What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-13 · 102 added, 82 removed, 237 unchanged (44% of the section changed)

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Certain other amounts that appear in this section may similarly not sum due to rounding.

Recent Developments

On September 10, 2021, we entered into a Stock Purchase Agreement (the "Agreement") with Caleb Borgstrom for the purchase all issued and outstanding shares of common stock of Lyte Technology, Inc.

("Lyte") with an initial purchase price of up to approximately $10.3 million ($2.5 million of which is an earnout payment based upon Lyte operations meeting certain annual revenue milestones).

On October 18, 2021, we closed the acquisition with an adjusted purchase price of up to approximately $11.0 million (subject to the earnout adjustment), representing an increase in working capital as of the closing date.

We are currently determining the final purchase price allocation, but we expect the majority to be allocated to intangible assets and goodwill.

We also expect to finalize the valuation and complete the price purchase allocation (other than the earnout) in the fourth quarter of 2021.

Phunware, Inc.

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

We also believe our recent acquisition of Lyte will leverage a new distribution network for our blockchain initiatives.

We intend to continue investing for long-term growth.

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We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals.

We reasonably expect approximately 40% of our backlog as of June 30, 2021 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.

We reasonably expect approximately 40% of our backlog as of September 30, 2021 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.

In addition, our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenues as of the end of a reporting period.

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The following table sets forth our backlog and deferred revenue:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands)

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Our non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net loss, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net income (loss), as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

Our non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP.

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The following table sets forth the non-GAAP financial measures we monitor.

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands, except percentages) 2021 2020 2021 2020

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We believe Adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations.

We define adjusted EBITDA as net loss plus (i) interest expense, (ii) income tax expense, (iii) depreciation, (iv) amortization, and further adjusted for (v) non-cash impairment and valuation adjustments and (vi) stock-based compensation expense.

We define adjusted EBITDA as net income (loss) plus (i) interest expense, (ii) income tax expense, (iii) depreciation, (iv) amortization, and further adjusted for (v) non-cash impairment and valuation adjustments and (vi) stock-based compensation expense.

Reconciliation of Non-GAAP Financial Measures

The following tables set forth a reconciliation of the most directly comparable GAAP financial measure to each of the non-GAAP financial measures discussed above.

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands, except percentages) 2021 2020 2021 2020

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Adjusted gross margin 68.8 % 74.8 % 62.8 % 68.4 %

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2021 2020 2021 2020

Net loss $ (8,293) $ (3,511) $ (20,656) $ (7,474)

Net income (loss) $ 372 $ (8,567) $ (21,711) $ (16,041)

Depreciation and amortization 17 33 75 120

Interest expense 1,845 460 4,064 561

(Less) add back:

Interest (income) expense (7) 1,362 4,057 1,923

EBITDA 382 (7,172) (17,579) (13,998)

Stock-based compensation 1,495 1,708 3,933 3,458

Legal settlement — 4,500 — 4,500

Loss on extinguishment of debt — 950 7,952 1,031

Impairment of digital currencies — — 776 —

Gain on forgiveness of PPP loan (2,850) — (2,850) —

(Less) add back:

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As a result, our application transaction gross profit may fluctuate from period to period due to variable costs of advertising traffic.

Lyte Revenue .

We expect to begin recognizing revenue as a result of closing our acquisition of Lyte during the fourth quarter of 2021.

Revenue from Lyte will mainly be derived from the sale of high-performance personal computers.

Lyte computers are sold with a variety of pre-packaged solutions, as well as customizable solutions selected by our customers.

We expect to recognize revenue at the time a unit ships from our facility.

Lyte gross profit will be equal to Lyte revenue less the costs associated with the assembly of computers.

Lyte gross profit is impacted by the costs that we pay for parts incorporated into a Lyte computer system, as well as labor costs of computer builders and shipping.

Demand may exceed available supply at times, which may hamper our ability to deliver computer systems timely and may increase the costs at which we can obtain inventory needed for computer builds.

Customizable solutions we offer our customers may also vary from time to time.

As a result, revenue and gross profit related to Lyte may fluctuate from period to period.

Although we plan to invest in Lyte for future growth, Lyte may experience revenue and gross profit fluctuations as a result of seasonality.

Gross margin measures gross profit as a percentage of revenue.

Gross margin is generally impacted by the same factors that affect changes in the mix of subscriptions and services and application transactions.

Gross margin is generally impacted by the same factors that affect changes in the mix of subscriptions and services and application transactions, and beginning in the fourth quarter of 2021, Lyte.

Operating Expenses

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Results of Operations

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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Application transactions as a percentage of net revenues 18.0 % 8.6 %

Six Months Ended June 30, Change

Nine Months Ended September 30, 2021 Change

(in thousands, except percentages) 2021 2020 Amount %

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Application transactions as a percentage of net revenues 14.7 % 8.9 %

Net revenues decreased $0.8 million, or 35.1%, for the three months ended June 30, 2021 compared to the corresponding period in 2020.

Net revenues decreased $1.0 million, or 31.0%, for the three months ended September 30, 2021 compared to the corresponding period in 2020.

Platform subscriptions and services revenue decreased $1.1 million, or 38.1%.

Greater revenues derived in 2020 were primarily driven by development, licensing and support services provided to a customer during 2020.

This customer is identified as " Customer E" in Note 3, Revenue in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Application transaction revenue increased $0.1 million, or 34.7%, for the three months ended June 30, 2021, compared to the corresponding period in 2020, primarily due to PhunToken sales.

Net revenues decreased $1.8 million, or 36.5%, for the six months ended June 30, 2021 compared to the corresponding period in 2020.

This customer is identified as " Customer F" in Note 3, Revenue , in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Application transaction revenue increased $0.1 million, or 44.1%, for the three months ended September 30, 2021, compared to the corresponding period in 2020, primarily due to an increase in advertising campaigns.

Net revenues decreased $2.7 million, or 34.3%, for the nine months ended September 30, 2021 compared to the corresponding period in 2020.

Platform subscriptions and services revenue decreased $2.8 million, or 38.5%.

Greater revenues derived in 2020 were primarily driven by development, licensing and support services provided to a customer during 2020.

This customer is identified as " Customer E" in Note 3, Revenue in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Application transaction revenue decreased $0.1 million, or 13.2%, for the six months ended June 30, 2021, compared to the corresponding period in 2020, primarily due to a decrease in app store revenue.

This decrease was partially offset by PhunToken sales.

This customer is identified as " Customer F" in Note 3, Revenue , in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Application transaction revenue increased $0.1 million, or 8.6%, for the nine months ended September 30, 2021, compared to the corresponding period in 2020, primarily due to an increase in advertising campaigns and PhunToken sales.

This increase was partially offset by the decrease in app store revenue.

Cost of Revenues, Gross Profit and Gross Margin

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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Total gross margin 52.5 % 71.3 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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Total gross margin 45.8 % 65.5 %

Total gross profit decreased $1.1 million, or 78.4% and $1.7 million, or 57.7% for the three and six months ended June 30, 2021, respectively, when compared to the corresponding period of 2020.

In addition to the revenue items described above, we recorded approximately $0.5 million in labor costs during the second quarter of 2021 related to a customer project, for which we have yet to deliver against.

We expect to fulfill at least some of the performance obligations against this contract the third quarter of 2021.

Furthermore, stock-based compensation increased $0.2 million and $0.4 million during the three and six months ended June 30, 2021, respectively.

Total gross profit decreased $1.1 million, or 49.2% and $2.8 million, or 54.1% for the three and nine months ended September 30, 2021, respectively, when compared to the corresponding period of 2020.

In addition to the revenue items described above, stock-based compensation increased $0.3 million and $0.7 million during the three and nine months ended September 30, 2021, respectively.

Overall margin decrease can be attributed to a higher margin realized in 2020 related to Customer F, as compared to the same period in 2021 related to Customer A, as identified in Note 3, Revenue , in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Operating Expenses

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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Research and development 1,160 572 588 102.8 %

Legal Settlement — 4,500 (4,500) (100.0) %

Total operating expenses $ 5,171 $ 9,731 $ (4,560) (46.9) %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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Research and development 3,058 1,811 1,247 68.9 %

Legal Settlement — 4,500 (4,500) (100.0) %

Total operating expenses $ 14,043 $ 19,557 $ (5,514) (28.2) %

Sales and Marketing

Sales and marketing expense increased $0.4 million, or 130.7% for the three months ended June 30, 2021 compared to the corresponding period of 2020, primarily due to an increase of employee compensation costs resulting from a higher headcount of $0.2 million and an increase in stock-based compensation expense.

Sales and marketing expense increased $0.3 million, or 35.5% for the six months ended June 30, 2021 compared to the corresponding period of 2020, primarily due to an increase of employee compensation costs resulting from a higher headcount of $0.1 million, a $0.2 million increase in stock-based compensation expense and $0.1 million lead generation programs.

This increase is partially offset by $0.1 million related to marketing expenditures and travel.

Sales and marketing expense increased $0.3 million, or 86.7% for the three months ended September 30, 2021 compared to the corresponding period of 2020, primarily due to an increase of $0.1 million in each of employee compensation costs resulting from a higher headcount, $0.1 million increase in stock-based compensation expense and $0.1 million in marketing related expenditures.

Sales and marketing expense increased $0.6 million, or 51.0% for the nine months ended September 30, 2021 compared to the corresponding period of 2020, primarily due to an increase of employee compensation costs resulting from a higher headcount of $0.2 million, $0.3 million increase in stock-based compensation expense and $0.1 million lead generation programs.

General and Administrative

General and administrative expense decreased $0.7 million, or 19.7% for the three months ended June 30, 2021 compared to the corresponding period of 2020, due to a decrease of $0.5 million in legal fees mainly related to our previous litigation with Uber, which was settled in October 2020, $0.3 million in stock-based compensation, $0.2 million in payroll related items and $0.1 million in other information technology costs such as server and software expenses.

General and administrative expense decreased $1.0 million, or 22.9% for the three months ended September 30, 2021 compared to the corresponding period of 2020, primarily due to a decrease of $0.7 million in stock-based compensation and $0.6 million in legal fees mainly related to our previous litigation with Uber, which was settled in October 2020.

This decrease was partially offset by $0.3 million in expenses related to investor relations.

General and administrative expense decreased $1.9 million, or 25.0% for the six months ended June 30, 2021 compared to the corresponding period of 2020, due to a decrease of $1.0 million in legal fees mainly related to our previous litigation with Uber, $0.7 million in payroll related items, $0.3 million in stock-based compensation expense and $0.2 million in other information technology costs such as server and software expenses.

This decrease was partially offset by additional expenses related to investor relations.

General and administrative expense decreased $2.9 million, or 24.3% for the nine months ended September 30, 2021 compared to the corresponding period of 2020, primarily due to a decrease of $1.7 million in legal fees mainly related to our previous litigation with Uber, $1 million in stock-based compensation expense, $0.6 million related to employee retention tax credit, $0.3 million in bad debt recoveries, and $0.2 million in other information technology costs such as server and software expenses.

This decrease was partially offset by additional expenses of $1 million related to investor relations.

Research and Development

Research and development expense increased $0.5 million, or 123.8%, for the three months ended June 30, 2021, compared to the corresponding period of 2020, primarily due to payroll related items of $0.2 million and $0.2 million in stock-based compensation expense.

Research and development expense increased $0.7 million, or 53.2%, for the six months ended June 30, 2021, compared to the corresponding period of 2020, primarily due to increases of $0.3 million for increased headcount dedicated to research and development projects and $0.4 million in stock-based compensation expense.

Research and development expense increased $0.6 million, or 102.8%, for the three months ended September 30, 2021, compared to the corresponding period of 2020, primarily due to payroll related items of $0.3 million, $0.2 million in stock-based compensation expense and $0.1 million for travel and recruiting fees.

Research and development expense increased $1.2 million, or 68.9%, for the nine months ended September 30, 2021, compared to the corresponding period of 2020, primarily due to increases of $0.7 million for increased headcount dedicated to research and development projects and $0.5 million in stock-based compensation expense.

Legal Settlement

Legal settlement of $4.5 million relates to the settlement of the Company's litigation with Uber Technologies, Inc.

as further described in Note 7, Commitments and Contingencies , in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q.

Other expense

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

Other expense

Interest expense $ (1,845) $ (460) $ (1,385) 301.1 %

Other income (expense)

Interest income (expense) $ 7 $ (1,362) $ 1,369 (100.5) %

Loss on extinguishment of debt — (950) 950 (100.0) %

Impairment of digital currencies (776) — (776) 100.0 %

Gain on change in fair value of warrant liability 1,501 1,244 257 20.7 %

Gain on forgiveness of PPP loan 2,850 — 2,850 100.0 %

Other income 51 — 51 100.0 %

Total other expense $ (4,099) $ (541) $ (3,558) 657.7 %

Six Months Ended June 30, Change

Total other income (expense) $ 4,409 $ (1,068) $ 5,477 (512.8) %

Nine Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

Other expense

Other income (expense)

Interest expense $ (4,057) $ (1,923) $ (2,134) 111.0 %

Loss on extinguishment of debt (7,952) (1,031) (6,921) 671.3 %

Impairment of digital currencies (776) — (776) 100.0 %

Loss on change in fair value of warrant liability (222) — (222) 100.0 %

Other expense (36) — (36) 100.0 %

Impairment of digital currency (776) — (776) 100.0 %

(Loss) gain on change in fair value of warrant liability (148) 1,244 (1,392) (111.9) %

Gain on forgiveness of PPP loan 2,850 — 2,850 100.0 %

Other income 15 — 15 100.0 %

Total other expense $ (10,068) $ (1,710) $ (8,358) 488.8 %

Other expense increased $3.6 million and $12.4 million for the three and six months ended June 30, 2021, compared to the corresponding period of 2020, respectfully, primarily due to losses on extinguishment of debt and interest related to our debt borrowings as further described in Note 5 " Debt" in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other (increases) and decreases were related to impairment charges for our digital currencies and adjustments related to the fair value of the warrants outstanding that were issued in conjunction with our 2020 senior convertible notes.

Other income increased $5.5 million for the three months ended September 30, 2021, compared to the corresponding period of 2020, primarily due to Paycheck Protection Program ("PPP") loan forgiveness, change in fair value of our warrant liability and decrease in interest expense related to our outstanding debt.

Other expense increased $8.4 million for the nine months ended September 30, 2021, compared to the corresponding period of 2020, primarily due to losses on extinguishment of debt and interest related to our debt borrowings as further described in Note 5 " Debt " in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other increases were related to impairment charges for our digital currencies and adjustments related to the fair value of the warrants outstanding that were issued in conjunction with our 2020 senior convertible notes.

These were partially offset by decreases in other expense related to gain on forgiveness of our PPP loan.

Liquidity and Capital Resources

As of June 30, 2021, we held total cash (including restricted cash) of $2.8 million, all of which was held in the United States.

As of September 30, 2021, we held total cash (including restricted cash) of $1.0 million, all of which was held in the United States.

We have a history of operating losses and negative operating cash flows.

As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

On October 9, 2020, we entered into a settlement agreement with Uber Technologies, Inc.

("Uber") and certain other parties related to our complaint against Uber, Uber's cross-complaint and amended cross-complaint against us and certain individual defendants.

The settlement agreement provides that we will pay to Uber a total sum of $4.5 million in a series of installments.

We recorded a charge in the third quarter of 2020 related to the settlement agreement.

As of June 30, 2021, we owe $1.5 million, which will be paid no later than September 30, 2021.

For further information related to the Uber settlement agreement, refer to Note 9 " Commitments and Contingencies" of the notes to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K filed with the SEC on March 31, 2021.

As of June 30, 2021, the principal balance of our debt was approximately $4.0 million from various debt, including a Paycheck Protection Program ("PPP") loan and other debt offerings.

The debt we believe will have the most significant impact on our future liquidity and capital resources is discussed below.

For further information on all our debt outstanding as of June 30, 2021, refer to Note 5 “ Debt ” of the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In April 2020, we received a PPP loan of approximately $2.85 million, which bears interest at a rate of 0.98% per annum.

The principal amount of our PPP loan is subject to forgiveness under the PPP.

On July 7, 2021, we submitted our request to the Small Business Administration ("SBA") to forgive the full principal amount of the loan.

The SBA is currently reviewing our forgiveness application.

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

The PPP loan matures in April 2022.

We entered into a note purchase agreement and completed the sale of an unsecured promissory note with an original principal amount of $5.2 million in a private placement that closed on October 18, 2021.

After deducting all transaction cost, net cash proceeds to the Company were $4.7 million.

No interest will accrue on the promissory note unless and until the occurrence of an event of default (as defined in the promissory note).

We may prepay outstanding balance of the promissory note earlier than it is due with a prepayment premium of 110%.

Beginning on January 15, 2022 and on the same day of each month thereafter until the promissory note is paid in full, we are required to make a monthly amortization payments in the amount of $574 thousand which are considered prepayments subject to the prepayment premium.

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 for an aggregate offering price of up to $25 million.

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

Riley, we currently anticipate future sales of our common stock will be necessary to fund operations.

As of June 30, 2021, we sold 691,584 shares of our common stock under the sales agreement, which generated aggregate net cash proceeds of approximately $1.0 million.

As of the filing date of this Quarterly Report on Form 10-Q, we sold an additional 1,691,572 shares of our common stock for aggregate net proceeds of approximately $1.8 million and may sell additional shares for an aggregate offering price of approximately $22 million under our sales agreement with B.

While our liquidity risk continues as a result of the continuing and evolving effects of the COVID-19 pandemic, which resulted in smaller backlog and larger negative working capital than originally anticipated, management believes our cash on-hand, along with our ability to obtain financing through our at-the-market offering described above, will be adequate to support the capital needs for the next 12 months.

Refer to " Going Concern, Liquidity and Management's Plan" , under Note 1, " The Company and Basis of Presentation" of the notes to the condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the expansion of sales and marketing activities and the market acceptance of our products and services.

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

We filed two prospectus supplements on April 7, 2021 and October 26, 2021 that form part of our shelf registration statement for the offer and sale of up to an aggregate of $25 million and $48.5 million in common stock, respectively.

As of September 30, 2021, we sold 2,730,654 shares of our common stock under the sales agreement, which generated aggregate net cash proceeds of approximately $3.1 million.

As of the filing date of this Quarterly Report on Form 10-Q, we sold an additional 18,220,369 shares of our common stock for aggregate net proceeds of approximately $62.1 million.

We may sell additional shares for an aggregate offering price of approximately $6.3 million under our sales agreement with B.

Riley and shelf registration statement.

On October 22, 2021, the holder of our 2020 Convertible Notes partially exercised its warrant for 2,060,000 shares of Common Stock with an exercise price of $2.25 for net proceeds of $4.6 million to the Company.

As a result of the financing events described above, while our liquidity risk continues as a result of the continuing and evolving effects of the COVID-19 pandemic, management believes it has sufficient cash on hand for at least one year following the filing date of this Quarterly Report on Form 10-Q.

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the pace at which we can scale Lyte, the expansion of sales and marketing activities and the market acceptance of our products and services.

We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights.

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

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands, except percentages) 2021 2020 Amount %

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The primary uses of cash from operating activities are payments to employees for compensation and related expenses, publishers and other vendors for the purchase of digital media inventory and related costs, sales and marketing expenses and general operating expenses.

We utilized $14.4 million of cash from operating activities during the six months ended June 30, 2021, primarily resulting from a net loss of $20.7 million.

The net loss included non-cash charges of $14.3 million, primarily consisting of the loss on the extinguishment and amortization of debt issuance costs related to our 2020 Convertible Notes, as well as stock-based compensation.

We utilized $19.1 million of cash from operating activities during the nine months ended September 30, 2021, primarily resulting from a net loss of $21.7 million.

The net loss included non-cash charges of $13.3 million, primarily consisting of the loss on the extinguishment and amortization of debt issuance costs related to our 2020 Convertible Notes, as

well as stock-based compensation.

In addition, certain changes in our operating assets and liabilities resulted in significant cash (decreases) as follows:

$(7.1) million from a decrease in accounts payable, accrued expenses and an installment payment to Uber related to the settlement of our lawsuit, as well as $(3.3) million from other working capital changes, primarily a decrease in deferred revenue.

We utilized $4.8 million of cash from operating activities during the six months ended June 30, 2020, primarily resulting from a net loss of $7.5 million, as adjusted $1.8 million for stock-based compensation, $0.2 million for amortization of debt discount and deferred financing costs and $0.1 million for loss on extinguishment of debt.

We utilized $6.5 million of cash from operating activities during the nine months ended September 30, 2020, primarily resulting from a net loss of $16.0 million, as adjusted $3.5 million for stock-based compensation, $1.2 million for amortization of debt discount and deferred financing costs, $1.2 million for gain on the change in fair value of warrants and $1.0 million for loss on extinguishment of debt.

In addition, certain changes in our operating assets and liabilities resulted in significant cash increases (decreases) as follows:

$0.4 million from an increase in accounts payable, $0.9 million from an increase in accrued expenses, $0.8 million from an increase in account receivable, $(1.3) million from an decrease in deferred revenue and $(0.2) million from an decrease in prepaid and other assets.

$0.5 million from an increase in accounts payable, $1.3 million from an increase in accrued expenses, $4.5 million from an increase in legal settlement accrual, $0.6 million from an increase in account receivable, $(1.9) million from a decrease in deferred revenue and $(0.1) million from a decrease in prepaid and other assets.

Investing Activities

Investing activities for the six months ended June 30, 2021 consisted of the purchase of digital currencies.

Investing activities for the nine months ended September 30, 2021 consisted of the purchase of digital currencies.

Financing Activities

Our financing activities during the six months ended June 30, 2021 consisted of proceeds from equity financings and debt borrowings offset by payments on debt.

Our financing activities during the nine months ended September 30, 2021 consisted of proceeds from equity financings and debt borrowings offset by payments on debt.

We acquired $17.5 million of cash from financing activities resulting primarily from $32.6 million in proceeds from the sale of our common stock and $10 million in proceeds from our Series B Convertible Note.

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Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Report on Form 10-Q for information on the Company's financing activities.

Our financing activities during the six months ended June 30, 2020 consisted of proceeds from various debt borrowings offset by net repayments on our financing factoring agreement.

We acquired $4.7 million of cash from financing activities, as a result of $6.0 million from new issuances of debt (inclusive of $0.6 million from related parties), partially offset of $0.7 million of payments on debt (inclusive of $0.2 million to related parties) and $0.7 million in net repayments on our factoring financing agreement.

Our financing activities during the nine months ended September 30, 2020 consisted of proceeds from various debt borrowings offset by net repayments on our financing factoring agreement.

We acquired $7.4 million of cash from financing activities, as a result of $10.8 million from new issuances of debt (inclusive of $0.6 million from related parties) and $1.3 million from our at-the-market offering of common stock.

These sources of financing were partially offset by $4.1 million of payments on debt (inclusive of $0.2 million to related parties) and $0.6 million in net repayments on our factoring financing agreement.

Off-Balance Sheet Arrangements

Through June 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Through September 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Indemnification Agreements

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Recent Accounting Pronouncements

Refer to Note 2, “ Summary of Significant Accounting Policies ”, in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Report on Form 10-Q for analysis of recent accounting pronouncements that are applicable to our business.

Refer to Note 2, “ Summary of Significant Accounting Policies ”, in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for analysis of recent accounting pronouncements that are applicable to our business.

Summary of Significant Accounting Policies

7 unchanged sentences

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 2. Management’s Discussion and Analysis