and retain customers without compromising our operating results;

• one-time, non-recurring revenue generating events.

There has been limited precedent set for financial accounting of digital assets. It is unclear how the Company will be required to account for digital assets transactions in the future.

There has been limited precedent set for the financial accounting of digital assets, including accounting for the issuance of our digital assets, PhunCoin and Phun. It is unclear how the Company will be required to account for issuances of its own digital assets and the digital assets it holds on its balance sheet. Furthermore, a change in regulatory or financial accounting standards could result in the necessity to restate the Company’s financial statements. Such a restatement could negatively impact the Company’s business, prospects, financial condition and results of operations. Such circumstances would have a material adverse effect on the ability of the Company to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on the business, prospects or operations of the Company and potentially the value of any cryptocurrencies the Company holds or expects to acquire for its own account, including PhunCoin and Phun, to the detriment of the Company's investors.

We intend to raise additional capital to fund a Token Generation Event, pursuant to a Rule 506(c) of Regulation D offering by our wholly-owned subsidiary, PhunCoin, Inc., of rights to receive future PhunCoin. We further intend for our wholly-owned subsidiary, Phun Token International, to sell Phun. There can be no assurance that PhunCoin or Phun will ever be issued and, any significant difficulties we, PhunCoin, Inc., or Phun Token International may experience with the offerings of PhunCoin or Phun could result in claims against us. Additionally, the Token Generation Event and the offerings of PhunCoin and Phun could subject us to various other business and regulatory uncertainties.

In June 2018, PhunCoin, Inc. launched an offering to raise capital by offering investors the right to acquire PhunCoin ("Rights") pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act. In addition, in 2019, PhunCoin, Inc. commenced an offering of Rights pursuant to Regulation CF, which closed May 1, 2019. As of August 1, 2019, a total of $1.2 million has been raised in both Rights offerings.

During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, by its wholly owned subsidiary, Phun Token International, which enables consumers to participate in our blockchain-enabled data exchange and mobile loyalty ecosystem. As of June 30, 2019, no Phun has been sold.

We will use our commercially reasonable efforts to cause PhunCoin, Inc. and Phun Token International to develop and issue PhunCoin and Phun, but there is no assurance that such efforts will be successful. If the Token Generation Event, defined as the launch of the Token Ecosystem, is not consummated or the Rights offerings of PhunCoin or sales of Phun do not result in substantial proceeds, it could have a material adverse effect on our cash position. If the Token Generation Event is not consummated or Phun is not adopted commercially, we would have to reduce our planned expenditures and/or would require additional funding from other sources in order to carry out our business plan. Also, any significant difficulties we may experience with the Token Generation Event or the development of PhunCoin or Phun could result in claims against us and could have a material adverse effect on the Company and its stockholders.

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The further development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets would have a material adverse effect on PhunCoin, Inc.'s and Phun Token International's business plans, which would have a material adverse effect on the Company and its stockholders.

The growth of the blockchain industry in general, as well as the networks on which PhunCoin will rely to consummate the Token Generation Event, is subject to a high degree of uncertainty. The cryptocurrency and cryptosecurities industries as a whole have been characterized by rapid changes and innovations and are constantly evolving. The slowing or stopping of the development, general acceptance and adoption and usage of blockchain networks and blockchain assets may materially adversely affect our business plans to launch and maintain PhunCoin and Phun. For example, given the regulatory complexity with respect to cryptocurrency and related digital assets, complying with such regulations, which could change in the future or be subject to new interpretations, could have a material and adverse effect on our ability to develop, launch and continue to operate PhunCoin, Phun and the Token Ecosystem. In addition, the tax and accounting consequences to us of the Token Generation Event, PhunCoin and Phun are uncertain, which could lead to incorrect reporting, classification or liabilities. If the Token Generation Event occurs and PhunCoin and Phun are developed, the structural foundation of PhunCoin and Phun, and the software applications and other interfaces or applications upon which PhunCoin, Phun and the Token Ecosystem rely or on which PhunCoin, Phun and the Token Ecosystem may rely in the future, are and will be unproven. There can be no assurances that PhunCoin or Phun will be fully secure, which may result in impermissible transfers, a complete loss of users’ PhunCoin or Phun on the Token Ecosystem, or an unwillingness of users to access, adopt and utilize PhunCoin or Phun, whether through system faults or malicious attacks. Any such faults or attacks on PhunCoin or Phun may materially and adversely affect our business.

Because PhunCoin and Phun will be digital assets built and transacted initially on top of Stellar, an existing blockchain technology, Phunware is reliant on another blockchain network, and users are subject to the risk of wallet incompatibility and blockchain protocol risks.

We have decided to initially use the Stellar blockchain as the underlying blockchain technology to create the Token Ecosystem, although we may choose another blockchain technology in the future. Reliance upon another blockchain technology subjects us and the Token Ecosystem users to the risk of digital wallet incompatibility, or additional ecosystem malfunction, unintended function, unexpected functioning of, or attack on, the Stellar blockchain protocol, which may cause PhunCoin or Phun to malfunction or function in an unexpected manner, including, but not limited to, slowdown or complete cessation in functionality of the network. 

The Token Ecosystem is designed to distribute PhunCoin and Phun to consumers in exchange for their agreement to provide certain personal information to us. Providing this data exposes us to risks of privacy data breach and cybersecurity attacks.

We utilize a substantial amount of electronic information. This includes transaction information and sensitive personal information of the users of the Token Ecosystem. The service providers used by us, may also use, store, and transmit such information. While we intend to implement detailed cybersecurity policies and procedures and an incident response plan designed to protect such information and prevent data loss and security breaches, there can be no assurances that such policies and procedures will be effective.

There can be no assurances that PhunCoin, Phun or a user’s data will be fully secure, which may result in impermissible transfer, a complete loss of users’ PhunCoin, Phun or data on the Token Ecosystem, and an unwillingness of users to access, adopt and utilize PhunCoin and Phun, whether through system faults or malicious attacks. Any such faults or attacks on PhunCoin, Phun or users’ data may materially and adversely affect PhunCoin, Phun and the Token Ecosystem. There are a number of data protection, security, privacy and other government- and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data. Security compromises could harm the Token Ecosystem’s reputation, erode user confidence in the effectiveness of its security measures, negatively impact its ability to attract new users, or cause existing users to stop using the Token Ecosystem, PhunCoin and Phun. We may be compelled to disclose personal information about a user or users of the Token Ecosystem to federal or state government regulators or taxation authorities.  Accordingly, certain information concerning users may be shared outside Phunware.

The regulatory regime governing blockchain technologies, cryptocurrencies, digital assets, utility tokens, and offerings of digital assets and utility tokens such as PhunCoin and Phun is uncertain, and new regulations or policies may materially adversely affect the development and the value of PhunCoin and Phun.

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Regulation of digital assets, like PhunCoin and Phun, cryptocurrencies, blockchain technologies and cryptocurrency exchanges, is currently undeveloped and likely to rapidly evolve as government agencies take greater interest in them. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. For example, Phun will only be initially available to residents outside of the United States and Canada.

Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them. In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with PhunCoin or Phun could subject us to fines, penalties or other regulatory actions, as well as to civil actions by affected parties. Any such violations could adversely affect the ability of Phunware to cause its subsidiaries to maintain PhunCoin or Phun, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.

We have a concentration of sales with key customers and any substantial reduction in sales to these customers would have a material adverse effect on our results of operations and financial condition.

Revenue from Fox Networks Group  (“Fox”) was 57% and 59% of total revenue for the three and six months ended June 30, 2019, respectively. Revenue from Houston Methodist was 8% and 11% of total revenue for the three and six months ended June 30, 2019, respectively. Fox and Houston Methodist are currently of key importance to our business, and our results of operations would be materially adversely affected if these relationships ceased or were reduced in any material respect. We cannot guarantee that the volume of sales will remain consistent going forward. Any substantial change in purchasing decisions by these customers, whether due to actions by our competitors, industry factors or otherwise, could have a material adverse effect on our business, financial condition and results of operations.

Current and future litigation could adversely affect us.

We, along with the Company’s Chief Executive Officer, are parties to the legal proceedings with Uber described in Item 1 of Part 2 of this Quarterly Report on Form 10-Q. We, along with our officers and directors, may also become subject to other legal proceedings in our ordinary course of business. We cannot predict with certainty the outcomes of these legal proceedings. The outcome of some of these legal proceeding could require us to take, or refrain from taking, actions which could negatively affect our operations. Such legal proceedings involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty, or fine. As a smaller company, the collective costs of litigation proceedings represent a drain on our cash resources, and require an inordinate amount of our management’s time and attention. Moreover, an adverse ruling in respect of the Uber or any other litigation could have a material adverse effect on our results of operations and financial condition. Negative publicity surrounding such legal proceedings may also harm our reputation and adversely impact our business and results.

Our recent reduction in workforce may prevent us from executing initiatives to improve the performance of our business effectively or at all.

We have been and are currently implementing certain initiatives to improve the performance of our business, and our recent reduction in workforce could prevent us from engaging in certain initiatives we had previously considered, and could prevent us from executing such initiatives effectively. On April 12, 2019, we reduced our workforce by 23 persons, or approximately 15%. The reduction in our workforce could prevent us from engaging in certain initiatives to improve the performance of our business, due to an insufficiency of workforce size or an insufficiency of certain required skills, and could prevent us from executing initiatives effectively, which could have a material adverse effect on our financial results, business and prospects.

We require significant additional capital funding and such capital may not be available to us.

We expect that our operating expenses will be higher than our net revenues for the foreseeable future, we currently lack sufficient working capital and we do not currently have financing available to pay all liabilities as they are scheduled to come due in the next twelve months. We are working on several contingency plans within our control to conserve existing liquidity through the reduction of discretionary expenses. We are also exploring various alternatives including debt and equity financing vehicles, alternative offerings, and strategic partnerships.

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Our cash requirements relate primarily to our current negative working capital balance plus working capital needed to operate and grow our business, including funding operating expenses and continued development and expansion of our products and services. We are currently unable to fund our operations without additional external financing and therefore cannot sustain future operations. As such, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection. Although we have successfully raised funds from investors in the past, no assurances can be made that we will be able to obtain sufficient additional capital to satisfy the current negative working capital balances and future operations. Furthermore, if adequate additional funds are not available, we will be required to delay, reduce the scope of, or eliminate material parts of the implementation of our business strategy, including potential additional acquisitions or internally-developed businesses, which could seriously harm our business and operating results.

     Additionally, even if we raise sufficient capital through additional equity or debt financings, strategic alternatives or otherwise, there can be no assurance that the revenue or capital infusion will be sufficient to enable us to develop our business to a level where it will be profitable or generate positive cash flow. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we incur additional debt, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. The debt holders would have rights senior to common stockholders to make claims on our assets and the terms of any debt securities issued could also impose significant restrictions on our operations. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Our warrants may and have been exercised on a cashless basis. As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance and may adversely impact our ability to raise additional funds. If we raise additional funds through collaborations and/or licensing arrangements, we might be required to relinquish significant rights to our technologies, or grant licenses on terms that are not favorable to us.

Our subsidiary, PhunCoin, Inc., launched an offering to raise capital in 2018 by offering investors Rights to acquire PhunCoin. During the second quarter of 2019, Phunware’s board of directors authorized the issuance of $20 million of convertible promissory notes. As of June 30, 2019, $1.2 million had been raised in the PhunCoin Rights offerings and $250 thousand in convertible notes had been issued. There can be no assurance that the Company will be able to obtain additional funding via these capital raises or at all, and there can be no assurances that the Company will be able to obtain additional funding on satisfactory terms. 

The price of our common stock and warrants has been, and may continue to be, volatile, and you could lose all or part of your investment.

Technology stocks have historically experienced high levels of volatility. The trading price and volume of our common stock and warrants has fluctuated, and may continue to fluctuate, substantially due to a variety of factors, including those described in this “Risk Factors” section and within our Form 10-K filed with the SEC on March 20, 2019 for year ended December 31, 2018, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock and/or warrants could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our common stock and warrants might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, results of operations and financial condition.

Specifically, while we cannot state with certainty what circumstances and factors are causing volatility in our stock price, such volatility may be attributable in part to the following factors:

• the periodic trading of shares by existing holders of pre-merger shares of common stock, who were not subject to any lock-up, and therefore are able to freely trade shares of common stock on the public market free of restriction;

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• the lock-up of 180-days expired on June 26, 2019, which may have increased the trading activity and the supply of freely tradeable shares on the public market;

• the effectiveness of our registration statement, filed with the SEC on May 3, 2019 for the registration of additional shares of common stock, including those shares of common stock underlying outstanding warrants, which signaled that additional dilution may result in the event that such warrants are or were exercised for the underlying shares;

• short-sales and trading by public investors who may be either attempting to take advantage of the low public float or covering their short positions and, because of the low public float at times, may have had to pay relatively high prices for their shares to close out their positions;

• the cashless exercises of up to 6,900,610 in public warrants for the underlying shares of common stock, which shares may be unrestricted and available for trading immediately; and

• the public market’s disproportionate focus on PhunCoin, Phun, and other ancillary activities that are speculative in nature and separate from our core operations.

As a result of the offering covered by the Registration Statement on Form S-1 (as amended), which was declared effective on May 14, 2019, the number of shares of common stock that are in the public float increased due to shares issued upon the exercise of outstanding warrants. Such shares, which are now registered are in the hands of stockholders who are not subject to lock-ups. This resulted in a larger public market for our shares, and may or may not normalize the trading price and reduce volatility in the stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following list sets forth information as to all Phunware securities sold which were not registered under the Securities Act.

Plan-Related Issuances

During the six months ended June 30, 2019, we issued 106,397 shares of common stock pursuant to the exercise of options previously granted under the Company’s 2009 Equity Incentive Plan.  The exercise prices of the options ranged from $0.4357 to $2.3094 per share, after giving effect to the Reverse Merger and Recapitalization’s exchange ratio of 0.459. Aggregate consideration to the Company for the options exercised over this period totaled approximately $72 thousand.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The Registrant believes these transactions were exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about the Company.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On July 16, 2019, the Company entered into a lease agreement with BRE CA Office Owner, LLC for new office space in Irvine, California, for the lease of approximately 8,687 rentable square feet located at 16845 Von Karman Avenue (the “Lease”). The Lease commences on November 1, 2019, and terminates on March 31, 2025, subject to one five-year renewal option. Under the Lease, the Company will pay monthly rent of approximately $354 thousand per year for the first year, with

41

such rent increasing by a specified amount every year thereafter. The Lease also obligates the Company to pay its proportionate share of certain cost increases incurred by the landlord. The Company may receive certain abatements subject to the terms and conditions of the Lease. The Company is also obligated to pay a security deposit of approximately $118 thousand. Future minimum lease payments are set forth in Note 13 in the notes to the condensed consolidated financial statements.

The foregoing description and the description set forth in Note 13 in the notes to the condensed consolidated financial statements of the Lease is only a summary, and is qualified in its entirety by reference to the complete terms and conditions of the Lease, which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

Item 6. Exhibits

Unless otherwise noted, the exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated February 27, 2018, by and among Stellar, STLR Merger Subsidiary Inc. and Phunware, Inc (Incorporated by reference to Exhibit 2.1 of Stellar’s Form 8-K (File No. 001-37862), filed with the SEC on February 28, 2018, and also included as Annex C to the joint proxy statement/prospectus).
2.2	First Amendment to Agreement and Plan of Merger, dated November 1, 2018, by and among Stellar, Phunware, Inc. and the Holder Representative named therein (Incorporated by reference to Annex C-1 to Stellar’s Form S-4/A (File No. 333-224227), filed with the SEC on November 13, 2018).
3.1	Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
3.2	Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
3.3	Certificate of Designation (Incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-K (File No. 001-37862) filed with the SEC on January 2, 2019).
4.1	Form of Convertible Promissory Note (Incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K (File No. 001-37862) filed with the SEC on June 5, 2019.
10.1	Form of Purchase Agreement (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K (File No. 001-37862) filed with the SEC on June 5, 2019.
10.2	Form of Cryptocurrency Payment Agreement (Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K (File No. 001-37862) filed with the SEC on June 5, 2019.
10.3*	Standard office lease dated July 16, 2019, between the Company and BRE CA Office Owner, LLC.
10.4*	Lease agreement dated October 1, 2014, between the Company and Promontory Associates, GP.
10.5*	Lease agreement and first amendment thereto dated March 2013 and May 18, 2018, respectively, between the Company and 3050 Biscayne Properties, LLC.
31.1*	Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2*	Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1(1)	Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema*
101.CAL	XBRL Taxonomy Calculation Linkbase*
101.LAB	XBRL Taxonomy Label Linkbase*
101.PRE	XBRL Definition Linkbase Document*
101.DEF	XBRL Definition Linkbase Document*

* Filed herewith

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(1) The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

August 13, 2019	Phunware, Inc.
	By:	/s/ Alan S. Knitowski
		Name:	Alan S. Knitowski
		Title:	Chief Executive Officer
			(Principal Executive Officer)

By:	/s/ Matt Aune
	Name:	Matt Aune
	Title:	Chief Financial Officer
		(Principal Accounting and Financial Officer)

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EX-10.3

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 STANDARD OFFICE LEASE BY AND BETWEEN BRE CA OFFICE OWNER LLC, a Delaware limited liability company, AS LANDLORD, AND PHUNWARE, INC., a Delaware corporation, AS TENANT SUITE 150 16845 Von Karman Avenue 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 TABLE OF CONTENTS Page ARTICLE 1 BASIC LEASE PROVISIONS ............................................................................. 1 ARTICLE 2 TERM/PREMISES/BENEFICIAL OCCUPANCY ............................................. 2 (a) Term .......................................................................................................... 2 (b) Premises .................................................................................................... 2 (c) Beneficial Occupancy ............................................................................... 2 ARTICLE 3 RENTAL ............................................................................................................... 2 (a) Basic Rental .............................................................................................. 2 (b) Increase in Direct Costs ............................................................................ 3 (c) Definitions................................................................................................. 3 (d) Determination of Payment ........................................................................ 4 (e) Audit Right................................................................................................ 5 ARTICLE 4 SECURITY DEPOSIT.......................................................................................... 5 ARTICLE 5 HOLDING OVER ................................................................................................ 6 ARTICLE 6 OTHER TAXES ................................................................................................... 7 ARTICLE 7 USE ....................................................................................................................... 7 ARTICLE 8 CONDITION OF PREMISES .............................................................................. 7 ARTICLE 9 REPAIRS AND ALTERATIONS ........................................................................ 8 (a) Landlord's Obligations .............................................................................. 8 (b) Tenant's Obligations ................................................................................. 8 (c) Alterations ................................................................................................. 8 (d) Insurance; Liens ........................................................................................ 9 (e) Costs and Fees; Removal .......................................................................... 9 ARTICLE 10 LIENS ................................................................................................................... 9 ARTICLE 11 PROJECT SERVICES .......................................................................................... 9 (a) Basic Services ........................................................................................... 9 (b) Excess Usage .......................................................................................... 10 (c) Additional Electrical Service .................................................................. 10 (d) HVAC Balance ....................................................................................... 10 (e) Telecommunications ............................................................................... 10 (f) After-Hours Use ...................................................................................... 11 (g) Reasonable Charges ................................................................................ 11 (h) Supplemental HVAC .............................................................................. 11 (i) Sole Electrical Representative ................................................................ 11 ARTICLE 12 RIGHTS OF LANDLORD ................................................................................. 11 (a) Right of Entry ......................................................................................... 11 (b) Maintenance Work .................................................................................. 11 (c) Rooftop ................................................................................................... 12 ARTICLE 13 INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY .............. 12 (a) Indemnity ................................................................................................ 12 (b) Exemption of Landlord from Liability ................................................... 12 (c) Security ................................................................................................... 12 ARTICLE 14 INSURANCE ...................................................................................................... 12 (a) Tenant's Insurance ................................................................................... 12 (b) Form of Policies ...................................................................................... 13 (c) Landlord's Insurance ............................................................................... 13 (d) Waiver of Subrogation ............................................................................ 13 (e) Compliance with Insurance Requirements ............................................. 14 (i) 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Page ARTICLE 15 ASSIGNMENT AND SUBLETTING ............................................................... 14 ARTICLE 16 DAMAGE OR DESTRUCTION ........................................................................ 16 ARTICLE 17 SUBORDINATION ............................................................................................ 16 ARTICLE 18 EMINENT DOMAIN ......................................................................................... 17 ARTICLE 19 DEFAULT .......................................................................................................... 17 ARTICLE 20 REMEDIES......................................................................................................... 18 ARTICLE 21 TRANSFER OF LANDLORD'S INTEREST .................................................... 19 ARTICLE 22 BROKER ............................................................................................................ 19 ARTICLE 23 PARKING ........................................................................................................... 20 ARTICLE 24 WAIVER............................................................................................................. 20 ARTICLE 25 ESTOPPEL CERTIFICATE ............................................................................... 21 ARTICLE 26 LIABILITY OF LANDLORD ............................................................................ 21 ARTICLE 27 INABILITY TO PERFORM .............................................................................. 21 ARTICLE 28 HAZARDOUS WASTE ..................................................................................... 21 ARTICLE 29 SURRENDER OF PREMISES; REMOVAL OF PROPERTY ......................... 23 ARTICLE 30 MISCELLANEOUS ........................................................................................... 24 (a) SEVERABILITY; ENTIRE AGREEMENT .......................................... 24 (b) Attorneys' Fees; Waiver of Jury Trial ..................................................... 24 (c) Time of Essence ...................................................................................... 24 (d) Headings; Joint and Several .................................................................... 24 (e) Reserved Area ......................................................................................... 25 (f) NO OPTION ........................................................................................... 25 (g) Use of Project Name; Improvements ...................................................... 25 (h) Rules and Regulations............................................................................. 25 (i) Quiet Possession ..................................................................................... 25 (j) Rent ......................................................................................................... 25 (k) Successors and Assigns........................................................................... 25 (l) Notices .................................................................................................... 25 (m) Persistent Delinquencies ......................................................................... 26 (n) Right of Landlord to Perform ................................................................. 26 (o) Access, Changes in Project, Facilities, Name ......................................... 26 (p) Signing Authority.................................................................................... 26 (q) Identification of Tenant........................................................................... 27 (r) Substitute Premises ................................................................................. 28 (s) Survival of Obligations ........................................................................... 28 (t) Confidentiality ........................................................................................ 28 (u) Governing Law ....................................................................................... 28 (v) Office of Foreign Assets Control ............................................................ 28 (w) Financial Statements ............................................................................... 28 (x) Exhibits ................................................................................................... 28 (y) Independent Covenants ........................................................................... 28 (z) Counterparts ............................................................................................ 29 (aa) Non-Discrimination ................................................................................ 29 (bb) California Certified Access Specialist Inspection ................................... 29 (cc) Pet-Friendly Environment ....................................................................... 29 ARTICLE 31 OPTION TO EXTEND....................................................................................... 29 (a) Option Right............................................................................................ 29 (ii) 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Page (b) Option Rent ............................................................................................. 30 (c) Exercise of Option .................................................................................. 30 ARTICLE 32 SIGNAGE/DIRECTORY ................................................................................... 30 ARTICLE 33 FURNITURE ...................................................................................................... 30 LIST OF EXHIBITS EXHIBIT "A" Premises EXHIBIT "B" Rules and Regulations EXHIBIT "C" Notice of Term Dates and Tenant's Proportionate Share EXHIBIT "D" Tenant Work Letter EXHIBIT "E" Furniture List (iii) 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 INDEX Page(s) Abated Rent Amount .................................................................................................................... 3 ADA .............................................................................................................................................. 4 Additional Rent ............................................................................................................................. 3 Alterations ..................................................................................................................................... 9 Approved Working Drawings ......................................................................................... Exhibit D Architect .......................................................................................................................... Exhibit D Base Year ...................................................................................................................................... 1 Basic Rental .................................................................................................................................. 1 Beneficial Occupancy Date........................................................................................................... 2 Beneficial Occupancy Period ........................................................................................................ 2 Brokers .......................................................................................................................................... 1 CASp Report ............................................................................................................................... 30 Claims ......................................................................................................................................... 13 Commencement Date .................................................................................................................... 1 Contractor ....................................................................................................................... Exhibit D Development ................................................................................................................................. 1 Direct Costs ................................................................................................................................... 3 Dispute Notice .............................................................................................................................. 6 Estimate......................................................................................................................................... 6 Estimate Statement........................................................................................................................ 6 Estimated Excess .......................................................................................................................... 6 Event of Default .......................................................................................................................... 18 Excess ........................................................................................................................................... 5 Expiration Date ............................................................................................................................. 1 FF&E........................................................................................................................................... 31 Force Majeure ............................................................................................................................. 23 Hazardous Material ..................................................................................................................... 24 Improvements ................................................................................................................. Exhibit D Initial Installment of Basic Rental ................................................................................................ 2 Interest Notice ............................................................................................................................. 31 Landlord ........................................................................................................................................ 1 Landlord Parties .......................................................................................................................... 13 Laws ............................................................................................................................................ 24 Lease ............................................................................................................................................. 1 LEED ............................................................................................................................................ 4 Market Rent ................................................................................................................................ 31 Moving Costs .............................................................................................................................. 31 Operating Costs ............................................................................................................................. 3 Option ......................................................................................................................................... 31 Option Rent ................................................................................................................................. 31 Option Rent Notice ..................................................................................................................... 31 Option Term ................................................................................................................................ 31 Original Tenant ........................................................................................................................... 31 Over-Allowance Amount ................................................................................................ Exhibit D Parking Passes ............................................................................................................................... 2 Partnership Tenant ...................................................................................................................... 28 Permitted Use ................................................................................................................................ 1 Pet-Friendly Rules ...................................................................................................................... 30 Plans ................................................................................................................................ Exhibit D Premises ........................................................................................................................................ 1 Project ........................................................................................................................................... 1 Real Property ................................................................................................................................ 3 Relocation Allowance ................................................................................................................. 31 Review Notice ............................................................................................................................... 6 Review Period ............................................................................................................................... 6 Rules and Regulations................................................................................................................. 26 Security Deposit ............................................................................................................................ 1 Square Footage.............................................................................................................................. 1 Statement....................................................................................................................................... 6 (iv) 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Page(s) Substantial Completion ................................................................................................... Exhibit D Supplemental Unit ...................................................................................................................... 12 Tax Costs ...................................................................................................................................... 3 Tenant ........................................................................................................................................... 1 Tenant Delays ................................................................................................................. Exhibit D Tenant Improvements ................................................................................................................... 9 Tenant's Acceptance ................................................................................................................... 31 Tenant's Proportionate Share ........................................................................................................ 1 Term .............................................................................................................................................. 1 Transfer ....................................................................................................................................... 16 Transfer Premium ....................................................................................................................... 16 Transferee ................................................................................................................................... 16 Working Drawings .......................................................................................................... Exhibit D (v) 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 STANDARD OFFICE LEASE This Standard Office Lease ("Lease") is made and entered into as of _________________,7/16/2019 2019, by and between BRE CA OFFICE OWNER LLC, a Delaware limited liability company ("Landlord"), and PHUNWARE, INC., a Delaware corporation ("Tenant"). Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises described as Suite No. 150, as designated on the plan attached hereto and incorporated herein as Exhibit "A" ("Premises"), of the project ("Project") whose address is 16845 Von Karman Avenue, Irvine, California. The Project is part of a multi-building development known as Von Karman Creative Campus (the "Development"). This Lease shall be for the Term and upon the terms and conditions hereinafter set forth, and Landlord and Tenant hereby agree as follows: ARTICLE 1 BASIC LEASE PROVISIONS A. Term: Sixty-five (65) months. Commencement Date: November 1, 2019. Expiration Date: March 31, 2025. B. Square Footage: 8,687 rentable square feet. C. Basic Rental: Approximate Annual Annual Monthly Basic Rental Months Basic Rental Basic Rental* Per Rentable Square Foot 1-12 $354,429.60 $29,535.80 $40.80 13-24 $365,062.49 $30,421.87 $42.02 25-36 $376,014.36 $31,334.53 $43.28 37-48 $387,294.79 $32,274.57 $44.58 49-60 $398,913.64 $33,242.80 $45.92 61-65 N/A $34,240.09 $47.30 *Subject to abatement as provided in Section 3(a) below D. Base Year: 2019 E. Tenant's Proportionate Share: 20.5206% F. Security Deposit: $118,143.20. The security deposit shall be paid by Tenant in three (3) installments. The first (1st) installment of $39,381.07 shall be due and payable by Tenant to Landlord upon Tenant's execution of this Lease. The second (2nd) installment of $39,381.07 shall be due and payable by Tenant to Landlord on or before August 1, 2019. The third (3rd) installment of $39,381.06 shall be due and payable by Tenant to Landlord on or before September 1, 2019. In no event shall Tenant be entitled to possession of the Premises until Tenant has paid the entire security deposit to Landlord; provided in no event shall Tenant's failure to timely pay the entire security deposit delay the Commencement Date. G. Permitted Use: General office use consistent with the character of the Project as a first-class office project. However, at no time during the Term of this Lease shall (i) Tenant’s 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 primary business be the operation of an executive suites service, or (ii) Tenant sell on a retail basis to the general public (a) coffee or coffee drinks, specialty coffee drinks, specialty tea drinks or specialty boba drinks, or (b) any breakfast items. H. Brokers: CBRE, Inc., representing the Landlord and Newmark Knight Frank, representing the Tenant. I. Parking Passes: Tenant shall be entitled to use fifty (50) parking passes, upon the terms and conditions and at the rate provided in Article 23 hereof. J. Initial Installment of Basic The first full month's Basic Rental of $29,535.80 shall Rental: be due and payable by Tenant to Landlord upon Tenant's execution of this Lease. ARTICLE 2 TERM/PREMISES/BENEFICIAL OCCUPANCY (a) Term. The Term of this Lease shall commence on the Commencement Date as set forth in Article 1.A. of the Basic Lease Provisions and shall end on the Expiration Date set forth in Article 1.A. of the Basic Lease Provisions. If Landlord does not deliver possession of the Premises to Tenant on or before the anticipated Beneficial Occupancy Date (as set forth in Section 2(c) below), Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Lease nor the obligations of Tenant hereunder. Landlord may deliver to Tenant a Commencement Letter in a form substantially similar to that attached hereto as Exhibit "C", which Tenant shall execute and return to Landlord within five (5) days of receipt thereof. Failure of Tenant to timely execute and deliver the Commencement Letter shall constitute acknowledgment by Tenant that the statements included in such notice are true and correct, without exception. (b) Premises. Landlord and Tenant hereby stipulate that the Premises contains the number of square feet specified in Article 1.B. of the Basic Lease Provisions, except that the rentable and usable square feet of the Premises and the Project are subject to verification from time to time by Landlord's architect/space planner. In the event that Landlord's architect/space planner determines that the amounts thereof shall be different from those set forth in this Lease, all amounts, percentages and figures appearing or referred to in this Lease based upon such incorrect amount (including, without limitation, the amount of the Basic Rental and Tenant's Proportionate Share) shall be modified in accordance with such determination. If such determination is made, it will be confirmed in writing by Landlord to Tenant. (c) Beneficial Occupancy. Notwithstanding anything to the contrary contained herein, Tenant shall have the right to commence business from the Premises during the period, if any (the "Beneficial Occupancy Period") from the date of Substantial Completion of the Improvements in the Premises (the "Beneficial Occupancy Date") until the Commencement Date, provided that all of the terms and conditions of this Lease shall apply, including Tenant's obligations to obtain and maintain insurance pursuant to Article 14 below, during the Beneficial Occupancy Period, except that Tenant's obligation to pay monthly Basic Rental and any Direct Costs shall not apply during the Beneficial Occupancy Period. The Beneficial Occupancy Date is anticipated to be on or about the date which is six (6) weeks after the date of full execution and delivery of this Lease. ARTICLE 3 RENTAL (a) Basic Rental. Tenant agrees to pay to Landlord during the Term hereof, at Landlord's office or to such other person or at such other place as directed from time to time by written notice to Tenant from Landlord, the monthly and annual sums as set forth in Article 1.C. of the Basic Lease Provisions, payable in advance on the first (1st) day of each calendar month, without demand, setoff or deduction, and in the event this Lease commences or the date of expiration of this Lease occurs other than on the first (1st) day or last day of a calendar month, the rent for such month shall be prorated. Notwithstanding anything to the contrary contained herein and provided that Tenant faithfully performs all of the terms and conditions of this Lease, Landlord -2- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 hereby agrees to abate Tenant's obligation to pay monthly Basic Rental for the second (2nd), thirteenth (13th), twenty-fifth (25th), thirty-seventh (37th) and forty-ninth (49th) full calendar months of the initial Lease Term. During such abatement period, Tenant shall still be responsible for the payment of all of its other monetary obligations under this Lease. In the event of a default by Tenant under the terms of this Lease that results in early termination pursuant to the provisions of Section 20(a) of this Lease, then as a part of the recovery set forth in Article 20 of this Lease, Landlord shall be entitled to recover the monthly Basic Rental that were abated under the provisions of this Section 3(a). The amount of Basic Rental Costs to be abated pursuant to this Section 3(a) above may be referred herein as "Abated Rent Amount." Notwithstanding the foregoing or anything to the contrary contained herein, upon written notice to Tenant, Landlord shall have the option to purchase all or any portion of Tenant's Abated Rent Amount by paying the then present value of such amount to Tenant (calculated with an 8% annual discount rate), in which case the amount so paid to Tenant shall nullify the applicable future amount of abatement of Tenant's Basic Rental as to the period so designated by Landlord in Landlord's written notice to Tenant. In addition, notwithstanding the foregoing, the first full month's Basic Rental shall be paid to Landlord in accordance with Article 1.J. of the Basic Lease Provisions and, if the Commencement Date is not the first day of a month, Basic Rental for the partial month commencing as of the Commencement Date shall be prorated based upon the actual number of days in such month and shall be due and payable upon the Commencement Date. (b) Increase in Direct Costs. The term "Base Year" means the calendar year set forth in Article 1.D. of the Basic Lease Provisions. If, in any calendar year during the Term of this Lease, the "Direct Costs" (as hereinafter defined) paid or incurred by Landlord shall be higher than the Direct Costs for the Base Year, Tenant shall pay an additional sum for each such subsequent calendar year equal to the product of the percentage set forth in Article 1.E. of the Basic Lease Provisions multiplied by such increased amount of "Direct Costs." In the event either the Premises and/or the Project is expanded or reduced, then Tenant's Proportionate Share shall be appropriately adjusted, and as to the calendar year in which such change occurs, Tenant's Proportionate Share for such calendar year shall be determined on the basis of the number of days during that particular calendar year that such Tenant's Proportionate Share was in effect. In the event this Lease shall terminate on any date other than the last day of a calendar year, the additional sum payable hereunder by Tenant during the calendar year in which this Lease terminates shall be prorated on the basis of the relationship which the number of days which have elapsed from the commencement of said calendar year to and including said date on which this Lease terminates bears to three hundred sixty five (365). Any and all amounts due and payable by Tenant pursuant to this Lease (other than Basic Rental) shall be deemed "Additional Rent" and Landlord shall be entitled to exercise the same rights and remedies upon default in these payments as Landlord is entitled to exercise with respect to defaults in monthly Basic Rental payments. Any and all amounts due and payable by Tenant to Landlord shall be in the form of (i) business checks, (ii) wire transfers, (iii) electronic funds transfers, and (iv) automated clearing house payments. Any other forms of payment are not acceptable to Landlord including, without limitation (1) cash or currency, (2) cashier's checks and money orders, (3) traveler's checks, (4) payments from credit unions or other non-bank financial institutions, (5) multiple payments for one (1) scheduled payment, and (6) third party checks. (c) Definitions. As used herein the term "Direct Costs" shall mean the sum of the following: (i) "Tax Costs", which shall mean any and all real estate taxes and other similar charges on real property or improvements, assessments, water and sewer charges, and all other charges assessed, reassessed or levied upon the Project and appurtenances thereto and the parking or other facilities thereof, or the real property thereunder (collectively the "Real Property") or attributable thereto or on the rents, issues, profits or income received or derived therefrom which are assessed, reassessed or levied by the United States, the State of California or any local government authority or agency or any political subdivision thereof, and shall include Landlord's reasonable legal fees, costs and disbursements incurred in connection with proceedings for reduction of Tax Costs or any part thereof; provided, however, if at any time after the date of this Lease the methods of taxation now prevailing shall be altered so that in lieu of or as a supplement to or a substitute for the whole or any part of any Tax Costs, there shall be assessed, reassessed or levied (a) a tax, assessment, reassessment, levy, imposition or charge wholly or partially as a net income, capital or franchise levy or otherwise on the rents, issues, profits or income derived therefrom, or (b) a tax, assessment, reassessment, levy (including but not limited to any municipal, state or federal levy), imposition or charge measured by or based in whole or in part upon the Real -3- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Property and imposed upon Landlord, then except to the extent such items are payable by Tenant under Article 6 below, such taxes, assessments, reassessments or levies or the part thereof so measured or based, shall be deemed to be included in the term "Direct Costs." (ii) "Operating Costs", which shall mean all costs and expenses incurred by Landlord in connection with the maintenance, operation, replacement, ownership and repair of the Project, the equipment, the intrabuilding cabling and wiring, adjacent walks, malls and landscaped and common areas and the parking structure, areas and facilities of the Project. Operating Costs shall include but not be limited to, salaries, wages, fringe benefits, and employment taxes for all persons who perform duties connected with the operation, maintenance and repair of the Project, its equipment, the intrabuilding cabling and wiring and the adjacent walks and landscaped areas, including janitorial, gardening, security, parking, operating engineer, elevator, painting, plumbing, electrical, carpentry, heating, ventilation, air conditioning and window washing; hired services; a reasonable allowance for depreciation of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project; accountant's fees incurred in the preparation of rent adjustment statements; legal fees; real estate tax consulting fees; personal property taxes on property used in the maintenance and operation of the Project; fees, costs, expenses or dues payable pursuant to the terms of any covenants, conditions or restrictions or owners' association pertaining to the Project; capital expenditures incurred to effect economies of operation of, or stability of services to, the Project and capital expenditures required by government regulations, laws, or ordinances including, but not limited to the Americans with Disabilities Act; provided, however, that capital expenditures included in Operating Costs shall be amortized (with interest at ten percent (10%) per annum) over its useful life; costs incurred (capital or otherwise) on a regular recurring basis every three (3) or more years for certain maintenance projects (e.g., parking lot slurry coat or replacement of lobby and elevator cab carpeting); costs incurred (capital or otherwise) in order for the Project, or any portion thereof, to apply for, obtain or maintain a certification pursuant to the United States Green Building Council's Leadership in Energy and Environmental Design ("LEED") rating system, or other applicable certification agency, in connection with Landlord's sustainability practices for the Project and all costs of maintaining, managing, reporting and commissioning the Project or any part thereof that was designed and/or built to be sustainable and conform with the LEED rating system (or other applicable certification standard); the cost of all charges for electricity, gas, water and other utilities furnished to the Project (including, without limitation, costs incurred in connection with Landlord's supplying of "green" or other renewable energy), and any taxes thereon; the cost of all charges for fire and extended coverage, liability and all other insurance in connection with the Project carried by Landlord; the cost of all building and cleaning supplies and materials; the cost of all charges for cleaning, maintenance and service contracts and other services with independent contractors and administration fees; a property management fee (which fee may be imputed if Landlord has internalized management or otherwise acts as its own property manager but shall in no event exceed three percent (3%) of the Project's gross revenue per annum, disregarding rent abatement) and license, permit and inspection fees relating to the Project and costs of providing to tenants of the Project and their employees (A) first-class concierge services (if any), including assistance with reservations, ticket procurement, errand running, procurement of personal services, and corporate event management, and (B) a bicycle sharing program (if any) (provided, however, that nothing contained herein shall be deemed to require Landlord to provide any such concierge services or bicycle sharing program). In the event, during any calendar year, the Project is less than ninety-five percent (95%) occupied at all times, Operating Costs shall be adjusted to reflect the Operating Costs of the Project as though ninety-five percent (95%) were occupied at all times, and the increase or decrease in the sums owed hereunder shall be based upon such Operating Costs as so adjusted. Notwithstanding anything above to the contrary, Operating Costs shall not include (1) the cost of providing any service directly to and paid directly by any tenant (outside of such tenant's Direct Cost payments) such as where a Tenant directly contracts for electric power or other utilities with the local public services company, provided that in each such case, Landlord shall have the right to "gross up" such item as if such space was vacant; (2) the cost of any items for which Landlord is reimbursed by insurance proceeds, condemnation awards, a tenant of the Project (outside of such tenant's Direct Cost payments), or otherwise to the extent so reimbursed; (3) any real estate brokerage commissions or other costs incurred in procuring tenants, or any fee in lieu of commission; (4) amortization of principal and interest on mortgages or ground lease payments (if any); (5) costs of items considered capital repairs, replacements, improvements and equipment under generally accepted accounting principles consistently applied except as expressly included -4- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 in Operating Costs pursuant to the definition above; (6) costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Project or any law, code, regulation, ordinance or the like; (7) any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord (other than in the parking facility for the Project); (8) costs incurred in connection with upgrading the Project to comply with disability, life, seismic, fire and safety codes, ordinances, statutes, or other laws in effect prior to the Commencement Date, including, without limitation, the then applicable requirements of the Americans with Disabilities Act ("ADA"), including penalties or damages incurred due to such non-compliance; (9) bad debt expenses and interest, principal, points and fees on debts (except in connection with the financing of items which may be included in Operating Costs); (10) marketing costs, including those costs described in (3) above, attorneys' fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Project, including attorneys' fees and other costs and expenditures incurred in connection with disputes with present or prospective tenants or other occupants of the Project; (11) costs, including permit, license and inspection costs, incurred with respect to the installation of other tenants' or occupants' improvements made for tenants or other occupants in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants in the Project; (12) any costs expressly excluded from Operating Costs elsewhere in this Lease; (13) costs of any items (including, but not limited to, costs incurred by Landlord for the repair of damage to the Project) to the extent Landlord receives reimbursement from insurance proceeds or from a third party (except that any deductible amount under any insurance policy shall be included within Operating Costs); (14) rentals and other related expenses for leasing an HVAC system, elevators, or other items (except when needed in connection with normal repairs and maintenance of the Project) which if purchased, rather than rented, would constitute a capital improvement not included in Operating Costs pursuant to this Lease; (15) depreciation, amortization and interest payments, except as specifically included in Operating Costs pursuant to the terms of this Lease and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party, where such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied, and when depreciation or amortization is permitted or required, the item shall be amortized over its reasonably anticipated useful life; (16) expenses in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged for directly but which are provided to another tenant or occupant of the Project, without charge; (17) costs incurred in connection with the operation of retail stores selling merchandise and restaurants in the Project to the extent such costs are in excess of the costs Landlord reasonably estimates would have been incurred had such space been used for general office use; (18) costs (including in connection therewith all attorneys' fees and costs of settlement, judgments and/or payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims litigation or arbitrations pertaining to Landlord and/or the Project, other than such claims or disputes respecting any services or equipment used in the operation of the Project by Landlord; (19) costs associated with the operation of the business of the partnership which constitutes Landlord as the same are distinguished from the costs of operation of the Project; (20) costs incurred in connection with the original construction of the Project; (21) costs of correcting defects in or inadequacy of the initial design or construction of the Project; and (22) costs incurred to (i) comply with laws relating to the removal of any "Hazardous Material," as that term is defined in Article 28 of this Lease, which was in existence on the Project prior to the Commencement Date, and was of such a nature that a federal, state or municipal governmental authority, if it had then had knowledge of the presence of such Hazardous Material, in the state, and under the conditions that it then existed on the Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto, and (ii) remove, remedy, contain, or treat any Hazardous Material, which Hazardous Material is brought onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, state or municipal governmental authority, if it had then had knowledge of the presence of such Hazardous Material, in the state, and under the conditions, that it then exists on the Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto. -5- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 (d) Determination of Payment. (i) If for any calendar year ending or commencing within the Term, Tenant's Proportionate Share of Direct Costs for such calendar year exceeds Tenant's Proportionate Share of Direct Costs for the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Sections 3(d)(ii) and (iii), below, and as Additional Rent, an amount equal to the excess (the "Excess"). Notwithstanding the foregoing, Tenant shall not be obligated to pay Tenant's Proportionate Share of Direct Costs during the first twelve (12) full calendar months of the initial Term. (ii) Landlord shall give Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth Landlord's reasonable estimate (the "Estimate") of what the total amount of Direct Costs for the then-current calendar year shall be and the estimated Excess (the "Estimated Excess") as calculated by comparing Tenant's Proportionate Share of Direct Costs for such calendar year, which shall be based upon the Estimate, to Tenant's Proportionate Share of Direct Costs for the Base Year. If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current calendar year, Tenant shall pay, with its next installment of Monthly Basic Rental due, a fraction of the Estimated Excess for the then-current calendar year (reduced by any amounts paid pursuant to the last sentence of this Section 3(d)(ii)). Such fraction shall have as its numerator the number of months which have elapsed in such current calendar year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the Monthly Basic Rental installments, an amount equal to one-twelfth (1/12th) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant. (iii) In addition, Landlord shall give to Tenant as soon as reasonably practicable following the end of each calendar year, a statement (the "Statement") which shall state the Direct Costs incurred or accrued for such preceding calendar year, and which shall indicate the amount, if any, of the Excess. Upon receipt of the Statement for each calendar year during the Term, if amounts paid by Tenant as Estimated Excess are less than the actual Excess as specified on the Statement, Tenant shall pay, with its next installment of monthly Basic Rental due, the full amount of the Excess for such calendar year, less the amounts, if any, paid during such calendar year as Estimated Excess. If, however, the Statement indicates that amounts paid by Tenant as Estimated Excess are greater than the actual Excess as specified on the Statement, such overpayment shall be credited against Tenant's next installments of Estimated Excess. The failure of Landlord to timely furnish the Statement for any calendar year shall not prejudice Landlord from enforcing its rights under this Article 3, once such Statement has been delivered. Even though the Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Proportionate Share of the Direct Costs for the calendar year in which this Lease terminates, if an Excess is present, Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of this Section 3(d). The provisions of this Section 3(d)(iii) shall survive the expiration or earlier termination of the Term. (iv) Because the Project is a part of a multi-building Development, those Direct Costs attributable to such Development as a whole (and not attributable solely to any individual building therein) shall be allocated by Landlord to the Project and to the other buildings within such Development on an equitable basis. (e) Audit Right. Within one hundred twenty (120) days after receipt of a Statement by Tenant ("Review Period"), if Tenant disputes the amount set forth in the Statement, Tenant's employees or an independent certified public accountant (which accountant is a member of a nationally or regionally recognized accounting firm and is not retained on a contingency fee basis), designated by Tenant, may, after reasonable notice to Landlord ("Review Notice") and at reasonable times, inspect Landlord's records at Landlord's offices, provided that Tenant is not then in default after expiration of all applicable cure periods and provided further that Tenant and such accountant or representative shall, and each of them shall use their commercially reasonable efforts to cause their respective agents and employees to, maintain all information contained in Landlord's records in strict confidence. Notwithstanding the foregoing, Tenant shall only have the right to review Landlord's records one (1) time during any twelve (12) month period. If after such inspection, but within thirty (30) days after the Review Period, Tenant notifies Landlord in writing ("Dispute Notice") that Tenant still disputes such amounts, a certification as to the proper amount shall be made in accordance with Landlord's standard accounting practices, at Tenant's expense, by an independent certified public accountant selected by Landlord and who is a member of a -6- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 nationally or regionally recognized accounting firm. Tenant's failure to deliver the Review Notice within the Review Period or to deliver the Dispute Notice within thirty (30) days after the Review Period shall be deemed to constitute Tenant's approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If Tenant timely delivers the Review Notice and the Dispute Notice, Landlord shall cooperate in good faith with Tenant and the accountant to show Tenant and the accountant the information upon which the certification is to be based. However, if such certification by the accountant proves that the Direct Costs set forth in the Statement were overstated by more than five percent (5 %), then the cost of the accountant and the cost of such certification shall be paid for by Landlord. Promptly following the parties receipt of such certification, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such certification. Tenant agrees that this section shall be the sole method to be used by Tenant to dispute the amount of any Direct Costs payable by Tenant pursuant to the terms of this Lease, and Tenant hereby waives any other rights at law or in equity relating thereto. ARTICLE 4 SECURITY DEPOSIT Tenant is obligated to deposit with Landlord the sum set forth in Article 1.F. of the Basic Lease Provisions as security for the full and faithful performance of every provision of this Lease to be performed by Tenant. If Tenant breaches any provision of this Lease, including but not limited to the payment of rent, Landlord may use all or any part of this security deposit for the payment of any rent or any other sums in default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of said deposit is so used or applied, Tenant shall, within five (5) days after written demand therefor, deposit funds with Landlord in a form acceptable under Section 3(b) above and in an amount sufficient to restore the security deposit to its full amount. Notwithstanding anything to the contrary contained in this Article 4, (a) in the event that Tenant, at the expiration of the twenty-fourth (24th) full calendar month of the initial Lease Term, is not in default of any of its obligations under this Lease, Landlord shall reduce the amount of the Security Deposit by $31,334.53, and Landlord shall apply such amount against Tenant's monthly Basic Rental obligation for the twenty-fifth (25th) full calendar month of the initial Lease Term, and (b) in the event that Tenant, at the expiration of the thirty-sixth (36th) full calendar month of the initial Lease Term, is not in default of any of its obligations under this Lease, Landlord shall reduce the amount of the Security Deposit by $32,274.57 and Landlord shall apply such amount against Tenant's monthly Basic Rental obligation for the thirty-seventh (37th) full calendar month of the initial Lease Term. Tenant agrees that Landlord shall not be required to keep the security deposit in trust, segregate it or keep it separate from Landlord's general funds, but Landlord may commingle the security deposit with its general funds and Tenant shall not be entitled to interest on such deposit. At the expiration of the Term, and provided there exists no default by Tenant hereunder, the security deposit or any balance thereof shall be returned to Tenant (or, at Landlord's option, to Tenant's "Transferee", as such term is defined in Article 15 below), provided that subsequent to the expiration of this Lease, Landlord may retain from said security deposit (i) an amount reasonably estimated by Landlord to cover potential Direct Cost reconciliation payments due with respect to the calendar year in which this Lease terminates or expires (such amount so retained shall not, in any event, exceed ten percent (10%) of estimated Direct Cost payments due from Tenant for such calendar year through the date of expiration or earlier termination of this Lease and any amounts so retained and not applied to such reconciliation shall be returned to Tenant within thirty (30) days after Landlord's delivery of the Statement for such calendar year), (ii) any and all amounts reasonably estimated by Landlord to cover the anticipated costs to be incurred by Landlord to remove any signage provided to Tenant under this Lease, to remove cabling and other items required to be removed by Tenant under Section 29(b) below and to repair any damage caused by such removal (in which case any excess amount so retained by Landlord shall be returned to Tenant within thirty (30) days after such removal and repair), and (iii) any and all amounts permitted by law or this Article 4. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code and all other provisions of law, now or hereafter in effect, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums specified in this Article 4 above, and all of Landlord's damages under this Lease and California law including, but not limited to, any damages accruing upon termination of this Lease under Section 1951.2 of the California Civil Code and/or those sums reasonably necessary to -7- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the acts or omissions of Tenant or any officer, employee, agent, contractor or invitee of Tenant. ARTICLE 5 HOLDING OVER Should Tenant (or any subtenant, assignee or other party occupying the Premises by, through, under, or with the permission of Tenant), without Landlord's written consent, hold over after termination of this Lease, Tenant shall, at Landlord's option, become either a tenant at sufferance or a month-to-month tenant upon each and all of the terms herein provided as may be applicable to such a tenancy and any such holding over shall not constitute an extension of this Lease. During such holding over, Tenant shall pay in advance, monthly, Basic Rental at a rate equal to one hundred and fifty percent (150%) of the rate in effect for the last month of the Term of this Lease , in addition to, and not in lieu of, all other payments required to be made by Tenant hereunder including but not limited to Tenant's Proportionate Share of any increase in Direct Costs. Nothing contained in this Article 5 shall be construed as consent by Landlord to any holding over of the Premises by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or earlier termination of the Term. If Tenant fails to surrender the Premises upon the expiration or termination of this Lease, Tenant agrees to indemnify, defend and hold Landlord harmless from and against all costs, loss, expense or liability, including without limitation, claims made by any succeeding tenant and real estate brokers claims and attorney's fees and costs. ARTICLE 6 OTHER TAXES Tenant shall pay, prior to delinquency, all taxes assessed against or levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant located in the Premises. In the event any or all of Tenant's trade fixtures, furnishings, equipment and other personal property shall be assessed and taxed with property of Landlord, or if the cost or value of any leasehold improvements in the Premises exceeds the cost or value of a Project-standard buildout as determined by Landlord and, as a result, real property taxes for the Project are increased, Tenant shall pay to Landlord, within ten (10) days after delivery to Tenant by Landlord of a written statement setting forth such amount, the amount of such taxes applicable to Tenant's property or above-standard improvements. Tenant shall assume and pay to Landlord at the time Basic Rental next becomes due (or if assessed after the expiration of the Term, then within ten (10) days), any excise, sales, use, rent, occupancy, garage, parking, gross receipts or other taxes (other than net income taxes) which may be assessed against or levied upon Landlord on account of the letting of the Premises or the payment of Basic Rental or any other sums due or payable hereunder, and which Landlord may be required to pay or collect under any law now in effect or hereafter enacted. In addition to Tenant's obligation pursuant to the immediately preceding sentence, Tenant shall pay directly to the party or entity entitled thereto all business license fees, gross receipts taxes and similar taxes and impositions which may from time to time be assessed against or levied upon Tenant, as and when the same become due and before delinquency. Notwithstanding anything to the contrary contained herein, any sums payable by Tenant under this Article 6 shall not be included in the computation of "Tax Costs." ARTICLE 7 USE Tenant shall use and occupy the Premises only for the use set forth in Article 1.G. of the Basic Lease Provisions and shall not use or occupy the Premises or permit the same to be used or occupied for any other purpose without the prior written consent of Landlord, which consent may be given or withheld in Landlord's sole and absolute discretion, and Tenant agrees that it will use the Premises in such a manner so as not to interfere with or infringe upon the rights of other tenants or occupants in the Project. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances, governmental regulations or requirements now in force or which may hereafter be in force relating to or affecting (i) the condition, use or occupancy of the Premises or the Project (excluding structural changes to the Project not related to Tenant's particular use of the Premises), and (ii) improvements installed or constructed in the Premises by or for the benefit of Tenant. Tenant hereby agrees and acknowledges that the manufacture, cultivation, sale, use, trade or possession of any drugs or other substance in violation of the laws of the United States of America in the Premises shall be a material breach of this Lease (without any applicable notice -8- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 and cure period) notwithstanding that any laws of the State of California permit the manufacture, cultivation, sale, use, trade or possession of such drugs or other substances for recreational or medicinal purposes, including without limitation, cannabis, cannabinoids or any derivations thereof. Tenant shall not permit more than six and one half (6.5) people per one thousand (1,000) rentable square feet of the Premises to occupy the Premises at any time. Tenant shall not do or permit to be done anything which would invalidate or increase the cost of any insurance policy covering the Project and/or the property located therein and Tenant shall comply with all rules, orders, regulations and requirements of any organization which sets out standards, requirements or recommendations commonly referred to by major fire insurance underwriters, and Tenant shall promptly upon demand reimburse Landlord for any additional premium charges for any such insurance policy assessed or increased by reason of Tenant's failure to comply with the provisions of this Article 7. Tenant shall comply with Landlord's reasonable sustainability practices and shall not permit any use of the Premises which may affect the continued certification of the Project issued pursuant to the LEED rating system (or other applicable certification standard). ARTICLE 8 CONDITION OF PREMISES Tenant hereby agrees that except as provided in the Tenant Work Letter attached hereto as Exhibit "D" and made a part hereof the Premises shall be taken "as is", "with all faults", "without any representations or warranties", and Tenant hereby agrees and warrants that it has investigated and inspected the condition of the Premises and the suitability of same for Tenant's purposes, and Tenant does hereby waive and disclaim any objection to, cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the Premises or the Project or the suitability of same for Tenant's purposes. Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or the Project or with respect to the suitability of either for the conduct of Tenant's business and Tenant expressly warrants and represents that Tenant has relied solely on its own investigation and inspection of the Premises and the Project in its decision to enter into this Lease and let the Premises in the above-described condition. Nothing contained herein is intended to, nor shall, obligate Landlord to implement sustainability practices for the Project or to seek certification under, or make modifications in order to obtain, a certification from LEED or any other comparable certification. The Premises shall be initially improved by Landlord as provided in, and subject to, the Tenant Work Letter attached hereto as Exhibit "D" and made a part hereof. The existing leasehold improvements in the Premises as of the date of this Lease, together with the Improvements (as defined in the Tenant Work Letter) may be collectively referred to herein as the "Tenant Improvements." The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Project were at such time in satisfactory condition. Tenant hereby waives subsection 1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of California or any successor provision of law. ARTICLE 9 REPAIRS AND ALTERATIONS (a) Landlord's Obligations. Landlord shall maintain the structural portions of the Project, including the foundation, floor/ceiling slabs, roof, curtain wall, exterior glass, columns, beams, shafts, stairs, stairwells, elevator cabs and common areas, and shall also maintain and repair the basic mechanical, electrical, life safety, plumbing, sprinkler systems and heating, ventilating and air-conditioning systems (provided, however, that Landlord's obligation with respect to any such systems shall be to repair and maintain those portions of the systems located in the core of the Project or in other areas outside of the Premises, but Tenant shall be responsible to repair and maintain any distribution of such systems throughout the Premises). (b) Tenant's Obligations. Except as expressly provided as Landlord's obligation in this Article 9, Tenant shall keep the Premises in good condition and repair and in compliance with Landlord's sustainability practices including, without limitation, compliance with any LEED rating system (or other certification standard) applicable to the Project. All damage or injury to the Premises or the Project resulting from the act or negligence of Tenant, its employees, agents or visitors, guests, invitees or licensees or by the use of the Premises, shall be promptly repaired by Tenant at its sole cost and expense, to the satisfaction of Landlord; provided, however, that for damage to the Project as a result of casualty or for any repairs that may impact the mechanical, electrical, plumbing, heating, ventilation or air-conditioning systems of the Project, Landlord shall have the right (but not the obligation) to select the contractor and oversee all such repairs. Landlord -9- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 may make any repairs which are not promptly made by Tenant after Tenant's receipt of written notice and the reasonable opportunity of Tenant to make said repair within five (5) business days from receipt of said written notice, and charge Tenant for the cost thereof, which cost shall be paid by Tenant within five (5) days from invoice from Landlord. Tenant shall be responsible for the design and function of all non-standard improvements of the Premises, whether or not installed by Landlord at Tenant's request. Tenant waives all rights to make repairs at the expense of Landlord, or to deduct the cost thereof from the rent. (c) Alterations. Tenant shall make no alterations, installations, changes or additions in or to the Premises or the Project (collectively, "Alterations") without Landlord's prior written consent, which shall not be unreasonably withheld. Without limitation as to other grounds for Landlord withholding its consent to any proposed Alteration, Landlord may withhold its consent to a proposed Alteration if Landlord determines that such Alteration is not compatible with any existing or planned future certification of the Project under the LEED rating system (or other applicable certification standard). Any Alterations approved by Landlord must be performed in accordance with the terms hereof, using only contractors or mechanics approved by Landlord in writing and upon the approval by Landlord in writing of fully detailed and dimensioned plans and specifications pertaining to the Alterations in question, to be prepared and submitted by Tenant at its sole cost and expense. Tenant shall at its sole cost and expense obtain all necessary approvals and permits pertaining to any Alterations approved by Landlord. Tenant shall cause all Alterations to be performed in a good and workmanlike manner, in conformance with all applicable federal, state, county and municipal laws, rules and regulations, pursuant to a valid building permit, and in conformance with Landlord's construction rules and regulations. If Landlord, in approving any Alterations, specifies a commencement date therefor, Tenant shall not commence any work with respect to such Alterations prior to such date. Tenant hereby agrees to indemnify, defend, and hold Landlord free and harmless from all liens and claims of lien, and all other liability, claims and demands arising out of any work done or material supplied to the Premises by or at the request of Tenant in connection with any Alterations. (d) Insurance; Liens. Prior to the commencement of any Alterations, Tenant shall provide Landlord with evidence that Tenant carries "Builder's All Risk" insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood that all such Alterations shall be insured by Tenant pursuant to Article 14 of this Lease immediately upon completion thereof. In addition, Landlord may, in its discretion, require Tenant to obtain a bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien free completion of such Alterations. (e) Costs and Fees; Removal. If permitted Alterations are made, they shall be made at Tenant's sole cost and expense and shall be and become the property of Landlord, except that Landlord may, by written notice to Tenant given concurrently with Landlord's approval of such Alteration or Improvement, require Tenant at Tenant's expense to remove all partitions, counters, railings, Improvements and other Alterations from the Premises, and to repair any damage to the Premises and the Project caused by such removal. Any and all costs attributable to or related to the applicable building codes of the city in which the Project is located (or any other authority having jurisdiction over the Project) arising from Tenant's plans, specifications, improvements, Alterations or otherwise shall be paid by Tenant at its sole cost and expense. With regard to repairs, Alterations or any other work arising from or related to this Article 9, Landlord shall be entitled to receive an administrative/coordination fee in the amount of 5% of the cost of such work unless such work is strictly cosmetic in nature (i.e. paint and re-carpeting) in which case no administrative/coordination fee shall be required to be paid by Tenant. The construction of initial improvements to the Premises shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 9, except as expressly provided in the first sentence of this Section 9(e). ARTICLE 10 LIENS Tenant shall keep the Premises and the Project free from any mechanics' liens, vendors liens or any other liens arising out of any work performed, materials furnished or obligations incurred by Tenant, and Tenant agrees to defend, indemnify and hold Landlord harmless from and against any such lien or claim or action thereon, together with costs of suit and reasonable attorneys' fees and costs incurred by Landlord in connection with any such claim or action. Before commencing any work of alteration, addition or improvement to the Premises, Tenant shall give -10- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Landlord at least ten (10) business days' written notice of the proposed commencement of such work (to afford Landlord an opportunity to post appropriate notices of non-responsibility). In the event that there shall be recorded against the Premises or the Project or the property of which the Premises is a part any claim or lien arising out of any such work performed, materials furnished or obligations incurred by Tenant and such claim or lien shall not be removed or discharged within ten (10) days of filing, Landlord shall have the right but not the obligation to pay and discharge said lien without regard to whether such lien shall be lawful or correct (in which case Tenant shall reimburse Landlord for any such payment made by Landlord within ten (10) days following written demand), or to require that Tenant promptly deposit with Landlord in cash, lawful money of the United States, one hundred fifty percent (150%) of the amount of such claim, which sum may be retained by Landlord until such claim shall have been removed of record or until judgment shall have been rendered on such claim and such judgment shall have become final, at which time Landlord shall have the right to apply such deposit in discharge of the judgment on said claim and any costs, including attorneys' fees and costs incurred by Landlord, and shall remit the balance thereof to Tenant. ARTICLE 11 PROJECT SERVICES (a) Basic Services. Landlord agrees to furnish to the Premises, at a cost to be included in Operating Costs, from 8:00 a.m. to 6:00 p.m. Mondays through Fridays and upon request from Tenant, 8:00 a.m. to noon on Saturdays, excepting local and national holidays, air conditioning and heat all in such reasonable quantities as in the judgment of Landlord is reasonably necessary for the comfortable occupancy of the Premises. In addition, Landlord shall provide electric current for normal lighting and normal office machines, elevator service and water on the same floor as the Premises for lavatory and drinking purposes in such reasonable quantities as in the judgment of Landlord is reasonably necessary for general office use and in compliance with applicable codes. Tenant shall cooperate with Landlord's efforts to cause the utilities for the Project to comply with Landlord's sustainability practices and any LEED rating (or other applicable certification standard) applicable to the Project. Such efforts may include, without limitation, the use of energy efficient bulbs in task lighting, energy efficient lighting controls and measures to avoid over- lighting interior spaces. Janitorial and maintenance services shall be furnished five (5) days per week, excepting local and national holidays. Tenant shall comply with all rules and regulations which Landlord may establish for the proper functioning and protection of the common area air conditioning, heating, elevator, electrical, intrabuilding cabling and wiring and plumbing systems. Landlord shall not be liable for, and there shall be no rent abatement as a result of, any stoppage, reduction or interruption of any such services caused by governmental rules, regulations or ordinances, riot, strike, labor disputes, breakdowns, accidents, necessary repairs or other cause. Except as specifically provided in this Article 11, Tenant agrees to pay for all utilities and other services utilized by Tenant and any additional building services furnished to Tenant which are not uniformly furnished to all tenants of the Project, at the rate generally charged by Landlord to tenants of the Project for such utilities or services. (b) Excess Usage. Tenant will not, without the prior written consent of Landlord, use any apparatus or device in the Premises which will in any way increase the amount of electricity or water usually furnished or supplied for use of the Premises as general office space; nor connect any apparatus, machine or device with water pipes or electric current (except through existing electrical outlets in the Premises), for the purpose of using electric current or water. Tenant shall promptly respond to all reasonable informational requests made by Landlord from time to time regarding Landlord's reporting requirements under the LEED rating system (or other applicable certification standard) including, without limitation, informational requests regarding Tenant's utility usage. (c) Additional Electrical Service. If Tenant shall require electric current in excess of that which Landlord is obligated to furnish under Section 11(a) above, Tenant shall first obtain the written consent of Landlord, which Landlord may refuse in its sole and absolute discretion. Additionally, Landlord may cause an electric current meter or submeter to be installed in or about the Premises to measure the amount of any such excess electric current consumed by Tenant in the Premises. The cost of any such meter and of installation, maintenance and repair thereof shall be paid for by Tenant and Tenant agrees to pay to Landlord, promptly upon demand therefor by Landlord, for all such excess electric current consumed by any such use as shown by said meter at the rates charged for such service by the city in which the Project is located or the local public -11- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 utility, as the case may be, furnishing the same, plus any additional expense incurred by Landlord in keeping account of the electric current so consumed. (d) HVAC Balance. If any lights, machines or equipment (including but not limited to computers and computer systems and appurtenances) are used by Tenant in the Premises which materially affect the temperature otherwise maintained by the air conditioning system, or generate substantially more heat in the Premises than would be generated by the building standard lights and usual office equipment, Landlord shall have the right to install any machinery and equipment which Landlord reasonably deems necessary to restore temperature balance, including but not limited to modifications to the standard air conditioning equipment, and the cost thereof, including the cost of installation and any additional cost of operation and maintenance occasioned thereby, shall be paid by Tenant to Landlord upon demand by Landlord. (e) Telecommunications. Upon request from Tenant from time to time, Landlord will provide Tenant with a listing of telecommunications and media service providers serving the Project, and Tenant shall have the right to contract directly with the providers of its choice. If Tenant wishes to contract with or obtain service from any provider which does not currently serve the Project or wishes to obtain from an existing carrier services which will require the installation of additional equipment, such provider must, prior to providing service, enter into a written agreement with Landlord setting forth the terms and conditions of the access to be granted to such provider. In considering the installation of any new or additional telecommunications cabling or equipment at the Project, Landlord will consider all relevant factors in a reasonable and non- discriminatory manner, including, without limitation, the existing availability of services at the Project, the impact of the proposed installations upon the Project and its operations and the available space and capacity for the proposed installations. Landlord may also consider whether the proposed service may result in interference with or interruption of other services at the Project or the business operations of other tenants or occupants of the Project. In no event shall Landlord be obligated to incur any costs or liabilities in connection with the installation or delivery of telecommunication services or facilities at the Project. All such installations shall be subject to Landlord’s prior approval and shall be performed in accordance with the terms of Article 9. If Landlord approves the proposed installations in accordance with the foregoing, Landlord will deliver its standard form agreement upon request and will use commercially reasonable efforts to promptly enter into an agreement on reasonable and non-discriminatory terms with a qualified, licensed and reputable carrier confirming the terms of installation and operation of telecommunications equipment consistent with the foregoing. (f) After-Hours Use. If Tenant requires heating, ventilation and/or air conditioning during times other than the times provided in Section 11(a) above, Tenant shall give Landlord such advance notice as Landlord shall reasonably require and shall pay Landlord's reasonable standard charge for such after-hours use, with a one (1) hour minimum. Landlord's current after-hours charge is $45.00/hour. (g) Reasonable Charges. Landlord may impose a reasonable charge for any utilities or services (other than electric current and heating, ventilation and/or air conditioning which shall be governed by Sections 11(c) and (f) above) utilized by Tenant in excess of the amount or type that Landlord reasonably determines is typical for general office use. (h) Supplemental HVAC. Tenant shall be entitled to install, as an Alteration, a dedicated heating, ventilation and air conditioning unit ("Supplemental Unit") within the Premises at Tenant's sole cost and expense. The plans and specifications for any Supplemental Unit shall, as indicated in Article 9 above, be subject to Landlord's reasonable approval. If Tenant elects to install a Supplemental Unit within the Premises, Tenant shall also install, at Tenant's sole cost and expense, a separate meter or at Landlord's option, submeter, in order to measure the amount of electricity furnished to such unit and Tenant shall be responsible for Landlord's actual cost of supplying electricity to such unit as reflected by such meter or submeter, which amounts shall be payable on a monthly basis as Additional Rent. Tenant shall be solely responsible for maintenance and repair of the Supplemental Unit and such unit shall, at Landlord's option, be considered to be a fixture within the Premises and shall remain upon the Premises upon the expiration or earlier termination of the Lease Term or any applicable Option Term. (i) Sole Electrical Representative. Tenant agrees that Landlord shall be the sole and exclusive representative with respect to, and shall maintain exclusive control over, the reception, utilization and distribution of electrical power, regardless of point or means of origin, use or -12- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 generation. Tenant shall not have the right to contract directly with any provider of electrical power or services. ARTICLE 12 RIGHTS OF LANDLORD (a) Right of Entry. Landlord and its agents shall have the right to enter the Premises at all reasonable times for the purpose of cleaning the Premises, examining or inspecting the same, serving or posting and keeping posted thereon notices as provided by law, or which Landlord deems necessary for the protection of Landlord or the Project, showing the same to prospective tenants, lenders or purchasers of the Project, in the case of an emergency, and for making such alterations, repairs, improvements or additions to the Premises or to the Project as Landlord may deem necessary or desirable. If Tenant shall not be personally present to open and permit an entry into the Premises at any time when such an entry by Landlord is necessary or permitted hereunder, Landlord may enter by means of a master key, or may forcibly enter in the case of an emergency, in each event without liability to Tenant and without affecting this Lease. (b) Maintenance Work. Landlord reserves the right from time to time, but subject to payment by and/or reimbursement from Tenant as otherwise provided herein: (i) to install, use, maintain, repair, replace, relocate and control for service to the Premises and/or other parts of the Project pipes, ducts, conduits, wires, cabling, appurtenant fixtures, equipment spaces and mechanical systems, wherever located in the Premises or the Project, (ii) to alter, close or relocate any facility in the Premises or the common areas or otherwise conduct any of the above activities for the purpose of complying with a general plan for fire/life safety for the Project or otherwise, and (iii) to comply with any federal, state or local law, rule or order. Landlord shall attempt to perform any such work with the least inconvenience to Tenant as is reasonably practicable, but in no event shall Tenant be permitted to withhold or reduce Basic Rental or other charges due hereunder as a result of same, make any claim for constructive eviction or otherwise make any claim against Landlord for interruption or interference with Tenant's business and/or operations. (c) Rooftop. If Tenant desires to use the rooftop of the Project for any purpose, including the installation of communication equipment to be used from the Premises, such rights will be granted in Landlord’s sole discretion and Tenant must negotiate the terms of any rooftop access with Landlord or the rooftop management company or lessee holding rights to the rooftop from time to time. Any rooftop access granted to Tenant will be at prevailing rates and will be governed by the terms of a separate written agreement or an amendment to this Lease. ARTICLE 13 INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY (a) Indemnity. Tenant shall indemnify, defend and hold Landlord and its members, officers, directors, employees and contractors (collectively, "Landlord Parties") harmless from any loss, cost, liability, damage or expense including, but not limited to, penalties, fines, attorneys' fees and costs (collectively, "Claims") arising from Tenant's use of the Premises or the Project or from the conduct of its business or from any activity, work or thing which may be permitted or suffered by Tenant in or about the Premises or the Project and shall further indemnify, defend and hold Landlord and the Landlord Parties harmless from and against any and all Claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under this Lease or arising from any negligence or willful misconduct of Tenant or any of its agents, contractors, employees or invitees, patrons, customers or members in or about the Project and from any and all costs, attorneys' fees and costs, expenses and liabilities incurred in the defense of any Claim or any action or proceeding brought thereon, including negotiations in connection therewith. Tenant hereby assumes all risk of damage to property or injury to persons in or about the Premises from any cause, and Tenant hereby waives all claims in respect thereof against Landlord and the Landlord Parties, excepting where the damage is caused solely by the gross negligence or willful misconduct of Landlord or the Landlord Parties. (b) Exemption of Landlord from Liability. Landlord and the Landlord Parties shall not be liable for injury to Tenant's business, or loss of income therefrom, however occurring (including, without limitation, from any failure or interruption of services or utilities or as a result of Landlord's negligence), or, except in connection with damage or injury resulting from the gross negligence or willful misconduct of Landlord or the Landlord Parties, for damage that may be sustained by the person, goods, wares, merchandise or property of Tenant, its employees, invitees, -13- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 customers, agents, or contractors, or any other person in, on or about the Premises directly or indirectly caused by or resulting from any cause whatsoever, including, but not limited to, fire, steam, electricity, gas, water, or rain which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, light fixtures, or mechanical or electrical systems, or from intrabuilding cabling or wiring, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Project or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant. Landlord and the Landlord Parties shall not be liable to Tenant for any damages arising from any willful or negligent action or inaction of any other tenant of the Project. (c) Security. Tenant acknowledges that Landlord's election whether or not to provide any type of mechanical surveillance or security personnel whatsoever in the Project is solely within Landlord's discretion; Landlord and the Landlord Parties shall have no duty or liability in connection with the provision, or lack, of such services, and Tenant hereby agrees to hold Landlord and the Landlord Parties harmless with regard to any such potential claim. Landlord and the Landlord Parties shall not be liable for losses due to theft, vandalism, or like causes. Tenant shall defend, indemnify, and hold Landlord and the Landlord Parties harmless from and against any such claims made by any employee, licensee, invitee, contractor, agent or other person whose presence in, on or about the Premises or the Project is attendant to the business of Tenant. ARTICLE 14 INSURANCE (a) Tenant's Insurance. Tenant, shall at all times during the Term of this Lease, and at its own cost and expense, procure and continue in force the following insurance coverage: (i) Commercial General Liability Insurance, written on an occurrence basis, with a combined single limit for bodily injury and property damages of not less than Two Million Dollars ($2,000,000) per occurrence and Three Million Dollars ($3,000,000) in the annual aggregate, including products liability coverage if applicable, owners and contractors protective coverage, blanket contractual coverage including both oral and written contracts, and personal injury coverage, covering the insuring provisions of this Lease and the performance of Tenant of the indemnity and exemption of Landlord from liability agreements set forth in Article 13 hereof; (ii) a policy of standard fire, extended coverage and special extended coverage insurance (all risks), including a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage where sprinklers are provided in an amount equal to the full replacement value new without deduction for depreciation of all (A) Tenant Improvements, Alterations, fixtures and other improvements in the Premises, including but not limited to all mechanical, plumbing, heating, ventilating, air conditioning, electrical, telecommunication and other equipment, systems and facilities, and (B) trade fixtures, furniture, equipment and other personal property installed by or at the expense of Tenant; (iii) Worker's Compensation coverage as required by law; and (iv) business interruption, loss of income and extra expense insurance covering any failure or interruption of Tenant's business equipment (including, without limitation, telecommunications equipment) and covering all other perils, failures or interruptions sufficient to cover a period of interruption of not less than twelve (12) months. Tenant shall carry and maintain during the entire Term (including any option periods, if applicable), at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 14 and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably required by Landlord. (b) Form of Policies. The aforementioned minimum limits of policies and Tenant's procurement and maintenance thereof shall in no event limit the liability of Tenant hereunder. The Commercial General Liability Insurance policy shall name Landlord, the Landlord Parties, Landlord's property manager, Landlord's lender(s) and such other persons or firms as Landlord specifies from time to time, as additional insureds with an appropriate endorsement to the policy(s). All such insurance policies carried by Tenant shall be with companies having a rating of not less than A-VIII in Best's Insurance Guide. Tenant shall furnish to Landlord, from the insurance companies, or cause the insurance companies to furnish, certificates of coverage. The deductible under each such policy shall be reasonably acceptable to Landlord. No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after thirty (30) days prior written notice to Landlord by the insurer. All such policies shall be endorsed to agree that Tenant's policy is primary and that any insurance carried by Landlord is excess and not contributing with any Tenant insurance requirement hereunder. Tenant shall, at -14- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 least twenty (20) days prior to the expiration of such policies, furnish Landlord with renewals or binders. Tenant agrees that if Tenant does not take out and maintain such insurance or furnish Landlord with renewals or binders in a timely manner, Landlord may (but shall not be required to) procure said insurance on Tenant's behalf and charge Tenant the cost thereof, which amount shall be payable by Tenant upon demand with interest (at the rate set forth in Section 20(e) below) from the date such sums are expended. Tenant shall have the right to provide such insurance coverage pursuant to blanket policies obtained by Tenant, provided such blanket policies expressly afford coverage to the Premises and to Tenant as required by this Lease. (c) Landlord's Insurance. Landlord may, as a cost to be included in Operating Costs, procure and maintain at all times during the Term of this Lease, a policy or policies of insurance covering loss or damage to the Project in the amount of the full replacement cost without deduction for depreciation thereof, providing protection against all perils included within the classification of fire and extended coverage, vandalism coverage and malicious mischief, sprinkler leakage, water damage, and special extended coverage on the building. Additionally, Landlord may carry: (i) Bodily Injury and Property Damage Liability Insurance and/or Excess Liability Coverage Insurance; and (ii) Earthquake and/or Flood Damage Insurance; and (iii) Rental Income Insurance; and (iv) any other forms of insurance Landlord may deem appropriate or any lender may require. The costs of all insurance carried by Landlord shall be included in Operating Costs. (d) Waiver of Subrogation. Landlord and Tenant each agree to require their respective insurers issuing the insurance described in Sections 14(a)(ii), 14(a)(iv) and the first sentence of Section 14(c), to waive any rights of subrogation that such companies may have against the other party. Tenant hereby waives any right that Tenant may have against Landlord and Landlord hereby waives any right that Landlord may have against Tenant as a result of any loss or damage to the extent such loss or damage is insurable under such policies. (e) Compliance with Insurance Requirements. Tenant agrees that it will not, at any time, during the Term of this Lease, carry any stock of goods or do anything in or about the Premises that will in any way tend to increase the insurance rates upon the Project. Tenant agrees to pay Landlord forthwith upon demand the amount of any increase in premiums for insurance that may be carried during the Term of this Lease, or the amount of insurance to be carried by Landlord on the Project resulting from the foregoing, or from Tenant doing any act in or about the Premises that does so increase the insurance rates, whether or not Landlord shall have consented to such act on the part of Tenant. If Tenant installs upon the Premises any electrical equipment which causes an overload of electrical lines of the Premises, Tenant shall at its own cost and expense, in accordance with all other Lease provisions (specifically including, but not limited to, the provisions of Article 9, 10 and 11 hereof), make whatever changes are necessary to comply with requirements of the insurance underwriters and any governmental authority having jurisdiction thereover, but nothing herein contained shall be deemed to constitute Landlord's consent to such overloading. Tenant shall, at its own expense, comply with all insurance requirements applicable to the Premises including, without limitation, the installation of fire extinguishers or an automatic dry chemical extinguishing system. ARTICLE 15 ASSIGNMENT AND SUBLETTING Tenant shall have no power to, either voluntarily, involuntarily, by operation of law or otherwise, sell, assign, transfer or hypothecate this Lease, or sublet the Premises or any part thereof, or permit the Premises or any part thereof to be used or occupied by anyone other than Tenant or Tenant's employees without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. If Tenant is a corporation, unincorporated association, partnership or limited liability company, the sale, assignment, transfer or hypothecation of any class of stock or other ownership interest in such corporation, association, partnership or limited liability company in excess of twenty-five percent (25%) in the aggregate shall be deemed a "Transfer" within the meaning and provisions of this Article 15. Tenant may transfer its interest pursuant to this Lease only upon the following express conditions, which conditions are agreed by Landlord and Tenant to be reasonable: (a) That the proposed Transferee (as hereafter defined) shall be subject to the prior written consent of Landlord, which consent will not be unreasonably withheld but, without limiting the generality of the foregoing, it shall be reasonable for Landlord to deny such consent if: -15- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 (i) The use to be made of the Premises by the proposed Transferee is (A) not generally consistent with the character and nature of all other tenancies in the Project, or (B) a use which conflicts with any so-called "exclusive" then in favor of another tenant of the Project or any other buildings which are in the same complex as the Project, or (C) a use that is not compatible with the existing certification or a planned future certification of the Project under the LEED rating system (or other applicable certification standard), or (D) a use which would be prohibited by any other portion of this Lease (including but not limited to any Rules and Regulations then in effect); (ii) The financial responsibility of the proposed Transferee is not reasonably satisfactory to Landlord or in any event not at least equal to the financial responsibility possessed by Tenant as of the date of execution of this Lease; (iii) The proposed Transferee is either a governmental agency or instrumentality thereof; or (iv) Either the proposed Transferee or any person or entity which directly or indirectly controls, is controlled by or is under common control with the proposed Transferee (A) occupies space in the Project at the time of the request for consent, or (B) is negotiating with Landlord or has negotiated with Landlord during the six (6) month period immediately preceding the date of the proposed Transfer, to lease space in the Project (b) .Upon Tenant's submission of a request for Landlord's consent to any such Transfer, Tenant shall pay to Landlord Landlord's then standard processing fee and reasonable attorneys' fees and costs incurred in connection with the proposed Transfer, which the parties hereby stipulate to be $1,500.00, unless Landlord provides to Tenant evidence that Landlord has incurred greater costs in connection with the proposed Transfer; (c) That the proposed Transferee shall execute an agreement pursuant to which it shall agree to perform faithfully and be bound by all of the terms, covenants, conditions, provisions and agreements of this Lease applicable to that portion of the Premises so transferred; and (d) That an executed duplicate original of said assignment and assumption agreement or other Transfer on a form reasonably approved by Landlord, shall be delivered to Landlord within five (5) days after the execution thereof, and that such Transfer shall not be binding upon Landlord until the delivery thereof to Landlord and the execution and delivery of Landlord's consent thereto. It shall be a condition to Landlord's consent to any subleasing, assignment or other transfer of part or all of Tenant's interest in the Premises ("Transfer") that (i) upon Landlord's consent to any Transfer, Tenant shall pay and continue to pay Landlord fifty percent (50%) of any "Transfer Premium" (defined below), received by Tenant from the transferee; (ii) any sublessee of part or all of Tenant's interest in the Premises shall agree that in the event Landlord gives such sublessee notice that Tenant is in default under this Lease, such sublessee shall thereafter make all sublease or other payments directly to Landlord, which will be received by Landlord without any liability whether to honor the sublease or otherwise (except to credit such payments against sums due under this Lease), and any sublessee shall agree to attorn to Landlord or its successors and assigns at their request should this Lease be terminated for any reason, except that in no event shall Landlord or its successors or assigns be obligated to accept such attornment; (iii) any such Transfer and consent shall be effected on forms supplied by Landlord and/or its legal counsel; (iv) Landlord may require that Tenant not then be in default hereunder in any respect; and (v) Tenant or the proposed subtenant or assignee (collectively, "Transferee") shall agree to pay Landlord, upon demand, as Additional Rent, a sum equal to the additional costs, if any, incurred by Landlord for maintenance and repair as a result of any change in the nature of occupancy caused by such subletting or assignment. "Transfer Premium" shall mean all rent, Additional Rent or other consideration payable by a Transferee in connection with a Transfer in excess of the Basic Rental and Direct Costs payable by Tenant under this Lease during the term of the Transfer and if such Transfer is for less than all of the Premises, the Transfer Premium shall be calculated on a rentable square foot basis. In any event, the Transfer Premium shall be calculated after deducting the reasonable expenses incurred by Tenant for (1) any changes, alterations and improvements to the Premises paid for by Tenant and approved by Landlord in connection with the Transfer, (2) any other out-of-pocket monetary concessions provided by Tenant to the Transferee, and (3) any brokerage commissions paid for by Tenant in connection with the Transfer. The calculation of "Transfer Premium" shall also include, but not be limited to, key money, bonus money or other cash consideration paid by a Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to the Transferee and any -16- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 payment in excess of fair market value for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to the Transferee in connection with such Transfer. Any Transfer of this Lease which is not in compliance with the provisions of this Article 15 shall be voidable by written notice from Landlord and shall, at the option of Landlord, terminate this Lease. In no event shall the consent by Landlord to any Transfer be construed as relieving Tenant or any Transferee from obtaining the express written consent of Landlord to any further Transfer, or as releasing Tenant from any liability or obligation hereunder whether or not then accrued and Tenant shall continue to be fully liable therefor. No collection or acceptance of rent by Landlord from any person other than Tenant shall be deemed a waiver of any provision of this Article 15 or the acceptance of any Transferee hereunder, or a release of Tenant (or of any Transferee of Tenant). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under this Article 15 or otherwise has breached or acted unreasonably under this Article 15, their sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed Transferee. Notwithstanding anything to the contrary contained in this Article 15, Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after Landlord's receipt of a request for consent to a proposed Transfer, to grant or deny consent to the proposed Transfer or to terminate this Lease as to the portion of the Premises that is the subject of the proposed Transfer. If this Lease is so terminated with respect to less than the entire Premises, the Basic Rental and Tenant's Proportionate Share shall be prorated based on the number of rentable square feet retained by Tenant as compared to the total number of rentable square feet previously contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon the request of either party, the parties shall execute written confirmation of the same. ARTICLE 16 DAMAGE OR DESTRUCTION If the Project is damaged by fire or other insured casualty and the insurance proceeds have been made available therefor by the holder or holders of any mortgages or deeds of trust covering the Premises or the Project, the damage shall be repaired by Landlord to the extent such insurance proceeds are available therefor and provided such repairs can, in Landlord's sole opinion, be completed within two hundred seventy (270) days after the necessity for repairs as a result of such damage becomes known to Landlord, without the payment of overtime or other premiums, and until such repairs are completed rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of its business (but there shall be no abatement of rent by reason of any portion of the Premises being unusable for a period equal to one (1) day or less). However, if the damage is due to the fault or neglect of Tenant, its employees, agents, contractors, guests, invitees and the like, there shall be no abatement of rent, unless and to the extent Landlord receives rental income insurance proceeds. Upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Section 14(a)(ii)(A) above; provided, however, that if the cost of repair of improvements within the Premises by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, as so assigned by Tenant, such excess costs shall be paid by Tenant to Landlord prior to Landlord's repair of such damage. If repairs cannot, in Landlord's opinion, be completed within two hundred seventy (270) days after the necessity for repairs as a result of such damage becomes known to Landlord without the payment of overtime or other premiums, Landlord may, at its option, either (i) make such repairs in a reasonable time and in such event this Lease shall continue in effect and the rent shall be abated, if at all, in the manner provided in this Article 16, or (ii) elect not to effect such repairs and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after Landlord learns of the necessity for repairs as a result of damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises. In addition, Landlord may elect to terminate this Lease if the Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, if the damage is not fully covered, except for deductible amounts, by Landlord's insurance policies. Finally, if the Premises or the Project is damaged to any substantial extent during the last twelve (12) months of the Term, then notwithstanding anything contained in this Article 16 to the contrary, Landlord shall have the option to terminate this Lease by giving written notice to Tenant of the exercise of such option within sixty (60) days after Landlord learns of the necessity for repairs as the result of such damage. A total destruction of the Project shall -17- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 automatically terminate this Lease. Except as provided in this Article 16, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business or property arising from such damage or destruction or the making of any repairs, alterations or improvements in or to any portion of the Project or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant understands that Landlord will not carry insurance of any kind on Tenant's furniture, furnishings, trade fixtures or equipment, and that Landlord shall not be obligated to repair any damage thereto or replace the same. Tenant acknowledges that Tenant shall have no right to any proceeds of insurance carried by Landlord relating to property damage. With respect to any damage which Landlord is obligated to repair or elects to repair, Tenant, as a material inducement to Landlord entering into this Lease, irrevocably waives and releases its rights under the provisions of Sections 1932 and 1933 of the California Civil Code. ARTICLE 17 SUBORDINATION This Lease is subject to, and Tenant agrees to comply with, all matters of record affecting the Real Property. This Lease is also subject and subordinate to all existing and future ground or underlying leases, mortgages and deeds of trust which affect the Real Property, including all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, if the lessor under any such lease or the holder or holders of any such mortgage or deed of trust shall advise Landlord that they desire or require this Lease to be prior and superior thereto, upon written request of Landlord to Tenant, Tenant agrees to promptly execute, acknowledge and deliver any and all documents or instruments which Landlord or such lessor, holder or holders deem necessary or desirable for purposes thereof. Tenant agrees that in the event any proceedings are brought for the foreclosure of any mortgage or deed of trust or any deed in lieu thereof, to attorn to the mortgagee under such mortgage or deed of trust, such mortgagee's successor purchaser or any of their successors or assigns upon any such foreclosure sale or deed in lieu thereof as so requested to do so by such purchaser and to recognize such purchaser as the lessor under this Lease; provided, however, that such mortgagee or its successor shall not be liable for or bound by (i) any payment of any rent installment which may have been made more than thirty (30) days before the due date of such installment, (ii) any act or omission of or default by Landlord under this Lease (but such mortgagee, or such successor, shall be subject to the continuing obligations of Landlord under this Lease to the extent arising from and after such succession to the extent of such mortgagee's or such successor's interest in the Project), (iii) any credit, claims, setoffs or defenses which Tenant may have against Landlord, (iv) any modification or amendment to this Lease for which such mortgagee's consent is required, but has not been obtained, under a mortgage or deed of trust or (v) any obligation under this Lease to maintain a fitness facility at the Project, if any. Tenant, upon the reasonable request by such mortgagee or such successor in interest, shall execute and deliver within five (5) days of such request an instrument or instruments confirming such attornment. Tenant agrees to provide copies of any notices of Landlord's default under this Lease to any mortgagee, deed of trust beneficiary and mezzanine lender whose address has been provided to Tenant and Tenant shall provide such mortgagee, deed of trust beneficiary and mezzanine lender a commercially reasonable time after receipt of such notice within which to cure any such default. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. ARTICLE 18 EMINENT DOMAIN If the whole of the Premises or the Project or so much thereof as to render the balance unusable by Tenant shall be taken under power of eminent domain, or is sold, transferred or conveyed in lieu thereof, this Lease shall automatically terminate as of the date of such condemnation, or as of the date possession is taken by the condemning authority, at Landlord's option. No award for any partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for the taking of personal property and trade fixtures belonging to Tenant and removable by Tenant at the expiration of the Term hereof as provided hereunder or for the interruption of, or damage to, Tenant's business. In the event of a partial taking described in this Article 18, or a sale, transfer or conveyance in lieu -18- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 thereof, which does not result in a termination of this Lease, the rent shall be apportioned according to the ratio that the part of the Premises remaining useable by Tenant bears to the total area of the Premises. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure. ARTICLE 19 DEFAULT Each of the following acts or omissions of Tenant or of any guarantor of Tenant's performance hereunder, or occurrences, shall constitute an "Event of Default": (a) Failure or refusal to pay Basic Rental, Additional Rent or any other amount to be paid by Tenant to Landlord hereunder within three (3) calendar days after notice that the same is due or payable hereunder; said three (3) day period shall be in lieu of, and not in addition to, the notice requirements of Section 1161 of the California Code of Civil Procedure or any similar or successor law; (b) Except as set forth in items (a) above and (c) through and including (g) below, failure to perform or observe any other covenant or condition of this Lease to be performed or observed within thirty (30) days following written notice to Tenant of such failure. Such thirty (30) day notice shall be in lieu of, and not in addition to, any required under Section 1161 of the California Code of Civil Procedure or any similar or successor law; (c) Abandonment or vacating or failure to accept tender of possession of the Premises or any significant portion thereof; (d) The taking in execution or by similar process or law (other than by eminent domain) of the estate hereby created; (e) The filing by Tenant or any guarantor hereunder in any court pursuant to any statute of a petition in bankruptcy or insolvency or for reorganization or arrangement for the appointment of a receiver of all or a portion of Tenant's property; the filing against Tenant or any guarantor hereunder of any such petition, or the commencement of a proceeding for the appointment of a trustee, receiver or liquidator for Tenant, or for any guarantor hereunder, or of any of the property of either, or a proceeding by any governmental authority for the dissolution or liquidation of Tenant or any guarantor hereunder, if such proceeding shall not be dismissed or trusteeship discontinued within thirty (30) days after commencement of such proceeding or the appointment of such trustee or receiver; or the making by Tenant or any guarantor hereunder of an assignment for the benefit of creditors. Tenant hereby stipulates to the lifting of the automatic stay in effect and relief from such stay for Landlord in the event Tenant files a petition under the United States Bankruptcy laws, for the purpose of Landlord pursuing its rights and remedies against Tenant and/or a guarantor of this Lease; (f) Tenant's failure to cause to be released any mechanics liens filed against the Premises or the Project within twenty (20) days after the date the same shall have been filed or recorded; or (g) Tenant's failure to observe or perform according to the provisions of Articles 7, 14, 17 or 25 within two (2) business days after notice from Landlord. All defaults by Tenant of any covenant or condition of this Lease shall be deemed by the parties hereto to be material. ARTICLE 20 REMEDIES (a) Upon the occurrence of an Event of Default under this Lease as provided in Article 19 hereof, Landlord may exercise all of its remedies as may be permitted by law, including but not limited to the remedy provided by Section 1951.4 of the California Civil Code, and including without limitation, terminating this Lease, reentering the Premises and removing all persons and property therefrom, which property may be stored by Landlord at a warehouse or elsewhere at the risk, expense and for the account of Tenant. If Landlord elects to terminate this Lease, Landlord shall be entitled to recover from Tenant the aggregate of all amounts permitted by law, including but not limited to (i) the worth at the time of award of the amount of any unpaid -19- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 rent which had been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, tenant improvement expenses, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and (v) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term "rent" as used in this Section 20(a) shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in items (i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in item (e), below, but in no case greater than the maximum amount of such interest permitted by law. As used in item (iii), above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (b) Nothing in this Article 20 shall be deemed to affect Landlord's right to indemnification for liability or liabilities arising prior to the termination of this Lease for personal injuries or property damage under the indemnification clause or clauses contained in this Lease. (c) Notwithstanding anything to the contrary set forth herein, Landlord's re-entry to perform acts of maintenance or preservation of or in connection with efforts to relet the Premises or any portion thereof, or the appointment of a receiver upon Landlord's initiative to protect Landlord's interest under this Lease shall not terminate Tenant's right to possession of the Premises or any portion thereof and, until Landlord does elect to terminate this Lease, this Lease shall continue in full force and effect and Landlord may enforce all of Landlord's rights and remedies hereunder including, without limitation, the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due. (d) All rights, powers and remedies of Landlord hereunder and under any other agreement now or hereafter in force between Landlord and Tenant shall be cumulative and not alternative and shall be in addition to all rights, powers and remedies given to Landlord by law, and the exercise of one or more rights or remedies shall not impair Landlord's right to exercise any other right or remedy. (e) Any amount due from Tenant to Landlord hereunder which is not paid when due shall bear interest at the lower of eighteen percent (18%) per annum or the maximum lawful rate of interest from the due date until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. In addition to such interest: (i) if Basic Rental is not paid on or before the fifth (5th) day of the calendar month for which the same is due, a late charge equal to ten percent (10%) of the amount overdue or $100, whichever is greater, shall be immediately due and owing and shall accrue for each calendar month or part thereof until such rental, including the late charge, is paid in full, which late charge Tenant hereby agrees is a reasonable estimate of the damages Landlord shall suffer as a result of Tenant's late payment and (ii) an additional charge of $25 shall be assessed for any check given to Landlord by or on behalf of Tenant which is not honored by the drawee thereof; which damages include Landlord's additional administrative and other costs associated with such late payment and unsatisfied checks and the parties agree that it would be impracticable or extremely difficult to fix Landlord's actual damage in such event. Such charges for interest and late payments and unsatisfied checks are separate and cumulative and are in addition to and shall not diminish or represent a substitute for any or all of Landlord's rights or remedies under any other provision of this Lease. Notwithstanding the foregoing, Tenant shall be entitled to notice and the expiration of a five (5) day cure period prior to imposition of any late charge or interest charge under this Section 20(e) one (1) time per calendar year; after such written notice has been -20- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 provided to Tenant in a calendar year, Tenant shall not be entitled to any further notice prior to imposition of a late charge or interest under this Section 20(e) in such calendar year. (f) In the event of any default, breach or violation of Tenant's rights under this Lease by Landlord, Tenant's exclusive remedies shall be an action for specific performance or action for actual damages. Without limiting any other waiver by Tenant which may be contained in this Lease, Tenant hereby waives the benefit of any law granting it the right to perform Landlord's obligation, or the right to terminate this Lease on account of any Landlord default. ARTICLE 21 TRANSFER OF LANDLORD'S INTEREST In the event of any transfer or termination of Landlord's interest in the Premises or the Project by sale, assignment, transfer, foreclosure, deed-in-lieu of foreclosure or otherwise whether voluntary or involuntary, Landlord shall be automatically relieved of any and all obligations and liabilities on the part of Landlord from and after the date of such transfer or termination, including furthermore without limitation, the obligation of Landlord under Article 4 and California Civil Code 1950.7 above to return the security deposit, provided said security deposit is transferred to said transferee. Tenant agrees to attorn to the transferee upon any such transfer and to recognize such transferee as the lessor under this Lease and Tenant shall, within five (5) days after request, execute such further instruments or assurances as such transferee may reasonably deem necessary to evidence or confirm such attornment. ARTICLE 22 BROKER In connection with this Lease, Tenant warrants and represents that it has had dealings only with firm(s) set forth in Article 1.H. of the Basic Lease Provisions and that it knows of no other person or entity who is or might be entitled to a commission, finder's fee or other like payment in connection herewith and does hereby indemnify and agree to hold Landlord, its agents, members, partners, representatives, officers, affiliates, shareholders, employees, successors and assigns harmless from and against any and all loss, liability and expenses that Landlord may incur should such warranty and representation prove incorrect, inaccurate or false. ARTICLE 23 PARKING Commencing on the Beneficial Occupancy Date, Tenant shall be entitled to use the number of parking passes set forth in Article 1.I. of the Basic Lease Provisions, which parking passes shall pertain to the Project parking facility. All of such parking passes shall be for unreserved parking, except that Tenant may, upon thirty (30) days prior written notice to Landlord, convert up to two (2) of such unreserved parking passes to reserved stalls at locations designated by Landlord. Tenant shall not be required to pay to Landlord any fee for such unreserved parking during the initial Term and reserved parking shall be at the rate of $75 per reserved stall per month throughout the initial Term. Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the use of such parking by Tenant. Tenant's continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located, including any sticker or other identification system established by Landlord, Tenant's cooperation in seeing that Tenant's employees and visitors also comply with such rules and regulations, and Tenant not being in default under this Lease. Landlord specifically reserves the right to (i) designate certain areas of the parking facility as reserved for certain occupants or visitors, or (ii) change the size, configuration, design, layout and all other aspects of the Project parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of rent under this Lease, from time to time, close-off or restrict access to the Project parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. In addition, Landlord hereby reserves the right to implement unreserved parking charges after the initial Lease Term. Landlord may, from time to time, relocate any reserved parking spaces (if any) rented by Tenant to another location in the Project parking facility but in a reasonable distance from the Premises. Landlord may delegate its responsibilities hereunder to a parking operator or a lessee of the parking facility in which case such parking operator or lessee shall have all the rights of control attributed hereby to the Landlord. The parking passes rented by Tenant pursuant to this -21- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Article 23 are provided to Tenant solely for use by Tenant's own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval. Tenant's visitor parking shall be free of charge during the initial Term. ARTICLE 24 WAIVER No waiver by Landlord of any provision of this Lease shall be deemed to be a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. No provision of this Lease may be waived by Landlord, except by an instrument in writing executed by Landlord. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act of Tenant, whether or not similar to the act so consented to or approved. No act or thing done by Landlord or Landlord's agents during the Term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. Any payment by Tenant or receipt by Landlord of an amount less than the total amount then due hereunder shall be deemed to be in partial payment only thereof and not a waiver of the balance due or an accord and satisfaction, notwithstanding any statement or endorsement to the contrary on any check or any other instrument delivered concurrently therewith or in reference thereto. Accordingly, Landlord may accept any such amount and negotiate any such check without prejudice to Landlord's right to recover all balances due and owing and to pursue its other rights against Tenant under this Lease, regardless of whether Landlord makes any notation on such instrument of payment or otherwise notifies Tenant that such acceptance or negotiation is without prejudice to Landlord's rights. ARTICLE 25 ESTOPPEL CERTIFICATE Tenant shall, at any time and from time to time, upon not less than ten (10) days' prior written notice from Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying the following information, (but not limited to the following information in the event further information is requested by Landlord): (i) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as modified, is in full force and effect); (ii) the dates to which the rental and other charges are paid in advance, if any; (iii) the amount of Tenant's security deposit, if any; and (iv) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, and no events or conditions then in existence which, with the passage of time or notice or both, would constitute a default on the part of Landlord hereunder, or specifying such defaults, events or conditions, if any are claimed. It is expressly understood and agreed that any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Real Property. Tenant's failure to deliver such statement within such time shall constitute an admission by Tenant that all statements contained therein are true and correct. Furthermore, if Tenant fails to timely deliver an estoppel certificate to Landlord pursuant to the terms of this Article 25, then without limiting any other rights and remedies of Landlord, Landlord shall have the right to charge Tenant an amount equal to $500 per day for each day thereafter until Tenant delivers to Landlord an estoppel certificate pursuant to the terms hereof. Tenant acknowledges and agrees that (A) such charge compensates Landlord for the administrative costs caused by the delinquency, and (B) Landlord's damage would be difficult to compute and the amount stated above represents a reasonable estimate of such damage. Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead to execute any and all documents described in this Article 25 if Tenant fails to do so within the specified time period. ARTICLE 26 LIABILITY OF LANDLORD Notwithstanding anything in this Lease to the contrary, any remedy of Tenant for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder or any claim, cause of action or obligation, contractual, statutory or otherwise by Tenant against Landlord or the Landlord Parties concerning, -22- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 arising out of or relating to any matter relating to this Lease and all of the covenants and conditions or any obligations, contractual, statutory, or otherwise set forth herein, shall be limited solely and exclusively to an amount which is equal to the lesser of (i) the interest of Landlord in and to the Project, and (ii) the interest Landlord would have in the Project if the Project were encumbered by third party debt in an amount equal to ninety percent (90%) of the then current value of the Project (as such value is reasonably determined by Landlord). No other property or assets of Landlord or any Landlord Party shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this Lease, Landlord's obligations to Tenant, whether contractual, statutory or otherwise, the relationship of Landlord and Tenant hereunder, or Tenant's use or occupancy of the Premises. ARTICLE 27 INABILITY TO PERFORM This Lease and the obligations of Tenant hereunder shall not be affected or impaired because Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of any prevention, delay, stoppage due to strikes, lockouts, acts of God, terrorism, evacuation or any other cause previously, or at such time, beyond the reasonable control or anticipation of Landlord (collectively, a "Force Majeure") and Landlord's obligations under this Lease shall be forgiven and suspended by any such Force Majeure. ARTICLE 28 HAZARDOUS WASTE (a) Tenant shall not cause or permit any Hazardous Material (as defined in Section 28(d) below) to be brought, kept or used in or about the Project by Tenant, its agents, employees, contractors, or invitees. Tenant indemnifies Landlord and the Landlord Parties from and against any breach by Tenant of the obligations stated in the preceding sentence, and agrees to defend and hold Landlord and the Landlord Parties harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities, or losses (including, without limitation, diminution in value of the Project, damages for the loss or restriction or use of rentable or usable space or of any amenity of the Project, damages arising from any adverse impact or marketing of space in the Project, and sums paid in settlement of claims, attorneys' fees and costs, consultant fees, and expert fees) which arise during or after the Term of this Lease as a result of such breach. This indemnification of Landlord and the Landlord Parties by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by any federal, state, or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Project. Without limiting the foregoing, if the presence of any Hazardous Material on the Project caused or permitted by Tenant results in any contamination of the Project, then subject to the provisions of Articles 9, 10 and 11 hereof, Tenant shall promptly take all actions at its sole expense as are necessary to return the Project to the condition existing prior to the introduction of any such Hazardous Material and the contractors to be used by Tenant for such work must be approved by Landlord, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Project and so long as such actions do not materially interfere with the use and enjoyment of the Project by the other tenants thereof; provided however, Landlord shall also have the right, by written notice to Tenant, to directly undertake any such mitigation efforts with regard to Hazardous Materials in or about the Project due to Tenant's breach of its obligations pursuant to this Section 28(a), and to charge Tenant, as Additional Rent, for the costs thereof. (b) Landlord and Tenant acknowledge that Landlord may become legally liable for the costs of complying with Laws (as defined in Section 28(e) below) relating to Hazardous Material which are not the responsibility of Landlord or the responsibility of Tenant, including the following: (i) Hazardous Material present in the soil or ground water on the Project of which Landlord has no knowledge as of the effective date of this Lease; (ii) a change in Laws which relate to Hazardous Material which make that Hazardous Material which is present on the Real Property as of the effective date of this Lease, whether known or unknown to Landlord, a violation of such new Laws; (iii) Hazardous Material that migrates, flows, percolates, diffuses, or in any way moves on to, or under, the Project after the effective date of this Lease; or Hazardous Material present on or under the Project as a result of any discharge, dumping or spilling (whether accidental or otherwise) on the Project by other lessees of the Project or their agents, employees, contractors, -23- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 or invitees, or by others. Accordingly, Landlord and Tenant agree that the cost of complying with Laws relating to Hazardous Material on the Project for which Landlord is legally liable and which are paid or incurred by Landlord shall be an Operating Cost (and Tenant shall pay Tenant's Proportionate Share thereof in accordance with Article 3) unless the cost of such compliance as between Landlord and Tenant, is made the responsibility of Tenant pursuant to Section 28(a) above. To the extent any such Operating Cost relating to Hazardous Material is subsequently recovered or reimbursed through insurance, or recovery from responsible third parties or other action, Tenant shall be entitled to a proportionate reimbursement to the extent it has paid its share of such Operating Cost to which such recovery or reimbursement relates. (c) It shall not be unreasonable for Landlord to withhold its consent to any proposed Transfer if (i) the proposed transferee's anticipated use of the Premises involves the generation, storage, use, treatment, or disposal of Hazardous Material; (ii) the proposed Transferee has been required by any prior landlord, lender, or governmental authority to take remedial action in connection with Hazardous Material contaminating a property if the contamination resulted from such Transferee's actions or use of the property in question; or (iii) the proposed Transferee is subject to an enforcement order issued by any governmental authority in connection with the use, disposal, or storage of a Hazardous Material. (d) As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term "Hazardous Material" includes, without limitation, any material or substance which is (i) defined as "Hazardous Waste," "Extremely Hazardous Waste," or "Restricted Hazardous Waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "Hazardous Substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "Hazardous Material," "Hazardous Substance," or "Hazardous Waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "Hazardous Substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as Hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (viii) designated as a "Hazardous Substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. §1317), (ix) defined as a "Hazardous Waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq. (42 U.S.C. §6903), or (x) defined as a "Hazardous Substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq. (42 U.S.C. §9601). (e) As used herein, the term "Laws" means any applicable federal, state or local law, ordinance, or regulation relating to any Hazardous Material affecting the Project, including, without limitation, the laws, ordinances, and regulations referred to in Section 28(d) above. ARTICLE 29 SURRENDER OF PREMISES; REMOVAL OF PROPERTY (a) The voluntary or other surrender of this Lease by Tenant to Landlord, or a mutual termination hereof, shall not work a merger, and shall at the option of Landlord, operate as an assignment to it of any or all subleases or subtenancies affecting the Premises. (b) Upon the expiration of the Term of this Lease, or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in good order and condition, reasonable wear and tear and repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, all furniture, equipment, business and trade fixtures, free-standing cabinet work, moveable partitioning, telephone and data cabling and other articles of personal property in the Premises except to the extent (i) Landlord elects by notice to Tenant to exercise its option to have any subleases or subtenancies assigned to it, and/or (ii) Landlord elects by notice to Tenant not to require Tenant to remove any data cabling servicing the Premises (in which event Tenant shall pay to Landlord the estimated cost [as determined by Landlord] to be incurred by Landlord in connection with removing said data cabling within three (3) business days following written -24- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 demand therefor from Landlord). Tenant shall be responsible for the cost to repair all damage to the Premises resulting from the removal of any of such items from the Premises, provided that Landlord shall have the right to either (I) cause Tenant to perform said repair work, or (II) perform said repair work itself, at Tenant's expense (with any such costs incurred by Landlord to be reimbursed by Tenant to Landlord within three (3) business days following written demand therefor from Landlord). (c) Whenever Landlord shall reenter the Premises as provided in Article 20 hereof, or as otherwise provided in this Lease, any property of Tenant not removed by Tenant upon the expiration of the Term of this Lease (or within forty-eight (48) hours after a termination by reason of Tenant's default), as provided in this Lease, shall be considered abandoned and Landlord may remove any or all of such items and dispose of the same in any manner or store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant, and if Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of thirty (30) days or more, Landlord may sell any or all of such property at public or private sale, in such manner and at such times and places as Landlord, in its sole discretion, may deem proper, without notice to or demand upon Tenant, for the payment of all or any part of such charges or the removal of any such property, and shall apply the proceeds of such sale as follows: first, to the cost and expense of such sale, including reasonable attorneys' fees and costs for services rendered; second, to the payment of the cost of or charges for storing any such property; third, to the payment of any other sums of money which may then or thereafter be due to Landlord from Tenant under any of the terms hereof; and fourth, the balance, if any, to Tenant. (d) All fixtures, Tenant Improvements, Alterations and/or appurtenances attached to or built into the Premises prior to or during the Term, whether by Landlord or Tenant and whether at the expense of Landlord or Tenant, or of both, shall be and remain part of the Premises and shall not be removed by Tenant at the end of the Term unless otherwise expressly provided for in this Lease or unless such removal is required by Landlord. Such fixtures, Tenant Improvements, Alterations and/or appurtenances shall include but not be limited to: all floor coverings, drapes, paneling, built-in cabinetry, molding, doors, plumbing systems, security systems, electrical systems, lighting systems, all fixtures and outlets for the systems mentioned above and for all telephone, radio and television purposes, and any special flooring or ceiling installations. ARTICLE 30 MISCELLANEOUS (a) SEVERABILITY; ENTIRE AGREEMENT. ANY PROVISION OF THIS LEASE WHICH SHALL PROVE TO BE INVALID, VOID, OR ILLEGAL SHALL IN NO WAY AFFECT, IMPAIR OR INVALIDATE ANY OTHER PROVISION HEREOF AND SUCH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT. THIS LEASE AND THE EXHIBITS AND ANY ADDENDUM ATTACHED HERETO CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH REGARD TO TENANT'S OCCUPANCY OR USE OF ALL OR ANY PORTION OF THE PROJECT, AND NO PRIOR AGREEMENT OR UNDERSTANDING PERTAINING TO ANY SUCH MATTER SHALL BE EFFECTIVE FOR ANY PURPOSE. NO PROVISION OF THIS LEASE MAY BE AMENDED OR SUPPLEMENTED EXCEPT BY AN AGREEMENT IN WRITING SIGNED BY THE PARTIES HERETO OR THEIR SUCCESSOR IN INTEREST. THE PARTIES AGREE THAT ANY DELETION OF LANGUAGE FROM THIS LEASE PRIOR TO ITS MUTUAL EXECUTION BY LANDLORD AND TENANT SHALL NOT BE CONSTRUED TO HAVE ANY PARTICULAR MEANING OR TO RAISE ANY PRESUMPTION, CANON OF CONSTRUCTION OR IMPLICATION INCLUDING, WITHOUT LIMITATION, ANY IMPLICATION THAT THE PARTIES INTENDED THEREBY TO STATE THE CONVERSE, OBVERSE OR OPPOSITE OF THE DELETED LANGUAGE. (b) Attorneys' Fees; Waiver of Jury Trial. (i) In any action to enforce the terms of this Lease, including any suit by Landlord for the recovery of rent or possession of the Premises, the losing party shall pay the successful party a reasonable sum for attorneys' fees and costs in such suit and such attorneys' fees and costs shall be deemed to have accrued prior to the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Tenant shall also reimburse Landlord for all costs incurred by Landlord in connection with enforcing its rights under this Lease against -25- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 Tenant following a bankruptcy by Tenant or otherwise, including, without limitation, legal fees, experts' fees and expenses, court costs and consulting fees. (ii) Should Landlord, without fault on Landlord's part, be made a party to any litigation instituted by Tenant or by any third party against Tenant, or by or against any person holding under or using the Premises by license of Tenant, or for the foreclosure of any lien for labor or material furnished to or for Tenant or any such other person or otherwise arising out of or resulting from any act or transaction of Tenant or of any such other person, Tenant covenants to save and hold Landlord harmless from any judgment rendered against Landlord or the Premises or any part thereof and from all costs and expenses, including reasonable attorneys' fees and costs incurred by Landlord in connection with such litigation. (iii) TO THE EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION SEEKING SPECIFIC PERFORMANCE OF ANY PROVISION OF THIS LEASE, FOR DAMAGES FOR ANY BREACH UNDER THIS LEASE, OR OTHERWISE FOR ENFORCEMENT OF ANY RIGHT OR REMEDY HEREUNDER. (c) Time of Essence. Each of Tenant's covenants herein is a condition and time is of the essence with respect to the performance of every provision of this Lease. (d) Headings; Joint and Several. The article headings contained in this Lease are for convenience only and do not in any way limit or amplify any term or provision hereof. The terms "Landlord" and "Tenant" as used herein shall include the plural as well as the singular, the neuter shall include the masculine and feminine genders and the obligations herein imposed upon Tenant shall be joint and several as to each of the persons, firms or corporations of which Tenant may be composed. (e) Reserved Area. Tenant hereby acknowledges and agrees that the exterior walls of the Premises and the area between the finished ceiling of the Premises and the slab of the floor of the Project thereabove have not been demised hereby and the use thereof together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wiring and cabling leading through, under or above the Premises or throughout the Project in locations which will not materially interfere with Tenant's use of the Premises and serving other parts of the Project are hereby excepted and reserved unto Landlord. (f) NO OPTION. THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED HEREBY THAT THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY LANDLORD AND TENANT AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT. (g) Use of Project Name; Improvements. Tenant shall not be allowed to use the name, picture or representation of the Project, or words to that effect, in connection with any business carried on in the Premises or otherwise (except as Tenant's address) without the prior written consent of Landlord. In the event that Landlord undertakes any additional improvements on the Real Property including but not limited to new construction or renovation or additions to the existing improvements, Landlord shall not be liable to Tenant for any noise, dust, vibration or interference with access to the Premises or disruption in Tenant's business caused thereby. (h) Rules and Regulations. Tenant shall observe faithfully and comply strictly with the rules and regulations ("Rules and Regulations") attached to this Lease as Exhibit "B" and made a part hereof, and such other Rules and Regulations as Landlord may from time to time reasonably adopt for the safety, care and cleanliness of the Project, the facilities thereof, or the preservation of good order therein. Landlord shall not be liable to Tenant for violation of any such Rules and Regulations, or for the breach of any covenant or condition in any lease by any other tenant in the Project. A waiver by Landlord of any Rule or Regulation for any other tenant shall not constitute nor be deemed a waiver of the Rule or Regulation for this Tenant. -26- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 (i) Quiet Possession. Upon Tenant's paying the Basic Rental, Additional Rent and other sums provided hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire Term hereof, subject to all of the provisions of this Lease. (j) Rent. All payments required to be made hereunder to Landlord shall be deemed to be rent, whether or not described as such. (k) Successors and Assigns. Subject to the provisions of Article 15 hereof, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. (l) Notices. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal service evidenced by a signed receipt (or refusal to accept delivery) or sent by registered or certified mail, return receipt requested, or via overnight courier, and shall be effective upon proof of delivery (or refusal to accept delivery), addressed to Tenant at the Premises or to Landlord as follows: BRE CA OFFICE OWNER LLC c/o EQ Office 19191 South Vermont, Suite 100 Torrance, California 90502 Attn: Regional Finance Group – MLA with copies to: BRE CA OFFICE OWNER LLC c/o EQ Office 3100 Bristol Street, Suite 200 Costa Mesa, California 92626 Attn: Managing Counsel and: BRE CA OFFICE OWNER LLC c/o EQ Office 233 South Wacker Drive, Suite 4700 Chicago, IL 60606 Attn: Lease Administration Either party may by notice to the other specify a different address for notice purposes except that, upon Tenant's taking possession of the Premises, the Premises shall constitute Tenant's address for notice purposes. A copy of all notices to be given to Landlord hereunder shall be concurrently transmitted by Tenant to such party hereafter designated by notice from Landlord to Tenant. Any notices sent by Landlord regarding or relating to eviction procedures, including without limitation three (3) day notices, may be sent by regular mail. (m) Persistent Delinquencies. In the event that Tenant shall be delinquent by more than fifteen (15) days in the payment of rent on three (3) separate occasions in any twelve (12) month period, Landlord shall have the right to terminate this Lease by thirty (30) days written notice given by Landlord to Tenant within thirty (30) days of the last such delinquency. (n) Right of Landlord to Perform. All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of rent. If Tenant shall fail to pay any sum of money, other than rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, and such failure shall continue beyond any applicable cure period set forth in this Lease, Landlord may, but shall not be obligated to, without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such other act on Tenant's part to be made or performed as is in this Lease provided. All sums so paid by Landlord and all reasonable incidental costs, together with interest thereon at the rate specified in Section 20(e) above from the date of such payment by Landlord, shall be payable to Landlord on demand and Tenant covenants to pay any such sums, and Landlord shall have (in addition to any other right or -27- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 remedy of Landlord) the same rights and remedies in the event of the nonpayment thereof by Tenant as in the case of default by Tenant in the payment of the rent. (o) Access, Changes in Project, Facilities, Name. (i) Every part of the Project except the inside surfaces of all walls, windows and doors bounding the Premises (including exterior building walls, the rooftop, core corridor walls and doors and any core corridor entrance), and any space in or adjacent to the Premises or within the Project used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other building facilities, and the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, decoration and repair, are reserved to Landlord. (ii) Landlord reserves the right, without incurring any liability to Tenant therefor, to make such changes in or to the Project and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, elevators, stairways and other improvements thereof, as it may deem necessary or desirable. (iii) Landlord may adopt any name for the Project and Landlord reserves the right, from time to time, to change the name and/or address of the Project at any time. (p) Signing Authority. If Tenant is a corporation, partnership or limited liability company, each individual executing this Lease on behalf of said entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity in accordance with: (i) if Tenant is a corporation, a duly adopted resolution of the Board of Directors of said corporation or in accordance with the By-laws of said corporation, (ii) if Tenant is a partnership, the terms of the partnership agreement, and (iii) if Tenant is a limited liability company, the terms of its operating agreement, and that this Lease is binding upon said entity in accordance with its terms. Concurrently with Tenant's execution of this Lease, Tenant shall provide to Landlord a copy of: (A) if Tenant is a corporation, such resolution of the Board of Directors authorizing the execution of this Lease on behalf of such corporation, which copy of resolution shall be duly certified by the secretary or an assistant secretary of the corporation to be a true copy of a resolution duly adopted by the Board of Directors of said corporation and shall be in a form reasonably acceptable to Landlord, (B) if Tenant is a partnership, a copy of the provisions of the partnership agreement granting the requisite authority to each individual executing this Lease on behalf of said partnership, and (C) if Tenant is a limited liability company, a copy of the provisions of its operating agreement granting the requisite authority to each individual executing this Lease on behalf of said limited liability company. In the event Tenant fails to comply with the requirements set forth in this subparagraph (p), then each individual executing this Lease shall be personally liable, jointly and severally along with Tenant, for all of Tenant's obligations in this Lease. (q) Identification of Tenant. (i) If Tenant constitutes more than one person or entity, (A) each of them shall be jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions and provisions of this Lease to be kept, observed and performed by Tenant, (B) the term "Tenant" as used in this Lease shall mean and include each of them jointly and severally, and (C) the act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons or entities executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed. (ii) If Tenant is a partnership (or is comprised of two or more persons, individually and as co-partners of a partnership) or if Tenant's interest in this Lease shall be assigned to a partnership (or to two or more persons, individually and as co-partners of a partnership) pursuant to Article 15 hereof (any such partnership and such persons hereinafter referred to in this Section 30(q)(ii) as "Partnership Tenant"), the following provisions of this Lease shall apply to such Partnership Tenant: (A) The liability of each of the parties comprising Partnership Tenant shall be joint and several. -28- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 (B) Each of the parties comprising Partnership Tenant hereby consents in advance to, and agrees to be bound by, any written instrument which may hereafter be executed, changing, modifying or discharging this Lease, in whole or in part, or surrendering all or any part of the Premises to the Landlord, and by notices, demands, requests or other communication which may hereafter be given, by the individual or individuals authorized to execute this Lease on behalf of Partnership Tenant under Subparagraph (p) above. (C) Any bills, statements, notices, demands, requests or other communications given or rendered to Partnership Tenant or to any of the parties comprising Partnership Tenant shall be deemed given or rendered to Partnership Tenant and to all such parties and shall be binding upon Partnership Tenant and all such parties. (D) If Partnership Tenant admits new partners, all of such new partners shall, by their admission to Partnership Tenant, be deemed to have assumed performance of all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed. (E) Partnership Tenant shall give prompt notice to Landlord of the admission of any such new partners, and, upon demand of Landlord, shall cause each such new partner to execute and deliver to Landlord an agreement in form satisfactory to Landlord, wherein each such new partner shall assume performance of all of the terms, covenants and conditions of this Lease on Partnership Tenant's part to be observed and performed (but neither Landlord's failure to request any such agreement nor the failure of any such new partner to execute or deliver any such agreement to Landlord shall terminate the provisions of clause (D) of this Section 30(q)(ii) or relieve any such new partner of its obligations thereunder). (r) Intentionally Deleted. (s) Survival of Obligations. Any obligations of Tenant occurring prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination. (t) Confidentiality. Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant's financial, legal and space planning consultants and any proposed Transferees. (u) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of California. No conflicts of law rules of any state or country (including, without limitation, California conflicts of law rules) shall be applied to result in the application of any substantive or procedural laws of any state or country other than California. All controversies, claims, actions or causes of action arising between the parties hereto and/or their respective successors and assigns, shall be brought, heard and adjudicated by the courts of the State of California, with venue in the county in which the Project is located. Each of the parties hereto hereby consents to personal jurisdiction by the courts of the State of California in connection with any such controversy, claim, action or cause of action, and each of the parties hereto consents to service of process by any means authorized by California law and consent to the enforcement of any judgment so obtained in the courts of the State of California on the same terms and conditions as if such controversy, claim, action or cause of action had been originally heard and adjudicated to a final judgment in such courts. Each of the parties hereto further acknowledges that the laws and courts of California were freely and voluntarily chosen to govern this Lease and to adjudicate any claims or disputes hereunder. (v) Office of Foreign Assets Control. Tenant certifies to Landlord that (i) Tenant is not entering into this Lease, nor acting, for or on behalf of any person or entity named as a terrorist or other banned or blocked person or entity pursuant to any law, order, rule or regulation of the United States Treasury Department or the Office of Foreign Assets Control, and (ii) Tenant shall not assign this Lease or sublease to any such person or entity or anyone acting on behalf of any such person or entity. Landlord shall have the right to conduct all reasonable searches in order to ensure compliance with the foregoing. Tenant hereby agrees to indemnify, defend and hold Landlord and the Landlord Parties harmless from any and all claims arising from or related to any breach of the foregoing certification. (w) Financial Statements. Within ten (10) days after Tenant's receipt of Landlord's written request but no more frequently than once per calendar year, Tenant shall provide Landlord -29- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 with current financial statements of Tenant and financial statements for the three (3) calendar or fiscal years (if Tenant's fiscal year is other than a calendar year) prior to the current financial statement year. Any such statements shall be prepared in accordance with generally accepted accounting principles and, if the normal practice of Tenant, shall be audited by an independent certified public accountant. (x) Exhibits. The Exhibits attached hereto are incorporated herein by this reference as if fully set forth herein. (y) Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent (and not dependent) and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to set off of any of the rent or other amounts owing hereunder against Landlord. (z) Counterparts. This Lease may be executed in counterparts, each of which shall be deemed an original, but such counterparts, when taken together, shall constitute one agreement. (aa) Non-Discrimination. Tenant herein covenants that Tenant and its heirs, executors, administrators and assigns, and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall Tenant, or any person claiming under or through Tenant, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, subtenants or vendees in the Premises." (bb) California Certified Access Specialist Inspection. Pursuant to California Civil Code §1938, Landlord hereby states that the Premises have not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code §55.52(a)(3)). Pursuant to Section 1938 of the California Civil Code, Landlord hereby provides the following notification to Tenant: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction related accessibility standards within the premises." If Tenant requests to perform a CASp inspection of the Premises, (i) Tenant shall, at its cost, retain a CASp approved by Landlord (provided that Landlord may designate the CASp, at Landlord’s option) to perform the inspection of the Premises at a time agreed upon by the parties, (ii) Tenant shall provide Landlord with a copy of any report or certificate issued by the CASp (the "CASp Report"), and (iii) Tenant shall, at its cost, promptly complete any modifications necessary to correct violations of construction related accessibility standards identified in the CASp Report, which modifications will be completed as part of the Improvements or as an Alteration, as applicable, notwithstanding anything to the contrary in this Lease. Tenant agrees to keep the information in the CASp Report confidential except as necessary for the Tenant to complete such modifications. (cc) Pet-Friendly Environment. Notwithstanding any contrary provision of this Lease, Landlord, at its option and in its sole and absolute discretion, may permit tenants of the Project to bring dogs and other pets into the Project, subject to such rules, regulations, policies and procedures as Landlord may establish in good faith from time to time in order to promote a pet- friendly work environment consistent with a contemporary, first-class office project (collectively "Pet-Friendly Rules"). Tenant acknowledges and agrees that the presence of dogs and other pets in the Project in conformity with Pet-Friendly Rules will not be incompatible with a first-class -30- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 office project and will not breach any covenant or quiet enjoyment or other obligation of Landlord under or relating to this Lease. Tenant shall comply with any Pet-Friendly Rules established by Landlord from time to time. For the avoidance of doubt, Tenant shall not bring into the Project or the Premises any dog or other pet (other than a service animal legally required to be admitted) unless and except to the extent, if any, that such activity is permitted under any then-existing Pet- Friendly Rules. (dd) Relocation Allowance. Landlord hereby agrees to reimburse Tenant for costs up to $8,687.00 (based on $1.00 per rentable square foot of the Premises) (the "Relocation Allowance") that Tenant actually incurs in relocating from Tenant's current office space to the Premises (collectively "Moving Costs"). Landlord shall reimburse Tenant for Moving Costs within thirty (30) days after the later of (i) Landlord's receipt of invoices evidencing Tenant's Moving Costs, and (ii) the Commencement Date. Notwithstanding the foregoing, upon written notice to Landlord, Tenant may elect to apply all or any portion of the Relocation Allowance (A) to reimburse Tenant for costs incurred for furniture, fixtures or equipment ("FF&E") to be installed in the Premises, or (B) as a credit against Tenant's monthly Basic Rental obligation. In the event Tenant elects to apply the Relocation Allowance to reimburse Tenant for FF&E, Landlord shall reimburse Tenant for FF&E within thirty (30) days after the later of (1) Landlord's receipt of invoices evidencing Tenant's FF&E costs, and (2) the Commencement Date. If Tenant elects to apply all or any portion of the Relocation Allowance as a credit against monthly Basic Rental, such credit shall be applied as a credit toward Tenant's monthly Basic Rental obligation for the third (3rd) full calendar month of the Term. In no event shall Landlord be obligated to make disbursements pursuant to this Section 30(dd) in a total amount which exceeds the Relocation Allowance and in no event shall Tenant be entitled to any credit for any portion of the Relocation Allowance not used by Tenant or applied as a credit against monthly Basic Rental within ninety (90) days after the Commencement Date. ARTICLE 31 OPTION TO EXTEND (a) Option Right. Landlord hereby grants the Tenant named in this Lease (the "Original Tenant") one (1) option ("Option") to extend the Term for the entire Premises for a period of five (5) years (an "Option Term"), which Option shall be exercisable only by written notice delivered by Tenant to Landlord as set forth below. The rights contained in this Article 31 shall be personal to the Original Tenant and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) if the Original Tenant occupies the entire Premises as of the date of Tenant's Acceptance (as defined in Section 31(c) below). (b) Option Rent. The rent payable by Tenant during the Option Term ("Option Rent") shall be equal to the "Market Rent" (defined below). "Market Rent" shall mean the applicable Monthly Basic Rental, and all escalations, Direct Costs, additional rent and other charges at which tenants, as of the commencement of the Option Term, are entering into leases for non-sublease space which is not encumbered by expansion rights and which is comparable in size, location and quality to the Premises in renewal transactions for a term comparable to the Option Term which comparable space is located in the Development and in office buildings comparable to the Project in the John Wayne Airport Area of Irvine, California, taking into consideration the value of the existing improvements in the Premises to Tenant, as compared to the value of the existing improvements in such comparable space, with such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by Tenant with consideration given to the fact that the improvements existing in the Premises are specifically suitable to Tenant. (c) Exercise of Option. The Option shall be exercised by Tenant only in the following manner: (i) Tenant shall not be in default, and shall not have been in default under this Lease more than once, on the delivery date of the Interest Notice and Tenant's Acceptance; (ii) Tenant shall deliver written notice ("Interest Notice") to Landlord not more than twelve (12) months nor less than nine (9) months prior to the expiration of the Term, stating that Tenant is interested in exercising the Option; (iii) within fifteen (15) business days of Landlord's receipt of Tenant's written notice, Landlord shall deliver notice ("Option Rent Notice") to Tenant setting forth the Option Rent; and (iv) if Tenant desires to exercise such Option, Tenant shall provide Landlord written notice within five (5) business days after receipt of the Option Rent Notice ("Tenant's Acceptance"). Tenant's failure to deliver the Interest Notice or Tenant's Acceptance on or before -31- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 the dates specified above shall be deemed to constitute Tenant's election not to exercise the Option. If Tenant timely and properly exercises its Option, the Term shall be extended for the Option Term upon all of the terms and conditions set forth in this Lease, except that the rent for the Option Term shall be as indicated in the Option Rent Notice. ARTICLE 32 SIGNAGE/DIRECTORY Provided Tenant is not in default hereunder, Tenant, at Landlord's sole cost and expense, shall have the right to Project standard suite entry signage and one (1) line in the lobby directory during the Term. ARTICLE 33 FURNITURE For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord hereby transfers to Tenant ownership of the furniture and equipment currently located within the Premises and listed on Exhibit "E" attached hereto (collectively, the "Furniture"). Landlord has made no representations or warranties, expressed, implied or otherwise regarding the condition or working order of the Furniture and Tenant confirms that it has had the reasonable opportunity to inventory and inspect the furniture and to accept the Furniture in its "as-is" condition. [ Signature page follows ] -32- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 IN WITNESS WHEREOF, the parties have executed this Lease, consisting of the foregoing provisions and Articles, including all exhibits and other attachments referenced therein, as of the date first above written. "LANDLORD" BRE CA OFFICE OWNER LLC, a Delaware limited liability company By: Print Name: Spencer Rose Title: Managing Director "TENANT" PHUNWARE, INC., a Delaware corporation By: Print Name: Matt Aune Title: Chief Financial Officer By: Print Name: Title: -33- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 EXHIBIT "A" PREMISES This Exhibit "A" is provided for informational purposes only and is intended to be only an approximation of the layout of the Premises and shall not be deemed to constitute any representation by Landlord as to the exact layout or configuration of the Premises. EXHIBIT "A" -1- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 EXHIBIT "B" RULES AND REGULATIONS 1. No sign, advertisement or notice shall be displayed, printed or affixed on or to the Premises or to the outside or inside of the Project or so as to be visible from outside the Premises or Project without Landlord's prior written consent. Landlord shall have the right to remove any non-approved sign, advertisement or notice, without notice to and at the expense of Tenant, and Landlord shall not be liable in damages for such removal. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by Landlord or by a person selected by Landlord and in a manner and style acceptable to Landlord. 2. Tenant shall not obtain for use on the Premises ice, waxing, cleaning, interior glass polishing, rubbish removal, towel or other similar services, or accept barbering or bootblackening, or coffee cart services, milk, soft drinks or other like services on the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord. No vending machines or machines of any description shall be installed, maintained or operated upon the Premises without Landlord's prior written consent. 3. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used for any purpose other than for ingress and egress from Tenant's Premises. Under no circumstances is trash to be stored in the corridors. Notice must be given to Landlord for any large deliveries. Furniture, freight and other large or heavy articles, and all other deliveries may be brought into the Project only at times and in the manner designated by Landlord, and always at Tenant's sole responsibility and risk. Landlord may impose reasonable charges for use of freight elevators after or before normal business hours. All damage done to the Project by moving or maintaining such furniture, freight or articles shall be repaired by Landlord at Tenant's expense. Tenant shall not take or permit to be taken in or out of entrances or passenger elevators of the Project, any item normally taken, or which Landlord otherwise reasonably requires to be taken, in or out through service doors or on freight elevators. Tenant shall move all supplies, furniture and equipment as soon as received directly to the Premises, and shall move all waste that is at any time being taken from the Premises directly to the areas designated for disposal. 4. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. 5. Tenant shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, ceilings or floor or in any way deface the Premises. Tenant shall not place typed, handwritten or computer generated signs in the corridors or any other common areas. Should there be a need for signage additional to the Project standard tenant placard, a written request shall be made to Landlord to obtain approval prior to any installation. All costs for said signage shall be Tenant's responsibility. 6. In no event shall Tenant place a load upon any floor of the Premises or portion of any such flooring exceeding the floor load per square foot of area for which such floor is designed to carry and which is allowed by law, or any machinery or equipment which shall cause excessive vibration to the Premises or noticeable vibration to any other part of the Project. Prior to bringing any heavy safes, vaults, large computers or similarly heavy equipment into the Project, Tenant shall inform Landlord in writing of the dimensions and weights thereof and shall obtain Landlord's consent thereto. Such consent shall not constitute a representation or warranty by Landlord that the safe, vault or other equipment complies, with regard to distribution of weight and/or vibration, with the provisions of this Rule 6 nor relieve Tenant from responsibility for the consequences of such noncompliance, and any such safe, vault or other equipment which Landlord determines to constitute a danger of damage to the Project or a nuisance to other tenants, either alone or in combination with other heavy and/or vibrating objects and equipment, shall be promptly removed by Tenant, at Tenant's cost, upon Landlord's written notice of such determination and demand for removal thereof. 7. Tenant shall not use or keep in the Premises or Project any kerosene, gasoline or inflammable, explosive or combustible fluid or material, or use any method of heating or air- conditioning other than that supplied by Landlord. EXHIBIT "B" -1- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 8. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord. 9. Tenant shall not install or use any blinds, shades, awnings or screens in connection with any window or door of the Premises and shall not use any drape or window covering facing any exterior glass surface other than the standard drapes, blinds or other window covering established by Landlord. 10. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of the cooling system by closing window coverings when the sun's rays fall directly on windows of the Premises. Tenant shall not obstruct, alter, or in any way impair the efficient operation of Landlord's heating, ventilating and air-conditioning system. Tenant shall not tamper with or change the setting of any thermostats or control valves. Tenant shall participate in recycling programs undertaken by Landlord as part of Landlord's sustainability practices including, without limitation, the sorting and separation of its trash and recycling into such categories as required by such sustainability practices. 11. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the permitted use of the Premises. Tenant shall not, without Landlord's prior written consent, occupy or permit any portion of the Premises to be occupied or used for the manufacture or sale of liquor or tobacco in any form, or a barber or manicure shop, or as an employment bureau. The Premises shall not be used for lodging or sleeping or for any improper, objectionable or immoral purpose. No auction shall be conducted on the Premises. 12. Tenant shall not make, or permit to be made, any unseemly or disturbing noises, or disturb or interfere with occupants of Project or neighboring buildings or premises or those having business with it by the use of any musical instrument, radio, phonographs or unusual noise, or in any other way. 13. No vehicles or animals (except as provided in Section 30(cc) of the Lease) of any kind shall be brought into or kept in or about the Premises, and no cooking shall be done or permitted by any tenant in the Premises, except that the preparation of coffee, tea, hot chocolate and similar items for tenants, their employees and visitors shall be permitted. No tenant shall cause or permit any unusual or objectionable odors to be produced in or permeate from or throughout the Premises. The foregoing notwithstanding, Tenant shall have the right to use a microwave and to heat microwavable items typically heated in an office. No hot plates, toasters, toaster ovens or similar open element cooking apparatus shall be permitted in the Premises unless authorized by Landlord in writing. 14. The sashes, sash doors, skylights, windows and doors that reflect or admit light and air into the halls, passageways or other public places in the Project shall not be covered or obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the window sills. All electrical ceiling fixtures hung in the Premises or spaces along the perimeter of the Project must be of a quality, type, design and bulb color approved in advance by Landlord. 15. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanisms thereof unless Landlord is first notified thereof, gives written approval, and is furnished a key therefor. Each tenant must, upon the termination of his tenancy, give to Landlord all keys and key cards of stores, offices, or toilets or toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant shall pay Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change. If more than two keys for one lock are desired, Landlord will provide them upon payment therefor by Tenant. Tenant shall not key or re-key any locks. All locks shall be keyed by Landlord's locksmith only. 16. Landlord shall have the right to prohibit any advertising by any tenant which, in Landlord's opinion, tends to impair the reputation of the Project or its desirability as an office building and upon written notice from Landlord any tenant shall refrain from and discontinue such advertising. EXHIBIT "B" -2- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 17. Landlord reserves the right to control access to the Project by all persons after reasonable hours of generally recognized business days and at all hours on Sundays and legal holidays and may at all times control access to the equipment areas of the Project outside the Premises. Each tenant shall be responsible for all persons for whom it requests after hours access and shall be liable to Landlord for all acts of such persons. Landlord shall have the right from time to time to establish reasonable rules and charges pertaining to freight elevator usage, including the allocation and reservation of such usage for tenants' initial move-in to their premises, and final departure therefrom. Landlord may also establish from time to time reasonable rules and charges for accessing the equipment areas of the Project, including the risers, rooftops and telephone closets. 18. Any person employed by any tenant to do janitorial work shall, while in the Project and outside of the Premises, be subject to and under the control and direction of the Office of the Project or its designated representative such as security personnel (but not as an agent or servant of Landlord, and the Tenant shall be responsible for all acts of such persons). 19. All doors opening on to public corridors shall be kept closed, except when being used for ingress and egress. Tenant shall cooperate and comply with any reasonable safety or security programs, including fire drills and air raid drills, and the appointment of "fire wardens" developed by Landlord for the Project, or required by law. Before leaving the Premises unattended, Tenant shall close and securely lock all doors or other means of entry to the Premises and shut off all lights and water faucets in the Premises. 20. The requirements of tenants will be attended to only upon application to the management office of the Project. 21. Canvassing, soliciting and peddling in the Project are prohibited and each tenant shall cooperate to prevent the same. 22. All office equipment of any electrical or mechanical nature shall be placed by tenants in the Premises in settings approved by Landlord, to absorb or prevent any vibration, noise or annoyance. 23. No air-conditioning unit or other similar apparatus shall be installed or used by any tenant without the prior written consent of Landlord. Tenant shall pay the cost of all electricity used for air-conditioning in the Premises if such electrical consumption exceeds normal office requirements, regardless of whether additional apparatus is installed pursuant to the preceding sentence. 24. There shall not be used in any space, or in the public halls of the Project, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards. 25. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Project must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord. Tenant shall not permit the consumption in the Premises of more than 2½ watts per net usable square foot in the Premises in respect of office lighting nor shall Tenant permit the consumption in the Premises of more than 1½ watts per net usable square foot of space in the Premises in respect of the power outlets therein, at any one time. In the event that such limits are exceeded, Landlord shall have the right to require Tenant to remove lighting fixtures and equipment and/or to charge Tenant for the cost of the additional electricity consumed. 26. Parking. (a) Subject to Landlord's reasonable security requirements, repairs made by Landlord to the Project and Articles 16 and 18 of the Lease, Tenant shall have access to the Project parking facility twenty-four (24) hours per day, seven (7) days per week throughout the Term. (b) Automobiles must be parked entirely within the stall lines on the floor. (c) All directional signs and arrows must be observed. (d) The speed limit shall be 5 miles per hour. (e) Parking is prohibited in areas not striped for parking. EXHIBIT "B" -3- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 (f) Parking cards or any other device or form of identification supplied by Landlord (or its operator) shall remain the property of Landlord (or its operator). Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Devices are not transferable or assignable and any device in the possession of an unauthorized holder will be void. There will be a replacement charge to the Tenant or person designated by Tenant of $30.00 for loss of any parking card. There shall be a security deposit of $30.00 due at issuance for each card key issued to Tenant. (g) The monthly rate for reserved parking is payable one (1) month in advance and must be paid by the third business day of each month. Failure to do so will automatically cancel parking privileges and a charge at the prevailing daily rate will be due. No deductions or allowances from the monthly rate will be made for days parker does not use the parking facilities. After the initial term and in the event Landlord implements charges for unreserved parking, the monthly rate for unreserved parking will be payable one (1) month in advance and must be paid by the third business day of each month. Failure to do so will automatically cancel parking privileges and a charge at the prevailing daily rate will be due. No deductions or allowances from the monthly rate will be made for days parker does not use the parking facilities. (h) Tenant may validate visitor parking by such method or methods as the Landlord may approve, at the validation rate from time to time generally applicable to visitor parking. (i) Landlord (and its operator) may refuse to permit any person who violates the within rules to park in the Project parking facility, and any violation of the rules shall subject the automobile to removal from the Project parking facility at the parker's expense. In either of said events, Landlord (or its operator) shall refund a prorata portion of the current monthly parking rate and the sticker or any other form of identification supplied by Landlord (or its operator) will be returned to Landlord (or its operator). (j) Project parking facility managers or attendants are not authorized to make or allow any exceptions to these Rules and Regulations. (k) All responsibility for any loss or damage to automobiles or any personal property therein is assumed by the parker. (l) Loss or theft of parking identification devices from automobiles must be reported to the Project parking facility manager immediately, and a lost or stolen report must be filed by the parker at that time. (m) The parking facilities are for the sole purpose of parking one automobile per space. Washing, waxing, cleaning or servicing of any vehicles by the parker or his agents is prohibited. (n) Landlord (and its operator) reserves the right to refuse the issuance of monthly stickers or other parking identification devices to any Tenant and/or its employees who refuse to comply with the above Rules and Regulations and all City, State or Federal ordinances, laws or agreements. (o) Tenant agrees to acquaint all employees with these Rules and Regulations. (p) No vehicle shall be stored in the Project parking facility for a period of more than one (1) week. 27. The Project is a non-smoking Project. Smoking or carrying lighted cigars or cigarettes in the Premises or the Project, including the elevators in the Project, is prohibited. 28. Tenant shall not, without Landlord's prior written consent (which consent may be granted or withheld in Landlord's absolute discretion), allow any employee or agent to carry any type of gun or other firearm in or about any of the Premises or Project. EXHIBIT "B" -4- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 EXHIBIT "C" NOTICE OF TERM DATES AND TENANT'S PROPORTIONATE SHARE TO: DATE: RE: Lease dated ________________, 20__, between ________________________________ ______________________________ ("Landlord"), and _________________________ ______________________________ ("Tenant"), concerning Suite ________, located at __________________________________________. Ladies and Gentlemen: In accordance with the Lease, Landlord wishes to advise and/or confirm the following: 1. That the Premises have been accepted herewith by the Tenant as being substantially complete in accordance with the Lease and that there is no deficiency in construction. 2. That the Tenant has taken possession of the Premises and acknowledges that under the provisions of the Lease the Term of said Lease shall commence as of ____________ for a term of ________________________ ending on ________________________. 3. That in accordance with the Lease, Basic Rental commenced to accrue on ________________________. 4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a prorata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in said Lease. 5. Rent is due and payable in advance on the first day of each and every month during the Term of said Lease. Your rent checks should be made payable to ________________________ at ________________________________________________. 6. The exact number of rentable square feet within the Premises is __________ square feet. 7. Tenant's Proportionate Share, as adjusted based upon the exact number of rentable square feet within the Premises is _______%. AGREED AND ACCEPTED: TENANT: , a By: Its: EXHIBIT ONLY ***DO NOT SIGN*** EXHIBIT "C" -1- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 EXHIBIT "D" TENANT WORK LETTER [PHUNWARE, INC.] This Tenant Work Letter shall set forth the terms and conditions relating to the renovation of the tenant improvements in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise. SECTION 1 CONSTRUCTION DRAWINGS FOR THE PREMISES Landlord shall construct the improvements in the Premises (the "Improvements") pursuant to that certain plans attached hereto as Schedule 1 (collectively, the "Plans"). Unless specifically noted to the contrary on the Plans, the Improvements shall be constructed using Project-standard quantities, specifications and materials as determined by Landlord. If determined by Landlord to be necessary, based upon the Plans, Landlord shall cause the Architect to prepare detailed plans and specifications for the Improvements ("Working Drawings"). Landlord shall then forward the Working Drawings to Tenant for Tenant's approval. Tenant shall approve or reasonably disapprove any draft of the Working Drawings within three (3) business days after Tenant's receipt thereof; provided, however, that (i) Tenant shall not be entitled to disapprove any portion, component or aspect of the Working Drawings which are consistent with the Plans unless Tenant agrees to pay for the additional cost resulting from such change in the Plans as part of the Over-Allowance Amount pursuant to Section 2 below, and (ii) any disapproval of the Working Drawings by Tenant shall be accompanied by a detailed written explanation of the reasons for Tenant's disapproval. Failure of Tenant to reasonably disapprove any draft of the Working Drawings within said three (3) business day period shall be deemed to constitute Tenant's approval thereof. The Working Drawings, as approved by Landlord and Tenant, may be referred to herein as the "Approved Working Drawings." Tenant shall make no changes or modifications to the Plans or the Approved Working Drawings without the prior written consent of Landlord. SECTION 2 OVER-ALLOWANCE AMOUNT In the event any revisions, changes, or substitutions are made with Tenant's consent to the Plans or the Approved Working Drawings or the Improvements, any additional costs which arise in connection with such revisions, changes or substitutions shall be considered to be an "Over- Allowance Amount." The Over-Allowance Amount shall be paid by Tenant to Landlord, as Additional Rent, within ten (10) days after Tenant's receipt of invoice therefor. The Over- Allowance Amount shall be disbursed by Landlord prior to the disbursement of any portion of Landlord's contribution to the construction of the Improvements. SECTION 3 RETENTION OF CONTRACTOR; WARRANTIES AND GUARANTIES Landlord hereby assigns to Tenant all warranties and guaranties by the contractor who constructs the Improvements (the "Contractor") relating to the Improvements, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Improvements. The Contractor shall be designated and retained by Landlord to construct the Improvements. EXHIBIT " D" -1- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SECTION 4 TENANT'S COVENANTS Tenant shall, at no cost to Tenant, cooperate with Landlord and the space planner or architect retained by Landlord ("Architect") to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Orange in accordance with Section 8182 of the Civil Code of the State of California or any successor statute upon completion of construction of the Improvements. SECTION 5 COMPLETION OF THE IMPROVEMENTS 5.1 Substantial Completion. For purposes of this Lease, "Substantial Completion" of the Improvements in the Premises shall occur upon the completion of construction of the Improvements in the Premises pursuant to the Approved Working Drawings, with the exception of any punch list items and any tenant fixtures, work-stations, built-in furniture, or equipment to be installed by Tenant. 5.2 Delay of the Substantial Completion of the Premises. Except as provided in this Section 5.2, the Beneficial Occupancy Date and the Commencement Date shall occur as set forth in the Lease. If there shall be a delay or there are delays in the Substantial Completion of the Improvements in the Premises as a result of the following (collectively, "Tenant Delays"): 5.2.1 Tenant's failure to timely approve any matter requiring Tenant's approval; 5.2.2 A breach by Tenant of the terms of this Tenant Work Letter or the Lease; 5.2.3 Tenant's request for changes in the Plans, Working Drawings or Approved Working Drawings; 5.2.4 Changes in any of the Plans, Working Drawings or Approved Working Drawings because the same do not comply with applicable laws; 5.2.5 Tenant's requirement for materials, components, finishes or improvements which are not available in a commercially reasonable time given the anticipated date of Substantial Completion of the Improvements in the Premises, or which are different from, or not included in, Landlord's standard improvement package items for the Project; 5.2.6 Changes to the base, shell and core work of the Project required by the Approved Working Drawings or any changes thereto; or 5.2.7 Any other acts or omissions of Tenant, or its agents, or employees; then, notwithstanding anything to the contrary set forth in the Lease or this Tenant Work Letter and regardless of the actual date of the Substantial Completion of the Improvements in the Premises, the date of Substantial Completion thereof shall be deemed to be the date that Substantial Completion would have occurred if no Tenant Delay or Delays, as set forth above, had occurred. SECTION 6 MISCELLANEOUS 6.1 Tenant's Representative. Tenant has designated Tracy Nolazco as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter. 6.2 Landlord's Representative. Prior to commencement of construction of the Improvements, Landlord shall designate a representative with respect to the matters set forth in EXHIBIT " D" -2- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter. 6.3 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a "number of days" shall mean and refer to calendar days. 6.4 Tenant's Entry into the Premises Prior to Substantial Completion. Provided that Tenant and its agents do not interfere with Landlord's work in the Premises, Landlord shall allow Tenant access to the Premises prior to the date of Substantial Completion of the Improvements for the purpose of Tenant installing furniture and equipment in the Premises. Prior to Tenant's entry into the Premises as permitted by the terms of this Section 6.4, Tenant shall submit certificates of insurance reasonably acceptable to Landlord and shall submit a schedule to Landlord (and the Contractor, if so requested by Landlord), for their approval, which schedule shall detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Project or Premises and against injury to any persons caused by Tenant's actions pursuant to this Section 6.4. EXHIBIT " D" -3- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 PLANS SCHEDULE 1 -1- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 -2- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 -3- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 -4- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 -5- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 SCHEDULE 1 -6- 4825-0360-7189.6

DocuSign Envelope ID: F32E88BC-4608-425B-A72B-F97928691E01 EXHIBIT "E" FURNITURE LIST • 6 Bar Stools • 1 Wood Table – Bar Height • 4 Multicolored Lounge Chairs – 2 by the sofa and two by the entry • 1 Teal Velvet Sofa • 1 Round End Table • 1 Coffee Table • 1 Shuffleboard Table Game • 1 Area Rug • 7 Decorative Pillows EXHIBIT "E" -1- 4825-0360-7189.6

EX-10.4

EX-10.5

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Alan S. Knitowski, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Phunware Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2019	By:	/s/ Alan S. Knitowski
		Alan S. Knitowski Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Matt Aune, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Phunware Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 13, 2019	By:	/s/ Matt Aune
		Matt Aune Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Alan S. Knitowski, Chief Executive Officer (Principal Executive Officer) of Phunware, Inc. (the “Company”), and Matt Aune, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, each hereby certifies that, to the best of his or her knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 13, 2019 Phunware, Inc.

By:	/s/Alan S. Knitowski
	Name:	Chief Executive Officer
	Title:	(Principal Executive Officer)

By:	/s/ Matt Aune
	Name:	Matt Aune
	Title:	Chief Financial Officer
		(Principal Accounting and Financial Officer)

“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Phunware, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 08, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	Phunware, Inc.
Entity Central Index Key	0001665300
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Ex Transition Period	false
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		38,966,575

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Condensed Consolidated Balance Sheet - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash	$ 248	$ 844
Accounts receivable, net	3,546	3,606
Prepaid expenses and other current assets	740	272
Total current assets	4,534	4,722
Property and equipment, net	36	66
Goodwill	25,817	25,821
Intangible assets, net	378	521
Deferred tax asset – long term	64	64
Restricted Cash	0	5,500
Other assets	187	187
Total assets	31,016	36,881
Current liabilities:
Accounts payable	9,083	9,890
Accrued expenses	3,357	3,028
Deferred revenue	2,101	2,629
PhunCoin deposits	1,181	0
Factored receivables payable	1,775	2,434
Short term notes payable - related party	0	1,993
Total current liabilities	17,497	19,974
Convertible note payable (see Note 5)	250	0
Deferred tax liability	64	64
Deferred revenue	5,048	5,622
Deferred rent	14	17
Total liabilities	22,873	25,677
Commitments and contingencies (see Note 6)
Redeemable convertible preferred stock, $0.0001 par value (see Note 8)	0	5,377
Stockholders’ equity
Common stock, $0.0001 par value (see Note 9)	4	3
Additional paid in capital	125,854	118,062
Accumulated other comprehensive loss	(421)	(418)
Accumulated deficit	(117,294)	(111,820)
Total stockholders’ equity	8,143	5,827
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity	$ 31,016	$ 36,881

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Condensed Consolidated Balance Sheet (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Redeemable convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Commitments and contingencies (see Note 6)

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net revenues	$ 5,510	$ 14,185	$ 10,825	$ 19,165
Cost of revenues	2,722	3,069	5,339	5,936
Gross profit	2,788	11,116	5,486	13,229
Operating expenses:
Sales and marketing	665	1,414	1,389	3,332
General and administrative	3,970	3,318	7,945	7,807
Research and development	1,077	1,718	2,386	4,018
Total operating expenses	5,712	6,450	11,720	15,157
Operating (loss) income	(2,924)	4,666	(6,234)	(1,928)
Interest expense
Interest expense	(151)	(183)	(339)	(385)
Fair value adjustment for warrant liabilities	0	0	0	(54)
Impairment of digital currencies	0	(21)	0	(334)
Other income	13	10	17	9
Total other expense	(138)	(194)	(322)	(764)
(Loss) income before taxes	(3,062)	4,472	(6,556)	(2,692)
Income tax expense	(5)	0	(5)	0
Net (loss) income	(3,067)	4,472	(6,561)	(2,692)
Other comprehensive loss
Cumulative translation adjustment	(30)	(81)	(3)	(27)
Comprehensive (loss) income	$ (3,097)	$ 4,391	$ (6,564)	$ (2,719)
Net (loss) income per share, basic (in dollars per share)	$ (0.08)	$ 0.18	$ (0.19)	$ (0.11)
Net (loss) income per share, diluted (in dollars per share)	$ (0.08)	$ 0.17	$ (0.19)	$ (0.11)
Weighted-average shares used to compute net (loss) income per share, basic (in shares)	38,810	25,396	34,537	25,174
Weighted-average shares used to compute net (loss) income per share, diluted (in shares)	38,810	26,164	34,537	25,174

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Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Other Comprehensive Loss
Beginning balance at Dec. 31, 2017	$ 7,904		$ 3	$ 110,265	$ (102,017)	$ (347)
Beginning balance (in shares) at Dec. 31, 2017			24,559,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, net of vesting of restricted shares	127			127
Exercise of stock options, net of vesting of restricted shares (in shares)			226,000
Issuance of common stock, net of issuance costs	9,574			9,574
Issuance of common stock, net of issuance costs (in shares)			1,086,000
Stock-based compensation expense	211			211
43100	(27)					(27)
Exercise of stock options, net of vesting of restricted shares	(2,692)				(2,692)
Ending balance at Jun. 30, 2018	15,097		$ 3	120,177	(104,709)	(374)
Ending balance (in shares) at Jun. 30, 2018			25,871,000
Beginning balance at Mar. 31, 2018	5,772		$ 3	115,243	(109,181)	(293)
Beginning balance (in shares) at Mar. 31, 2018			25,135,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, net of vesting of restricted shares	102			102
Exercise of stock options, net of vesting of restricted shares (in shares)			193,000
Issuance of common stock, net of issuance costs	4,770			4,770
Issuance of common stock, net of issuance costs (in shares)			543,000
Stock-based compensation expense	62			62
43100	(81)					(81)
Exercise of stock options, net of vesting of restricted shares	4,472				4,472
Ending balance at Jun. 30, 2018	15,097		$ 3	120,177	(104,709)	(374)
Ending balance (in shares) at Jun. 30, 2018			25,871,000
Beginning balance at Dec. 31, 2018	5,827	$ 5,377	$ 3	118,062	(111,820)	(418)
Beginning balance (in shares) at Dec. 31, 2018		6	27,253,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, net of vesting of restricted shares	52			52
Exercise of stock options, net of vesting of restricted shares (in shares)			119,000
Exercise of common stock warrants for cash	6,184			6,184
Exercise of common stock warrants for cash (in shares)			617,000
Exercise of common stock warrants pursuant to cashless provisions	0		$ 1	(1)
Exercise of common stock warrants pursuant to cashless provisions (in shares)			10,913,000
Series A convertible preferred stock redeemed for cash	(863)	$ (5,377)		(863)
Series A convertible preferred stock redeemed for cash (in shares)		(6)
Waiver of sponsor promissory note originally issued in conjunction with Reverse Merger and Recapitalization	1,993			1,993
Stock-based compensation expense	427			427
43100	(3)					(3)
Exercise of stock options, net of vesting of restricted shares	(6,561)				(6,561)
Ending balance at Jun. 30, 2019	8,143		$ 4	125,854	(117,294)	(421)
Ending balance (in shares) at Jun. 30, 2019			38,902,000
Beginning balance at Mar. 31, 2019	10,807		$ 4	125,421	(114,227)	(391)
Beginning balance (in shares) at Mar. 31, 2019			38,331,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options, net of vesting of restricted shares	17			17
Exercise of stock options, net of vesting of restricted shares (in shares)			58,000
Exercise of common stock warrants pursuant to cashless provisions	0
Exercise of common stock warrants pursuant to cashless provisions (in shares)			513,000
Stock-based compensation expense	416			416
43100	(30)					(30)
Exercise of stock options, net of vesting of restricted shares	(3,067)				(3,067)
Ending balance at Jun. 30, 2019	8,143		$ 4	$ 125,854	(117,294)	$ (421)
Ending balance (in shares) at Jun. 30, 2019			38,902,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative-effect adjustment resulting from the adoption of ASU 2014-09 (Note 2)	$ 1,087				$ 1,087

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Exercise of stock options, net of vesting of restricted shares	$ (6,561)	$ (2,692)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	30	32
Loss (gain) on sale of digital currencies	4	(10)
Bad debt expense	132	68
Amortization of acquired intangibles	143	211
Change in fair value of warrants	0	54
Impairment of digital currencies	0	334
Stock-based compensation	427	211
Changes in operating assets and liabilities:
Accounts receivable	(71)	1,505
Prepaid expenses and other assets	(99)	118
Deferred merger costs	0	(857)
Accounts payable	(807)	2,067
Accrued expenses	330	(6,504)
Warrant liability	0	450
Deferred revenue	606	(1,006)
Net cash used in operating activities	(5,866)	(6,019)
Investing activities
Proceeds received from sale of digital currencies	88	175
Payments for note receivable	0	(325)
Net cash provided by (used in) investing activities	88	(150)
Financing activities
Proceeds from convertible note	250	0
Proceeds from PhunCoin deposits	191	0
Net (repayments) proceeds from factoring agreement	(659)	521
Proceeds from common stock subscriptions, net of issuance costs	0	5,459
Proceeds from warrant exercises	6,092	0
Proceeds from exercise of options to purchase common stock	52	128
Series A convertible preferred stock redemptions and dividend payments	(6,240)	0
Net cash (used in) provided by financing activities	(314)	6,108
Effect of exchange rate on cash and restricted cash	(4)	(26)
Net decrease in cash and restricted cash	(6,096)	(87)
Cash and restricted cash at the beginning of the period	6,344	308
Cash and restricted cash at the end of the period	248	221
Supplemental disclosure of cash flow information
Interest paid	361	370
Common stock issuances from subscription payable, net of fair value convertible stock warrants issued	$ 0	$ 9,604

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The Company and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company and Basis of Presentation

The Company and Basis of Presentation

The Company

Phunware, Inc. (the “Company”) is a provider of Multiscreen as a Service (MaaS) solutions, an integrated customer engagement platform that enables organizations to develop customized, immersive, branded mobile applications. The Company sells its services in vertical markets, including health care, retail, hospitality, transportation, sports, and entertainment. The Company enables brands to engage, manage, and monetize their anytime-anywhere mobile users. 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 developers, the Company also maximizes mobile monetization through an advertising product suite including real-time bidding, publisher mediation and yield optimization, cross-platform ad creation, and dynamic ad serving. Founded in 2009, the Company is a Delaware corporation headquartered in Austin, Texas.

Business Combination

On February 27, 2018, Phunware entered into an Agreement and Plan of Merger, as amended (collectively, the “Merger Agreement”) with Stellar Acquisition III, Inc. (“Stellar”). On December 26, 2018, the Company consummated the transaction contemplated by the Merger Agreement (the “Reverse Merger and Recapitalization”). In connection with the closing of the Reverse Merger and Recapitalization, the registrant changed its name from Stellar Acquisition III, Inc. to Phunware, Inc. (“Successor”). Furthermore, the holders of Phunware’s preferred stock converted all of their issued and outstanding shares of preferred stock into shares of Phunware common stock at a conversion ratio of one share of common stock for each share of preferred stock (the “Preferred Stock Exchange”). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Reverse Merger and Recapitalization (the “Effective Time”): (i) all shares of Phunware common stock and preferred stock (the “Phunware Stock”) issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Exchange) converted into the right to receive the Stockholder Merger Consideration (as defined below); (ii) each outstanding warrant to acquire shares of Phunware Stock was cancelled, retired and terminated in exchange for the right to receive from the Successor a new warrant for shares of Successor common stock with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration, but with terms otherwise the same as the Phunware warrant (each, a “Replacement Warrant”); and (iii) each outstanding option to acquire Phunware Stock (whether vested or unvested) was assumed by the Successor and automatically converted into an option to acquire shares of Successor common stock, with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration (each, an “Assumed Option”). The shares of Successor common stock and the Transferred Sponsor Warrants (as defined in Amendment No. 5 to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission ("SEC") on November 13, 2018) transferred to Phunware stockholders are collectively referred to as “Stockholder Merger Consideration”. The per share Merger Consideration paid to Phunware Stockholders was 0.459 shares of Successor stock for each share of Phunware Stock.

Unless otherwise noted, the financial statements, footnotes, and basic and dilutive net (loss) income per share presented give retroactive effect of the Reverse Merger and Recapitalization.

Basis of Presentation

The 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, 2018 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, 2018, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018, 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 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, 2019 and the results of operations for the three and six months ended June 30, 2019 and 2018, and cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any future interim period.

Going Concern

Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (ASC 205-40) requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. Under ASC 205-40, management has the responsibility to evaluate whether conditions and/or events raise substantial doubt about the Company’s ability to meet future financial obligations as they become due within one year after the date the financial statements are issued. As required by this standard, management’s evaluation shall initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.

The Company has a history of operating losses and negative operating cash flows. Although the Company continues to focus on growing its revenues, it expects these trends to continue into the foreseeable future.

The Company’s assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. Future plans may include utilizing existing credit lines and/or obtaining new credit lines, expanding credit lines, issuing additional equity securities, including the exercise of warrants, issuing convertible notes payable or other debt instruments and reducing overhead expenses. Despite a history of successfully implementing similar plans to alleviate the adverse financial conditions, these sources of working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above. There can be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s capital needs and support its growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, its operations would be materially negatively impacted. The Company has concluded there is substantial doubt about its ability to continue as a going concern through one year from the issuance of these financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K filed with the SEC on March 20, 2019 for the year ended December 31, 2018, other than those described below.

Changes in Accounting Policies

On January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as amended (“ASU 2014-09” or "ASC 606"), and have revised certain related accounting policies in connection with revenue recognition and deferred costs, as follows:

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct, distinct within the context of the contract, and accounted for as separate performance obligations.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time.

Platform Subscriptions and Services Revenue

The Company derives subscription revenue from software license fees, which comprise subscription fees from customers licensing the Company’s Software Development Kits (SDKs), which includes accessing the MaaS platform and/or MaaS platform data; application development service revenue from the development of customer applications, or apps, which are built and delivered to customers; and support fees. The Company’s contract terms generally range from 6 to 60 months.

Subscription revenue from SDK licenses gives the customer the right to access the Company’s MaaS platform. In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. The Company plans to recognize application development revenue upon the transfer of control of the completed application or application development services.

Support and maintenance revenue comprises support fees for customer applications, software updates, and technical support for application development services for a support term. Support revenue is recognized ratably over the support term.

From time to time, the Company also provides professional services by outsourcing employees’ time and materials to customers. Such amounts are typically recorded as the services are delivered.

Application Transaction Revenue

The Company also generates revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, the Company generally recognizes 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, clicks, or actions by users on mobile advertisements delivered, and the Company recognizes revenue at the time the user views, clicks, or otherwise acts on the ad. The Company sells ads through several offerings: cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers; cost per click, on which advertisers are charged for each ad clicked or touched on by a user; and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app. In addition, the Company generates application transaction revenue thru in-app purchases from an application on our platform.

In the normal course of business, the Company acts as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in its transactions with advertisers. Control is a determining factor in assessing principal versus agent relation. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. ASC 606 provides indicators of when an entity controls specified goods or services and is therefore acting as a principal. Based on the indicators of control, the Company has determined that it is the principal in all advertising arrangements because it is responsible for fulfilling the promise to provide the specified advertisements to advertising agencies or companies; establishing the selling prices of the advertisements sold; and credit risk with its advertising traffic providers. Accordingly, the Company acts as the principal in all advertising arrangements and therefore reports revenue earned and costs incurred related to these transactions on a gross basis.

The Company records deferred revenue when it receives cash payments from advertiser clients in advance of when the services are performed under the arrangements with the customer. The Company recognizes deferred revenue as revenue only when revenue recognition criteria are met.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Items subject to the use of estimates include revenue recognition for contract completion, useful lives of long-lived assets including intangibles, valuation of intangible assets acquired in business combinations, reserves and certain accrued liabilities, determination of the provision for income taxes, and fair value of equity instruments.

Earnings (Loss) per Common Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Restricted shares subject to repurchase provisions relating to early exercises under the Company’s 2009 Equity Incentive Plan were excluded from basic shares outstanding.

For the three months ended June 30, 2018, diluted earnings per share was computed by giving effect to all potential shares of common stock, including those related to the Company’s outstanding warrants and options, to the extent dilutive. For all other periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for those periods.

Fair Value of Financial Instruments

Authoritative guidance on fair value measurements defines fair value, establishes a consistent framework for measuring fair value, and expands disclosures for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets.

Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying value of accounts receivable, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

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.

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,
	2019		2018		2019		2018
Fox Networks Group	57	%	22	%	59	%	33	%
Fetch Media, Ltd.	—	%	45	%	—	%	33	%
Houston Methodist	8	%	—	%	11	%	—	%
Cisco	—	%	12	%	—	%	9	%

The following table sets forth the Company's concentration of accounts receivable, net of specific allowances for doubtful accounts.

	June 30, 2019		December 31, 2018
Fox Networks Group	46	%	66	%
American Made Media	15	%	—	%

Cash, Cash Equivalents, and Restricted Cash

The Company considers all investments with a maturity of three months or less from the date of acquisition to be cash equivalents. The Company had no cash equivalents at June 30, 2019.

As a result of the Series A Financing (defined and discussed further below), the Company had $5,500 in restricted cash as of December 31, 2018. The Company did not have any restricted cash as of June 30, 2019. 

Accounts Receivable and Reserves

Accounts receivable are presented net of allowances. The Company considers receivables past due based on the contractual payment terms. The Company makes judgments as to its ability to collect outstanding receivables and records a bad debt allowance for receivables when collection becomes doubtful. The allowances are based upon historical loss patterns, current and prior trends in its aged receivables, credit memo activity, and specific circumstances of individual receivable balances.

Accounts receivable consisted of the following:

	June 30, 2019			December 31, 2018
Accounts receivable	$	6,882		$	6,882
Less allowances for doubtful accounts	(3,336		)	(3,276		)
Balance	$	3,546		$	3,606

Allowance for doubtful accounts related to the Company’s litigation with Uber was $3,089 as of June 30, 2019 and December 31, 2018. (See Note 6 for more discussion on the Uber litigation.)

Long-Lived Assets

In accordance with authoritative guidance, the Company periodically re-evaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of all of its long-lived assets, including property and equipment. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the asset to the Company’s business objective. The Company did not recognize any impairment losses during the three and six months ended June 30, 2019 or 2018, respectively.

Deferred Revenue

The Company’s deferred revenue balance consisted of the following:

	June 30, 2019		December 31, 2018
Current deferred revenue
Platform subscriptions and services revenue	$	2,008	$	1,506
Application transaction revenue	93		133
PhunCoin deposits	—		990
Total current deferred revenue	$	2,101	$	2,629
Non-current deferred revenue
Platform subscriptions and services revenue	$	5,048	$	5,622
Total non-current deferred revenue	$	5,048	$	5,622
Total deferred revenue	$	7,149	$	8,251

During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, in addition to its current token, PhunCoin. As a result of this expanded dual token structure, the Company believes the economic substance and business characteristics of all previously issued PhunCoin Rights changed such that PhunCoin would be the investment vehicle in the Company's blockchain-enabled data exchange. As a result, the Company has reclassified all PhunCoin deposits from deferred revenue to a separate line item, "PhunCoin deposits," on its condensed consolidated balance sheet as of June 30, 2019.

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Recently Adopted Accounting Policies

In May 2014, the FASB and the International Accounting Standards Board jointly issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current authoritative guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

The Company elected to take advantage of the extended transition period provided in Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards. As a result, we adopted the ASU and related guidance as of January 1, 2019 using the modified retrospective method.

The most significant impact of the standard relates to the elimination of the requirement to have vendor specific objective evidence, or VSOE, of fair value to separate and recognize revenue for products and services in a contract. The elimination of the VSOE requirement causes a significant change to the timing of revenue recognition for multiple-element arrangements with our MaaS subscriptions, application development services and related support and maintenance on the development services that lacked VSOE of fair value. Under ASC 606, we recognize the application development services at the time of delivery to our customer and recognize the license subscription and support services ratably over the term of the subscription agreements. Under ASC 605, we recognized all revenue from those arrangements ratably over the term of the subscription or support agreements. Due to the complexity of our revenue contracts, the actual revenue recognition treatment required under the new standard depends on contract-specific terms and in some instances may vary from recognition at the time of delivery. The timing of revenue recognized from professional services for our MaaS licenses, professional services, support and maintenance and hardware remains substantially unchanged.

In addition, Accounting Standards Codification Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, or ASC 340, requires us to recognize an asset for the incremental costs of obtaining a contract with a customer if our sales incentive programs meet the requirements for capitalization. Previously we recorded these incremental costs of obtaining a contract as commission expense when we booked a sales transaction; whereas under ASC 340, we record an asset for the incremental cost to obtain a contract and recognize the cost over the period commensurate with revenue recognition.

When implementing ASC 606, the Company applied the practical expedient to reflect the aggregate effect of all contracts that were not completed as of January 1, 2019 when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The following table sets forth the cumulative impact of the adoption of the new revenue standard for select condensed consolidated balance sheet line items:

	Balance at December 31, 2018			Adjustments due to ASU 2014-09			Balance at January 1, 2019
Assets:
Prepaid expenses and other current assets	$	272		$	369		$	641
Liabilities:
Deferred revenue short-term	$	2,629		$	(465	)	$	2,164
Deferred revenue long-term	$	5,622		$	(253	)	$	5,369
Stockholders’ deficit:
Accumulated deficit	$	(111,820	)	$	1,087		$	(110,733	)

The following tables summarize the significant impacts of adopting ASC 606 on our financial statements as of and for the three and six months ended June 30, 2019:

Condensed Consolidated Balance Sheet

	June 30, 2019
	As reported			Impact of Adoption			Balances Without Adoption of ASC 606
Assets:
Prepaid expenses and other current assets	$	740		$	(374	)	$	366
Liabilities:
Deferred revenue short-term	$	2,101		$	218		$	2,319
Deferred revenue long-term	$	5,048		$	209		$	5,257
Stockholders’ deficit:
Accumulated deficit	$	(117,294	)	$	(801	)	$	(118,095	)

Condensed Consolidated Statement of Operations

	Three Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	5,510		$	109	$	5,619
Sales and marketing	$	665		$	50	$	715
Net loss	$	(3,067	)	$	59	$	(3,008	)
Net loss per share, basic and diluted	$	(0.08	)	$	—	$	(0.08	)

	Six Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	10,825		$	291	$	11,116
Sales and marketing	$	1,389		$	5	$	1,394
Net loss	$	(6,561	)	$	286	$	(6,275	)
Net loss per share, basic and diluted	$	(0.19	)	$	0.01	$	(0.18	)

In connection with our adoption of ASC 606 on January 1, 2019, there was an increase to the Company’s deferred income tax liabilities and an offsetting reduction in the valuation allowance recorded against deferred tax assets.  No income tax impact was recorded to retained earnings upon adoption as a result of the full valuation allowance on United States deferred tax assets. During the three and six months ended June 30, 2019, there is no income tax expense or benefit recorded as a result of the adoption of the ASC 606.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18), which provides amendments to current guidance to address the classification and presentation of changes in restricted cash in the statement of cash flows. We adopted ASU 2016-18 effective January 1, 2019 on a retrospective basis. The adoption of this guidance changed the presentation of restricted cash on the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2019. There was no impact to the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2018.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company adopted this disclosure beginning with its quarterly report on Form 10-Q for the quarter ended March 31, 2019.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Under current U.S. GAAP, the Company recognizes rent expense on a straight-line basis for all operating leases, taking into account fixed accelerations, as well as reasonably assured renewal periods. The accounting applied by a lessor is largely unchanged from that applied under previous generally accepted accounting principles. This ASU is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Earlier application is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.

In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a new framework for entities to determine whether a set of assets and activities (together referred to as “a set”) is a business. The amendments in the ASU will assist entities when they evaluate whether transactions should be accounted for as acquisitions (or disposals) either of businesses or of assets. This distinction is important since there are significant differences between the accounting for business combinations and the accounting for acquisitions of assets. Public business entities should apply the amendments to Topic 805 to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. As the Company is an emerging growth company, it has elected to defer implementation. The Company does not believe there will be a material impact to the consolidated financial statements upon adoption.

In January 2017, the FASB issued ASU 2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step; comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Public business entities that are SEC filers should adopt the amendments in this ASU for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 improves the effectiveness of disclosures about fair value measurements required under ASC 820. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact this ASU has on its consolidated financial statements.

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Reverse Merger

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Reverse Merger

Reverse Merger

On February 27, 2018, Phunware entered into an Agreement and Plan of Merger, as amended (collectively, the “Merger Agreement”) with Stellar Acquisition III, Inc. (“Stellar”). On December 26, 2018, the Company consummated the transaction contemplated by the Merger Agreement (the “Reverse Merger and Recapitalization”). In connection with the closing of the Reverse Merger and Recapitalization, the registrant changed its name from Stellar Acquisition III, Inc. to Phunware, Inc. (“Successor”). Furthermore, the holders of Phunware’s preferred stock converted all of their issued and outstanding shares of preferred stock into shares of Phunware common stock at a conversion ratio of one share of common stock for each share of preferred stock (the “Preferred Stock Exchange”). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Reverse Merger and Recapitalization (the “Effective Time”): (i) all shares of Phunware common stock and preferred stock (the “Phunware Stock”) issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Exchange) converted into the right to receive the Stockholder Merger Consideration (as defined below); (ii) each outstanding warrant to acquire shares of Phunware Stock was cancelled, retired and terminated in exchange for the right to receive from the Successor a new warrant for shares of Successor common stock with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration, but with terms otherwise the same as the Phunware warrant (each, a “Replacement Warrant”); and (iii) each outstanding option to acquire Phunware Stock (whether vested or unvested) was assumed by the Successor and automatically converted into an option to acquire shares of Successor common stock, with its price and number of shares equitably adjusted based on the conversion of the shares of Phunware Stock into the Stockholder Merger Consideration (each, an “Assumed Option”). The shares of Successor common stock and the Transferred Sponsor Warrants transferred to Phunware stockholders are collectively referred to as “Stockholder Merger Consideration”. The aggregate merger consideration paid pursuant to the Merger Agreement to Phunware stockholders amounted to approximately $301 million plus adjustments for cash on-hand as of the date of Closing. The merger consideration paid to Phunware stockholders was paid in the form of shares of Successor common stock. In addition, each holder of Phunware common and convertible preferred stock was entitled to elect to receive such holder’s pro rata share of up to an aggregate of 3,985,244 warrants (the “Transfer Sponsor Warrants”) to purchase shares of Successor common stock that were held by certain shareholders of Stellar. The Transfer Sponsor Warrants have the same terms as the Private Placement Warrants described in more detail in Note 9 below. The per share Merger Consideration paid to Phunware Stockholders was 0.459 shares of Successor stock for each share of Phunware Stock.

As consideration for the Transfer Sponsor Warrants transferred to Phunware shareholders, a promissory note was issued to the Sponsors (the “Transfer Sponsor Warrant Note”). The amount of the note was approximately $1,993, which represented $0.50 per warrant transferred to former stockholders of Phunware. The Transfer Sponsor Warrant Note bore no interest and was to mature on December 26, 2019. Shareholders of Phunware forfeited 187,188 shares to receive 3,985,244 Transfer Sponsor Warrants. On January 15, 2019, the Transfer Sponsor Warrant Note was waived and forgiven by the noteholders.

The Company issued 2,211,572 Private Placement Warrants to the Sponsors as repayment in full for certain promissory notes (not the Transfer Sponsor Warrant Note) at the closing of the Reverse Merger and Recapitalization. In connection with the consummation of the Reverse Merger and Recapitalization, certain holders of shares of Stellar common stock sold in its initial public offering (“Public Shares”) exercised their right to redeem their Public Shares for cash. As a result of these redemptions, the cash proceeds to the Company as a result of the Reverse Merger and Recapitalization was $0.4 million before transaction costs.

In addition, 6,000 shares for aggregate cash proceeds of $6.0 million from the Series A 8% convertible preferred stock financing (“Series A Financing”) were issued in conjunction with the Reverse Merger and Recapitalization. In connection with the Series A Financing, certain Stellar shareholders transferred an aggregate of 250,000 shares of Stellar common stock and 250,000 warrants to purchase shares of Stellar common stock to the Series A Financing investor, and 181,391 shares to certain service providers. See Note 8 for additional discussion on the Series A Financing.

The Sponsors are Astra Maritime Inc. and Dominium Investments Inc., affiliated with the Company’s Chairman of the board of directors and Magellan Investments Corp. and Firmus Investments Inc., affiliated with a member of our board of directors.

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Factoring Agreement

6 Months Ended

Jun. 30, 2019

Factoring Agreement [Abstract]

Factoring Agreement

Factoring Agreement

On June 15, 2016 the Company entered into a factoring agreement with CSNK Working Capital Finance Corp. (d/b/a Bay View Funding) (“Bay View”) whereby it sells select accounts receivable with recourse.

Under the terms of the agreement, Bay View may make advances to the Company of amounts representing up to 80% of the net amount of eligible accounts receivable. The factor facility is collateralized by a general security agreement over all the Company’s personal property and interests. Fees paid to Bay View for factored receivables are 1.80% for the first 30 days and 0.65% for every ten days thereafter, to a maximum of 90 days total outstanding. The Company bears the risk of credit loss on the receivables. These receivables are accounted for as a secured borrowing arrangement and not as a sale of financial assets.

The Company's factor expense is recorded as interest expense in the condensed consolidated statement of net income (loss). Factor expense totaled $146 and $332 for the three and six months ended June 30, 2019, respectively, and $179 and $380 for the three and six months ended June 30, 2018, respectively.

The amount of factored receivables outstanding was $1,775 and $2,434 as of June 30, 2019 and December 31, 2018, respectively. There was $1,225 and $566 available for future advances as of June 30, 2019 and December 31, 2018, respectively.

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Convertible Notes

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Notes

Convertible Notes

During the second quarter of 2019, the Company’s board of directors authorized the issuance of $20 million of convertible promissory notes (the “Notes”), which may be paid by investors in the form of cash or, in the Company’s sole discretion, cryptocurrency, such as Bitcoin or Ethereum. The Notes will be sold and issued only to accredited investors, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder.

The Notes bear ordinary interest at a rate of 7% per annum. Interest under the Notes is payable quarterly beginning on September 30, 2019, and interest and principal under the Notes is payable monthly beginning on June 30, 2021. However, at the holder’s election, interest payments may be deferred until the earlier of (i) repayment in full of all remaining unpaid principal, and (ii) conversion. The notes mature on June 3, 2024.

The Notes are convertible into shares of the Company’s common stock at a price of $11.50 per share. Each Note will convert voluntarily upon a holder’s election, or automatically upon the occurrence of the following events: (a) the closing sale price of the Company’s common stock equals or exceeds $17.25 per share for 20 out of 30 consecutive trading days, and (b) a registration statement is then in effect covering the disposition of the converted shares.

On June 3, 2019, the Company entered into a Note Purchase Agreement with an investor for the sale of a Note. The sale of this Note constituted an initial closing on June 3, 2019, and the Company issued a Note in the principal amount of $250. The Company may hold subsequent closings until June 2, 2020. The Company may not issue Notes under the Purchase Agreement in excess of $20 million, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Notes.

The balance of outstanding Notes is $250 as of June 30, 2019. Interest expense related to the Note for the three and six months ended June 30, 2019, and interest payable under the Note as of June 30, 2019 is immaterial.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

The Company has operating office space leases in Austin, Texas; Newport Beach (Orange County), California; San Diego, California; and Miami, Florida. Rent expense under operating leases totaled $166 and $331 for the three and six months ended June 30, 2019, respectively, and $153 and $305 for the three and six months ended June 30, 2018, respectively.

Future minimum annual lease payments as of June 30, 2019 under the Company’s operating leases are set forth as follows:

Future minimum lease obligations years ended December 31,	Lease Obligations
2019 (Remainder)	$	242
2020	164
2021	119
2022	119
2023	59
Thereafter	—
Total	$	703

Litigation

On September 26, 2017, we filed a breach of contract complaint against Uber Technologies, Inc. seeking approximately $3 million (plus interest) for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017. The case, captioned Phunware, Inc. v. Uber Technologies, Inc., Case No. CGC-17-561546 was filed in the Superior Court of the State of California County of San Francisco. On November 13, 2017, Uber generally denied the allegations in our complaint and also filed a cross-complaint against us and Fetch - the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017 (the “Fetch Campaign”), asserting numerous fraud and contract-based claims. All the claims stem from Uber’s allegation that Fetch and/or we (and/or other-as-yet-unidentified ad networks and publishers) are liable for the Fetch Campaign, under which Uber allegedly overpaid Fetch and mobile advertising providers due to allegedly fraudulent attribution for installments of the Uber application. Uber did not allege any specific dollar amount that it is seeking in damages against either of the named cross-defendants (Fetch and Phunware). We filed a motion to dismiss the cross-complaint, which was heard on February 7, 2018. The motion was granted in part and denied in part by the Court. On April 16, 2018, the action was designated complex, and the matter was assigned for all purposes to Judge Wiss of the Superior Court of California, San Francisco County (Department 305). In March 2019, Uber and Fetch settled Uber’s claims against Fetch on terms that have not been disclosed to Phunware at this time. On May 7, 2019, we retained new counsel. In June 2019, the Court set a new trial date of April 20, 2020. Discovery is continuing. On June 26, 2019, the case was reassigned for all purposes to Judge Jackson of the Superior Court of California, San Francisco County (Department 613). On July 12, 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants (Phunware Chief Executive Officer Alan S. Knitowski, and former Phunware employees D. Stasiuk, M. Borotsik, and A. Cook) accused of civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware. Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $17 million from Uber, and claims treble damages, general and punitive damages, and attorneys’ fees and costs. We maintain that our claims against Uber are meritorious and that Uber’s claims against us are not. However, we make no predictions on the likelihood of success of prevailing on our contract action against Uber or on the likelihood of defeating Uber’s claims against us.

From time to time, the Company is and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

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PhunCoin & PhunToken

6 Months Ended

Jun. 30, 2019

Security Token [Abstract]

PhunCoin & PhunToken

PhunCoin & PhunToken

PhunCoin

In June 2018, PhunCoin, Inc., the Company’s wholly-owned subsidiary, launched an offering pursuant to Rule 506(c) of Regulation D (the "Reg D Offering") as promulgated under the Securities Act of rights (the “Rights”) to acquire a security token denominated as "PhunCoin". In addition, in 2019, we commenced an offering of Rights pursuant to Regulation CF (the "Reg CF Offering").

PhunCoin, Inc. accepts payment in the form of cash and digital currencies for purchases of the Rights. PhunCoin, Inc. plans to sell between $10 million and $100 million of the Rights, which will entitle the Rights holders to receive between approximately 8 billion and 30.5 billion of PhunCoin. The amount of PhunCoin to be issued to the purchaser is equal to the dollar amount paid by the purchaser divided by the price of PhunCoin at the time of issuance of the PhunCoin during the Token Generation Event (as defined below) before taking into consideration an applicable discount rate, which is based on the time of the purchase (early purchasers will receive a larger discount rate).

As of June 30, 2019, the Company has received aggregate cash proceeds from the Reg D Offering and Reg CF Offering of $1.2 million, pursuant to which the holders of the Rights will receive an aggregate of approximately 577.9 million PhunCoin if the Token Generation Event occurs. The Reg CF Offering closed May 1, 2019, while the Reg D Offering is ongoing.

The rights, privileges, and obligations of Rights holders are set forth as follows:

Issuance of PhunCoin

PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch (the "Token Generation Event") of PhunCoin, Inc.’s blockchain technology enabled data exchange (the “Token Ecosystem”), or (ii) the date PhunCoin, Inc. determines that it has the ability to enforce resale restrictions with respect to PhunCoin pursuant to applicable federal securities laws. Proceeds from the Rights offering are generally not refundable if the Token Generation Event is not consummated; however, the Company believes PhunCoin, Inc. has a contractual obligation to use good faith efforts to issue PhunCoin to Rights holders under the Token Rights Agreement.

The Company currently anticipates that PhunCoin will be issued to the holders of the Rights after the one year period from when the earliest Rights were acquired by the holders (which was June 2018). Holders of the Rights may be issued PhunCoin even if the Token Ecosystem is not yet operational. PhunCoin will have no usefulness until the Token Ecosystem is operational because PhunCoin is expected to only be useable on the Token Ecosystem.

There can be no assurance as to when (or if) the Company will be able to successfully launch the Token Ecosystem. The Company is currently developing multiple aspects of the Token Ecosystem and expects that a review (beta) period will likely conclude during the third quarter of 2019. The final software readiness date of the Token Ecosystem may be adjusted based on user feedback provided in the review (beta) period and thus a specific launch date is difficult to determine at this time, as it is based on many external factors outside of our control.

Termination of the Token Rights Agreement

Termination of the Token Rights Agreement occurs on the earlier of (i) PhunCoin being issued to the Rights holder pursuant to the provisions noted above, (ii) the payment, or setting aside of payment with respect to a dissolution event (as described below), or (iii) twelve months from the date of the Token Rights Agreement with the Rights holder, which PhunCoin, Inc. may extend at its sole discretion if a Token Generation Event has not occurred. Upon termination of the Token Rights Agreement, PhunCoin, Inc. has no further obligation to the Rights holder. PhunCoin, Inc. has extended the termination date of the Token Rights Agreement.

Dissolution Event

A dissolution event occurs if there has been (i) a voluntary termination of PhunCoin, Inc.’s operations, (ii) a general assignment for the benefit of PhunCoin, Inc.’s creditors, (iii) a change of U.S. laws that makes the use or issuance of PhunCoin or the Token Generation Event impractical or unfeasible, or (iv) any other liquidation, dissolution or winding up of PhunCoin, Inc.

In the event a dissolution event occurs prior to the termination of the Token Rights Agreement, if there are any remaining proceeds from the Rights offering that have not been utilized by PhunCoin, Inc. in its operations or for the development of the PhunCoin Ecosystem, such remaining proceeds would be distributed pro rata to purchasers in the Rights offering following any distributions to holders of PhunCoin, Inc.’s capital stock or debt, if any.

No Voting Rights or Profit Share

Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware, PhunCoin, Inc. or any subsidiaries of the Company. However, PhunCoin holders will be provided fractional interests in the Token Ecosystem, including ongoing monthly PhunCoin dividends to PhunCoin holders, based on their respective pro rata ownership percentage of PhunCoin, totaling 2.5% of the monthly credits purchased by Phunware customers.

PhunToken ("Phun")

During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, which is meant to act as a medium of exchange within the Token Ecosystem. Phun will be issued through a separate, wholly-owned subsidiary, Phun Token International, available initially only to persons outside of the United States and Canada. Consumers may receive Phun for actively engaging in marketing campaigns; developers and publishers may receive Phun for utilizing Phunware’s loyalty software development kit in order to better engage, manage and monetize their consumers; and brands will gain access to more relevant, verifiable data by accessing Phunware’s data exchange and using Phun for their own loyalty programs. As of June 30, 2019, the Company has not sold any Phun.

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Series A Convertible Preferred Stock

6 Months Ended

Jun. 30, 2019

Series A Convertible Preferred Stock [Abstract]

Series A Convertible Preferred Stock

Series A Convertible Preferred Stock

In connection with the consummation of the Reverse Merger and Recapitalization, Phunware issued 6,000 shares to a single investor for aggregate cash proceeds of $6.0 million from the Series A 8% convertible preferred stock financing (“Series A Financing”) with stated value of $1,000 per share. The Company deposited $5.5 million of the $6 million proceeds into a restricted escrow account in accordance with the securities purchase agreement entered into with the investor.

The shares were mandatorily redeemable in cash at the following schedule; (i) 104% of the aggregate value of three thousand (3,000) shares on the 30 day anniversary of the issuance; (ii) 104% of the aggregate value of two thousand five hundred (2,500) shares on the 60th anniversary of the original issue; and (iii) 104% of the aggregate value of five hundred (500) shares of the 90th anniversary of the original issue.

The Preferred Stock was also convertible into shares of the Company’s common stock at the option of the holder at a price of $11.50 per share, subject to adjustments for stock dividends, stock splits and other recapitalization type events and antidilutive events which would include subsequent issuances of equity or equity linked securities at prices more favorable than the conversion price of these preferred shares. Generally, the Preferred Stock does not have voting rights. The holder did not convert any of the Series A convertible preferred stock prior to the redemption dates.

On the 30-day, 60-day, and 90-day anniversaries of the issuance, the holder redeemed an aggregate of 6,000 shares of the Series A convertible preferred stock for total proceeds of $6,240, representing $6,000 original issue price and $240 of dividends. Of the proceeds paid to the holder,$5.5 million was paid from the restricted cash account, and $740 from the Company’s operating account.

In the event of liquidation, dissolution or winding up of the Company the Preferred Stock would be entitled to receive assets ahead of the Company’s common stockholders. Total preferred stock authorized to be issued as of June 30, 2019 was 100,000,000, with a par value of $0.0001 per share. There were 0 and 6,000 shares of preferred stock outstanding as of June 30, 2019 and December 31, 2018, respectively.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

Total common stock authorized to be issued as of June 30, 2019 was 1,000,000,000, with a par value of $0.0001 per share. At June 30, 2019 and December 31, 2018, there were 38,927,776 and 27,294,164 shares outstanding, inclusive of 25,230 and 40,707 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity plans, respectively.

During fiscal year 2018, the Company completed several closings of stock financings resulting in the issuance of 1,085,096 shares for aggregate cash proceeds of $9,565, net of issuance costs.

During 2019, the Company issued an aggregate of 11,530,442 shares of common stock related to various cash and cashless (net) exercises of warrants for common stock. Cash exercises for warrants for 617,296 shares of common stock resulted in aggregate gross proceeds of approximately $6,184, of which $6,092 was received in cash, $92 was received in digital currencies. Furthermore, there were 13,975,359 warrants exercised under cashless (net) provisions resulting in the issuance of 10,913,146 shares of common stock. See further discussion regarding details of the Company’s various warrants below.

Dividends

Dividends are paid on a when-and-if-declared basis. The Company has not declared any dividends through June 30, 2019.

Warrants

A summary of the Company’s warrant activity by warrant type is as follows:

Warrant Type	Cash Exercise Price per share		Warrants/UPO's Outstanding December 31, 2018	Warrants issued for UPO exercises	Warrants/UPO’s Exercised				Warrants Outstanding June 30, 2019
					Cash		Cashless
Common stock warrant (Series D-1)	$	5.54	14,866	—	—		—		14,866
Common stock warrants (Series F)	$	9.22	1,085,059	—	(400,740	)	(306,917	)	377,402
Public Warrants (PHUNW)	$	11.50	6,900,610	—	—		(5,139,319	)	1,761,291
Private Placement Warrants	$	11.50	10,182,060	—	(216,556	)	(8,307,123	)	1,658,381
Unit Purchase Options (UPOs)	$	11.50	130,000	—	—		(130,000	)	—
Unit Purchase Option Warrants	$	11.50		116,172	—		(92,000	)	24,172
Total			18,312,595	116,172	(617,296	)	(13,975,359	)	3,836,112

In 2012, the Company issued a warrant to purchase an aggregate of 14,866 shares of the Company’s common stock with an exercise price of $5.54 per share to a banking institution with which the Company previously had a revolving line of credit. The term of the warrant is the earlier of (i) the tenth anniversary of the date of issuance, (ii) the closing of the initial registered public offering of the Company’s common stock, or (iii) the closing of an acquisition (as defined in the warrant) where the consideration consisting of cash or publicly traded securities payable in connection with the acquisition for each share is at least three (3)times the exercise price. The Reverse Merger and Recapitalization did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above. The warrant is fully vested.

In 2018, but prior to the Reverse Merger and Recapitalization, the Company issued warrants to purchase an aggregate of 1,085,059 shares of the Company’s common stock with an exercise price of $9.22 per share. The term of the warrants is the earlier of (i) the fifth anniversary of the date of issuance, (ii) an acquisition, merger, or consolidation of the Company or a sale, lease or other disposition of all or substantially all of the assets of Phunware and its subsidiaries, except (a) any sale of stock for capital raising purposes, (b) purpose of changing the Company’s state of incorporation, and (c) where the shareholders of Phunware immediately before such transaction retain at least a majority of the voting power immediately following such transaction; or (iii) immediately prior to an initial public offering. The Reverse Merger and Recapitalization did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above. These warrants are fully vested.

The Company has common stock warrants trading under the Nasdaq ticker symbol PHUNW (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants became exercisable for cash 30 days after the completion of the Reverse Merger and Recapitalization.  In addition, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants was not filed with the SEC and declared effective within 90 days from the consummation the Reverse Merger and Recapitalization, holders were entitled to exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The Company was unable to have the registration statement declared effective by the 90-day deadline, although it was declared effective on May 14, 2019. As of June 30, 2019, 5,139,319 Public Warrants have been exercised on a cashless basis that resulted in the issuance of 2,951,741 shares. The Public Warrants will expire five years after the completion of the Reverse Merger and Recapitalization or earlier upon redemption or liquidation.

The Company also has Private Placement Warrants outstanding (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The Private Placement Warrants became exercisable 30 days after the completion of the Reverse Merger and Recapitalization. The Private Placement Warrants are exercisable for cash (even if a registration statement covering the common stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option and will not be redeemable in each case so long as they are still held by the initial purchasers or their affiliates.

Unit Purchase Option ("UPOs")

The Company sold to the underwriters for its initial public offering in 2016 an option to purchase up to a total of 130,000 units, at an exercise price of $11.50 per unit. The units are comprised of one share of common stock and one warrant to purchase common stock. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the closing of the Reverse Merger and Recapitalization and terminating on the fifth anniversary of the Reverse Merger and Recapitalization. The units issuable upon exercise of this option are identical to those offered in the Company’s initial public offering in 2016. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the UPO and underlying ordinary shares) to exercise the unit purchase option without the payment of cash. As of June 30, 2019, all UPOs had been exercised, and 24,172 warrants related to the UPO exercise remained outstanding.

PhunCoin Warrant

In 2018, the Company issued warrants to to sixty-eight (68) stockholders to receive an aggregate of approximately 27.4 billion PhunCoin. Should the Company complete a Token Generation Event, the stockholders would receive their requisite amount of PhunCoin. The Company believes there is no traditional “exercise period” or ‘term” as with other typical embedded features, and the PhunCoin warrants were originally issued in conjunction with the Company’s Series F Preferred Stock financing. The PhunCoin warrants lack characteristics of financial instruments and derivatives. In addition, the PhunCoin warrants do not obligate the Company to achieve the Token Generation Event or launch and distribute PhunCoin to the warrantholders.  At the time of the PhunCoin warrant issuance, there was no market for PhunCoin, and they did not exist. Accordingly, the Company determined there was no value assigned to the PhunCoin warrants issued to the stockholders. As of June 30, 2019, no PhunCoin had been issued to the PhunCoin warrantholders.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2018 Equity Incentive Plan

In connection with the consummation of the Reverse Merger and Recapitalization, our board of directors adopted, and our stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”). The purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to employees, directors and consultants who perform services to the Company, and to promote the success of our business. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of: (i) 10% of the post-closing outstanding shares of common stock; (ii) 5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year; or (iii) such other amount as our board of directors may determine.

In addition, the shares of common stock reserved for issuance under the 2018 Plan also will include any shares of common stock subject to stock options, restricted stock units or similar awards granted under the 2009 Equity Incentive Plan (the “2009 Plan”), that, on or after the Reverse Merger and Recapitalization, are assumed in connection with the Reverse Merger and Recapitalization, expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that, on or after the Reverse Merger and Recapitalization, are forfeited to or repurchased by us. As of June 30, 2019, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing equals 1,954,306.

During the second quarter of 2019, we granted 620,363 restricted stock units to employees and 45,000 restricted stock units to non-employee directors, each with a grant date fair value of $7.34 per share. The awards granted to team members vest over eighteen months in three equal installments on May 18, 2020, August 18, 2020, and November 18, 2020, respectively, and are subject to service conditions. The awards granted to non-employee directors vest in two equal installments on July 1, 2019 and December 26, 2019, respectively, and are subject to service conditions.

A summary of the Company’s restricted stock unit activity under the 2018 Plan is set forth below:

	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2018	—	$	—
Granted	665,363	7.34
Released	—	—
Forfeited	—	—
Outstanding as of June 30, 2019	665,363	$	7.34

The 2018 Plan had 2,403,321 and 2,729,416 shares of common stock reserved for issuance as of June 30, 2019 and December 31, 2018, respectively.

2018 Employee Stock Purchase Plan

Also, in connection with the consummation of the Reverse Merger and Recapitalization, our board of directors adopted, and our stockholders approved, the 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The 2018 ESPP will be administered by our board of directors or a committee appointed by the board (the “administrator”). The purpose of the 2018 ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock through accumulated contributions. The 2018 ESPP permits participants to purchase shares of common stock through contributions (generally in the form of payroll deductions) of up to an amount of their eligible compensation determined by the administrator. Subject to certain other limitations or unless otherwise determined by the administrator, a participant may purchase a maximum of 2,000 shares of common stock during a purchase period. The offering periods under the 2018 ESPP will begin on such date as determined by the administrator and expire on the earliest to occur of (a) the completion of the purchase of shares on the last exercise date occurring within 27 months of the applicable enrollment date of the offering period on which the purchase right was granted, or (b) a shorter period established by the administrator prior to an enrollment date for all options to be granted on such enrollment date. Amounts deducted and accumulated by the participant are used to purchase shares of common stock on each exercise date. The purchase price of the shares will be determined by the administrator but in no event will be less than 85% of the lower of the fair market value of common stock on the enrollment date or on the exercise date. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment with the Company.

The number of shares of common stock that may be made available for sale under the 2018 ESPP also includes an annual increase on the first day of each fiscal year beginning for the fiscal year following the fiscal year in which the first enrollment date (if any) occurs equal to the lesser of (i) 3% of the expected post-closing outstanding shares of common stock; (ii)1.5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year; or such other amount as the administrator may determine.

As of June 30, 2019, the Company has not consummated an enrollment or offering period related to the 2018 ESPP. The 2018 ESPP had 272,942 shares of common stock available for sale and reserved for issuance as of June 30, 2019 and December 31, 2018.

2009 Equity Incentive Plan

In 2009, the Company adopted its 2009 Equity Incentive Plan (the “Plan”), which allowed for the granting of incentive and non-statutory stock options, as defined by the Internal Revenue Code, to employees, directors, and consultants. The exercise price of the options granted was generally equal to the value of the Company’s common stock on the date of grant, as determined by the Company’s board of directors. The awards are exercisable and vest, generally over four years, in accordance with each option agreement. The term of each option is no more than ten years from the date of the grant. The Plan allows for options to be immediately exercisable, subject to the Company’s right of repurchase for unvested shares at the original exercise price. The total amount received in exchange for these shares has been included in accrued expenses on the accompanying consolidated balance sheets and is reclassified to equity as the shares vest. As of June 30, 2019 and December 31, 2018, 25,230 and 40,707 shares were unvested amounting to $17 and $34 in accrued expenses, respectively. Effective with the Reverse Merger and Recapitalization, no additional grants will be made under the Plan.

A summary of the Company’s stock option activity under the Plan and related information is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2018	2,364,823		$	0.90	8.12	$	71,332
Granted	—		—
Released	(106,397	)	0.68
Forfeited	(329,350	)	1.69
Outstanding as of June 30, 2019	1,929,076		$	0.78	7.07	$	4,492
Exercisable as of June 30, 2019	1,258,784		$	0.67	6.31	$	3,067

For the six months ended June 30, 2019, the aggregate intrinsic value of options exercised was $7,324 and the total fair value of options vested was $229.

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table sets forth information relating to stock options granted:

	Three Months Ended June 30, 2018	Six Months Ended June 30, 2018
Weighted average risk-free rate	2.75%	2.51%
Expected dividend yield	—	—
Weighted average expected life (years)	6.08	6.08
Weighted average volatility	56.87%	56.87%

The Company did not grant any options during the three and six months ended June 30, 2019.

Stock-Based Compensation

Compensation costs that have been included on the Company’s consolidated statements of operations and comprehensive income (loss) for all stock-based compensation arrangements are detailed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
Stock-based compensation	2019		2018		2019			2018
Cost of revenues	$	24	$	14	$	38		$	18
Sales and marketing	9		13		(16		)	15
General and administrative	349		27		372			151
Research and development	34		8		33			27
Total stock-based compensation	$	416	$	62	$	427		$	211

The Company recognizes forfeitures as they occur. As of June 30, 2019, the unamortized fair value of the restricted stock units under the 2018 Plan was approximately $4.5 million. The weighted-average remaining recognition period over which these costs will be amortized was approximately 1.3 years. Unrecognized stock compensation expense for options granted under the 2009 Plan was $334, as of June 30, 2019.

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Domestic and Foreign Operations

6 Months Ended

Jun. 30, 2019

Domestic and Foreign Operations [Abstract]

Domestic and Foreign Operations

Domestic and Foreign Operations

Identifiable long-lived assets attributed to the United States and international geographies are based upon the country in which the asset is located or owned. As of June 30, 2019 and December 31, 2018, all of the Company’s identifiable long-lived assets were in the United States.

We derived over 99% of our net revenues from within the United States for the three and six months ended June 30, 2019. During the three and six months ended June 30, 2018, the Company derived 45% and 33% of its net revenues from outside the United States, respectively.

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Related-Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

As consideration for the Transfer Sponsor Warrants transferred to Phunware shareholders, a promissory note was issued to the Sponsors (the “Transfer Sponsor Warrant Note”). The amount of the note was approximately $1,993, which represented $0.50 per warrant transferred to former stockholders of Phunware. The Transfer Sponsor Warrant Note bore no interest. The Transfer Sponsor Warrants have an exercise price of $11.50 per share. The Transfer Sponsor Warrant Note was to mature on December 26, 2019. The Transfer Sponsor Warrant Note was waived and forgiven by the noteholders on January 15, 2019. 

With the Reverse Merger and Recapitalization, the Company assumed $255 in payables from Stellar to Nautilus Energy Management Corporation, an affiliate of two members of the Company’s board of directors. This balance remains outstanding and is recorded in accounts payable as of June 30, 2019.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has evaluated subsequent events through August 8, 2019.

On July 16, 2019, the Company entered into a lease agreement with BRE CA Office Owner, LLC for new office space in Irvine, California, for the lease of approximately 8,687 rentable square feet located at 16845 Von Karman Avenue (the “Lease”). The Lease commences on November 1, 2019, and terminates on March 31, 2025, subject to one five-year renewal option. Under the Lease, the Company will pay monthly rent of approximately $354 per year for the first year, with such rent increasing by a specified amount every year thereafter. The Lease also obligates the Company to pay its proportionate share of certain cost increases incurred by the landlord. The Company may receive certain abatements subject to the terms and conditions of the Lease. The Company is also obligated to pay a security deposit of approximately $118.

Future minimum annual lease payments under the Lease are as follows:

Future minimum lease obligation under the Lease for the years ended December 31,	Lease Obligation
2019	$	30
2020	326
2021	336
2022	346
2023	356
Thereafter	502
Total	$	1,896

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The 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, 2018 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, 2018, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018, 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 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, 2019 and the results of operations for the three and six months ended June 30, 2019 and 2018, and cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any future interim period.

Changes in Accounting Policies

Changes in Accounting Policies

On January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as amended (“ASU 2014-09” or "ASC 606"), and have revised certain related accounting policies in connection with revenue recognition and deferred costs, as follows:

Revenue Recognition

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct, distinct within the context of the contract, and accounted for as separate performance obligations.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time.

Platform Subscriptions and Services Revenue

The Company derives subscription revenue from software license fees, which comprise subscription fees from customers licensing the Company’s Software Development Kits (SDKs), which includes accessing the MaaS platform and/or MaaS platform data; application development service revenue from the development of customer applications, or apps, which are built and delivered to customers; and support fees. The Company’s contract terms generally range from 6 to 60 months.

Subscription revenue from SDK licenses gives the customer the right to access the Company’s MaaS platform. In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. The Company plans to recognize application development revenue upon the transfer of control of the completed application or application development services.

Support and maintenance revenue comprises support fees for customer applications, software updates, and technical support for application development services for a support term. Support revenue is recognized ratably over the support term.

From time to time, the Company also provides professional services by outsourcing employees’ time and materials to customers. Such amounts are typically recorded as the services are delivered.

Application Transaction Revenue

The Company also generates revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, the Company generally recognizes 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, clicks, or actions by users on mobile advertisements delivered, and the Company recognizes revenue at the time the user views, clicks, or otherwise acts on the ad. The Company sells ads through several offerings: cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers; cost per click, on which advertisers are charged for each ad clicked or touched on by a user; and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app. In addition, the Company generates application transaction revenue thru in-app purchases from an application on our platform.

In the normal course of business, the Company acts as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in its transactions with advertisers. Control is a determining factor in assessing principal versus agent relation. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. ASC 606 provides indicators of when an entity controls specified goods or services and is therefore acting as a principal. Based on the indicators of control, the Company has determined that it is the principal in all advertising arrangements because it is responsible for fulfilling the promise to provide the specified advertisements to advertising agencies or companies; establishing the selling prices of the advertisements sold; and credit risk with its advertising traffic providers. Accordingly, the Company acts as the principal in all advertising arrangements and therefore reports revenue earned and costs incurred related to these transactions on a gross basis.

The Company records deferred revenue when it receives cash payments from advertiser clients in advance of when the services are performed under the arrangements with the customer. The Company recognizes deferred revenue as revenue only when revenue recognition criteria are met.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Items subject to the use of estimates include revenue recognition for contract completion, useful lives of long-lived assets including intangibles, valuation of intangible assets acquired in business combinations, reserves and certain accrued liabilities, determination of the provision for income taxes, and fair value of equity instruments.

Earnings (Loss) per Common Share

Earnings (Loss) per Common Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Restricted shares subject to repurchase provisions relating to early exercises under the Company’s 2009 Equity Incentive Plan were excluded from basic shares outstanding.

For the three months ended June 30, 2018, diluted earnings per share was computed by giving effect to all potential shares of common stock, including those related to the Company’s outstanding warrants and options, to the extent dilutive. For all other periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for those periods.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Authoritative guidance on fair value measurements defines fair value, establishes a consistent framework for measuring fair value, and expands disclosures for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets.

Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying value of accounts receivable, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Concentrations of Credit Risk

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.

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash

The Company considers all investments with a maturity of three months or less from the date of acquisition to be cash equivalents. The Company had no cash equivalents at June 30, 2019.

As a result of the Series A Financing (defined and discussed further below), the Company had $5,500 in restricted cash as of December 31, 2018. The Company did not have any restricted cash as of June 30, 2019.

Accounts Receivable and Reserves

Accounts Receivable and Reserves

Accounts receivable are presented net of allowances. The Company considers receivables past due based on the contractual payment terms. The Company makes judgments as to its ability to collect outstanding receivables and records a bad debt allowance for receivables when collection becomes doubtful. The allowances are based upon historical loss patterns, current and prior trends in its aged receivables, credit memo activity, and specific circumstances of individual receivable balances.

Accounts receivable consisted of the following:

	June 30, 2019			December 31, 2018
Accounts receivable	$	6,882		$	6,882
Less allowances for doubtful accounts	(3,336		)	(3,276		)
Balance	$	3,546		$	3,606

Allowance for doubtful accounts related to the Company’s litigation with Uber was $3,089 as of June 30, 2019 and December 31, 2018. (See Note 6 for more discussion on the Uber litigation.)

Long-Lived Assets

Long-Lived Assets

In accordance with authoritative guidance, the Company periodically re-evaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of all of its long-lived assets, including property and equipment. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the asset to the Company’s business objective. The Company did not recognize any impairment losses during the three and six months ended June 30, 2019 or 2018, respectively.

Deferred Revenue

During the second quarter of 2019, Phunware announced the launch of a separate token, Phun, in addition to its current token, PhunCoin. As a result of this expanded dual token structure, the Company believes the economic substance and business characteristics of all previously issued PhunCoin Rights changed such that PhunCoin would be the investment vehicle in the Company's blockchain-enabled data exchange. As a result, the Company has reclassified all PhunCoin deposits from deferred revenue to a separate line item, "PhunCoin deposits," on its condensed consolidated balance sheet as of June 30, 2019.

Emerging Growth Company

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Recent Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Policies

In May 2014, the FASB and the International Accounting Standards Board jointly issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current authoritative guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

The Company elected to take advantage of the extended transition period provided in Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards. As a result, we adopted the ASU and related guidance as of January 1, 2019 using the modified retrospective method.

The most significant impact of the standard relates to the elimination of the requirement to have vendor specific objective evidence, or VSOE, of fair value to separate and recognize revenue for products and services in a contract. The elimination of the VSOE requirement causes a significant change to the timing of revenue recognition for multiple-element arrangements with our MaaS subscriptions, application development services and related support and maintenance on the development services that lacked VSOE of fair value. Under ASC 606, we recognize the application development services at the time of delivery to our customer and recognize the license subscription and support services ratably over the term of the subscription agreements. Under ASC 605, we recognized all revenue from those arrangements ratably over the term of the subscription or support agreements. Due to the complexity of our revenue contracts, the actual revenue recognition treatment required under the new standard depends on contract-specific terms and in some instances may vary from recognition at the time of delivery. The timing of revenue recognized from professional services for our MaaS licenses, professional services, support and maintenance and hardware remains substantially unchanged.

In addition, Accounting Standards Codification Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, or ASC 340, requires us to recognize an asset for the incremental costs of obtaining a contract with a customer if our sales incentive programs meet the requirements for capitalization. Previously we recorded these incremental costs of obtaining a contract as commission expense when we booked a sales transaction; whereas under ASC 340, we record an asset for the incremental cost to obtain a contract and recognize the cost over the period commensurate with revenue recognition.

When implementing ASC 606, the Company applied the practical expedient to reflect the aggregate effect of all contracts that were not completed as of January 1, 2019 when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The following table sets forth the cumulative impact of the adoption of the new revenue standard for select condensed consolidated balance sheet line items:

	Balance at December 31, 2018			Adjustments due to ASU 2014-09			Balance at January 1, 2019
Assets:
Prepaid expenses and other current assets	$	272		$	369		$	641
Liabilities:
Deferred revenue short-term	$	2,629		$	(465	)	$	2,164
Deferred revenue long-term	$	5,622		$	(253	)	$	5,369
Stockholders’ deficit:
Accumulated deficit	$	(111,820	)	$	1,087		$	(110,733	)

The following tables summarize the significant impacts of adopting ASC 606 on our financial statements as of and for the three and six months ended June 30, 2019:

Condensed Consolidated Balance Sheet

	June 30, 2019
	As reported			Impact of Adoption			Balances Without Adoption of ASC 606
Assets:
Prepaid expenses and other current assets	$	740		$	(374	)	$	366
Liabilities:
Deferred revenue short-term	$	2,101		$	218		$	2,319
Deferred revenue long-term	$	5,048		$	209		$	5,257
Stockholders’ deficit:
Accumulated deficit	$	(117,294	)	$	(801	)	$	(118,095	)

Condensed Consolidated Statement of Operations

	Three Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	5,510		$	109	$	5,619
Sales and marketing	$	665		$	50	$	715
Net loss	$	(3,067	)	$	59	$	(3,008	)
Net loss per share, basic and diluted	$	(0.08	)	$	—	$	(0.08	)

	Six Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	10,825		$	291	$	11,116
Sales and marketing	$	1,389		$	5	$	1,394
Net loss	$	(6,561	)	$	286	$	(6,275	)
Net loss per share, basic and diluted	$	(0.19	)	$	0.01	$	(0.18	)

In connection with our adoption of ASC 606 on January 1, 2019, there was an increase to the Company’s deferred income tax liabilities and an offsetting reduction in the valuation allowance recorded against deferred tax assets.  No income tax impact was recorded to retained earnings upon adoption as a result of the full valuation allowance on United States deferred tax assets. During the three and six months ended June 30, 2019, there is no income tax expense or benefit recorded as a result of the adoption of the ASC 606.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18), which provides amendments to current guidance to address the classification and presentation of changes in restricted cash in the statement of cash flows. We adopted ASU 2016-18 effective January 1, 2019 on a retrospective basis. The adoption of this guidance changed the presentation of restricted cash on the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2019. There was no impact to the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2018.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company adopted this disclosure beginning with its quarterly report on Form 10-Q for the quarter ended March 31, 2019.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Under current U.S. GAAP, the Company recognizes rent expense on a straight-line basis for all operating leases, taking into account fixed accelerations, as well as reasonably assured renewal periods. The accounting applied by a lessor is largely unchanged from that applied under previous generally accepted accounting principles. This ASU is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Earlier application is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.

In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a new framework for entities to determine whether a set of assets and activities (together referred to as “a set”) is a business. The amendments in the ASU will assist entities when they evaluate whether transactions should be accounted for as acquisitions (or disposals) either of businesses or of assets. This distinction is important since there are significant differences between the accounting for business combinations and the accounting for acquisitions of assets. Public business entities should apply the amendments to Topic 805 to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. As the Company is an emerging growth company, it has elected to defer implementation. The Company does not believe there will be a material impact to the consolidated financial statements upon adoption.

In January 2017, the FASB issued ASU 2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step; comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Public business entities that are SEC filers should adopt the amendments in this ASU for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 improves the effectiveness of disclosures about fair value measurements required under ASC 820. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact this ASU has on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedules of Concentration of Risk, by Risk Factor

Accounts receivable consisted of the following:

	June 30, 2019			December 31, 2018
Accounts receivable	$	6,882		$	6,882
Less allowances for doubtful accounts	(3,336		)	(3,276		)
Balance	$	3,546		$	3,606

The following table sets forth the Company's concentration of accounts receivable, net of specific allowances for doubtful accounts.

	June 30, 2019		December 31, 2018
Fox Networks Group	46	%	66	%
American Made Media	15	%	—	%

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,
	2019		2018		2019		2018
Fox Networks Group	57	%	22	%	59	%	33	%
Fetch Media, Ltd.	—	%	45	%	—	%	33	%
Houston Methodist	8	%	—	%	11	%	—	%
Cisco	—	%	12	%	—	%	9	%

Deferred Revenue

The Company’s deferred revenue balance consisted of the following:

	June 30, 2019		December 31, 2018
Current deferred revenue
Platform subscriptions and services revenue	$	2,008	$	1,506
Application transaction revenue	93		133
PhunCoin deposits	—		990
Total current deferred revenue	$	2,101	$	2,629
Non-current deferred revenue
Platform subscriptions and services revenue	$	5,048	$	5,622
Total non-current deferred revenue	$	5,048	$	5,622
Total deferred revenue	$	7,149	$	8,251

Condensed Income Statement

Condensed Consolidated Statement of Operations

	Three Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	5,510		$	109	$	5,619
Sales and marketing	$	665		$	50	$	715
Net loss	$	(3,067	)	$	59	$	(3,008	)
Net loss per share, basic and diluted	$	(0.08	)	$	—	$	(0.08	)

	Six Months Ended June 30, 2019
	As reported			Impact of Adoption		Amounts Without Adoption of ASC 606
Net revenue	$	10,825		$	291	$	11,116
Sales and marketing	$	1,389		$	5	$	1,394
Net loss	$	(6,561	)	$	286	$	(6,275	)
Net loss per share, basic and diluted	$	(0.19	)	$	0.01	$	(0.18	)

The following table sets forth the cumulative impact of the adoption of the new revenue standard for select condensed consolidated balance sheet line items:

	Balance at December 31, 2018			Adjustments due to ASU 2014-09			Balance at January 1, 2019
Assets:
Prepaid expenses and other current assets	$	272		$	369		$	641
Liabilities:
Deferred revenue short-term	$	2,629		$	(465	)	$	2,164
Deferred revenue long-term	$	5,622		$	(253	)	$	5,369
Stockholders’ deficit:
Accumulated deficit	$	(111,820	)	$	1,087		$	(110,733	)

The following tables summarize the significant impacts of adopting ASC 606 on our financial statements as of and for the three and six months ended June 30, 2019:

Condensed Consolidated Balance Sheet

	June 30, 2019
	As reported			Impact of Adoption			Balances Without Adoption of ASC 606
Assets:
Prepaid expenses and other current assets	$	740		$	(374	)	$	366
Liabilities:
Deferred revenue short-term	$	2,101		$	218		$	2,319
Deferred revenue long-term	$	5,048		$	209		$	5,257
Stockholders’ deficit:
Accumulated deficit	$	(117,294	)	$	(801	)	$	(118,095	)

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum annual lease payments as of June 30, 2019 under the Company’s operating leases are set forth as follows:

Future minimum lease obligations years ended December 31,	Lease Obligations
2019 (Remainder)	$	242
2020	164
2021	119
2022	119
2023	59
Thereafter	—
Total	$	703

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Attributable to Parent [Abstract]

Summary of Warrant Activity by Warrant Type

A summary of the Company’s warrant activity by warrant type is as follows:

Warrant Type	Cash Exercise Price per share		Warrants/UPO's Outstanding December 31, 2018	Warrants issued for UPO exercises	Warrants/UPO’s Exercised				Warrants Outstanding June 30, 2019
					Cash		Cashless
Common stock warrant (Series D-1)	$	5.54	14,866	—	—		—		14,866
Common stock warrants (Series F)	$	9.22	1,085,059	—	(400,740	)	(306,917	)	377,402
Public Warrants (PHUNW)	$	11.50	6,900,610	—	—		(5,139,319	)	1,761,291
Private Placement Warrants	$	11.50	10,182,060	—	(216,556	)	(8,307,123	)	1,658,381
Unit Purchase Options (UPOs)	$	11.50	130,000	—	—		(130,000	)	—
Unit Purchase Option Warrants	$	11.50		116,172	—		(92,000	)	24,172
Total			18,312,595	116,172	(617,296	)	(13,975,359	)	3,836,112

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Restricted Stock Unit Activity

A summary of the Company’s restricted stock unit activity under the 2018 Plan is set forth below:

	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2018	—	$	—
Granted	665,363	7.34
Released	—	—
Forfeited	—	—
Outstanding as of June 30, 2019	665,363	$	7.34

Stock-Based Compensation

A summary of the Company’s stock option activity under the Plan and related information is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2018	2,364,823		$	0.90	8.12	$	71,332
Granted	—		—
Released	(106,397	)	0.68
Forfeited	(329,350	)	1.69
Outstanding as of June 30, 2019	1,929,076		$	0.78	7.07	$	4,492
Exercisable as of June 30, 2019	1,258,784		$	0.67	6.31	$	3,067

Schedule of Stock Options Granted

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table sets forth information relating to stock options granted:

	Three Months Ended June 30, 2018	Six Months Ended June 30, 2018
Weighted average risk-free rate	2.75%	2.51%
Expected dividend yield	—	—
Weighted average expected life (years)	6.08	6.08
Weighted average volatility	56.87%	56.87%

Condensed Income Statement

Compensation costs that have been included on the Company’s consolidated statements of operations and comprehensive income (loss) for all stock-based compensation arrangements are detailed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
Stock-based compensation	2019		2018		2019			2018
Cost of revenues	$	24	$	14	$	38		$	18
Sales and marketing	9		13		(16		)	15
General and administrative	349		27		372			151
Research and development	34		8		33			27
Total stock-based compensation	$	416	$	62	$	427		$	211

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Subsequent Events (Tables)

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Future Minimum Annual Lease Payments

Future minimum annual lease payments under the Lease are as follows:

Future minimum lease obligation under the Lease for the years ended December 31,	Lease Obligation
2019	$	30
2020	326
2021	336
2022	346
2023	356
Thereafter	502
Total	$	1,896

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The Company and Basis of Presentation (Details)	Feb. 27, 2018 shares
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Per share merger consideration paid to Phunware stockholders	0.459

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Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($) customer	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Summary of Significant Accounting Policies (Textual)
Number of customers per impressions | customer	1,000
Restricted cash	$ 0	$ 0	$ 5,500
Cash equivalents, at carrying value	0	0
Accounts Receivable
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts	$ 3,089	$ 3,089	$ 3,089
Minimum
Summary of Significant Accounting Policies (Textual)
Term of license subscription agreement		6 months
Maximum
Summary of Significant Accounting Policies (Textual)
Term of license subscription agreement		60 months

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Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Accounts receivable	$ 6,882	$ 6,882
Less allowances for doubtful accounts	(3,336)	(3,276)
Balance	$ 3,546	$ 3,606

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Summary of Significant Accounting Policies - Deferred Revenue (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Product Information [Line Items]
Deferred revenue short-term	$ 2,101	$ 2,164	$ 2,629
Deferred revenue long-term	5,048	$ 5,369	5,622
Total deferred revenue	7,149		8,251
Platform subscriptions and services revenue
Product Information [Line Items]
Deferred revenue short-term	2,008		1,506
Deferred revenue long-term	5,048		5,622
Application transaction revenue
Product Information [Line Items]
Deferred revenue short-term	93		133
Total current deferred revenue
Product Information [Line Items]
Deferred revenue short-term	$ 0		$ 990

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Summary of Significant Accounting Policies - Condensed Consolidated Balance Sheet Line Items (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Assets:
Prepaid expenses and other current assets	$ 740	$ 641	$ 272
Liabilities:
Deferred revenue short-term	2,101	2,164	2,629
Deferred revenue long-term	5,048	5,369	5,622
Stockholders’ deficit:
Accumulated deficit	(117,294)	(110,733)	(111,820)
Balance at December 31, 2018
Assets:
Prepaid expenses and other current assets	366		272
Liabilities:
Deferred revenue short-term	2,319		2,629
Deferred revenue long-term	5,257		5,622
Stockholders’ deficit:
Accumulated deficit	(118,095)		$ (111,820)
Adjustments due to ASU 2014-09
Assets:
Prepaid expenses and other current assets	(374)	369
Liabilities:
Deferred revenue short-term	218	(465)
Deferred revenue long-term	209	(253)
Stockholders’ deficit:
Accumulated deficit	$ (801)	$ 1,087

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Summary of Significant Accounting Policies - Revenue Sources (Details) - Sales Revenue, Net	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Fox Networks Group
Revenue, Major Customer [Line Items]
Concentration risk, percentage	57.00%	22.00%	59.00%	33.00%
Fetch Media, Ltd.
Revenue, Major Customer [Line Items]
Concentration risk, percentage	0.00%	45.00%	0.00%	33.00%
Houston Methodist
Revenue, Major Customer [Line Items]
Concentration risk, percentage	8.00%	0.00%	11.00%	0.00%
Cisco
Revenue, Major Customer [Line Items]
Concentration risk, percentage	0.00%	12.00%	0.00%	9.00%

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Summary of Significant Accounting Policies - Concentration of Accounts Receivable (Details) - Accounts Receivable	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fox Networks Group
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration of accounts receivable, net of specific allowances, percentage	46.00%	66.00%
American Made Media
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration of accounts receivable, net of specific allowances, percentage	15.00%	0.00%

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Summary of Significant Accounting Policies - Condensed Consolidated Statements of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Income Statements, Captions [Line Items]
Net revenue	$ 5,510	$ 14,185	$ 10,825	$ 19,165
Sales and marketing	665	1,414	1,389	3,332
Net loss	$ (3,067)	$ 4,472	$ (6,561)	$ (2,692)
Net loss per share, basic and diluted (in dollars per share)	$ (0.08)		$ (0.19)
As reported
Condensed Income Statements, Captions [Line Items]
Net revenue	$ 5,619		$ 11,116
Sales and marketing	715		1,394
Net loss	$ (3,008)		$ (6,275)
Net loss per share, basic and diluted (in dollars per share)	$ (0.08)		$ (0.18)
Impact of Adoption
Condensed Income Statements, Captions [Line Items]
Net revenue	$ 109		$ 291
Sales and marketing	50		5
Net loss	$ 59		$ 286
Net loss per share, basic and diluted (in dollars per share)			$ 0.01

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Reverse Merger (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 27, 2018	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Per share merger consideration paid to Phunware stockholders	0.459
Notes payable			$ 1,993
Transferred per warrant (in dollars per share)			$ 0.50
Issuance of private placement warrants (in shares)			2,211,572
Aggregate cash proceeds amount		$ 4,770		$ 9,574
Merger Agreement
Business Acquisition [Line Items]
Cash	$ 301,000
Warrants to purchase common stock (in shares)	3,985,244		250,000
Forfeited shares (in shares)	187,188
Business acquisition, transaction costs			$ 400
Shares transferred to service providers (in shares)			181,391
Convertible Preferred Stock
Business Acquisition [Line Items]
Issued shares of preferred stock (in shares)			6,000
Aggregate cash proceeds amount			$ 6,000
Stellar Common Stock
Business Acquisition [Line Items]
Shares to purchase common stock (in shares)			250,000

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Factoring Agreement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jun. 15, 2016
Factoring Agreement [Line Items]
Advances, maximum percentage amount of eligible accounts receivable						80.00%
Factor expense	$ 146	$ 179	$ 332	$ 380
Factored receivables payable	1,775		1,775		$ 2,434
Future advances	$ 1,225		$ 1,225		$ 566
First 30 Days
Factoring Agreement [Line Items]
Fees paid for factored receivables, percentage						1.80%
Every Ten Days Thereafter
Factoring Agreement [Line Items]
Fees paid for factored receivables, percentage						0.65%

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Convertible Notes (Details)	3 Months Ended
	Jun. 30, 2019 USD ($) day $ / shares
Convertible Notes Payable
Debt Instrument [Line Items]
Value of notes	$ 20,000,000
Interest rate of notes	7.00%
Conversion price (in dollars per share) | $ / shares	$ 11.50
Debt instrument, convertible, stock price trigger (in dollars per share) | $ / shares	$ 17.25
Consecutive trading days | day	30
Note Purchase Agreement
Debt Instrument [Line Items]
Principal amount of note	$ 250,000
Long-term debt	$ 250,000
Minimum | Convertible Notes Payable
Debt Instrument [Line Items]
Threshold trading days | day	20
Maximum | Note Purchase Agreement
Debt Instrument [Line Items]
Value of notes	$ 20,000,000

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Commitments and Contingencies (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
	Jul. 12, 2019	Sep. 26, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Obligation with Joint and Several Liability Arrangement [Line Items]
Rent expense under operating leases			$ 166	$ 153	$ 331	$ 305
Phunware, Inc v Uber Technologies, Inc.
Obligation with Joint and Several Liability Arrangement [Line Items]
Stock issued during period, value, issued for Services		$ 3,000
Subsequent Event | Pending Litigation | Uber's First Amended Cross-Complaint
Obligation with Joint and Several Liability Arrangement [Line Items]
Stock issued during period, value, issued for Services	$ 17,000

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Commitments and Contingencies - Future Minimum Lease Obligations (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2019 (Remainder)	$ 242
2020	164
2021	119
2022	119
2023	59
Thereafter	0
Total	$ 703

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PhunCoin & PhunToken (Details) - USD ($) $ in Millions	1 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019
PhunCoin [Line Items]
Aggregate of receivable amount	$ 1.2
Ongoing monthly dividends, percentage of monthly credits purchased		2.50%
PhunCoin deposits
PhunCoin [Line Items]
Aggregate of receivable amount	577.9
Minimum
PhunCoin [Line Items]
PhunCoin rights	10.0
Minimum | PhunCoin deposits
PhunCoin [Line Items]
PhunCoin rights	8,000.0
Maximum
PhunCoin [Line Items]
PhunCoin rights	100.0
Maximum | PhunCoin deposits
PhunCoin [Line Items]
PhunCoin rights	$ 30,500.0

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Series A Convertible Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Class of Stock [Line Items]
Aggregate cash proceeds amount	$ 4,770		$ 9,574
Preferred stock, par or stated value per share		$ 0.0001
Restricted cash		$ 5,500
Operating account		$ 740
Preferred stock to be issued (in shares)		100,000,000
Preferred stock, shares outstanding (in shares)		0		6,000
Convertible Preferred Stock
Class of Stock [Line Items]
Issued shares of preferred stock (in shares)		6,000
Aggregate cash proceeds amount		$ 6,000
Preferred stock, par or stated value per share		$ 1,000
Security deposit		$ 5,500
Proceeds into restricted escrow account		$ 6,000
Conversion price (in dollars per share)		$ 11.50
Series A Preferred Stock
Class of Stock [Line Items]
Aggregate cash proceeds amount		$ 6,000
Shares redeemed (in shares)		6,000
Total proceeds issue price		$ 6,240
Dividends		$ 240
30 Day Anniversary | Convertible Preferred Stock
Class of Stock [Line Items]
Percentage of shares mandatorily redeemable		104.00%
Shares mandatorily redeemable (in shares)		3,000
60 Day Anniversary | Convertible Preferred Stock
Class of Stock [Line Items]
Percentage of shares mandatorily redeemable		104.00%
Shares mandatorily redeemable (in shares)		2,500
90 Day Anniversary | Convertible Preferred Stock
Class of Stock [Line Items]
Percentage of shares mandatorily redeemable		104.00%
Shares mandatorily redeemable (in shares)		500

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Stockholders' Equity (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) stockholder $ / shares shares	Dec. 31, 2016 $ / shares shares	Dec. 31, 2012 $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Common stock, shares authorized (in shares)	1,000,000,000
Common stock, par value | $ / shares	$ 0.0001	$ 0.0001
Common stock, shares outstanding (in shares)	38,927,776	27,294,164
Restricted shares subject to repurchase for unvested shares related to early option exercises under stock equity plans (in shares)	25,230	40,707
Issuance of common stock shares (in shares)		1,085,096
Issuance of common stock, net of issuance costs | $		$ 9,565,000
Cash exercises for warrants (in shares)	617,296
Aggregate gross proceeds | $	$ 6,184,000
Stock issued, warrants exercised (in shares)	10,913,146
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants outstanding (in shares)	3,836,112	18,312,595
Cash
Subsidiary, Sale of Stock [Line Items]
Aggregate gross proceeds | $	$ 6,092,000
Digital Currencies
Subsidiary, Sale of Stock [Line Items]
Aggregate gross proceeds | $	$ 92,000
Warrant
Subsidiary, Sale of Stock [Line Items]
Stock issued, warrants exercised (in shares)	2,951,741
Warrant to purchase aggregate shares of common stock (in shares)		1,085,059		14,866
Exercise price per share (in dollars per share) | $ / shares		$ 9.22		$ 5.54
Public warrants exercisable for cash, number of days following reverse merger and recapitalization		30 days
Effective registration statement not on file, number of days following reverse merger and recapitalization		90 days
Warrants exercised via cashless provisions (in shares)	5,139,319
PhunCoin Warrant
Subsidiary, Sale of Stock [Line Items]
PhunCoin warrants | $		$ 0
Exercise price per share (in dollars per share) | $ / shares		$ 11.5
Warrants outstanding (in shares)		27,400,000,000
Number of stockholders | stockholder		68
Warrants issued to Phunware shareholders (in shares)		0
Private Placement | Warrant
Subsidiary, Sale of Stock [Line Items]
Exercise price per share (in dollars per share) | $ / shares		$ 11.5
Public warrants exercisable for cash, number of days following reverse merger and recapitalization		30 days
Employee Stock Option
Subsidiary, Sale of Stock [Line Items]
Aggregate shares issued (in shares)			130,000
Exercise price per share (in dollars per share) | $ / shares			$ 11.5
Warrants outstanding (in shares)	24,172
Cash and Cashless Exercises
Subsidiary, Sale of Stock [Line Items]
Aggregate shares issued (in shares)	11,530,442
Cashless Exercises
Subsidiary, Sale of Stock [Line Items]
Warrants exercised (in shares)	13,975,359

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Stockholders' Equity - Warrants (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants/UPO's outstanding December 31, 2018	18,312,595
Warrants issued for UPO exercises	116,172
Warrants/UPO's exercised, cash	(617,296)
Warrants/UPO's exercised, cashless	(13,975,359)
Warrants/UPO's outstanding June 30, 2019	3,836,112
Common stock warrant (Series D-1)
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 5.54
Warrants/UPO's outstanding December 31, 2018	14,866
Warrants/UPO's outstanding June 30, 2019	14,866
Common stock warrants (Series F)
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 9.22
Warrants/UPO's outstanding December 31, 2018	1,085,059
Warrants/UPO's exercised, cash	(400,740)
Warrants/UPO's exercised, cashless	(306,917)
Warrants/UPO's outstanding June 30, 2019	377,402
Public Warrants (PHUNW)
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants/UPO's outstanding December 31, 2018	6,900,610
Warrants/UPO's exercised, cashless	(5,139,319)
Warrants/UPO's outstanding June 30, 2019	1,761,291
Private Placement Warrants
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants/UPO's outstanding December 31, 2018	10,182,060
Warrants/UPO's exercised, cash	(216,556)
Warrants/UPO's exercised, cashless	(8,307,123)
Warrants/UPO's outstanding June 30, 2019	1,658,381
Unit Purchase Options (UPOs)
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants/UPO's outstanding December 31, 2018	130,000
Warrants/UPO's exercised, cashless	(130,000)
Warrants/UPO's outstanding June 30, 2019	0
Unit Purchase Option Warrants
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Warrants issued for UPO exercises	116,172
Warrants/UPO's exercised, cashless	(92,000)
Total
Class of Warrant or Right [Line Items]
Warrants/UPO's exercised, cash	(617,296)

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Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock shares (in shares)			1,085,096
Aggregate intrinsic value of options exercised	$ 7,324
Fair value of options vested	$ 229
2018 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock shares (in shares)		1,954,306
Common stock reserved for issuance (in shares)	2,403,321	2,403,321	2,729,416
2018 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance (in shares)	272,942	272,942	1,228,237
Expiration period		27 months
ESPP, purchase price percentage		85.00%
2009 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested shares (in shares)	25,230	25,230	40,707
Accrued expenses	$ 17	$ 17	$ 34
Unamortized fair value of restricted stock units	4,500	$ 4,500
Weighed-average period of costs amortized		1 year 3 months 18 days
Unrecognized stock compensation expense	$ 334	$ 334
Selling and Marketing Expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares participant may purchase		2,000
Restricted Stock Units (RSUs) - Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock unit awards granted (in shares)	620,363
Restricted Stock Units (RSUs) - Non-Employee Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock unit awards granted (in shares)	45,000
Restricted stock units awards grant date fair value (in dollars per share)	$ 7.34	$ 7.34
Employee Stock | 2018 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual percentage increase	3.00%	3.00%
Percent of shares outstanding on last day	1.50%	1.50%
Post-Closing Outstanding Shares | Employee Stock | 2018 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual percentage increase	10.00%	10.00%
Outstanding Shares on Last Day of Immediately Preceding Year | Employee Stock | 2018 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual percentage increase	5.00%	5.00%

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Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Shares
Outstanding, beginning balance (in shares) | shares	0
Granted (in shares) | shares	665,363
Released (in shares) | shares	0
Forfeited (in shares) | shares	0
Outstanding, ending balance (in shares) | shares	665,363
Weighted Average Grant Date Fair Value
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 0.00
Granted (in dollars per share) | $ / shares	7.34
Released (in dollars per share) | $ / shares	0.00
Forfeited (in dollars per share) | $ / shares	0.00
Outstanding, ending balance (in dollars per share) | $ / shares	$ 7.34

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Stock-Based Compensation - Stock Option Activity (Details) - Employee Stock Option - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of shares, beginning outstanding (in shares)	2,364,823
Number of shares, released	(106,397)
Number of shares, forfeited	(329,350)
Number of shares, ending outstanding (in shares)	1,929,076	2,364,823
Number of shares, exercisable (in shares)	1,258,784
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price, beginning outstanding (in dollars per share)	$ 0.9
Weighted average exercise price, released (in dollars per share)	0.68
Weighted average exercise price, forfeited (in dollars per share)	1.69
Weighted average exercise price, ending outstanding (in dollars per share)	0.78	$ 0.9
Weighted average exercise price, exercisable (in dollars per share)	$ 0.67
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Weighted average remaining contractual term	7 years 26 days	8 years 1 month 13 days
Weighted average remaining contractual term, exercisable (in years)	6 years 3 months 22 days
Share-Based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value [Abstract]
Aggregate intrinsic value	$ 4,492	$ 71,332
Aggregate intrinsic value, exercisable	$ 3,067

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Stock-Based Compensation - Fair Value of Stock Options Granted (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Weighted average risk-free rate	2.75%	2.51%
Expected dividend yield	0.00%	0.00%
Weighted average expected life (years)	6 years 29 days	6 years 29 days
Weighted average volatility	56.87%	56.87%

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Stock-Based Compensation - Condensed Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 416	$ 62	$ 427	$ 211
Cost of revenues
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	24	14	38	18
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	9	13	(16)	15
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	349	27	372	151
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 34	$ 8	$ 33	$ 27

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Domestic and Foreign Operations (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Domestic and Foreign Operations (Textual)
Derived over net revenues percentage	99.00%	45.00%	99.00%	33.00%

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Related-Party Transactions (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares
Related Party Transactions [Abstract]
Amount of note | $	$ 1,993
Transferred per warrant (in dollars per share) | $ / shares	$ 0.50
Exercise price per share (in dollars per share) | $ / shares	$ 11.5
Recapitalization costs | $	$ 255

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Subsequent Events (Details) - OC Lease Obligation - Subsequent Event $ in Thousands	Jul. 16, 2019 USD ($) ft²
Subsequent Event [Line Items]
Rentable square feet | ft²	8,687
Monthly rent	$ 354
Security deposit	$ 118

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Subsequent Events - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jun. 30, 2019
Subsequent Event [Line Items]
2020		$ 164
2021		119
2022		119
2023		59
Thereafter		0
Total		$ 703
Subsequent Event
Subsequent Event [Line Items]
Total	$ 1,896
OC Lease Obligation | Subsequent Event
Subsequent Event [Line Items]
2019	30
2020	326
2021	336
2022	346
2023	356
Thereafter	$ 502