What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-12 · 293 added, 476 removed, 289 unchanged (73% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheet

(In thousands, except per share information)

September 30,

(In thousands, except share and per share information)

2021 December 31,

1 unchanged sentence

Cash $ 23,469 $ 3,940

Accounts receivable, net of allowance for doubtful accounts of $ 123 and $ 3,179 at September 30, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 122 and $ 356 at March 31, 2021 and December 31, 2020, respectively

Digital currencies 1,098 —

Prepaid expenses and other current assets 794 304

5 unchanged sentences

Restricted cash 91 91

Right-of-use asset 1,723 —

Other assets 276 276

5 unchanged sentences

Accrued legal settlement 3,000 3,000

Lease liability 530 —

Deferred revenue 2,180 2,397

PhunCoin deposits 1,202 1,202

Factored receivables payable 439 1,077

Current maturities of long-term debt, net 10,012 4,435

5 unchanged sentences

Deferred revenue 2,054 2,678

Lease liability 1,447 —

Deferred rent — 180

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Common stock, $ 0.0001 par value;

1,000,000,000 shares authorized at March 31, 2021 and December 31, 2020;

71,211,399 and 56,380,111 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 175,046 144,156

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net revenues $ 1,646 $ 2,640

5 unchanged sentences

Research and development 1,052 861

Legal settlement 4,500 — 4,500 —

Total operating expenses 4,366 5,411

3 unchanged sentences

Loss on extinguishment of debt ( 5,768 ) —

Gain on change in fair value of warrants 1,244 — 1,244 —

Other (expense) income — 11 — 28

Loss on change in fair value of warrant liability ( 885 ) —

Other expense ( 79 ) —

Total other expense ( 8,951 ) ( 101 )

2 unchanged sentences

Net loss ( 12,363 ) ( 3,963 )

Other comprehensive loss:

Other comprehensive income (loss):

Cumulative translation adjustment 10 ( 72 )

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Phunware, Inc.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands)

Preferred Stock Common Stock Additional

Capital Accumulated

Deficit Other

Comprehensive

Stockholders’

Shares Amount Shares Amount

Balance - June 30, 2020 — — 43,555 $ 4 $ 132,045 $ ( 131,078 ) $ ( 457 ) $ 514

Exercise of stock options, net of vesting of restricted shares — — 33 — 9 — — 9

Vesting of restricted stock units — — 388 — — — — —

Issuance of common stock for payment of legal, earned bonus, and board of director fees — — 164 — 225 — — 225

Sale of common stock — — 1,302 1 1,341 — — 1,342

Stock-based compensation expense — — — — 1,708 — — 1,708

Reacquisition of equity component of Senior Convertible Note — — — — ( 89 ) — — ( 89 )

Cumulative translation adjustment — — — — — — 47 47

Net loss — — — — — ( 8,567 ) — ( 8,567 )

Balance - September 30, 2020 — — 45,442 $ 5 $ 135,239 $ ( 139,645 ) $ ( 410 ) $ ( 4,811 )

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

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Equity (Deficit)

Shares Amount Shares Amount

Shares Amount

Balance - December 31, 2020 56,371 $ 6 $ 144,156 $ ( 145,803 ) $ ( 338 ) $ ( 1,979 )

Exercise of stock options, net of vesting of restricted shares 120 — 65 — — 65

Vesting of restricted stock units — — 1,082 — — — — —

Issuance of common stock for payment of legal, earned bonus, and board of director fees — — 1,297 — 1,239 — 1,239

Sale of common stock — — 1,302 1 1,341 — — 1,342

Stock-based compensation expense — — 3,458 — — 3,458

Issuance of common stock upon partial conversions of Senior Convertible Note — — 1,764 — 2,266 — — 2,266

Reacquisition of equity component of Senior Convertible Notes — — — — ( 1,388 ) — — ( 1,388 )

Equity classified cash conversion feature of Senior Convertible Notes — — — — 219 — — 219

Cumulative translation adjustment — — — — — ( 28 ) ( 28 )

Net loss — — — — — ( 16,041 ) ( 16,041 )

Balance - September 30, 2020 — — 45,442 $ 5 $ 135,239 $ ( 139,645 ) $ ( 410 ) $ ( 4,811 )

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity

Shares Amount Shares Amount

Balance - June 30, 2019 — — 38,902 $ 4 $ 125,854 $ ( 117,294 ) $ ( 421 ) $ 8,143

Exercise of stock options, net of vesting of restricted shares — — 179 — 113 — — 113

Vesting of restricted stock units — — 23 — — — — —

Release of restricted stock 183 — — — — —

Issuance of common stock for payment of board of director fees 99 — 66 — — 66

Sales of common stock, net of issuance costs 14,431 1 29,704 — — 29,705

Stock-based compensation expense — — 1,055 — — 1,055

1 unchanged sentence

Net loss — — — ( 12,363 ) — ( 12,363 )

Balance - September 30, 2019 — — 39,104 $ 4 $ 126,651 $ ( 119,720 ) $ ( 454 ) $ 6,481

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity

Shares Amount Shares Amount

Balance - March 31, 2021 71,204 $ 7 $ 175,046 $ ( 158,166 ) $ ( 328 ) $ 16,559

Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity

Shares Amount

Balance - December 31, 2019 39,811 $ 4 $ 128,008 $ ( 123,604 ) $ ( 382 ) $ 4,026

1 unchanged sentence

Vesting of restricted stock units 116 — — — — —

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

Issuance of common stock for payment of legal and board of director fees 733 — 492 — — 492

Stock-based compensation expense — — 635 — — 635

Cumulative-effect adjustment resulting from the adoption of ASU 2014-09 — — — — — 1,087 — 1,087

Equity classified cash conversion feature of Senior Convertible Note — — 219 — — 219

Cumulative translation adjustment — — — — ( 72 ) ( 72 )

Net loss — — — ( 3,963 ) — ( 3,963 )

Balance - September 30, 2019 — — 39,104 $ 4 $ 126,651 $ ( 119,720 ) $ ( 454 ) $ 6,481

Balance - March 31, 2020 40,693 $ 4 $ 129,370 $ ( 127,567 ) $ ( 454 ) $ 1,353

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

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities

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Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 10 46

Amortization of acquired intangibles 110 205

Depreciation and amortization 33 49

Amortization of debt discount and deferred financing costs 1,642 13

Gain on change in fair value of warrants ( 1,244 ) —

Loss on sale of digital currencies — 4

Amortization of right-of-use asset 114 —

Loss on change in fair value of warrant liability 885 —

Impairment of right-of-use asset 77 —

Loss on extinguishment of debt 5,768 —

Non-cash interest expense 55 —

Bad debt (recovery) expense ( 30 ) 79

Bad debt recovery ( 234 ) ( 16 )

Stock-based compensation 1,055 635

4 unchanged sentences

Accrued expenses ( 2,287 ) 643

Accrued legal settlement 4,500 —

Lease liability 64 —

Deferred revenue ( 841 ) ( 792 )

1 unchanged sentence

Investing activities

Proceeds received from sale of digital currencies — 88

Capital expenditures — ( 18 )

Purchase of digital currencies ( 1,098 ) —

Net cash provided by investing activities ( 1,098 ) —

3 unchanged sentences

Payments on senior convertible notes ( 11,835 ) —

Payments on related party notes ( 200 ) —

Net repayments on factoring agreement — ( 627 )

Proceeds from PhunCoin deposits — 212

Proceeds from warrant exercises — 6,092

Proceeds from exercise of options to purchase common stock 65 15

Proceeds from sales of common stock, net of issuance costs 29,705 —

Series A convertible preferred stock redemptions and dividend payments — ( 6,240 )

Net cash provided by (used in) financing activities 27,916 2,543

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Supplemental disclosures of non-cash financing activities:

Issuance of common stock for payment of legal, earned bonus and board of director fees $ 1,239 $ —

Issuance of common stock upon partial conversions of Senior Convertible Note $ 2,266 $ —

Reacquisition of equity component of Senior Convertible Note $ ( 1,388 ) $ —

Issuance of common stock for payment of legal and board of director fees $ 66 $ 492

Equity classified cash conversion feature of Senior Convertible Note $ — $ 219

Waiver of sponsor promissory note $ — $ 1,993

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

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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.

and its subsidiaries (the “Company”, "we", "us", or "our") 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 and media 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.

Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.

Basis of Presentation

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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.

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 September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019, are unaudited.

The balance sheet at December 31, 2020 was derived from our audited consolidated financial statements, but these interim condensed consolidated financial statements do not include all the annual disclosures required by U.S.

These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2020, which are referenced herein.

The accompanying interim condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, 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.

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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 September 30, 2020 and the results of operations for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

The results for the three and nine months ended September 30, 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.

In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state our financial position as of March 31, 2021 and the results of operations for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim period.

Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2020, except as set forth below.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 includes the removal of certain exceptions to the general principles of ASC 740 and simplifies the accounting for income taxes by clarifying and amending existing guidance.

We adopted the update January 1, 2021 and it did not have a material impact on our condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) ("ASU 2016-02").

We adopted ASU 2016-02 effective January 1, 2021.

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 the statement of financial position.

We have elected certain practical expedients permitted under the transition guidance that allows us to use the beginning of the period of adoption (January 1, 2021) as the date of initial recognition.

As a result, prior period comparative financial information was not recast under the new

standard and continues to be presented under the prior lease accounting standards.

Other practical expedients include our election to not separate non-lease components from lease components and to not reassess lease classification, treatment of initial direct costs or whether an existing or expired contract contains a lease.

We have also elected to apply the short-term lease exception for all leases, which we will not recognize right-of-use assets or lease liabilities for leases that, at the commencement date, have a term of twelve (12) months or less.

The adoption of the new lease standard on January 1, 2021, resulted in the recognition of right-of-use assets and operating lease liabilities of $ 2,101 on the condensed consolidated balance sheet.

In connection with the adoption of this standard, short-term deferred rent of $ 8 , which was previously recorded in accrued expenses and long term deferred rent of $ 180 previously recorded in deferred rent on the condensed consolidated balance sheet was offset against the right-of-use asset.

The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 are set forth below:

January 1, 2021

Right-of-use asset $ 2,101

Straight-line rent accrual ( 188 )

Lease liability, current $ 500

Lease liability, non-current 1,601

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 September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable.

Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits.

Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value.

The following table sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts.

March 31, 2021 December 31, 2020

Customer A 20 % — %

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Customer C 18 % 16 %

In addition to the above, revenue from Fox Networks Group was 55 % and 58 % for the three and nine months ended September 30, 2019, respectively.

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

September 30, 2020 December 31, 2019

Customer A 21 % 15 %

Customer C — % 10 %

Customer D — % 55 %

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Customer F 25 % — %

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.

During the quarter ended September 30, 2020, the Company obtained financings through the issuance of new convertible notes and the sale of its common stock through an at-the-market offering (both more fully described below).

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 sufficient and assured, and consequently do not 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.

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.

Digital Assets

During the three months ended March 31, 2021, we purchased an aggregate of $ 1,098 in digital assets, comprised solely of bitcoin.

We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other .

We have ownership of and control over our bitcoin and we may use third-party custodial services to secure it.

The digital assets are initially recorded at cost and are subsequently remeasured on the condensed consolidated balance sheet at cost, net of any impairment losses incurred since acquisition.

We determine the fair value of our bitcoin on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement , based on quoted prices on the active exchange(s) that we have determined is its principal market for bitcoin (Level 1 inputs).

We perform an analysis each quarter to identify whether events or changes in circumstances, principally

decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired.

In determining if an impairment has occurred, we consider the lowest market price of one bitcoin quoted on the active exchange since acquiring the bitcoin.

If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value.

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value.

Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held.

In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

Impairment losses and gains or losses on sales are recognized within other expense in our condensed consolidated statements of operations and comprehensive loss.

Impairment loss was immaterial and we did not sell any bitcoin during the three months ended March 31, 2021.

Use of Estimates

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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 the convertible note at issuance, the fair value of the convertible note outstanding upon derecognition, assumptions used in Black-Scholes valuation method, such as expected volatility, risk-free interest rate and expected dividend rate 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.

Convertible Debt with a Cash Conversion Feature

In March 2020, 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 note 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.

Convertible Debt and Related Derivative Financial Instruments

In July 2020, the Company issued a Series A Senior Convertible Note (defined below) with an initial principal amount of $ 4,320 .

After the payoff of the Senior Convertible Note and deducting transaction costs, aggregate net cash proceeds to the Company was $ 1,751 .

In accordance with ASC Topic 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock, the Company evaluates all of its financial instruments, including warrants to purchase common stock issued in conjunction with convertible debt, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statement of operations.

The Company uses a Black-Scholes option-pricing model to value the warrants at inception and subsequent valuation dates.

Debt Issuance Costs

Direct costs incurred to issue non-revolving debt instruments are recognized as a reduction to the related debt balance in the accompanying condensed consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method.

Fair Value of Financial Instruments

The Company follows the guidance in ASC 820, Fair Value Measurement, to account for financial assets and liabilities measured on a recurring basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.

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.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs).

The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Unadjusted quoted prices in active markets for identical assets or liabilities.

Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment.

The fair value of the Company’s warrant issued with the 2020 Convertible Notes at September 30, 2020 was $ 1,242 and is recorded as Warrant Liability on the accompanying condensed consolidated balance sheets is considered a Level 3 fair value measurement as there are significant unobservable inputs used in the underlying valuations.

The fair value measurements of the warrant are sensitive to changes in the unobservable inputs.

Changes in those inputs might result in a higher or lower fair value measurement.

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, assumptions used in Black-Scholes valuation method, such as expected volatility, risk-free interest rate and expected dividend rate, our incremental borrowing rate in determining the present value of remaining lease payments, and provision for (benefit from) income taxes.

Actual results could differ from those estimates and such differences could be material to the condensed consolidated financial statements.

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.

Restricted shares subject to repurchase provisions relating to early exercises under our 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 our 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.

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The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:

September 30,

Convertible notes 4,920,000 21,740

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Total 17,549,173 8,368,174

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.

Fair Value of Financial Instruments

We follow the guidance in ASC 820, Fair Value Measurement , to account for financial assets and liabilities measured on a recurring basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own

assumptions (unobservable inputs).

The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Unadjusted quoted prices in active markets for identical assets or liabilities.

Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment.

Our financial instruments measured at fair value as of March 31, 2021 are set forth below:

Level 1 Level 2 Level 3 Total

Digital currencies $ 1,098 $ — $ — $ 1,098

Total $ 1,098 $ — $ — $ 1,098

Warrant liability $ — $ 2,499 $ — $ 2,499

Total $ — $ 2,499 $ — $ 2,499

Our financial instruments measured at fair value as of December 31, 2020 are set forth below:

Level 1 Level 2 Level 3 Total

Warrant liability $ — $ 1,614 $ — $ 1,614

Total $ — $ 1,614 $ — $ 1,614

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.

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

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 Jumpstart Our Business Startups ("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.

The issuance of ASU 2020-05 further delayed the implementation of this guidance of the Company for one year.

Although ASU 2020-05 would defer implementation for the Company by an additional year, the Company believes this guidance would still be effective for the Company for fiscal years beginning after December 15, 2020, as it would lose its status as an EGC at the latest on December 31, 2021.

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.

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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.

ASU 2016-13 introduces a model based on expected 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.

The Company currently does 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 ASU 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 condensed consolidated financial statements.

As a smaller reporting company, the standard is currently effective for us for 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 this new standard effective January 1, 2023.

We currently do not expect the adoption of ASU 2016-13 to have a material impact on our condensed consolidated financial statements and disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) , (“ASU 2020-06”).

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

ASU 2020-06 is effective for SRCs for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

We are currently evaluating the impact of this guidance on our condensed consolidated financial statements and disclosures.

Disaggregation of Revenue

The Company derived 99 % and 96 % of its net revenues from within the United States for the three and nine months ended September 30, 2020, respectively.

The Company derived over 98 % of its net revenues from within the United States for each of the three and nine months ended September 30, 2019.

During the three and nine months ended September 30, 2020, the Company derived 1 % and 4 %, respectively, of its net revenues from outside the United States.

During the three and nine months ended September 30, 2019, the Company derived less than 2 % of its net revenues from outside the United States.

The following table sets forth the Company's net revenues:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

The following table sets forth our net revenues by category:

Three Months Ended March 31,

Platform subscriptions and services $ 1,521 $ 2,391

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Net revenues $ 1,646 $ 2,640

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity.

We derived 99 % and 90 % of our net revenues from within the United States for the three months ended March 31, 2021 and 2020, respectively.

The following table sets forth our concentration of revenue sources as a percentage of total net revenues.

Three Months Ended March 31,

Customer A 13 % — %

Customer B 15 % — %

Customer F 1 % 31 %

Customer G 17 % 11 %

Customer H 10 % 9 %

Deferred Revenue

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

September 30,

Our deferred revenue balance consisted of the following:

2021 December 31,

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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 nine months ended September 30, 2020, the Company recognized revenue of $ 3,971 that was included in its deferred revenue balance as of December 31, 2019.

We recognize deferred revenue as revenue only when revenue recognition criteria are met.

During the three months ended March 31, 2021, we recognized revenue of $ 1,279 that was included in its deferred revenue balance as of December 31, 2020.

Remaining Performance Obligations

Remaining performance obligations were $ 8,797 as of September 30, 2020, of which the Company expects to recognize 55 % as revenue over the next 12 months and the remainder thereafter.

Remaining performance obligations were $ 7,768 as of March 31, 2021, of which we expect to recognize 42 % as revenue over the next 12 months and the remainder thereafter.

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 September 30, 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 September 30, 2020 and December 31, 2019, respectively.

The following table sets forth the Company's cash and restricted cash as of September 30, 2020 and December 31, 2019:

Cash and restricted cash September 30, 2020

The following table sets forth our cash and restricted cash as of March 31, 2021 and December 31, 2020:

Cash and restricted cash March 31, 2021

December 31, 2020

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Total cash and restricted cash $ 23,560 $ 4,031

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 amount of factored receivables outstanding was $ 439 and $ 1,077 as of September 30, 2020 and December 31, 2019, respectively.

There was $ 2,561 and $ 1,923 available for future advances as of September 30, 2020 and December 31, 2019, respectively.

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

September 30, 2020 December 31, 2019

The following table sets forth our various debt obligations:

March 31, 2021 December 31, 2020

Series A Note (principal amount) $ — $ 2,481

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Promissory notes 905 905

Related-party bridge loans 360 —

Note payable 67 —

Total debt $ 15,076 $ 10,071

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2020 Convertible Notes

On July 15, 2020, the Company issued a Series A Senior Convertible Note (a “Series A Note”) to an institutional investor with an initial principal amount of $ 4,320 (reflecting an original issue discount of $ 320 ) in a private placement.

As noted above, the Company repaid in full the outstanding principal balance, accrued and unpaid interest and make-whole amount on the Senior Convertible Note issued on March 20, 2020 to the same investor.

After the payoff of the Senior Convertible Note and deducting transaction costs, aggregate net cash proceeds to the Company was $ 1,751 .

On the same date, the Company issued a Series B Senior Secured Convertible Note (a “Series B Note,” and together with the Series A Note, the “2020 Convertible Notes”) to the same investor with an initial principal amount of $ 17,280 (reflecting an original issue discount of $ 1,280 ).

On July 15, 2020, we issued a Series A Senior Convertible Note (a “Series A Note”) to an institutional investor with an initial principal amount of $ 4,320 (reflecting an original issue discount of $ 320 ) in a private placement.

We repaid in full the outstanding principal balance, accrued and unpaid interest and make-whole amount on a separate senior convertible note issued on March 20, 2020 to the same investor.

After the payoff of the senior convertible note and deducting transaction costs, net cash proceeds to the Company was $ 1,751 .

On the same date, we issued a Series B Senior Secured Convertible Note (a “Series B Note,” and together with the Series A Note, the “2020 Convertible Notes”) to the same investor with an initial principal amount of $ 17,280 (reflecting an original issue discount of $ 1,280 ).

The investor paid for the Series B Note by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $ 16,000 .

The Company will receive cash under the Series B Note only upon cash repayment of the corresponding Investor Note.

The investor may, at its option and at any time, voluntarily prepay an Investor Note, in whole or in part.

In addition, the Investor Note is subject to mandatory prepayment, in whole or in part, upon the occurrence of certain events.

The equity and other conditions include minimum price and volume thresholds, a minimum market capitalization at least $ 40 million.

Mandatory prepayments of principal outstanding under the Investor Note that, together with the unrestricted principal may not exceed the lesser of (i) $ 5,000 and (ii) 10 % of the 30 trading day market capitalization of the Company.

On September 15, 2020, the Company exercised its right under the Investor Note to require a mandatory prepayment of the Investor Note of $ 1,000 , of which the Company received in cash.

As a result, $ 1,000 in principal and $ 80 of original issue discount became unrestricted and owed under the Series B Note, after giving effect to netting of the remainder of the balance of the Investor Note and Series B Note.

Under certain circumstances, the Investor Note is automatically satisfied through netting against the Series B Note rather than through the payment of cash, which if triggered would reduce the amounts outstanding under the Series B Note and Investor Note.

The Series A Note and outstanding unrestricted principal balance on the Series B Note each bear 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.

The restricted principal of the Series B Note bears interest at a rate of 3 % per annum.

The 2020 Convertible Notes mature on December 31, 2021.

Monthly Payments

Starting on July 31, 2020 and on the last trading day of each month thereafter, and on the maturity date, the Company is required to make monthly amortization payments equal to 1/18th of the Series A Note, interest on the 2020 Convertible Notes and make-whole (the "Installment Amount"), which must be satisfied in cash at a redemption price equal to 107 % of the Installment Amount.

For the three and nine months ended September 30, 2020, the Company recorded $ 216 in a loss on extinguishment of debt in the condensed consolidated statements of operations and comprehensive loss related to monthly payments for the 2020 Convertible Notes.

The Company may redeem the 2020 Convertible Notes at a price equal to 107 % of the outstanding principal of the 2020 Convertible Notes (or, if greater, the market value of the shares underlying the 2020 Convertible Notes) and accrued and unpaid interest.

Subject to certain limited exceptions, the noteholder will have the right to have us redeem a portion of each 2020 Convertible Note not in excess of 40 % of the net proceeds from a qualified capital fund raise at a redemption price of 107 % of the portion of the 2020 Convertible Note subject to redemption or, if greater, the market value of the shares underlying the 2020 Convertible Note.

In connection with an Event of Default, the noteholder may require us to redeem in cash any or all of the 2020 Convertible Notes.

The redemption price will equal 115 % of the outstanding principal of the 2020 Convertible Notes to be redeemed, and accrued and unpaid interest.

In connection with a Change of Control (as defined in the 2020 Convertible Notes), a noteholder may require us to redeem all or any portion of the 2020 Convertible Notes.

The redemption price per share will equal the greatest of (i) 115 % of the outstanding principal to be redeemed, and accrued and unpaid interest, (ii) 115 % of the market value of the shares of our common stock, and (iii) 115 % of the aggregate cash consideration that would have been payable in respect of the shares of our common stock underlying the 2020 Convertible Notes.

Under certain circumstances, the unrestricted principal of the Series B Note is automatically netted against the principal amount of the corresponding Investor Note.

Under certain circumstances, upon such netting, the original issue discount under the Series B Note associated with the principal amount thereof being redeemed will be deemed satisfied.

The 2020 Convertible Notes are 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 anti-dilution protection and standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction.

If an Event of Default has occurred under the 2020 Convertible Notes, the noteholder may elect to alternatively convert the 2020 Convertible Notes at a redemption premium of 115 % at an alternate 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 2020 Convertible Notes) and 85 % of the lowest volume weighted average price in the 10 days prior to the applicable conversion date.

The Company will be subject to certain customary affirmative and negative covenants regarding the incurrence of certain 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.

We are also subject to a financial covenant that requires us to maintain available cash in the amount of $ 500 at the end of each fiscal quarter, subject to a right to cure.

In addition to the 2020 Convertible Notes, we issued a warrant exercisable for 3 years for the purchase of an aggregate of up to 2,160,000 shares of the Company's common stock, at an exercise price of $ 4.00 per share to the same investor.

We received cash under the Series B Note only upon cash repayment of the corresponding Investor Note.

The investor, at its option and at any time, had the right to voluntarily prepay the Investor Note, in whole or in part.

Until the Investor Note was repaid, the principal (and related original issue discount) of the Series B Note was considered to be "restricted." The Series B Note and the Investor Note were subject to the terms of a Master Netting Agreement between us and the investor.

repayment of the Investor Note, an equal amount of the Series B Note became "unrestricted" and recorded as debt in our condensed consolidated balance sheets.

As a result of multiple offerings of sales of shares of our common stock as more fully described Note 9 below, the investor elected to require us to use forty percent ( 40 %) of the net proceeds from those offerings to satisfy obligations under the 2020 Convertible Notes.

During January and February 2021, we paid approximately $ 11,507 , of which $ 5,717 was recorded as a loss on extinguishment of debt.

In March 2021, the investor voluntarily prepaid an aggregate of $ 10,250 pursuant to the terms of the Investor Note.

As a result, we received cash proceeds of $ 10,250 and this amount of principal of the Series B Note, along with $ 820 of original issue discount became "unrestricted" and outstanding.

After the aggregate payments pursuant to the Investor Note by the investor to us, there was no balance outstanding under the Investor Note and no restricted balance under the Series B Note.

On March 25, 2021, we delivered a Company Optional Redemption Notice (as defined in the Series B Note) to the holder of our Series B Note exercising our right to redeem and fully satisfy all obligations under the Series B Note on April 5, 2021.

See Note 13 below.

We recorded a loss on extinguishment of debt of $ 51 for the three months ended March 31, 2021 related to monthly installment payments made to the investor.

In addition to the 2020 Convertible Notes, we issued a warrant exercisable for 3 years for the purchase of an aggregate of up to 2,160,000 shares of the Company's common stock, with a current exercise price of $ 2.25 per share, which decreased from $ 4.00 in February 2021 as a result of our underwritten public offering.

The number of shares and exercise price are each subject to adjustment provided under the warrant.

If, at the time of exercise of the warrant, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares, then the warrant may also be exercised, in whole or in part, by means of a “cashless exercise.” The warrant may not be exercised if, after giving effect to the exercise, the investor would beneficially own amounts in excess of those permissible under the terms of the warrant.

The following table sets forth the assumptions used and calculated aggregated fair values of the liability classified warrants:

September 30, 2020 July 15, 2020

Upon issuance of the warrant, we recorded a warrant liability as a discount to the 2020 Convertible Notes.

We revalued the warrant as of March 31, 2021, and accordingly recorded a loss of $ 885 as a result of the change in the fair value of the warrant liability for the three months ended March 31, 2021.

The following table sets forth the assumptions used to calculate the fair value of our warrant liability at the respective dates:

March 31, 2021 December 31, 2020

Strike price per share $ 2.25 $ 4.00

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Dividend Yield — —

Upon issuance of the warrant, the Company recorded a warrant liability as a discount to the 2020 Convertible Notes of $ 2,486 .

The Company revalued the warrant as of September 30, 2020, and accordingly recorded a gain of $ 1,244 as a result of the change in the fair value of its liability classified warrants for the three and nine months ended September 30, 2020.

Registration Rights Agreement

The Company was required to file a registration statement covering the resale of the shares underlying the 2020 Convertible Notes and to have the registration statement declared effective within 90 days of after the closing of the Purchase Agreement.

The Company filed a registration statement, which was declared effective by the SEC on October 27, 2020.

The Company obtained a waiver of the Registration Delay Payments (as defined in the Registration Rights Agreement) from the noteholder.

Participation Rights

In addition, the Company granted the noteholder participation rights in future equity and equity-linked offerings of securities, subject to certain limited exceptions, during the two years after the later of (a) the closing or (b) the date the Investor Note no longer remains outstanding, in an amount of up to 30 % of the securities being sold in such offerings.

In addition, the Company granted the investor participation rights in future equity and equity-linked offerings of securities, subject to certain limited exceptions, during the two years after the later of (a) the closing or (b) the date the Investor Note no longer remains outstanding, in an amount of up to 30 % of the securities being sold in such offerings.

Paycheck Protection Program ("PPP") Loan

On April 10, 2020, the Company received loan proceeds in the amount of $ 2,850 from JPMorgan Chase, N.A.

On April 10, 2020, we received loan proceeds in the amount of $ 2,850 from JPMorgan Chase, N.A.

pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted on March 27, 2020.

The loan, which was in the form of a note dated April 9, 2020, matures on April 9, 2022, bears interest at a rate of 0.98 % per annum.

The Paycheck Protection Flexibility Act of 2020, extended the deferral period for loan payments to either (i) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (ii) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period.

The note may be prepaid by the Company at any time prior to the maturity with no prepayment penalties.

The principal amount of the PPP loan is subject to forgiveness under the PPP upon Phunware’s request to the extent that PPP loan proceeds are used to pay expenses permitted by the PPP.

Although the Company currently anticipates a portion of the loan to be forgiven, there can be no assurance that any part of the PPP loan will be forgiven.

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 cash proceeds 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.

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 was required to make monthly payments.

On each payment date, the Company was required to settle a principal repayment of approximately $ 143 plus interest thereon (the “Installment Amount”) which was to 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 were subject to customary equity conditions (including minimum floor price and volume thresholds), and were 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.

In addition to the monthly payments described above, during the second quarter of 2020, the noteholder elected an acceleration of payments of monthly principal, interest and make-whole payments pursuant to certain provisions of the Senior Convertible Note.

These accelerated payments were made in the form of shares of common stock of the Company at the rate then in effect per the Senior Convertible Note.

As a result, the Company issued an aggregate of 1,763,675 shares for principal, interest and make-whole payments to the noteholder.

In accounting for the accelerated conversions, the Company followed the guidance as prescribed in ASC 470 in accounting for derecognition (or conversion) of convertible debt with a cash conversion feature.

The Company determined the fair value of the debt immediately prior to its derecognition, with the difference between the consideration transferred to the noteholder and the fair value of the debt representing the reacquisition of the embedded conversion option.

A loss on extinguishment of $ 81 was recorded based on the difference between the calculated fair value of the debt immediately prior to its derecognition and the carrying amount of the debt component, including any unamortized debt discount or issuance costs.

In conjunction with the issuance of the 2020 Convertible Notes, the Company redeemed the Senior Convertible Note in July 2020 at a price equal to 110 % of the outstanding principal accrued and unpaid interest and make-whole interest.

The cash payment to the noteholder to satisfy the Senior Convertible Note was in the amount $ 2,084 .

The redemption of the Senior Convertible Note resulted in a loss on extinguishment of $ 734 .

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.

The loan, which was in the form of a note dated April 9, 2020, matures on April 9, 2022 and bears interest at a rate of 0.98 % per annum.

forgiveness, ten months after the end of the borrower’s loan forgiveness covered period.

The note may be prepaid by us at any time prior to the maturity with no prepayment penalties.

The principal amount of our PPP loan is subject to forgiveness under the PPP upon our request and to the extent that PPP loan proceeds were used to pay expenses permitted by the PPP.

Although we currently anticipate a portion of the loan to be forgiven, there can be no assurance that any part of the PPP loan will be forgiven.

Convertible Notes

In April 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.

Transaction costs related to the issuance of the Convertible Note were immaterial.

During April 2019, our board of directors authorized the issuance of $ 20,000 of convertible promissory notes (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 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 Convertible Notes are convertible into shares of the Company’s common stock at a price of $ 11.50 per share and mature on June 3, 2024.

Additional information about our Convertible Notes is included in Note 8, " Debt " of the notes to the consolidated financial statements included in our Annual Report on Form 10-K.

Promissory Notes

In October 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.

Transaction costs related to the issuance of the Notes were immaterial.

In October 2019, our board of directors authorized the issuance of $ 20,000 of promissory notes (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.

During the term of the Notes, we are required to 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.

Additional information about our Notes is included in Note 8, " Debt " of the notes to the consolidated financial statements included in our Annual Report on Form 10-K.

During 2019, we 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, our Chief Executive Officer and a member of our board of directors.

Interest Expense

The following table sets forth interest expense for the Company's various debt obligations included on the condensed consolidated statements of operations:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

The following table sets forth interest expense for our various debt obligations included on the condensed consolidated statements of operations:

Three Months Ended March 31,

2020 Convertible Notes $ 452 $ —

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Accretion of debt discount - warrants 1,029 —

Senior Convertible Note 3 — 197 —

Factoring financing agreement 44 140 141 472

All other debt and financing obligations 118 88

Total $ 2,219 $ 101

Commitments and Contingencies

The Company has operating office space leases in Austin, Texas;

As described in Note 2, we adopted ASU 2016-02, Leases (Topic 842) as of January 1, 2021.

We lease our corporate offices under operating leases and determine if an arrangement is or contains a lease at inception.

The initial terms of our real property lease agreements are generally five years and typically allows for renewals in five-year increments.

We may, at times, negotiate a shorter lease renewal term.

We generally do not account for any renewals at the lease adoption date.

We maintain four corporate offices located in Austin, Texas;

Irvine, California;

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and Miami, Florida.

Rent expense under operating leases totaled $ 207 and $ 631 for the three and nine months ended September 30, 2020, respectively.

Rent expense under operating leases totaled $ 188 and $ 519 for the three and nine months ended September 30, 2019, respectively.

Future minimum annual lease payments as of September 30, 2020 under the Company’s operating leases are set forth as follows:

The earliest of our lease agreements currently ends in March 2022 with the latest terminating in June 2025.

Some of our leases include both lease and non-lease components, which we have elected not to account for separately.

Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.

The weighted-average remaining lease term for operating leases as of March 31, 2021 was 3.79 years.

As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying a rate to each lease.

We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of January 1, 2021 to initially measure our lease liability.

The weighted average incremental borrowing rate used to measure our lease liability as of March 31, 2021 was 19.13 %.

We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred.

The components of lease expense are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive loss.

Lease expense for the three months ended March 31, 2021 was $ 212 .

Future minimum lease obligations are set forth below:

Future minimum lease obligations years ending December 31, Lease

2021 (Remainder) $ 636

Thereafter 208

Total $ 3,203

In 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 of 2017.

The case, captioned Phunware, Inc.

Uber Technologies, Inc., Case No.

CGC-17-561546 was filed in the Superior Court of the State of California County of San Francisco.

Uber generally denied the allegations in the Company's complaint and also filed a cross-complaint against Phunware and Fetch Media, Ltd., the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017, asserting numerous fraud and contract-based claims.

In 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants, Alan S.

Knitowski, who serves as a director and the Company's President and Chief Executive Officer and former Phunware employees D.

Borotsik, and A.

Cook, (collectively, the "Individual Defendants") alleging 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 claimed treble damages, general and punitive damages, and attorneys’ fees and costs.

On October 9, 2020, the Company entered into a Settlement Agreement and Mutual General Release (the "Settlement Agreement") with Uber and certain other parties related to the Company's complaint against Uber, Uber's cross-complaint against the Company and Uber's amended cross-complaint against the Company and Individual Defendants.

As provided in the Settlement Agreement, both parties have agreed to fully and finally settle, compromise, and resolve all disputes, differences and disagreements that have existed, now exist, or may exist between them that fall within the subject matter lawsuit.

Furthermore, each party denies engaging in any wrongdoing whatsoever and specifically denies each and every allegation of wrongdoing alleged in the lawsuit.

The Settlement Agreement provides that Phunware and its insurance carriers will pay a total sum of $ 6,000 to Uber, of which the Company's insurance carrier will pay $ 1,500 to settle Uber's claims against the Individual Defendants while the Company will pay a total of $ 4,500 to Uber in a series of installments beginning no later than December 31, 2020, and ending no later than September 30, 2021.

The Settlement Agreement further provides that the Company and the Individual Defendants fully release claims against Uber relating to the lawsuit and upon receipt of the payments, Uber will fully release claims against the Company and the Individual Defendants relating to the lawsuit.

The court will retain jurisdiction over the case until the terms of the Settlement Agreement have been fully satisfied.

The court has set a dismissal review hearing for November 16, 2021.

If the terms of the Settlement Agreement are fulfilled before that date, the parties will file requests to dismiss the action and the hearing will be taken off calendar.

On November 5, 2020, Uber filed a request for dismissal with prejudice of claims against the Individual Defendants;

Uber’s claims against Phunware remain until the terms of the Settlement Agreement have been fully satisfied.

The Company recorded a loss of $ 4,500 for its portion of the settlement in Legal Settlement in its condensed consolidated statements of operations for the three and nine months ending September 30, 2020.

On December 17, 2019, certain stockholders (the "Plaintiffs") filed a lawsuit against the Company.

Portion representing interest ( 823 )

On March 16, 2021, we entered into a sublease agreement pursuant to which we will sublease our existing office space in Irvine, California.

The term of the sublease commences on April 1, 2021 and terminates on March 31, 2025.

The subtenant will pay us initial base rent of approximately $ 17 per month, which is subject to certain discounts throughout the sublease, as well as rent escalations.

We recognized an impairment of our right-to-use asset related to the sublease of $ 77 , which is recorded in other expense in our condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2021.

Commitments and Contingencies

There have been no changes to the disclosure related to our settlements with Uber Technologies, Inc.

and Ellenoff Grossman & Schole LLP, as well as, the dismissal of claims brought by Sha-Poppin Gourmet Popcorn, LLC since the filing of our Annual Report on Form 10-K.

See Note 9, " Commitments and Contingencies " in our Annual Report on Form 10-K filed with the SEC on March 31, 2021 for further information on the these matters.

On December 17, 2019, certain stockholders filed a lawsuit against Phunware.

The case, captioned Wild Basin Investments, LLC, et al.

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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 invested in various early rounds of financing while the Company was private and claim Phunware should not have subjected their shares to a 180 -day "lock up" period.

According to the plaintiffs, the price of our stock dropped significantly during the lock up period.

The plaintiffs seek unspecified damages in excess of $ 1,000 .

The Company maintains the Plaintiffs' claims are without merit and intends to contest vigorously the claims asserted in the lawsuit, but there can be no guarantees that a favorable resolution will be successful.

We maintain the plaintiffs' claims are without merit and intends to contest vigorously the claims asserted in the lawsuit, but there can be no guarantees that a favorable resolution will be successful.

All defendants have answered.

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The case is in early stage of discovery.

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).

Pursuant to the complaint, EGS sought 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.

On September 29, 2020, the Company consummated a Settlement Agreement and General Release (the "Settlement Agreement") with EGS.

The Settlement Agreement provides that Phunware pay a total sum of $ 600 to EGS in a series of installments beginning no later than October 15, 2020, and ending no later than October 15, 2023.

There is no penalty for prepayments.

Pursuant to the Settlement Agreement, on September 30, 2020, EGS filed a Stipulation of Voluntary Discontinuance with Prejudice with the court.

In conjunction with the execution of the Settlement Agreement, the Company also signed an Affidavit of Confession of Judgment ("Confession of Judgment"), which provides that should the Company default in any payment obligations under the Settlement Agreement, EGS shall be entitled to enter the Confession of Judgment with the Court against the Company for $ 690 less any payments made under the Settlement Agreement.

The Company reclassified $ 690 from accounts payable to accrued expenses in the condensed consolidated balance sheet as of September 30, 2020 related to the settlement.

In accordance with authoritative guidance, the Company will defer any settlement gain, if any, until it has fulfilled its payment obligations under the settlement.

On April 24, 2020, Sha-Poppin Gourmet Popcorn, LLC, individually and on behalf of a class of similarly situated parties (the “Popcorn Company”), filed a lawsuit against certain defendants, including the Company.

The case captioned, Sha-Poppin Gourmet Popcorn, LLC v.

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 that the Company was unjustly enriched by JPMorgan Chase for the Company's loan made pursuant to the PPP under the CARES Act.

(See Note 6 for discussion related to the Company's CARES Act loan.) The Company filed a motion to dismiss the single claim against it and disputes the court's jurisdiction and the basis of the claim.

The Company intends to defend the matter vigorously, but there can be no guarantees that a favorable resolution will be successful.

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.

From time to time, the Company is and may become involved in various legal proceedings in the ordinary course of business.

Given the preliminary stage of the case, we are unable to predict the outcome of this dispute, or estimate the loss or range of loss, if any, associated with this matter.

On March 30, 2021, Phunware filed an action against its former counsel Wilson Sonsini Goodrich & Rosati, PC (“WSGR”).

The matter is Phunware, Inc., v.

Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No.

21CV381517, filed in the Superior Court of the State of California for the County of Santa Clara.

The complaint alleges a single cause of action for negligence related to services provided by WSGR to Phunware.

We’re seeking compensatory and

consequential damages, attorney’s fees and costs, interest and other relief the Court deems just and proper.

The case is in the early stages of litigation;

the outcome is not certain.

From time to time, we are 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.

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PhunCoin & PhunToken

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").

During 2018 and 2019, PhunCoin, Inc., our wholly-owned subsidiary, launched offerings of rights to acquire a token denominated as "PhunCoin" (the "Rights").

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.

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.

The ongoing coronavirus of 2019 pandemic has resulted in Phunware reducing human capital resources from the development of the Token Ecosystem to other initiatives of the organization.

There can be no assurance as to when, or if, the Company will allocate resources to the development of the Token Ecosystem in the future or if the Company will be able to successfully launch the Token Ecosystem.

As of September 30, 2020, the Company has received aggregate cash proceeds from the Reg D Offering and Reg CF Offering of $ 1,207 , 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;

Through March 31, 2021, we received aggregate net cash proceeds from our Rights offerings of $ 1,202 .

Proceeds from the Rights are recorded as PhunCoin deposits in the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020.

PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch of PhunCoin’s, Inc.’s blockchain technology enabled rewards marketplace and data exchange (“Token Ecosystem” or "Token Generation Event"), (ii) one ( 1 ) year after the issuance of the Rights to the purchaser or (iii) 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.

We currently anticipate that PhunCoin will be issued to the holders of the Rights in 2021;

however, there can be no assurance as to when or if we will be able to successfully launch the Token Ecosystem.

Additional information about PhunCoin is included in Note 10, " PhunCoin and PhunToken " of the notes to the consolidated financial statements included in our Annual Report on Form 10-K.

PhunToken ("PHTK")

During the second quarter of 2019, Phunware announced the launch of a separate token, PhunToken, which is meant to act as a medium of exchange within the Token Ecosystem.

PhunToken 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 PhunToken for actively engaging in marketing campaigns;

developers and publishers may receive PhunToken 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 September 30, 2020, the Company has not sold any Phun.

As of March 31, 2021, we had not issued or sold any PhunToken.

Stockholders’ Equity

Total common stock authorized to be issued as of September 30, 2020 was 1,000,000,000 shares, with a par value of $ 0.0001 per share.

At September 30, 2020 and December 31, 2019, there were 45,452,422 and 39,817,917 shares outstanding, inclusive of 1,198 and 6,219 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity plans, respectively.

On August 14, 2020, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Ascendiant shares of common stock for an aggregate offering price of up to $ 15,000 .

Subject to the terms and conditions of the Sales Agreement, Ascendiant will use commercially reasonable efforts consistent with its normal trading and sales practices to sell shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company.

Under the Sales Agreement, Ascendiant may sell shares by any method deemed to be an “at the market” offering as defined in Rule 415 under the U.S.

Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions.

During the three and nine months ended September 30, 2020, 1,301,665 shares of common stock were sold for gross proceeds of $ 1,493 .

Offering costs totaled $ 152 .

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.

The Company has various warrants outstanding.

A summary of the Company’s outstanding warrants is set forth below:

Total common stock authorized to be issued as of March 31, 2021 was 1,000,000,000 shares, with a par value of $ 0.0001 per share.

At March 31, 2021 and December 31, 2020, there were 71,211,399 and 56,380,111 shares outstanding, respectively, inclusive of 574 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity plans.

On August 14, 2020, we entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”), as sales agent, pursuant to which the Company would offer and sell, from time to time, through Ascendiant shares of common stock for an aggregate offering price of up to $ 15,000 .

In January 2021, we issued 2,670,121 shares of our common stock were sold for aggregate net cash proceeds of $ 5,058 .

Transaction costs were $ 156 .

We terminated the Sales Agreement with Ascendiant effective as of March 28, 2021.

In February 2021, we entered into an underwriting agreement with Northland Securities, Inc.

and Roth Capital Partners, LLC, relating to an underwritten public offering to which we issued 11,761,111 shares of our common stock at an

offering price of $ 2.25 per share.

Aggregate cash proceeds at closing, net of transaction costs of $ 1,740 , totaled $ 24,722 .

We incurred additional transaction costs paid outside of closing of $ 75 .

We have various warrants outstanding.

A summary of our outstanding warrants as of March 31, 2021 and December 31, 2020 is set forth below:

Warrant Type Cash Exercise

share Warrants Outstanding

September 30, 2020

Warrants Outstanding

December 31, 2019

2020 Convertible Note warrants $ 2.25 2,160,000

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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 September 30, 2020, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing equals 1,213,026 .

During the nine months ended September 30, 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:

As of March 31, 2021, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing equals 1,087,607 .

Since its inception, restricted stock units have been the only stock-based incentives granted under the 2018 Plan.

A summary of our restricted stock unit activity under the 2018 Plan for the three months ended March 31, 2021 is set forth below:

Shares Weighted Average Grant Date Fair Value

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Forfeited ( 88,994 ) 1.47

Outstanding as of September 30, 2020 2,223,773 $ 1.89

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 101,873 and 205,206 shares of common stock reserved for future issuances as of September 30, 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 a 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 .

During the second quarter of 2020, we granted 85,996 restricted stock units to non-employee directors, each with a grant date fair value of $ 0.71 per share in lieu of cash compensation board fees for services provided.

The awards vested immediately.

We also granted 375,000 restricted stock unit awards to team members with an average grant date fair value of $ 0.67 per share.

The awards granted to team members vest over 4 years with 25 % vesting May 18, 2021, then equal quarterly installments thereafter until the final vesting period of May 18, 2024 and are subject to service conditions.

We also granted 250,000 restricted stock units to a 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 $ 0.67 .

During the third quarter of 2020, we granted 39,426 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.28 per share in lieu of cash compensation board fees for services provided.

The awards vested immediately.

We also granted 12,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.68 per share.

We also granted 155,000 restricted stock units to non-employee service providers that were for the satisfaction of legal and professional fees.

The awards granted to the service providers have various vesting dates and had an average grant date fair value $ 1.52 .

The restricted stock unit grants were valued based on the fair value of the Company's common stock on the date of grant.

Outstanding as of March 31, 2021 5,545,454 $ 1.78

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 1,134,393 and 2,551,720 shares of common stock reserved for future issuances as of March 31, 2021 and December 31, 2020, respectively.

During the first quarter of 2021, we granted 3,488,262 restricted stock unit awards to team members with an average grant date fair value of $ 2.03 per share.

The awards granted to team members vest over range of 10 to 51 months with various installment and vesting dates, and are subject to service conditions.

We also granted 652,170 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.22 .

The awards vest in four equal installments on March 4, 2021, June 4, 2021, September 4, 2021, and December 4, 2021, respectively, and are subject to service conditions.

We also granted 97,744 restricted stock units to non-employee directors, with a grant date fair value of $ 1.22 per share in lieu of cash compensation board fees for services provided.

These awards vested immediately.

The restricted stock unit grants were valued based on the fair value of our common stock on the date of grant.

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 September 30, 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 September 30, 2020 and December 31, 2019.

As of March 31, 2021, we had 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, 2021 and December 31, 2020.

Additional information about our 2018 ESPP can be found in Note 12, " Stock-Based Compensation" in our Annual Report on Form 10-K.

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.

In 2009, we 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 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 September 30, 2020 and December 31, 2019, 1,198 and 6,219 shares were unvested amounting to $ 1 and $ 3 in accrued expenses, respectively.

As of March 31, 2021 and December 31, 2020, 574 shares were unvested amounting to $ 1 in accrued expenses.

Effective with the adoption of the 2018 Plan, no additional grants will be made under the 2009 Plan.

A summary of the Company’s stock option activity under the 2009 Plan and related information is as follows:

A summary of our option activity under the 2009 Plan and related information is as follows:

Number of Shares Weighted Average

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Forfeited ( 2,439 ) 2.31

Outstanding as of September 30, 2020 1,211,828 $ 0.80 6.46 $ 340

Exercisable as of September 30, 2020 1,008,747 $ 0.75 6.28 $ 295

For the nine months ended September 30, 2020, the aggregate intrinsic value of options exercised was $ 87 and the total fair value of options vested was $ 98 .

Outstanding as of March 31, 2021 1,087,033 $ 0.82 6.38 $ 986

Exercisable as of March 31, 2021 991,476 $ 0.78 6.33 $ 926

For the three months ended March 31, 2021, the aggregate intrinsic value of options exercised was $ 214 and the total fair value of options vested was $ 20 .

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 September 30, Nine Months Ended September 30,

Compensation costs that have been included in our condensed consolidated statements of operations and comprehensive loss for all stock-based compensation arrangements is set forth below:

Three Months Ended March 31,

Stock-based compensation 2021 2020

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Total stock-based compensation $ 1,055 $ 635

The Company recognizes forfeitures as they occur.

As of September 30, 2020, the unamortized fair value of the restricted stock units under the 2018 Plan was approximately $ 3,234 .

We recognize forfeitures as they occur.

As of March 31, 2021, the unamortized fair value of the restricted stock units under the 2018 Plan was approximately $ 8,852 .

The weighted-average remaining recognition period over which these costs will be amortized was approximately 2.5 years.

Unrecognized stock compensation expense for options granted under the 2009 Plan was $ 111 as of September 30, 2020.

Unrecognized stock compensation expense for options granted under the 2009 Plan was $ 64 as of March 31, 2021.

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 September 30, 2020 and December 31, 2019, all of the Company’s identifiable long-lived assets were in the United States.

As of March 31, 2021 and December 31, 2020, all of our identifiable long-lived assets were in the United States.

Related-Party Transactions

Accounts Payable

At September 30, 2020 and December 31, 2019, there is $ 255 recorded in accounts payable due to Nautilus Energy Management Corporation, an affiliate of a current member and former member of the Company’s board of directors.

As more fully discussed in Note 6, Debt , the Company entered into a Note and RPBLs (both defined above) with certain related parties.

There are $ 255 included in accounts payables in our condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020 for Nautilus Energy Management Corporation, an affiliate of a current member and former member of our board of directors.

As more fully discussed in Note 5, Debt , the Company entered into a Note (defined above) with a certain related party.

Subsequent Events

The Company has evaluated subsequent events through November 12, 2020.

Through the date noted above, the Company sold 3,868,027 shares of common stock pursuant to its at-the-market offering for gross proceeds of $ 3,259 .

Offering costs totaled $ 98 .

We have evaluated subsequent events through the date the financial statements were issued.

On April 5, 2021, we paid $ 13,902 in cash to the noteholder of our 2020 Convertible Notes in full satisfaction of all obligations under our Series B Note, which amounted to $ 11,718 of principal, interest and make-whole and $ 2,184 for the loss on extinguishment of debt.

On April 7, 2021, we entered into an At Market Issuance Sales Agreement with B.

Riley Securities, Inc.

Riley"), pursuant to which we may offer and sell, from time to time, shares of our common stock through or to B.

Riley, for an aggregate offering price of $ 25,000 .

We will pay B.

Riley a commission of 3 % of the gross proceeds of the sales price per share for sales of our common stock sold through or to B.

The sales agreement with B.

Riley will terminate the earlier of (i) the sale of all shares of our common stock permitted under the sales agreement;

(ii) we and B.

Riley may terminate by giving the other party five days notice to the other party;

and (iii) any other termination permitted therein.

We are not obligated to sell shares under the sales agreement with B.

Riley and as of the date noted above, we have not done so.

On May 11, 2021, we announced the commencement of the selling of PhunToken.

As of the date the financial statements were issued, sales of PhunToken were immaterial.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements