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Table of Contents

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 March 31, 2020
    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)
Delaware26-4413774
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)

7800 Shoal Creek BlvdSuite 230-SAustinTX78757
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 sharePHUN
The NASDAQ Capital Market
Warrants to purchase one share of Common StockPHUNW
The NASDAQ Capital Market
As of May 12, 2020, 40,950,206 shares of common stock, par value $0.0001 per share, were issued and outstanding. 



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TABLE OF CONTENTS
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Table of Contents
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)
March 31,
2020
December 31,
2019
(Unaudited)
Assets
Current assets:
Cash$833  $276  
Accounts receivable, net of allowance for doubtful accounts of $3,153 and $3,179 at March 31, 2020 and December 31, 2019, respectively
913  1,671  
Prepaid expenses and other current assets475  368  
Total current assets2,221  2,315  
Property and equipment, net16  24  
Goodwill25,784  25,857  
Intangible assets, net212  253  
Deferred tax asset – long term241  241  
Restricted cash91  86  
Other assets276  276  
Total assets$28,841  $29,052  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$10,670  $10,159  
Accrued expenses4,404  4,035  
Deferred revenue3,132  3,360  
PhunCoin deposits1,202  1,202  
Factored receivables payable450  1,077  
Current maturities of long-term debt, net1,195    
Total current liabilities21,053  19,833  
Long-term debt2,104  910  
Long-term debt - related party755  195  
Deferred tax liability241  241  
Deferred revenue3,200  3,764  
Deferred rent135  83  
Total liabilities27,488  25,026  
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value
4  4  
Additional paid in capital129,370  128,008  
Accumulated other comprehensive loss(454) (382) 
Accumulated deficit(127,567) (123,604) 
Total stockholders’ equity1,353  4,026  
Total liabilities and stockholders’ equity$28,841  $29,052  
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 Loss
(In thousands, except per share information)
(Unaudited)
Three Months Ended
March 31,
20202019
Net revenues$2,640  $5,315  
Cost of revenues1,091  2,617  
Gross profit1,549  2,698  
Operating expenses:
Sales and marketing605  724  
General and administrative3,945  3,975  
Research and development861  1,309  
Total operating expenses5,411  6,008  
Operating loss(3,862) (3,310) 
Other income (expense):
Interest expense(101) (188) 
Other income  4  
Total other expense(101) (184) 
Net loss(3,963) (3,494) 
Other comprehensive loss:
Cumulative translation adjustment(72) 27  
Comprehensive loss$(4,035) $(3,467) 
Net loss per common share, basic and diluted$(0.10) $(0.12) 
Weighted-average common shares used to compute net loss per share, basic and diluted40,095  30,264  
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 Redeemable Convertible Preferred Stock and Stockholders’ Equity
(In thousands)
(Unaudited)

Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance - December 31, 2019    39,811  $4  $128,008  $(123,604) $(382) $4,026  
Exercise of stock options, net of vesting of restricted shares—  —  33  —  16  —  —  16  
Release of restricted stock—  —  116  —  —  —  
Issuance of common stock for payment of legal and board of director fees —  —  733  —  492  —  —  492  
Stock-based compensation expense—  —  —  —  635  —  —  635  
Equity classified cash conversion feature of Senior Convertible Note—  —  —  —  219  —  —  219  
Cumulative translation adjustment—  —  —  —  —  —  (72) (72) 
Net loss—  —  —  —  —  (3,963) —  (3,963) 
Balance - March 31, 2020    40,693  $4  $129,370  $(127,567) $(454) $1,353  

Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance - December 31, 20186  5,377  27,253  $3  $118,062  $(111,820) $(418) $5,827  
Cumulative-effect adjustment resulting from the adoption of ASU 2014-09 (Note 2)—  —  —  —  —  1,087  —  1,087  
Exercise of stock options, net of vesting of restricted shares—  —  61  —  35  —  —  35  
Issuance of common stock related to cash-based exercise of common stock warrants—  —  617  —  6,184  —  6,184  
Issuance of common stock related to cashless exercise of warrants—  —  10,400  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 business combination—  —  —  —  1,993  —  —  1,993
Stock-based compensation expense—  —  —  —  11  —  —  11
Cumulative translation adjustment—  —  —  —  —  —  27  27
Net loss—  —  —  —  —  (3,494)   (3,494)
Balance - March 31, 2019    38,331  $4  $125,421  $(114,227) $(391) $10,807  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Phunware, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
20202019
Operating activities
Net loss$(3,963) $(3,494) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation8  16  
Amortization of acquired intangibles41  75  
Amortization of debt discount and deferred financing costs13    
Loss on sale of digital currencies  4  
Bad debt (recovery) expense (16) 15  
Stock-based compensation635  11  
Changes in operating assets and liabilities:
Accounts receivable783  850  
Prepaid expenses and other assets(108) (34) 
Accounts payable851  (1,290) 
Accrued expenses643  (87) 
Deferred revenue(792) (182) 
Net cash used in operating activities(1,905) (4,116) 
Investing activities
Proceeds received from sale of digital currencies  88  
Net cash provided by investing activities  88  
Financing activities
Proceeds from borrowings, net of issuance costs2,595    
Proceeds from related party bridge loans560  
Net repayments on factoring agreement(627) (803) 
Proceeds from warrant exercises  5,731  
Proceeds from exercise of options to purchase common stock15  35  
Series A convertible preferred stock redemptions and dividend payments  (6,240) 
Net cash provided by (used in) financing activities2,543  (1,277) 
Effect of exchange rate on cash and restricted cash(76) 26  
Net increase (decrease) in cash and restricted cash562  (5,279) 
Cash and restricted cash at the beginning of the period362  6,344  
Cash and restricted cash at the end of the period$924  $1,065  
Supplemental disclosure of cash flow information
Interest paid$98  $213  
Income taxes paid$  $  
Non-cash investing and financing activities:
Proceeds due from transfer agent for warrant exercises $  $361  
Issuance of common stock for payment of legal and board of director fees $492  $  
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”) 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. 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 advertisers, the Company provides in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. Founded in 2009, the Company is a Delaware corporation headquartered in Austin, Texas.
Basis of Presentation
The condensed 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, 2019 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, 2019, which are referenced herein. The accompanying interim condensed consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, 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 Securities and Exchange Commission ("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 March 31, 2020 and the results of operations for the three months ended March 31, 2020 and 2019, and cash flows for the three months ended March 31, 2020 and 2019. The results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim period.
Reclassifications of Prior Year Presentation
Certain amounts in the financial statements of prior periods have been reclassified to conform to the current period financial statement presentation. This reclassification had no effect on the Company's reported results of operations. A reclassification was made to the condensed consolidated balance sheet as of December 31, 2019 to identify related parties for debt issuances.
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.

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The following table sets forth the Company's concentration of revenue sources as a percentage of total net revenues.
Three Months Ended March 31,
20202019
Fox Networks Group %63 %
American Made Media Consultants, LLC31 % %
Houston Methodist11 %13 %

The following table sets forth the Company's concentration of accounts receivable, net of specific allowances for doubtful accounts.
March 31, 2020December 31, 2019
American Made Media Consultants, LLC30 %15 %
Presidio Networked Solutions LLC23 %11 %
Fort Lauderdale International Airport/Starmark10 % %
HID Global (through Bluvision Inc.) %23 %
MD Anderson %10 %
The Company completed its contractual obligations under its statement of work with Fox Networks Group ("Fox") as of September 30, 2019. While the underlying master services agreement with Fox (setting forth general terms and conditions) remains in place, the Company does not have any active statements of work with Fox.
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 that 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’s assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. The Company continues to focus on growing its revenues. Accordingly, operating expenditures may exceed the revenue it expects to receive for the foreseeable future. Additionally, the Company has a history of operating losses and negative operating cash flows and expects these trends to continue into the foreseeable future.
Future plans may include obtaining new debt financings and credit lines, utilizing existing or expanding existing credit lines, issuing equity securities, including the exercise of warrants, 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 therefore concluded there is substantial doubt about its ability to continue as a going concern through one year from the issuance of these condensed consolidated 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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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 30, 2020 for the year ended December 31, 2019, except as set forth below.
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. Items subject to the use of estimates include, but are not limited to, the standalone selling price for our products and services, stock-based compensation, useful lives of long-lived assets including intangibles, fair value of intangible assets and the recoverability or impairment of tangible and intangible assets, including goodwill, reserves and certain accrued liabilities, the benefit period of deferred commissions, fair value of debt component of convertible notes and provision for (benefit from) income taxes. Actual results could differ from those estimates and such differences could be material to the consolidated financial statements.
Senior Convertible Note
In March 2019, the Company issued a 7% Senior Convertible Note (defined below) with a principal amount of $3,000 for gross proceeds at closing of $2,371. In accounting for the issuance, the Company separated the note into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the par value of the notes. The difference represents the debt discount, recorded as a reduction of the senior convertible notes on our condensed consolidated balance sheet, and is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability component are being amortized using the effective interest rate method, to interest expense over the term of the notes. The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital.
Loss per Common Share
Basic loss per common share is computed by dividing net loss applicable to common stockholders 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. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to the Company's outstanding warrants and stock equity plans, to the extent dilutive. For all 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 all periods presented.
As of March 31, 2020 and December 31, 2019, 4,689 and 6,219 shares were restricted, respectively, relating to early exercises of the Company’s 2009 Stock Option Plan and are excluded from basic shares outstanding for the years then ended.
Recently Adopted Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). 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. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements or disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). The core principle of ASU 2016-02 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
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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. In November 2019, the FASB issued ASU No. 2019-10 ("ASU 2019-10"). ASU 2019-10 delayed the effective date of ASU 2016-02 for certain types of businesses, including private companies. Under the JOBS Act, the Company has previously 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 ("EGC"), can adopt the new or revised standard at the time private companies adopt the new or revised standard. Accordingly, this ASU is now effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Although earlier application is permitted, the Company plans to implement this guidance beginning the first quarter of its fiscal year 2021. The Company currently does not expect the ASU 2016-02 to materially impact our results of operations; although, based upon our current operating leases outstanding, we believe this guidance may have a material impact on our consolidated balance sheet. We do not plan on recasting prior periods.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 introduces a model based on expected losses to estimate credit losses for most financial assets and certain other instruments. In addition, for available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a Smaller Reporting Company ("SRC") as defined by the SEC, the standard is currently effective for the Company annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2019. We currently intend to adopt ASU No. 2016-13 effective January 1, 2023. Entities will apply the standard’s provisions by recording a cumulative-effect adjustment to retained earnings. We do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements and disclosures.
In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. Should the Company retain its EGC status through the fifth anniversary of the date of its initial public offering, this guidance will be effective for us in our financial statements and consolidated notes thereto for the fiscal year ending December 31, 2021 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
3. Revenue
Disaggregation of Revenue
We derived 90% and 99% of our net revenues from within the United States for the three months ended March 31, 2020 and March 31, 2019, respectively. During the three months ended March 31, 2020, the Company derived 10% of its net revenues from outside the United States.
The following table sets forth the Company's net revenues:
Three Months Ended March 31,
20202019
Net Revenues
Platform subscriptions and services$2,391  $4,821  
Application transaction249  494  
Net revenues$2,640  $5,315  

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Deferred Revenue
The Company’s deferred revenue balance consisted of the following:
March 31,
2020
December 31,
2019
Current deferred revenue
Platform subscriptions and services revenue$3,052  $3,278  
Application transaction revenue80  82  
Total current deferred revenue$3,132  $3,360  
Non-current deferred revenue
Platform subscriptions and services revenue$3,200  $3,764  
Total non-current deferred revenue$3,200  $3,764  
Total deferred revenue$6,332  $7,124  

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers. The Company recognizes deferred revenue as revenue only when revenue recognition criteria are met. During the three months ended March 31, 2020, the Company recognized revenue of $1,484 that was included in its deferred revenue balance as of December 31, 2019.
Remaining Performance Obligations
Remaining performance obligations were $11,219 as of March 31, 2020, of which the Company expects to recognize 45% as revenue over the next 12 months and the remainder thereafter.

4. 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 as of March 31, 2020 and December 31, 2019.
As a result of the issuance of the Notes (defined and discussed further below), the Company had $91 and $86 in restricted cash as of March 31, 2020 and December 31, 2019, respectively.
5. 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 operations and comprehensive loss. Factor expense totaled $53 and $186 for the three months ended March 31, 2020 and March 31, 2019, respectively.
The amount of factored receivables outstanding was $450 and $1,077 as of March 31, 2020 and December 31, 2019, respectively. There was $2,550 and $1,923 available for future advances as of March 31, 2020 and December 31, 2019, respectively.
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6. Debt

A summary of the Company's various debt obligations is set forth below:


March 31, 2020December 31, 2019
Senior convertible note$2,339  $  
Convertible notes250  250  
Promissory notes905  855  
Related-party bridge loans 560    
Total debt$4,054  $1,105  
Less: current maturities of long-term debt$(1,195) $  
Less: related-party debt$(755) $(195) 
Long-term debt$2,104  $910  


Senior Convertible Note
In March 2020, the Company issued a Senior Convertible Note to an institutional investor with an initial principal amount of $3,000 (the “Senior Convertible Note”) for a cash purchase price of $2,760 (reflecting an original issue discount of $240) in a private placement. After deducting the placement agent fee and other estimated expenses, net cash proceeds at the closing were approximately $2,371.
The Senior Convertible Note bears interest at a rate of 7% per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021.
Interest expense related to the Senior Convertible Note for the three months ended March 31, 2020 and interest payable at March 31, 2020 was immaterial.
Monthly Payments and Conversion
Starting on April 30, 2020 and on the last trading day of the month and on the maturity date, the Company is required to make monthly payments. On each payment date, the Company will be required to settle a principal repayment of approximately $143 plus interest thereon (the “Installment Amount”) which shall be satisfied in shares of common stock of the Company at 100% of the Installment Amount, or at the election of the Company, in whole or in part, in cash, at 105% of the Installment Amount. Installment payments made in common stock are subject to customary equity conditions (including minimum floor price and volume thresholds), and are calculated on a conversion price equal to the lower of (x) the conversion price then in effect and (y) the greater of the Floor Price (as defined in the Senior Convertible Note) and 85% of the lowest volume weighted average price in the 10 days prior to the payment date.
Subject to certain beneficial ownership limitations, the Senior Convertible Note is convertible, at the option of the noteholder, into shares of our common stock at a conversion price of $3.00 per share. The conversion price is subject to full ratchet antidilution protection upon any subsequent transaction at a price lower than the conversion price then in effect and standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction.
Redemption
The noteholder has the option to require the Company to redeem all or a portion of the Senior Convertible Note then unpaid and outstanding, as follows:
Subsequent Placement Optional Redemption - At any time after the earlier of the date a noteholder becomes aware of any placement by us of equity or equity-linked securities or the date of consummation of such a placement with net proceeds in the aggregate exceeding $5,000, subject to certain limited exceptions, the noteholder will have the right to have us redeem a portion of the Senior Convertible Note not in excess of 30% of the net proceeds from such placement at a redemption price of 110% of the portion of the Senior Convertible Note.
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Change in Control - In connection with a Change of Control (as defined in the Senior Convertible Note), the noteholder may require us to redeem all or any portion of the Senior Convertible Note. The redemption price per share will equal the greatest of (i) 115% of the outstanding principal of the Senior Convertible Note to be redeemed, and accrued and unpaid interest, (ii) 115% of the market value of the shares of our common stock underlying the Senior Convertible Note, and (iii) 115% of the aggregate cash consideration that would have been payable in respect of the shares of our common stock underlying the Senior Convertible Note, as determined in accordance with the Senior Convertible Note.
Event of Default – Upon occurrence of an Event of Default, the noteholder may require us to redeem in any or all of the Senior Convertible Note at cash redemption price equa1 to the greater of (i) 115% of the outstanding principal, and accrued and unpaid interest and unpaid late charges, or (ii) the market value of the shares of the common stock underlying the Senior Convertible Note.
At any time on or prior to May 19, 2020, the Company may redeem the Senior Convertible Note at a price equal to 100% of the outstanding principal or, if greater, the market value of the common stock underlying the Senior Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon. Thereafter, the Company’s optional redemption price will equal 110% of the outstanding principal or, if greater, the market value of the shares underlying the Senior Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon.
Covenants
Under the Senior Convertible Note, the Company is subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters, including the following provisions.
The Company is subject to a financial covenant that requires it to maintain available cash in the amount of $200 at the end of each fiscal quarter.
In addition, the Company granted the noteholder participation rights in future equity and equity-linked offerings of securities during the two years after the closing in an amount of up to 30% of the securities being sold in such offerings.
Related-Party Bridge Loans
During the first quarter of 2020, various related parties loaned the Company $560. The Related-Party Bridge Loans ("RPBLs") bear an interest of 10% per annum and will mature on November 14, 2024. Payments on or payoff of the RPBLs may be made early with no penalty. The RPBLs and amounts thereof were made by the following related parties: (i) $204 by Cane Capital, LLC, an entity owned in part by our Chief Executive Officer; (ii) $151 by Curo Capital Appreciation Fund, LLC, an entity in which the Company's Chief Executive Officer and Chief Technology Officer serve as co-presidents, (iii) $155 by various individuals associated by familiar relationship with our Chief Executive Officer; and (iv) $50 by Luan Dang, the Company's Chief Technology Officer. Transaction costs related to the RPBLs were not significant. Interest expense related to the RPBLs for the three months ended March 31, 2020 was not significant and interest payable as of March 31, 2020 was not significant.
Convertible Notes
In 2019, the Company’s board of directors authorized the issuance of $20,000 of convertible promissory notes (the “Convertible 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 Convertible Notes will be sold in reliance on an exemption from registration. The Company may not issue Convertible Notes under the Purchase Agreement in excess of $20,000, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Convertible Notes.
The Convertible Notes bear ordinary interest at a rate of 7% per annum. Interest under the Convertible Notes is payable quarterly beginning on September 30, 2019, and interest and principal under the Convertible 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 Convertible Notes mature on June 3, 2024.
The Convertible 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 closing sale price of the Company’s common stock equals or exceeds $17.25 per share for 20 out of 30 consecutive trading days, if a registration statement is then in effect covering the disposition of the converted shares. Assuming the Convertible Notes in an aggregate principal amount of $20,000
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are sold under the Purchase Agreement, and assuming that all interest payments are deferred until maturity, the Convertible Notes would be convertible to a maximum total of approximately 2,347,826 shares of the Company’s common stock.
The Company has one Convertible Note with a balance outstanding of $250 as of March 31, 2020. Transaction costs related to the issuance of the Convertible Note were immaterial. Interest expense related to the Convertible Note for the three months ended March 31, 2020 was immaterial and interest payable as of March 31, 2020 and December 31, 2019 was immaterial.
Promissory Notes
In 2019, the Company’s board of directors authorized the issuance of $20,000 of 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 in reliance on an exemption from registration. The Company may prepay the Notes at any time without penalty. The Company may not issue Notes under the Purchase Agreement in excess of $20,000, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Notes.
The Notes bear ordinary interest at a rate of 10% per annum. Interest under the Notes is payable monthly beginning on November 30, 2019. During the term of the Notes, the Company will maintain a restricted bank account with a minimum balance of one year of interest payments on the aggregate principal balance of all Notes, which will be available for use exclusively to satisfy any payments owed by the Company under the Notes. The principal and unpaid accrued interest on the Notes will be due and payable on demand by the majority Note holders on or after the date that is 60 months following November 15, 2019. If an event of default occurs under the Notes, the majority Note holders may cause all principal and unpaid interest under the Notes to become immediately due and payable. In such event, the Notes will thereafter accrue interest at a rate of 12% per annum. Upon agreement between the Company and any senior creditor, the Notes will be subject to subordination in the right of payment to all current and future indebtedness or obligations of the Company for borrowed money to banks, commercial finance lenders, and other institutions regularly engaged in the business of lending money, or for factoring arrangements to parties providing such factoring.
During 2019, the Company issued a Note in the principal amount of $195, in exchange for cash consideration, to Cane Capital, LLC, an entity owned in part by Alan S. Knitowski, the Company’s Chief Executive Officer and a member of its board of directors.
The Notes have a balance outstanding of $905 as of March 31, 2020. Transaction costs related to the issuance of the Notes were immaterial. Interest expense related to the Notes for the three months ended March 31, 2020 was immaterial and interest payable as of March 31, 2020 and December 31, 2019 was immaterial.
7. Commitments and Contingencies
Leases
The Company has operating office space leases in Austin, Texas; Irvine, California; San Diego, California; and Miami, Florida. Rent expense under operating leases totaled $211 and $165 for the three months ended March 31, 2020 and March 31, 2019, respectively.
Future minimum annual lease payments as of March 31, 2020 under the Company’s operating leases are set forth as follows:
Future minimum lease obligations years ending December 31,Lease
Obligations
2020 (Remainder)$542  
2021836  
2022725  
2023622  
2024609  
Thereafter274  
Total$3,608  
Litigation
On September 26, 2017, the Company filed a breach of contract complaint against Uber Technologies, Inc. ("Uber") seeking approximately $3,000 (plus interest) for unpaid invoices for advertising campaign services provided for Uber in the first quarter
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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 the Company's complaint and also filed a cross-complaint against Phunware and Fetch Media, Ltd. ("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 the Company (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). Phunware 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, the Company retained new counsel. In June 2019, the Court set a new trial date of April 20, 2020. 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 $17,000 from Uber, and claims treble damages, general and punitive damages, and attorneys’ fees and costs. On October 1, 2019, Alan S. Knitowski (“Knitowski”) filed his Motion to Quash Service of Summons, which was denied on October 29, 2019. On October 7, 2019, D. Stasiuk, M. Borotsik, and A. Cook filed their Motion to Quash Service of Summons, which was denied on December 17, 2019. On December 2, 2019, the case was reassigned for all purposes to Judge Cheng of the Superior Court of California, San Francisco County (Department 613). On January 22, 2020, the Court assigned the case to Judge Wiss of the Superior Court of California, San Francisco County (Department 305) for purposes of trial. On March 13, 2020, the Court announced that jury trials will be continued for 90 days from the date they have been scheduled in response to the COVID-19 pandemic. Additionally, on March 13, 2020, the Court ordered Phunware to pay $78 in monetary sanctions based on a discovery motion brought by Uber. On March 19, 2020, Uber filed a further discovery motion for sanctions with is due to be heard in June 2020. Discovery is continuing. On May 5, 2020, the court ordered a new trial date of September 21, 2020. The Company maintains that its claims against Uber are meritorious and that Uber’s claims against the Company are not. However, Phunware makes no predictions on the likelihood of success of prevailing on its contract action against Uber or on the likelihood of defeating Uber’s claims against the Company.
On December 17, 2019, certain stockholders (the "Plaintiffs") filed a lawsuit against the Company. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al.; Cause No. D-1-GN-19- 008846 was filed in the 126th Judicial District Court of Travis County, Texas. The Plaintiffs invested in various early rounds of financing while the Company was private and claim the Company should not have subjected their shares to a 180-day "lock up" period. According to the Plaintiffs, the price of Phunware stock dropped significantly during the lock up period. The Plaintiffs seek unspecified damages in excess of one million dollars. The Company maintains the Plaintiffs' claims are without merit and intends to contest vigorously the claims asserted in the lawsuit. All defendants have answered. The Court has not yet set a trial date or pretrial deadlines. Certain written discovery has been propounded, but responses are not yet due.
On March 9, 2020, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against the Company. The complaint, captioned Ellenoff Grossman & Schole LLP versus Stellar Acquisition III, Corp a/k/a Stellar Acquisition III, Inc. n/k/a Phunware, Inc., was filed in the Supreme Court of the State of New York, New York County (Case No. 152585/2020). EGS is seeking monetary damages in the amount of $690 for alleged unpaid invoices related to legal services rendered for Stellar in conjunction with the reverse merger with the Company, plus legal and court costs. Pursuant to a stipulation, the Company currently has until June 12, 2020 to respond to the complaint. The Company has $690 in accounts payable in the condensed consolidated balance sheet as of March 31, 2019 and December 31, 2019 related to the alleged unpaid invoices.
On April 24, 2020 Sha-Poppin Gourmet Popcorn, LLC (the “Popcorn Company”) filed a lawsuit against certain defendants, including the Company. The case captioned, Sha-Poppin Gourmet Popcorn, LLC versus JPMorgan Chase Bank, N.A., RCSH Operations, LLC, RCSH Operations, Inc (together d/b/a Ruth’s Chris Steakhouse), and Phunware, Inc., was filed in the Northern District of Illinois, Eastern Division. The Popcorn Company alleges, among other claims, the Company was unjustly enriched by JPMorgan Chase for the Company's loan made pursuant to the Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). (See Note 13 for discussion related to the Company's CARES Act loan.) The Company was served notice on April 27, 2020 and has 21 days after this date to answer. The Company disputes these claims and intends to defend the matter vigorously. Given the preliminary stage of the case, the Company is unable to predict the outcome of this dispute, or estimate the loss or range of loss, if any, associated with this matter.
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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.
8. PhunCoin & PhunToken
PhunCoin
In 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 to acquire a token denominated as "PhunCoin" (the "Rights"). 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. 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 PhunCoin during the launch of the Token Ecosystem (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).
PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch of the Company’s blockchain technology enabled rewards marketplace and data exchange ("Token Ecosystem"), (ii) one (1) year after the issuance of the Rights to the purchaser, or (iii) the date the Company 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; however, the Company believes it has a contractual obligation to use good faith efforts to issue a token to Rights holders under the token rights agreement. The Company currently anticipates that PhunCoin will be issued to the holders of the Rights in 2020. 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 in in the first half of 2020. 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.
As of March 31, 2020, 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 launch of the Token Ecosystem occurs. The Reg CF Offering closed May 1, 2019. While the Reg D Offering is ongoing, the Company does not anticipate any additional proceeds to be raised.
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 March 31, 2020, the Company has not sold any Phun.
9. Stockholders’ Equity
Common Stock
Total common stock authorized to be issued as of March 31, 2020 was 1,000,000,000 shares, with a par value of $0.0001 per share. At March 31, 2020 and December 31, 2019, there were 40,700,206 and 39,817,917 shares outstanding, inclusive of 4,689 and 6,219 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity plans, respectively.
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
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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.
Warrants
The Company has various warrants outstanding. A summary of the Company’s warrant activity is set forth below:
Warrant TypeCash Exercise
Price per
share
Warrants Outstanding December 31,
2019
Warrants ExercisedWarrants Outstanding March 31,
2020
CashCashless
Common stock warrant (Series D-1)$5.54  14,866  —  —  14,866  
Common stock warrants (Series F)$9.22  377,402  —  —  377,402  
Public Warrants (PHUNW)$11.50  1,761,291  —  —  1,761,291  
Private Placement Warrants$11.50  1,658,381  —  —  1,658,381  
Unit Purchase Option Warrants$11.50  24,172  —  —  24,172  
Total3,836,112  —  —  3,836,112  

10. Stock-Based Compensation
2018 Equity Incentive Plan
In 2018, 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 adoption of the 2018 Plan, 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 are forfeited to or repurchased by us. As of March 31, 2020, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing equals 1,385,862.
During the three months ended March 31, 2020, restricted stock units were the only stock-based incentives granted under the 2018 Plan. A summary of the Company’s restricted stock unit activity under the 2018 Plan is set forth below:
SharesWeighted Average Grant Date Fair Value
Outstanding as of December 31, 20192,436,968  $3.15  
Granted1,624,607  1.11
Released(848,615) 0.97  
Forfeited(88,500) 5.56  
Outstanding as of March 31, 20203,124,460  $2.61  
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Not including the maximum number of shares from the 2009 Plan that may be added to the 2018 Plan noted above, the 2018 Plan had 712,874 and 205,206 shares of common stock reserved for future issuances as of March 31, 2020 and December 31, 2019, respectively.
During the first quarter of 2020, we granted 123,084 restricted stock units to non-employee directors, each with a grant date fair value of $1.25 per share in lieu of cash compensation board fees for services provided. The awards vested immediately. We also granted 125,523 restricted stock units to non-employee directors, with a grant date fair value of $1.25 per share. The awards vest over ten months in four equal installments on March 26, 2020, June 26, 2020, September 18, 2020, and December 25, 2020, respectively, and are subject to service conditions. We also granted 756,000 restricted stock unit awards to team members with an average grant date fair value of $1.25 per share. The awards granted to team members vest over an average of 42 months with various installment and vesting dates, and are subject to service conditions. We also granted 610,000 restricted stock units to non-employee service provider that were for the satisfaction of legal fees owed. The awards granted to the legal service provider vested immediately and had an average grant date fair value $0.89.
2018 Employee Stock Purchase Plan
Also, in 2018, 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 March 31, 2020, 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 March 31, 2020 and December 31, 2019.
2009 Equity Incentive Plan
In 2009, the Company adopted its 2009 Equity Incentive Plan (the “2009 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 2009 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 condensed consolidated balance sheets and is reclassified to equity as the shares vest. As of March 31, 2020 and December 31, 2019, 4,689 and 6,219 shares were unvested amounting to $3 and $3 in accrued expenses, respectively. Effective with the adoption of the 2018 Plan, no additional grants will be made under the 2009 Plan.

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A summary of the Company’s stock option activity under the 2009 Plan and related information is as follows:
Number of SharesWeighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
Outstanding as of December 31, 20191,465,450  $0.80  6.86$771  
Granted—  
Released(31,506) 0.47  
Forfeited(52,771) 1.20  
Outstanding as of March 31, 20201,381,173  $0.79  6.41$115  
Exercisable as of March 31, 20201,033,654  $0.72  5.94$96  
For the three months ended March 31, 2020, the aggregate intrinsic value of options exercised was $17 and the total fair value of options vested was $34.
The Company has not granted any equity awards under the 2009 Plan since 2018.
Stock-Based Compensation
Compensation costs that have been included on the Company’s condensed consolidated statements of operations and comprehensive loss for all stock-based compensation arrangements are detailed as follows:
Three Months Ended March 31,
Stock-based compensation20202019
Cost of revenues$