What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-04-07 compared with 2021-03-31 · 545 added, 373 removed, 737 unchanged (55% of the section changed)

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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB Firm No.

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Changes Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Phunware, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Chance in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue in 2019 due to the adoption of the guidance in ASC 606, Revenue from Contracts with Customers.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the Accounting for and Disclosure of Digital Assets

Description of the Matter

As described in Note 2 to the consolidated financial statements, the Company’s digital assets held as of December 31, 2021, which consist mainly of Bitcoin and Ethereum, are accounted for as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet.

The Company’s digital assets as of December 31, 2021 were approximately $32.6 million.

For the year ended December 31, 2021, the Company generated revenue of $1.1 million from the sale of PhunToken for which they received both cash and digital currency from customers.

The Company’s management has exercised significant judgment in their determination of how existing accounting principles generally accepted in the United States of America (“GAAP”) should be applied to the accounting for digital assets held, the associated financial statement presentation and accompanying footnote disclosures.

We identified the accounting for and disclosures of digital assets held and sold as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the valuation, existence and rights and obligations of digital assets held and sold.

The nature and extent of audit effort required to address the matter included significant involvement of more experienced engagement team members and subject matter experts related to the matter.

How We Addressed the Matter in Our Audit

Our audit procedures included, amongst others:

• We obtained an understanding of management’s process with regards to the methodology used, and the factors considered in determining the appropriate accounting for and disclosure of its digital assets held;

• Evaluated management’s rationale for the application of Accounting Standards Codification (“ASC”) 350 to account for its digital assets held, including management’s processes for evaluating its digital assets for impairment;

• Evaluated management’s rationale for inclusion of digital assets as a current asset on the balance sheet;

• Evaluated management’s disclosures of its digital assets activity in the financial statement footnotes;

• In connection with the sales of digital assets, we traced and agreed the details of the transactions to the underlying documents, examined supporting sale and cash receipt evidence, and tested the fair value of the assets received;

• Confirmed the existence of the Company’s digital asset balances through a third-party custodian platform;

• Evaluated the third-party custodian platform’s pricing sources with various independent pricing sources.

/s/ Marcum LLP

We have served as the Company’s auditor since 2018.

March 31, 2021

Houston, Texas

April 7, 2022

Phunware, Inc.

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Accounts receivable, net of allowance for doubtful accounts of $ 10 and $ 356 at December 31, 2021 and 2020, respectively

Inventory 2,636 —

Digital assets 32,581 —

Prepaid expenses and other current assets 686 304

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Restricted cash — 91

Right-of-use asset 1,260 —

Other assets 276 276

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Accrued legal settlement — 3,000

Lease liability 399 —

Deferred revenue 3,973 2,397

PhunCoin deposits 1,202 1,202

Factored receivables payable — 1,077

Current maturities of long-term debt, net 4,904 4,435

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Deferred revenue 1,299 2,678

Lease liability 1,147 —

Deferred rent — 180

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Loss on extinguishment of debt ( 7,952 ) ( 2,158 )

Impairment of digital assets ( 9,383 ) —

Fair value adjustment for warrant liabilities ( 18,139 ) 872

Other income — 27

Gain on forgiveness of Paycheck Protection Program ("PPP") loan 2,850 —

Other income, net 1 —

Total other expense ( 37,104 ) ( 4,699 )

Loss before taxes ( 53,948 ) ( 22,197 )

Income tax expense ( 2 ) ( 5 )

Income tax benefit (expense) 426 ( 2 )

Net loss ( 53,522 ) ( 22,199 )

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Phunware, Inc.

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

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(In thousands)

Redeemable Convertible Preferred Stock Additional

Capital Accumulated Deficit Other

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Stockholders’

Shares Amount Shares Amount

Equity (Deficit)

Shares Amount

Balances as of December 31, 2019 39,811 $ 4 $ 128,008 $ ( 123,604 ) $ ( 382 ) $ 4,026

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

Exercise of stock options, net of vesting of restricted shares 188 — 99 — — 99

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 — — — — 1,993 — — 1,993

Release of restricted stock 1,631 — — — — —

Issuance of common stock for payment of legal, earned bonus and board of director fees 1,348 — 1,283 — — 1,283

Sales of common stock, net of issuance costs 11,629 1 9,177 — — 9,178

Stock-based compensation expense — — 4,492 — — 4,492

Issuance of common stock upon partial conversions of Senior Convertible Note 1,764 1 2,266 — — 2,267

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

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

Cumulative translation adjustment — — — — 44 44

Vesting of restricted stock units — — 45 — — — — —

Issuance of common stock for payment of bonus and legal fees — — 477 — 562 — — 562

Net Loss — — — ( 22,199 ) — ( 22,199 )

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Exercise of stock options, net of vesting of restricted shares 261 — 179 — — 179

Vesting of restricted stock units — — 1,631 — — — — —

Issuance of common stock for payment of legal, earned bonus, and board of director fees — — 1,348 — 1,283 — — 1,283

Release of restricted stock 2,494 — — — — —

Issuance of common stock under the 2018 employee stock purchase plan 84 — 100 — — 100

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

Sales of common stock, net of issuance costs 35,383 4 94,733 — — 94,737

Common stock issued pursuant to warrant exercises 2,060 — 20,782 — — 20,782

Stock-based compensation expense — — 4,928 — — 4,928

Issuance of common stock upon partial conversions of Senior Convertible Note — — 1,764 1 2,266 — — 2,267

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 — — — — ( 14 ) ( 14 )

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Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation 11 59

Amortization of acquired intangibles 142 268

Amortization of debt discount and deferred financing costs 2,185 —

Gain on change in fair value of warrants ( 872 ) —

Loss on sale of digital currencies — 4

Accretion of debt discount and amortization of deferred financing costs 2,942 2,185

Loss (gain) on change in fair value of warrant liability 18,139 ( 872 )

Loss on extinguishment of debt 7,952 2,158

Non-cash interest expense 55 —

Bad debt (recovery) expense 205 114

Settlement of accounts payable ( 453 ) —

Impairment of digital assets 9,383 —

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

Stock-based compensation 4,941 4,492

Deferred income taxes — —

Other adjustments ( 478 ) ( 40 )

Changes in operating assets and liabilities:

Accounts receivable ( 16 ) 796

Inventory ( 949 ) —

Prepaid expenses and other assets ( 383 ) 65

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Accrued legal settlement ( 3,000 ) 3,000

Lease liability payments ( 802 ) —

Deferred revenue ( 1,172 ) ( 2,049 )

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Investing activities

Proceeds received from sale of digital currencies — 88

Capital expenditures — ( 18 )

Net cash provided by investing activities — 70

Purchases of digital assets ( 41,284 ) —

Acquisitions, net of cash acquired ( 5,101 ) —

Net cash used in investing activities ( 46,385 ) —

Financing activities

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Proceeds from related party bridge loans — 560

Payments on convertible notes ( 8,418 ) —

Payments on borrowings ( 26,243 ) ( 8,418 )

Payments on related party notes — ( 560 )

Proceeds from PhunCoin deposits — 212

Net repayments on factoring agreement — ( 1,077 )

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Proceeds from exercise of stock options 179 99

Series A convertible preferred stock redemptions and dividend payments

Net cash provided for financing activities 14,596 99

Net cash provided by financing activities 88,019 14,596

Effect of exchange rate on cash and restricted cash ( 14 ) 46

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Interest paid $ 1,364 $ 1,251

Income taxes paid $ — $ —

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

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Supplemental disclosure of non-cash information

Issuance of common stock under the 2018 employee stock purchase plan $ 100 $ —

Issuance of common stock for payment of legal, earned bonus and board of director fees $ 66 $ 1,283

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

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

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

Waiver of sponsor promissory note $ — $ 1,993

Non-cash issuance of common stock upon partial exercise of a warrant $ 16,147 $ —

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

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

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

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

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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.

Our Multiscreen-as-a-Service ("MaaS") platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship.

Our MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions.

Through our integrated mobile advertising platform of publishers and advertisers, we provide in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization.

During 2021, we began to sell PhunToken to consumers, developers and brands.

PhunToken is an innovative cryptocurrency utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our MaaS platform.

PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest.

In October 2021, we acquired Lyte Technology, Inc.

("Lyte"), a provider of high-performance computer systems to individual consumers.

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

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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 our reported results of operations.

A reclassification was made to the consolidated balance sheet as of December 31, 2019 to identify related parties for debt issuances.

Certain reclassifications have been made to our consolidated statement of cash flows for year ended December 31, 2020.

We combined individual line items that we considered to be immaterial and recorded these in our consolidated statement of cash flows as other adjustments to conform to current year presentation.

These reclassifications had no impact on previously reported operating, investing or financing cash flows.

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.

Under ASC 205-40, management has the responsibility to evaluate whether conditions and/or events raise substantial doubt about our 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.

Our assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows.

We continue to focus on growing our revenues.

During 2021, we secured additional cash financings through the sales and issuances of our common stock through an underwritten public offering, an at-the-market offering and a partial exercise of a warrant.

However, we continue to focus on growing our revenues.

Accordingly, operating expenditures may exceed the revenue we expect to receive for the foreseeable future.

Furthermore, we have a history of operating losses and negative operating cash flows and expect these trends to continue into the foreseeable future.

During the year ended December 31, 2020, we secured 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).

Furthermore, as more fully noted in Note 16 " Subsequent Events ", we have raised additional cash proceeds from the issuance of shares of our common stock.

Subsequent to December 31, 2020, we raised net cash proceeds totaling approximately $ 29,780 , of which $ 5,058 was cash proceeds from our existing at-the-market offering in January 2021 and $ 24,722 was net cash proceeds from an underwritten offering in February 2021.

The holder of our Convertible Notes (defined below) elected to require us to use forty percent ( 40 %) of the net proceeds from both fund raising events to satisfy obligations to redeem the 2020 Convertible Notes.

We have a history of net losses and although we anticipate our future cash outflows to exceed cash inflows as we continue to invest in revenue growth, as a result of the subsequent cash financings described above, we believe we have sufficient cash on-hand to fund potential net cash outflows for one year following the filing date of this Annual Report on Form 10-K.

Accordingly, we believe there does not exist any indication of substantial doubt about our ability to continue as a going concern for one year following the filing date of this Annual Report on Form 10-K.

We, also, have a history of operating losses and negative operating cash flows and expect these trends to continue into the foreseeable future.

As of the date of this Annual Report on Form 10-K, while we believe we have adequate capital resources to complete our near-term operations, there is no guarantee that such capital resources will be sufficient until such time we reach profitability.

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The timing and amount of capital that may be raised is dependent on market conditions and the terms and conditions upon which investors would require to provide such capital.

The Company may utilize debt or sell newly issued equity securities through public or private transactions, or through the use of another at-the-market facility.

We currently have an effective "shelf" registration statement on Form S-3 we may utilize for financings for the issuance of our common stock, preferred stock, warrants or units.

We may utilize debt or sell newly issued equity securities through public or private transactions, or through the use of our at-the-market offering facility.

We currently have an effective "shelf"

registration statement on Form S-3, which we may utilize for future financings for the issuance of our common stock, preferred stock, warrants or units.

We also hold digital assets, which management believes can be readily sold and converted into cash.

As a result of the cash financings described above, we believe we have sufficient cash on-hand to fund potential net cash outflows for one year following the filing date of this Annual Report on Form 10-K.

There can be no assurance that we will be able to obtain additional funding on satisfactory terms or at all.

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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.

Items subject to the use of estimates include, but are not limited to, the standalone selling price for our products and services, digital assets, 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, contingent consideration for our business combination with Lyte and periodic reassessment of fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in our business combination, reserves and certain accrued liabilities, the benefit period of deferred commissions, fair value of debt component of convertible notes at issuance and derecognition, assumptions used in Black-Scholes valuation method, such as the current trading price of our common stock at time of exercise of our warrant, 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.

Recently Adopted Accounting Standards

On January 1, 2020, we adopted 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 adoption of this standard had no impact on the Company's consolidated financial statements or related disclosures.

During 2020, we also adopted ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13").

ASU 2018-13 improves the effectiveness of disclosures by removing, modifying or adding certain disclosures about fair value measurements required under ASC 820.

The amendments added disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty.

The applicable amendments were applied prospectively.

As ASU 2018-13 only revised disclosure requirements, it did not have a material impact on our consolidated financial statements.

Risks and Uncertainties

Regulation governing blockchain technologies, cryptocurrencies, digital assets, utility tokens, security tokens and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens.

Regulation of digital assets, like PhunCoin and PhunToken, cryptocurrencies, blockchain technologies and cryptocurrency exchanges, is likely to evolve.

Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty.

Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them.

Any such violations could adversely affect the ability of us to maintain PhunCoin and PhunToken, which could have a material adverse effect on our operations and financial condition.

Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could also result in a material adverse effect on our operations and financial condition.

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 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 allow 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 our 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 our 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

The adoption of ASU 2016-02 did not have a material impact on our consolidated statements of operations and comprehensive loss.

Revenue Recognition

On January 1, 2019, we adoption ASC 606, Revenue from Contracts with Customers ("ASC 606") .

On January 1, 2019, we adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") .

Generally, the provisions of ASC 606 state that revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services.

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The timing of revenue recognition may differ from the timing of invoicing for contracts with customers.

When the timing of revenue recognition differs from the timing of invoicing, the Company uses judgment to determine whether the contract includes a significant financing component requiring adjustment to the transaction price.

When the timing of revenue recognition differs from the timing of invoicing, we use judgment to determine whether the contract includes a significant financing component requiring adjustment to the transaction price.

Various factors are considered in this determination including the duration of the contract, payment terms and other circumstances.

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however, contracts typically stipulate a requirement for the customer to pay within 30 days.

Transaction price may be allocated to performance obligations that are unsatisfied or are partially unsatisfied.

The transaction price may be allocated to performance obligations that are unsatisfied or are partially unsatisfied.

Amounts relating to remaining performance obligations on non-cancelable contracts include both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer.

When selling our platform subscriptions and services, our contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

For contracts with multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required.

For contracts with

multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required.

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

Significant judgment is also required relating to the timing of the satisfaction of performance obligations.

Platform Subscriptions and Services Revenue

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License fees are typically billed annually in advance.

Subscription revenue from SDK licenses gives the customer the right to access our MaaS platform.

In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

Application development revenue is derived from development services around designing and building new applications or enhancing existing applications.

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We typically bill for application development revenue in advance at contract signing, but may at times, bill one-half in advance at contract execution and one-half upon completion.

Subscription revenue from SDK licenses gives the customer the right to access our MaaS platform.

In accordance with ASC 606, a ‘right to access’ license is recognized over the license period.

Support and maintenance revenue is comprised of support fees for customer applications, software updates and technical support for application development services for a support term.

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Support and maintenance is typically billed annually in advance.

When a customer contract consists of licensing, application development and support and maintenance, we consider these separate performance obligations, which would require an allocation of consideration.

From time to time, we may also provide professional services by outsourcing employees to customers on a time and materials basis.

Revenues from these arrangements are recognized as the services are performed.

The Company typically bills professional service customers in the month in which the services are performed.

We typically bill professional service customers in the month in which the services are performed.

Application Transaction Revenue

We also generate revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices.

Depending on the specific terms of each advertising contract, the Company generally recognizes revenue based on the activity of mobile users viewing these ads.

Fees from advertisers are commonly based on the number of ads delivered or views, clicks or actions by users on mobile advertisements delivered, and the Company recognizes revenue at the time the user views, clicks or otherwise acts on the ad.

Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads.

Fees from advertisers are commonly based on the number of ads delivered or views, clicks or actions by users on mobile advertisements delivered, and we recognize revenue at the time the user views, clicks or otherwise acts on the ad.

We sell ads through several offerings:

cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers;

cost per click, on which advertisers are charged for each ad clicked or

touched on by a user;

cost per click, on which advertisers are charged for each ad clicked or touched on by a user;

and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app.

In addition, we generate application transaction revenue thru in-app purchases from an application on our platform.

In addition, during 2020, we generated application transaction revenue thru in-app purchases from an application on our platform.

In the normal course of business, we may act as an intermediary in executing transactions with third parties.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in its transactions with advertisers.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in our transactions with advertisers.

Control is a determining factor in assessing principal versus agent relation.

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Accordingly, we act as the principal in all advertising arrangements and, therefore, report revenue earned and costs incurred related to these transactions on a gross basis.

During 2021, we announced the commencement of the selling of PhunToken to consumers, developers and brands.

PhunToken is an innovative cryptocurrency utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our MaaS platform.

We follow the guidance of ASC 606 in determination the revenue recognition of our PhunToken sales.

PhunToken customers pay us at the time of purchase of PhunToken.

We recognize revenue related to PhunToken at the time of delivery of PhunToken to a customer's ethereum-based digital wallet.

Computer Hardware Revenue

We acquired Lyte Technology in October 2021.

Revenue from Lyte is primarily 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.

Customers pay us in advance of shipment of their computer via the Lyte website.

A majority of Lyte's customers pay us via credit card payments, which are managed through a third party processor.

We recognize computer hardware revenue at the time a completed unit ships from our facility.

Deferred Commissions

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Concentrations of Credit Risk

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

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable and our digital asset holdings.

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.

There is currently no clearing house for our digital assets, including our bitcoin holdings, nor is there a central or major depository for the custody of our digital assets.

There is a risk that some or all of our digital asset holdings could be lost or stolen.

There can be no assurance that the custodians will maintain adequate insurance or that such coverage will cover losses with respect to our digital asset holdings.

Further, transactions denominated in digital assets are irrevocable.

Stolen or incorrectly transferred digital assets may be irretrievable.

As a result, any incorrectly executed transactions could adversely our financial condition.

The aggregate cost basis of our digital asset holdings is $ 41,964 at December 31, 2021.

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

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Customer C 0 % 13 %

Customer D 13 % 5 %

Customer E — % 10 %

Customer F 5 % 23 %

Cash, Cash Equivalents, and Restricted Cash

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The Company had no cash equivalents at December 31, 2021 or 2020.

As a result of certain debt financings, we are required to maintain restricted balances.

We had $ 91 and $ 86 in restricted cash as of December 31, 2020 and 2019, respectively.

As a result of certain debt financings, we were required to maintain restricted balances.

We had $ 91 in restricted cash as of December 31, 2020.

Accounts Receivable and Reserves

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Balance, beginning of period $ 356 $ 3,179

Allowances for bad debt 205 114

(Recovery) allowances for bad debt ( 286 ) 205

Issuance of credit memos and write offs ( 60 ) ( 3,028 )

Balance, end of period $ 10 $ 356

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally ranging from three to seven years .

Leasehold improvements are amortized over the shorter of their useful lives or the remaining terms of the related leases.

Net book value of property and equipment was $ 13 and $ 24 at December 31, 2020 and 2019, respectively, and total depreciation expense was $ 11 and $ 59 for the years ended December 31, 2020 and 2019, respectively.

Our inventory consists of computer hardware materials and finished computers available-for-sale and are stated at the lower of cost or net realizable value, determined using the first-in first-out (“FIFO”) method.

We purchase inventory from suppliers both domestically and internationally.

We believe that our products are generally available from more than one supplier and seek to maintain multiple sources for materials, both internationally and domestically.

We may, at times, purchase products in bulk quantities to take advantage of quantity discounts and to ensure inventory availability.

We recognize provisions for obsolete and slow-moving inventory primarily based on judgments about expected disposition of inventory, generally, through sales, or liquidations of obsolete inventory, and expected recoverable values based on currently available or historical information.

Digital Assets

During the year ended December 31, 2021, we purchased an aggregate of $ 41,284 in digital assets, and we were paid $ 680 in digital assets by various customers.

Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum.

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

We have ownership of and control over our digital assets and we may use third-party custodial services to secure them.

The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.

We determine the fair value of our digital assets 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 the principal market for bitcoin and ethereum (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 quoted on an active exchange since acquiring the respective digital asset.

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 or loss 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 consolidated statements of operations and comprehensive loss.

Impairment loss was $ 9,383 for the year ended December 31, 2021 and we did not sell any digital assets during the year ended December 31, 2021.

The following tables set forth changes in our bitcoin and ethereum holdings:

Bitcoin Digital Asset Original

Cost Basis Digital Asset Impairment

Losses Digital Asset Carrying

Balance as of December 31, 2020 $ — $ — $ —

Purchases 36,806 36,806

Received from customers 157 157

Impairment loss ( 8,554 ) ( 8,554 )

Balance as of December 31, 2021 $ 36,963 $ ( 8,554 ) $ 28,409

Ethereum Digital Asset Original

Cost Basis Digital Asset Impairment

Losses Digital Asset Carrying

Balance as of December 31, 2020 $ — $ — $ —

Purchases 4,191 4,191

Received from customers 523 523

Impairment loss ( 670 ) ( 670 )

Balance as of December 31, 2021 $ 4,714 $ ( 670 ) $ 4,044

Other digital assets purchased during the year ended December 31, 2021 was $ 287 and we recorded an impairment losses of $ 159 related to those purchases.

Goodwill and Intangible Assets

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In accordance with ASC 350, Intangibles — Goodwill and Other , we do not amortize goodwill or intangible assets with indefinite lives but rather assesses their carrying value for indications of impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired.

As discussed above, we adopted ASU 2017-04 on January 1, 2020, which states an entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

We attribute goodwill to a sole reporting unit for impairment testing.

We adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment , on January 1, 2020, which states an entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

We derived the fair value from the market capitalization approach, whereby we utilize the historical market price of our common stock traded on the Nasdaq to estimate the fair value of our reporting unit.

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Identifiable intangible assets consist of acquired trade names, customer lists, technology, in-process research and development and order backlog associated with the acquired businesses.

Amortization of finite-lived intangible assets is calculated using either the straight-line or accelerated amortization model based on the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Amortization of finite-lived intangible assets is calculated using either the straight-line or accelerated amortization model based on our best estimate of the distribution of the economic value of the identifiable intangible assets.

We did not recognize any goodwill or intangible impairment losses in the years ended December 31, 2021 or 2020.

Long-Lived Assets

Long-lived asset with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable.

Long-lived assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable.

In accordance with authoritative guidance, we evaluate the recoverability of each of our long-lived assets, including property and equipment, by comparing its carrying amount to the undiscounted future cash flows expected to be generated.

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In accounting for the issuance costs related to the note, 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.

Issuance costs attributable to the liability component were amortized using the effective interest rate method to interest expense over the term of the note.

The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital.

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

Leases are reviewed and classified as capital or operating at their inception.

For leases that contain rent escalations or periods during the lease term where rent is not required, we recognize rent expense based on allocating the total rent payable on a straight-line basis over the term of the lease excluding lease extension periods.

The difference between rent payments and straight-line rent expense is recorded as deferred rent.

Deferred rent that will be recognized during the succeeding 12-month period is recorded as the current portion of deferred rent and is included in accrued expenses and other and the remainder is recorded in deferred rent on the consolidated balance sheets.

Advertising Costs

Advertising costs are expensed as incurred.

We did not incur any advertising costs for the years ended December 31, 2020 and 2019, respectively.

We adopted the new lease accounting standard, ASU 2016-02 using the modified retrospective basis for all agreements existing as of January 1, 2021 as described further above Recently Adopted Accounting Pronouncements .

The Company recognizes a right-of-use asset and lease liability for all operating leases with terms greater than twelve months.

The lease liability is measured based on the present value of the lease payments not yet paid.

The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease.

Short-term leases, or leases that have a lease term of 12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

We did not enter into any financing leases for the year ended December 31, 2021.

Stock-Based Compensation

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For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

We have not recognized interest or penalties on the consolidated balance sheets or statements of operations and comprehensive loss.

Comprehensive Loss

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Comprehensive loss comprises net loss and cumulative foreign currency translation adjustments.

The accumulated comprehensive loss at December 31, 2020 and 2019 was due to foreign currency translation adjustments.

Accumulated comprehensive loss at December 31, 2021 and 2020 was due to foreign currency translation adjustments.

Loss per Common Share

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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).

We use 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:

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Level 1 Level 2 Level 3 Total

Digital assets $ 32,581 $ — $ — $ 32,581

Total $ 32,581 $ — $ — $ 32,581

Warrant liability $ — $ 3,605 $ — $ 3,605

Total $ — $ 3,605 $ — $ 3,605

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.

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, inventory, 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.

Loss Contingencies

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See Note 18 for additional discussion on our subsequent events.

Emerging Growth Company and Smaller Reporting Company

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act").

We currently anticipate that we will cease being an emerging growth company on December 31, 2021.

The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.

We did not elect not to opt out of such extended transition period.

We are also a "smaller reporting company" as defined by the Exchange Act.

Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company which would allow us to take advantage of many of the same exemptions from disclosure requirements.

Smaller Reporting Company

We are a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act, which qualifies the Company for reduced disclosure requirements and, if permitted, additional time to implement new or revised financial accounting standards.

Smaller reporting company status is determined on an annual basis.

Recent Accounting Standards 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, we recognize rent expense on a straight-line basis for all operating leases, taking into account fixed accelerations, as well as reasonably assured renewal periods.

As noted above, we believe we will lose our "emerging growth company" status as of December 31, 2021.

Accordingly, we will adopt ASU 2016-02 on January 1, 2021.

As a result of the new standard, we expect to record a lease liability of approximately $ 2.1 million and a corresponding right-of-use asset of approximately $ 1.9 million for leases designated as operating leases in Note 9, " Commitments and Contingencies " upon adoption.

We currently do not expect ASU 2016-02 to materially impact our results of operations and we do not plan on recasting prior periods.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

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

In December 2019, the FASB issued 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 plan to adopt the update January 1, 2021 and at this time, we do not expect the adoption of this new standard to have a material impact on our consolidated financial statements or 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 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

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.

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

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

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

Business Combination

On October 18, 2021, we closed the acquisition of Lyte with an adjusted purchase price of approximately $ 11.0 million (subject to an earn-out provision).

This acquisition was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged was recorded at estimated fair values on the date of acquisition.

The following table summarizes the consideration paid for Lyte and the estimated fair values of the aggregate assets and liabilities acquired, at the acquisition date:

Assets acquired

Inventory 1,687

Intangible assets 3,340

Total assets acquired 5,031

Liabilities assumed

Deferred revenue 1,369

Total liabilities assumed 1,369

Net assets acquired 3,662

Consideration:

Acquisition and earn-out payable (subject to fair value adjustments) 6,619

Total consideration 10,599

Goodwill $ 6,937

The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions at the time of acquisition.

Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.

The trade name represents the rights to the " Lyte Technology, Inc.

" brand name which is well known in the marketplace.

The useful life of the identified amortizable intangible assets acquired is five years .

Goodwill was recorded to reflect the excess purchase consideration over net assets acquired and primarily consists of the future economic benefits that we expect to receive as a result of the acquisition.

The amount of goodwill expected to be deductible for federal and state income tax purposes is $ 437 .

Expenses we incurred as a result of the acquisition of Lyte were not material and recorded in general and administrative expenses in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

Pursuant to terms of the stock purchase agreement, the future acquisition and earn-out payments consist of the following:

(i) $ 1,125 , as adjusted for working capital items, on June 30, 2022, (ii) the issuance of shares of our common stock with an aggregate value of $ 2,250 , in two equal installments valued at up to $ 1,125 , determined on the last business day of each of the quarter ending March 31, 2022 and September 30, 2022 and (iii) up to $ 1,250 in cash and issuance of shares of our common stock valued at up to $ 1,250 on the first anniversary of closing, as an earn-out payment based upon Lyte achieving certain annual revenue milestones as provided in the purchase agreement in the year following closing.

We believe Lyte will achieve the annual revenue milestone and we will owe the full amount of the contingent consideration on the first annual anniversary of closing.

For the year ended December 31, 2021, we generated computer hardware revenue of $ 3,095 and an operating loss of $ 609 , since the acquisition closing date.

The following table summarizes the unaudited pro forma condensed financial information of Phunware, Inc for the year ended December 31, 2021 as if the acquisition of Lyte had occurred on January 1, 2020:

Year Ended December 31,

(in thousands) (unaudited)

Net revenues $ 18,175 $ 15,581

Net loss ( 53,935 ) ( 22,922 )

Disaggregation of Revenue

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Platform subscriptions and services $ 5,308 $ 9,108

Computer hardware 3,095 —

Application transaction 2,240 893

Net revenues $ 10,643 $ 10,001

For the year ended December 31, 2021, we sold $ 1,063 of PhunToken for which we received both cash and digital assets from customers.

Revenue from sales of PhunToken is recorded within application transaction revenue in the table above.

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

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United States $ 9,939 $ 9,686

Other international revenue 314 183

International 704 315

Net revenues $ 10,643 $ 10,001

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Year Ended December 31,

Customer A 32 % 8 %

Customer G 12 % 7 %

In addition to the above, revenue from Fox Networks Group was 50 % of total net revenues for the year ended December 31, 2019.

Customer D — % 32 %

Customer E 7 % 12 %

Deferred Revenue

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Current deferred revenue

Computer hardware $ 2,149 $ —

Platform subscriptions and services revenue 1,744 2,317

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Total deferred revenue $ 5,272 $ 5,075

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers.

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under arrangements with customers.

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

During the twelve months ended December 31, 2020, the Company recognized revenue of $ 4,568 that was included in its deferred revenue balance as of December 31, 2019.

During the year ended December 31, 2021, we recognized revenue of $ 3,379 that was included in our deferred revenue balance as of December 31, 2020.

Remaining Performance Obligations

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Cash, Cash Equivalents, and Restricted Cash

The following table sets forth our cash and restricted cash balances as of December 31, 2020 and 2019:

We had no cash equivalents as of December 31, 2021 and 2020.

The following table sets forth our cash and restricted cash:

Cash $ 23,137 $ 3,940

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Balance, beginning of period $ 25,900 $ 25,857

Acquisition of Lyte 7,374 —

Foreign currency translation ( 14 ) 43

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Future amortization expense for the years ending December 31, Amortization

Total $ 3,213

Accrued Expenses

Accrued expenses consist of the following:

Accrued expenses consisted of the following:

Acquisition and earn out payable $ 5,531 $ —

Payroll related expenses 2,801 4,112

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Taxes 259 165

Partner revenue share — 155

Total accrued expenses $ 9,621 $ 5,353

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 advance us amounts representing up to 80 % of the net amount of eligible accounts receivable.

On June 15, 2016, we entered into a factoring agreement with CSNK Working Capital Finance Corp.

(d/b/a Bay View Funding) (“Bay View”) whereby we sold select accounts receivable with recourse.

Under the terms of the agreement, Bay View would advance us amounts representing up to 80 % of the net amount of eligible accounts receivable.

The factor facility was 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 is 0.65 % for

every ten days thereafter, to a maximum of 90 days total outstanding.

We bear 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 the factored receivables outstanding was $ 0 and $ 1,077 as of December 31, 2020 and 2019, respectively.

Future advances available under the factoring line amounted to $ 3,000 and $ 1,923 as of December 31, 2020 and 2019, respectively.

Fees paid to Bay View for factored receivables were 1.80 % for the first 30 days and 0.65 % for every ten days thereafter, to a maximum of 90 days total outstanding.

We bore the risk of credit loss on the receivables.

These receivables were accounted for as a secured borrowing arrangement and not as a sale of financial assets.

We terminated our factoring agreement with Bay View effective March 22, 2021.

Interest expense related to our Bay View factoring agreement was $ 75 and $ 175 for the years ended December 31, 2021 and 2020, respectively.

The following table sets forth our various debt obligations:

2021 Promissory Note $ 5,220 $ —

Series A Note (principal amount) — 2,481

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Total debt $ 5,220 $ 10,071

Debt discount - warrants (2021 Promissory Note) ( 316 ) —

Debt discount - warrants (2020 Convertible Notes) — ( 1,029 )

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current maturities of long-term debt ( 4,904 ) ( 4,435 )

related-party debt ( 195 ) ( 195 )

long-term related-party debt — ( 195 )

Long-term debt $ — $ 3,762

2021 Promissory Note

In connection with the acquisition of Lyte, we entered into a note purchase agreement and completed the sale of an unsecured promissory note with an original principal amount of $ 5,220 in a private placement that closed on October 18, 2021.

The promissory note was sold with an original issue discount of $ 200 and we paid at closing issuance costs totaling $ 280 .

After deducting all transaction costs, net cash proceeds to the Company were $ 4,740 .

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

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 until the maturity date of October 15, 2022.

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

The prepayment premium also applies to the monthly amortization payments, which amounts to an effective interest rate of approximately 18 %.

2020 Convertible Notes

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 the Senior Convertible Note (described below) 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 .

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 were $ 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 .

We 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 the Investor Note, in whole or in part.

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

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

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 and a minimum market capitalization of 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.

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.

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

During 2020, we exercised our right under the Investor Note to require a mandatory prepayment of the Investor Note of $ 1,000 and the noteholder voluntarily prepaid an aggregate of $ 4,750 pursuant to the terms of the Investor Note, for aggregate cash proceeds to us $ 5,750 .

As a result, $ 5,750 in principal and $ 460 of original issue discount became

"unrestricted".

As of December 31, 2020, the restricted balance of the Series B Note is $ 11,070 (including original issue discount).

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 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.

As a result, $ 5,750 in principal and $ 460 of original issue discount became "unrestricted".

As of December 31, 2020, the restricted balance of the Series B Note was $ 11,070 (including original issue discount).

The Series A Note and outstanding unrestricted principal balance on the Series B Note each bore 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 bore interest at a rate of 3 % per annum.

The 2020 Convertible Notes were scheduled to mature on December 31, 2021.

For the year ended December 31, 2020, we recorded a loss on extinguishment of debt in the amount of $ 1,343 as a result of monthly installment payments and optional redemption payments elected by the noteholder related to our various capital raises, as more fully described below.

Monthly Payments

Starting on July 31, 2020 and on the last trading day of each month thereafter, and on the maturity date, we are required to make monthly installment payments, 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.

We 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), the 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.

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.

We will be subject to certain customary affirmative and negative covenants regarding the issuance 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 conjunction with the issuance of 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.

As a result of multiple offerings of sales of shares of our common stock during the first quarter of 2021, as more fully described Note 13 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 the first quarter of 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.

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.

During the year ended December 31, 2021, we also recorded a loss on extinguishment of debt of $ 51 related to monthly installment payments made to the investor.

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

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.

As a result of our underwritten public offering in February 2021, the exercise price of each share decreased to $ 2.25 per share, and the number of shares for which the warrant is exercisable increased to 3,840,000 shares.

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 registration statement registering 2,160,000 shares of our common stock issuable pursuant to the terms of the warrant was declared effective by the SEC on October 27, 2020.

In February 2022, we filed a registration statement registering 250 % of additional warrant shares as result of the adjustment noted above.

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.

As more fully discussed in Note 13, the holder partially exercised its warrant during 2021.

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

December 31, 2020 July 15, 2020

December 31, 2021 December 31, 2020

Strike price per share $ 2.25 $ 4.00

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Warrant issued — 2,486

Warrant Exercised ( 16,148 ) —

Change in fair value of warrant liability 18,139 ( 872 )

Balance, end of period $ 3,605 $ 1,614

Registration Rights Agreement

We were 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 2020 Convertible Notes.

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

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

Participation Rights

In addition, we 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 2020 Convertible Notes 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 2020 Convertible Notes no longer remain outstanding, in an amount of up to 30 % of the securities being sold in such offerings.

This same investor has an additional 30 % participation right that expired on March 20, 2022 pursuant to a separate Securities Purchase Agreement relating to the Senior Convertible Note, which is more fully discussed below.

Paycheck Protection Program ("PPP") Loan

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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 loan, which was in the form of a note dated April 9, 2020, was originally scheduled to mature on April 9, 2022 and bore 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 the U.S.

Small Business Administration ("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 us at any time prior to the maturity with no prepayment penalties.

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

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

We currently expect our first payment under our PPP loan to be due in the third quarter of 2021.

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

On July 7, 2021, we submitted our request to the SBA to forgive the full principal amount of the loan and on August 16, 2021, we received notification that the SBA approved our PPP loan forgiveness application.

We recorded a gain on the forgiveness of the PPP loan and related interest for the year ended December 31, 2021.

Senior Convertible Note

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Monthly Payments and Conversion

Starting on April 30, 2020 and on the last trading day of the month and on the maturity date, we were required to make monthly payments.

On each payment date, we are required to settle a principal repayment of approximately $ 143 plus interest thereon (the “Payment Amount”) which were to be satisfied in shares of our common stock at 100 % of the Payment Amount, or at our election, in whole or in part, in cash, at 105 % of the Payment Amount.

Starting on April 30, 2020 and on the last trading day of the month and on the maturity date, we were required to make monthly payments on the Senior Convertible Note.

On each payment date, we were required to settle a principal repayment of approximately $ 143 plus interest thereon (the “Payment Amount”) which were to be satisfied in shares of our common stock at 100 % of the Payment Amount, or at our election, in whole or in part, in cash, at 105 % of the Payment 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.

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A loss on extinguishment of $ 81 was recorded based on the difference between the calculated fair value of the debt immediately prior to 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, we 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.

Upon the issuance of the 2020 Convertible Notes, we 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 payoff 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 .

The redemption of the Senior Convertible Note resulted in a loss on extinguishment of $ 734 in 2020.

Related-Party Bridge Loans

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(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;

(ii) $ 151 by Curo Capital Appreciation Fund, LLC, an entity in which our 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.

and (iv) $ 50 by Luan Dang, our Chief Technology Officer.

Transaction costs related to the RPBLs were not significant.

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In April 2019, our 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 our discretion, cryptocurrency, such as bitcoin or ethereum.

The Convertible Notes will be sold in reliance on an exemption from registration.

The Convertible Notes were sold in reliance on an exemption from registration.

We 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.

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 Convertible 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.

We have not filed a registration statement with the SEC covering the shares of stock that could be issued pursuant to the Convertible Notes.

The Convertible Notes bore 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 could have been deferred until the earlier of (i) repayment in full of all remaining unpaid principal and (ii) conversion.

The Convertible Notes were originally scheduled to mature on June 3, 2024.

On October 27, 2021, we paid $ 222 in cash in full satisfaction of all obligations under the Convertible Notes.

Promissory Notes

In October 2019, our 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 our discretion, cryptocurrency, such as bitcoin or ethereum.

The Notes will be sold in reliance on an exemption from registration.

The Notes were sold in reliance on an exemption from registration.

We may prepay the Notes at any time without penalty.

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

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, 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 us 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 us 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.

The Notes bore ordinary interest at a rate of 10 % per annum.

Interest under the Notes was payable monthly beginning on November 30, 2019.

During the term of the Notes, we were 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 us under the Notes.

The principal and unpaid accrued interest on the Notes were due and payable on demand by the majority Note holders on or after the date that is 60 months following November 15, 2019.

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.

Knitowski, our Chief Executive Officer and a member of its board of directors.

On October 27, 2021, we paid $ 905 in cash to each Note holder in full satisfaction of all obligations under the Notes.

Interest Expense

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

The following table sets forth interest expense for our various debt obligations included in the consolidated statements of operations and comprehensive loss:

Year Ended December 31,

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Accretion of debt discount - warrants 1,029 1,457

2021 Promissory Note

Senior Convertible Note — 197

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Total $ 4,481 $ 3,413

Commitments and Contingencies

We have 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 allow 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.

Our Lyte operations are currently located in Gurnee, Illinois.

We lease office and warehouse space for Lyte under a month-to-month lease.

Excluding our month-to-month lease, as of December 31, 2021, the earliest lease agreement 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 our operating leases as of December 31, 2021 was 3.14 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 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 consolidated statement of operations and comprehensive loss.

Rent expense under operating leases totaled $ 809 and $ 843 for the years ended December 31, 2021 and 2020, respectively.

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Future minimum lease obligations for the years ending December 31, Lease obligations

Total $ 3,000

Portion representing interest $ ( 561 )

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 commenced 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 as a component of other income, net in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

We recognized $ 154 of sublease income related to our Irvine, California lease for the year ended December 31, 2021.

On December 21, 2021, we entered into a sublease agreement pursuant to which we will sublease our existing office space in Miami, Florida.

The term of the sublease commenced on January 18, 2022 and terminates on June 30, 2023.

The subtenant will pay us initial base rent of approximately $ 8 per month, which is subject to rent escalations throughout the term.

We recognized an impairment of our right-to-use asset related to the sublease of $ 51 , which is recorded as a component of other income, net in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

Commitments and Contingencies

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.

On July 30, 2021, we filed a second action against WSGR in the Superior Court of the State of California for the County of Santa Clara.

This matter is captioned Phunware, Inc., v.

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

The two actions are pending in arbitration.

Both cases are in the early stages of litigation;

the outcome is not certain.

The relief sought, as stated in the complaints, are damages according to proof, interest and costs of suit.

WSGR filed a crossclaim in arbitration related to services provided to Phunware.

WSGR seeks to recover fees related to the services at issue in Phunware’s actions against WSGR, of which $ 4,321 is recorded in accounts payable in our consolidated balance sheets as of December 31, 2021 and 2020.

On December 17, 2019, certain stockholders filed a lawsuit against Phunware and its individual officers and directors.

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

Phunware, Inc., et al., was filed in the 126th Judicial District Court of Travis County, Texas (Cause No.

D-1-GN-19-008846).

Plaintiffs alleged that they invested in various early rounds of financing while the Company was private and that Phunware should not have subjected their shares to a 180-day “lock up” period.

Plaintiffs also allege that Phunware’s stock price dropped significantly during the lock up period and seek damages, costs and professional fees.

On June 23, 2021, defendants filed a motion to dismiss the petition based on the mandatory forum-selection clause in Phunware’s Articles of Incorporation, which require plaintiffs’ claims to be filed in Delaware Chancery Court.

On November 17, 2021, the court granted our motion to dismiss with prejudice to refiling in the State of Texas.

On December 17, 2021, plaintiffs filed a notice of appeal to the Court of Appeals, Third District of Texas, Case No.

03-21-*00665-CV.

On February 18, 2022, the plaintiffs filed a complaint in the Court of Chancery of the state of Delaware containing the same allegations.

We intend to vigorously defend against this lawsuit and any appeals.

We have not recorded an expense related to this matter because any potential loss is not currently probable or reasonably estimable.

Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter.

It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.

In 2017, we filed a breach of contract complaint against Uber Technologies, Inc.

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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 Chief Executive Officer and member of our board of directors and former Phunware employees D.

Knitowski, the Company's Chief Executive Officer and member of our board of directors and former Phunware employees D.

Borotsik, and A.

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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 our insurance carrier will pay $ 1,500 to settle Uber's claims against the Individual Defendants while we 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 we 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 us 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 are fulfilled before that date, the parties will file requests to dismiss the action and the hearing will be taken off calendar.

The settlement agreement provided that Phunware and its insurance carriers pay a total sum of $ 6,000 to Uber, of which our insurance carrier paid $ 1,500 to settle Uber's claims against the Individual Defendants while we paid a total of $ 4,500 to Uber in a series of installments that ended in September 2021.

We recorded a charge of $ 4,500 for our portion of the settlement in legal settlement in our consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

The settlement agreement further provided that we and the Individual Defendants fully release claims against Uber.

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.

We recorded a loss of $ 4,500 for our portion of the settlement in legal settlement in our consolidated statements of operations and comprehensive loss for the year ended December 31, 2020 and $ 3,000 is recorded in accrued legal settlement in our consolidated balance sheet as of December 31, 2020 related to the settlement.

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

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

Phunware, Inc., et al.;

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 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 .

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.

The court has not yet set a trial date or pretrial deadlines.

The case is in early stage of discovery.

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.

As a result of us remitting the final installment payment to Uber, on October 13, 2021, Uber's complaint against the Company was dismissed with prejudice.

On March 9, 2020, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against us.

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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 Phunware, plus legal and court costs.

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 Phunware, plus legal and court costs.

On September 29, 2020, we entered into a settlement agreement with EGS.

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We reclassified $ 690 from accounts payable to accrued expenses in the consolidated balance sheet as of December 31, 2020 related to the settlement.

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

In accordance with authoritative guidance, we will defer any settlement gain, if any, until we have fulfilled our 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 Phunware.

The case captioned, Sha-

Poppin Gourmet Popcorn, LLC v.

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

JPMorgan Chase Bank, N.A., RCSH Operations, LLC, RCSH Operations, Inc.

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In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

PhunCoin and PhunToken

In June 2018, PhunCoin, Inc., our wholly-owned subsidiary, launched an offering pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of rights (the “Rights”) to acquire the PhunCoin token.

In 2019, PhunCoin, Inc.

commenced an offering of Rrights pursuant of Regulation CF, which closed May 1, 2019.

accepts payment in the form of cash and digital currencies for purchases of the Rights.

In June 2018, we launched an offering pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of rights (the “Rights”) to acquire the PhunCoin token.

In 2019, we commenced an offering of Rights pursuant of Regulation CF, which closed May 1, 2019.

For both offerings, we accepted payment in the form of cash and digital assets 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 the PhunCoin at the time of issuance of the PhunCoin during the launch of the Token Ecosystem (as defined below) before taking into consideration any applicable discount rate, which is based on the time of the purchase.

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

We currently do not plan to raise additional proceeds under the PhunCoin Rights offering.

We currently do not plan to raise additional material proceeds under the PhunCoin Rights offerings.

Issuance of PhunCoin

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.

PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch of our 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 we determine that we have the ability to enforce resale restrictions with respect to PhunCoin pursuant to applicable federal securities laws.

Proceeds from the Rights offerings are generally not refundable if the Token Generation Event is not consummated.

In 2021, we notified holders of the PhunCoin Rights to request they complete additional information needed for issuance and we currently anticipate that PhunCoin will be issued to the holders of the Rights in 2022.

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.

We further anticipate reducing the number of PhunCoins(through a reverse PhunCoin split or otherwise) prior to issuance to promote a healthier token economy and adhere to listing exchange requirements.

As of the date of this Report, we do not yet know the number of PhunCoin we will be issuing pursuant to the Rights.

There can be no assurance as to when (or if) the Company will be able to successfully launch the Token Ecosystem.

PhunCoin may not have usefulness until the Token Ecosystem is operational.

There can be no assurance as to when (or if) we will be able to successfully launch the Token Ecosystem.

The Company is currently developing multiple aspects of the Token Ecosystem, as well as coordinating with trading platforms to support the compliant trading of PhunCoin.

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Termination of the Token Rights Agreement

Termination of the Token Rights Agreement occurs on the earlier of (i) PhunCoin being issued to the Rights holder pursuant to the provisions noted above, (ii) the payment, or setting aside of payment with respect to a dissolution event (as described below) or (iii) twelve months from the date of the Token Rights Agreement with the Rights holder, which PhunCoin, Inc.

may extend at its sole discretion for six months if a Token Generation Event has not occurred.

Upon termination of the Token Rights Agreement, PhunCoin, Inc.

has no further obligation to the Rights holder.

While the Token Rights Agreement has terminated in accordance with its terms (with respect to all Rights holders), as of the date of this Report, PhunCoin, Inc.

has determined to continue its obligations under the Token Rights Agreement.

Upon termination of the Token Rights Agreement, we have no further obligation to the Rights holder.

While the Token Rights Agreement has terminated in accordance with its terms (with respect to all Rights holders), as of the date of this Annual Report, we have determined to continue our obligations under the Token Rights Agreement.

Dissolution Event

A dissolution event occurs if there has been (i) a voluntary termination of PhunCoin, Inc.’s operations, (ii) a general assignment for the benefit of PhunCoin, Inc.’s creditors, (iii) a change of U.S.

laws that make the use or issuance of PhunCoin or the Token Generation Event impractical or unfeasible or (iv) any other liquidation, dissolution or winding up of PhunCoin, Inc.

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

A dissolution event occurs if there has been (i) a voluntary termination of our operations, (ii) a general assignment for the benefit of creditors, (iii) a change of U.S.

laws that make the use or issuance of PhunCoin or the Token Generation Event impractical or unfeasible or (iv) any other liquidation, dissolution or winding up of the Company.

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

No Voting Rights or Profit Share

Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware, PhunCoin, Inc.

or any subsidiaries of the Company.

Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware or any subsidiaries of the Company.

However, PhunCoin holders will be provided fractional interests in the Token Ecosystem, including ongoing monthly PhunCoin dividends to PhunCoin holders, based on their respective pro rata ownership percentage of PhunCoin, totaling 2.5 % of the monthly credits purchased by Phunware customers.

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Should we complete a Token Generation Event, the stockholders would receive their requisite amount of PhunCoin.

As stated above, the exact number of PhunCoin to be issued to holders of the warrants is unknown at this time.

PhunToken ("Phun")

In 2019, we 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 available initially only to persons outside of the United States and Canada.

As currenlt envisioned, consumers may receive Phun for actively engaging in marketing campaigns;

developers and publishers may receive Phun for utilizing Phunware’s loyalty software development kit in order to better engage, manage and monetize their consumers;

and brands will gain access to more relevant, verifiable data by accessing Phunware’s data exchange and using Phun for their own loyalty programs.

As of December 31, 2020, we had not issued or sold any Phun.

Stockholders’ Equity

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

At December 31, 2020 and 2019, there were 56,380,111 and 39,817,917 shares outstanding, inclusive of 574 and 6,219 restricted shares subject to repurchase for unvested shares related to early option exercises related to our 2009 Equity Incentive Plan (more fully described below), respectively.

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 we agreed to 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 agreed to use commercially reasonable efforts consistent with its normal trading and sales practices to sell shares from time to time based upon our instructions, including any price, time or size limits specified by us.

Under the Sales Agreement, Ascendiant was permitted to 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.

At December 31, 2021 and 2020, there were 96,751,610 and 56,371,207 shares outstanding, respectively.

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 our common stock for an aggregate offering price of up to $ 15,000 .

During the year ended December 31, 2020, we sold 11,629,160 shares of common stock for gross proceeds of $ 9,578 .

Offering costs totaled $ 401 .

During 2019, we 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 and $ 92 was received in digital currencies.

Furthermore, there were 13,975,359 warrants exercised under cashless (net) provisions resulting in the issuance of 10,913,146 shares of common stock.

See further discussion regarding details of our various warrants below.

In January 2021, 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 .

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

Riley Securities, Inc.

Riley"), pursuant to which we offered and sold, from time to time, shares of our common stock through or to 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.

As of December 31, 2021, 20,951,043 shares of our common stock had been sold and we had received aggregate net cash proceeds of $ 65,210 .

Transaction costs were $ 2,017 .

We also incurred additional transaction costs paid outside of closing of $ 178 .

We terminated the sales agreement with B.

Riley on February 4, 2022, with an effective date of February 9, 2022.

Dividends are paid on a when-and-if-declared basis.

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A summary of our outstanding warrants is set forth below:

Warrant Type Cash exercise December 31,

price per share 2020 2019

2020 Convertible Note warrants $ 4.00 2,160,000 —

December 31, 2021 December 31, 2020

Warrant Type Cash Exercise

share Number of warrants Cash Exercise

share Number of warrants

2020 Convertible Notes warrant $ 2.25 1,780,000 $ 4.00 2,160,000

Common stock warrant (Series D-1) $ 2.25 35,555 $ 5.54 14,866

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Total 5,636,801 5,996,112

In 2012, we issued a warrant to purchase an aggregate of 14,866 shares of the Company’s common stock with an exercise price of $ 5.54 per share to a banking institution with which we previously had a revolving line of credit.

Refer to Note 9, Debt , for details of our warrant issued in connection with our 2020 Convertible Notes.

During 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 per share for net proceeds of $ 4,635 .

In 2012, we issued a warrant to initially purchase an aggregate of 14,866 shares of the Company’s common stock with an initial exercise price of $ 5.54 per share to a banking institution with which we previously had a revolving line of credit.

The term of the warrant is the earlier of (i) the tenth anniversary of the date of issuance, (ii) the closing of the initial registered public offering of the Company’s common stock, or (iii) the closing of an acquisition (as defined in the warrant) where the consideration consisting of cash or publicly traded securities payable in connection with the acquisition for each share is at least three (3) times the exercise price.

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These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

Upon vesting of restricted stock units, shares will be delivered electronically to the holder shortly after vest date.

Upon exercise of stock options, shares will be delivered electronically to the holder pursuant to an effective registration statement.

The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of:

(i) 10 % of the post-closing outstanding shares of common stock;

(i) 2,729,416 shares of common stock;

(ii) 5 % of the outstanding shares of common stock on the last day of the immediately preceding fiscal year;

or (iii) such other amount as our board of directors may determine.

In addition, the shares of common stock reserved for issuance, 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 expire or otherwise terminate without having been exercised in full and are forfeited to or repurchased by us.

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 December 31, 2021, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing is 925,467 .

For the year ended December 31, 2020, the restricted stock units were the only stock-based incentives granted under the 2018 Plan.

Not including the maximum number of shares from the 2009 Plan that may be added to the 2018 Plan, the 2018 Plan had 762,038 and 2,551,720 shares of common stock reserved for future issuances as of December 31, 2021 and December 31, 2020, respectively.

Restricted Stock Units

A summary of our restricted stock unit activity is set forth below:

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Outstanding as of December 31, 2021 3,576,270 $ 1.94

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 2,551,720 and 205,206 shares of common stock reserved for future issuances as of December 31, 2020 and 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.

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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.

The awards vest 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 746,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.25 per share.

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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.

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 .

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

During the fourth quarter of 2020, we granted 30,000 restricted stock units to team members, 50,000 restricted stock units to non-employees directors with an average grant date fair value of $ 0.85 per share.

During the fourth quarter of 2020, we granted 30,000 restricted stock units to team members and 50,000 restricted stock units to non-employees directors with an average grant date fair value of $ 0.85 per share.

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

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The awards granted to the legal service provider vested immediately.

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 a 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.

During the second quarter of 2021, we granted 54,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.23 per share.

The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.

During the third quarter of 2021, we granted 54,000 restricted stock unit awards to team members with an average grant date fair value of $ 1.09 per share.

The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.

During the fourth quarter of 2021, we granted 170,000 restricted stock unit awards to team members with an average grant date fair value of $ 3.97 per share.

The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.

We also granted 368,672 restricted stock units to non-employee directors, each with a grant date fair value of $ 1.35 .

The awards vest in four equal installments throughout 2022 and are subject to service conditions.

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

Stock Options

During third quarter of 2021, we granted 50,000 stock options to a non-employee consultant at an exercise price of $ 1.08 per share.

The stock options vest over one year in twelve equal monthly installments.

As of December 31, 2021, this is the only stock option grant outstanding under the 2018 Plan.

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.

The total shares of common stock initially reserved under the 2018 ESPP was limited to 272,942 shares.

The purpose of the 2018 ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock at a discount through accumulated contributions generally in the form of payroll deductions of up to 15 % of eligible compensation, subject to caps of $ 25 in any calendar year and 4,000 shares on any purchase date.

The 2018 ESPP provides for 24 -month offering periods, generally beginning in June and December of each year, and each offering period consists of four six-month purchase periods.

The initial offering period began on June 1, 2021 and will end in May 2023.

The first purchase under the 2018 ESPP was in December 2021.

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;

On each purchase date, participating employees will purchase shares of our common stock at price per share equal to 85 % of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period.

If the price per share of our common stock on any purchase date in the offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period.

Purchased shares will be delivered electronically to the participant shortly after the purchase date pursuant to an effective registration statement.

We use a Black-Scholes option pricing model to determine the fair value of shares to be purchased under the 2018 ESPP.

Stock-based compensation expense related to our 2018 ESPP for the year ended December 31, 2021 was not significant.

(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 December 31, 2020, 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 December 31, 2020 and 2019.

The 2018 ESPP had 189,215 and 272,942 shares of common stock available for sale and reserved for issuance as of December 31, 2021 and 2020, respectively.

2009 Equity Incentive Plan

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The total amount received in exchange for these shares has been included in accrued expenses on the accompanying consolidated balance sheets and is reclassified to equity as the shares vest.

As of December 31, 2020 and 2019, 574 and 6,219 shares were unvested amounting to $ 1 and $ 3 in accrued expenses, respectively.

As of December 31, 2020, there were 574 unvested shares outstanding amounting to $ 1 in accrued expenses.

There were no unvested shares outstanding as of December 31, 2021.

Upon exercise, shares will be delivered electronically to the holder pursuant to an effective registration statement.

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Outstanding as of December 31, 2020 1,208,740 $ 0.80 6.19 $ 700

Exercised ( 260,451 ) 0.69

Cancelled/Expired ( 22,822 ) 2.01

Outstanding as of December 31, 2021 925,467 $ 0.80 5.59 $ 1,692

Exercisable as of December 31, 2021 904,259 $ 0.79 5.58 $ 1,668

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Total stock-based compensation $ 4,941 $ 4,492

As of December 31, 2020 and 2019, there was approximately $ 2,135 and $ 6,328 , respectively, of total unrecognized compensation cost related to unvested restricted stock units under the 2018 Plan.

This unrecognized compensation cost is expected to be recognized over an estimated weighted-average period of approximately 2.8 years.

As of December 31, 2020 and 2019, there was $ 80 and $ 221 , respectively, of total unrecognized compensation cost related to unvested stock options under the 2009 Plan.

This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 1.2 years.

As of December 31, 2021, there was approximately $ 5,943 , $ 328 and $ 14 of total unrecognized compensation cost related to the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively.

These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.7 years, 1.5 years and 0.3 years for the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively.

Deferred income taxes are recognized for the tax consequences in future years for differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

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Year Ended December 31,

Income tax at statutory rate $ ( 4,661 ) $ ( 2,703 )

Income tax (benefit) at statutory rate $ ( 11,330 ) $ ( 4,661 )

Valuation allowance 11,500 4,408

State income tax, net of federal benefit ( 330 ) ( 606 )

State income tax (benefit), net of federal benefit ( 1,978 ) ( 330 )

Business tax credit net of reserves ( 190 ) —

Non-deductible expenses 2,210 585

Business combination ( 437 ) —

Foreign income taxes at different rate ( 201 ) —

Income tax expense $ 2 $ 5

Income tax (benefit) expense $ ( 426 ) $ 2

Effective tax rate 0.79 % ( 0.01 ) %

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Total current 11 2

Federal ( 416 ) —

State ( 21 ) —

Total deferred ( 437 ) —

Total $ 2 $ 5

Total income tax (benefit) expense $ ( 426 ) $ 2

The components of net deferred income taxes consist of the following:

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Net operating loss $ 40,922 $ 30,705

Reserves and accruals 3,739 3,842

Unrealized loss on digital assets 2,015 —

Tax credits 1,416 1,193

Reserves and accruals 732 3,739

Leases - lease liability 376 —

Amortization of acquired intangibles 232 —

Other deferred tax assets 1,748 —

Gross deferred tax assets 47,441 35,637

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Amortization of acquired intangibles — ( 537 )

Leases - right of use asset ( 306 ) —

Other deferred tax liabilities ( 972 ) —

Total deferred tax liabilities ( 1,278 ) ( 537 )

Net deferred tax liabilities $ — $ —

As of December 31, 2020, we had net operating loss carryforwards of $ 126,303 and $ 60,929 for federal and state income tax purposes, respectively.

As of December 31, 2021, we had net operating loss ("NOL") carryforwards of $ 166,826 and $ 79,463 for federal and state income tax purposes, respectively.

The federal net operating losses of $ 85,674 which were generated in tax years beginning before January 1, 2018, will begin to expire in 2030 if not utilized.

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The state net operating losses expire at various times depending on the state with a majority beginning to expire in 2030 if not utilized.

As of December 31, 2020, we had R&D credit carryforwards of approximately $ 1,482 and $ 1,145 for federal and state income tax purposes, respectively.

As of December 31, 2021, we had research and development ("R&D") credit carryforwards of approximately $ 1,863 and $ 1,226 for federal and state income tax purposes, respectively.

The federal and Texas R&D credits will begin to expire in 2034, unless previously utilized.

California R&D credits carry forward indefinitely.

Utilization of the net operating losses ("NOL") and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code (IRC) of 1986, as amended (the "Code"), as well as similar state and foreign provisions.

Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code (IRC) of 1986, as amended (the "Code"), as well as similar state and foreign provisions.

These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income.

In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than fifty (50) percentage points of the outstanding stock of a company by certain stockholders.

As of December 31, 2020, we had not yet completed its analysis of the deferred tax assets for its NOL and tax credits.

As of December 31, 2021, we had not yet completed an analysis of the deferred tax assets for its NOL and tax credits.

The future utilization of our net operating loss to offset future taxable income may be subject to an annual limitation under IRC Section 382 as a result of ownership changes that may have occurred previously or that could occur in the future.

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Our tax years from inception are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.

On January 22, 2018, the FASB released guidance on the accounting for tax on the Global Intangible Low-Taxed Income (“GILTI”) provisions of H.R.

1, "The Tax Cuts and Jobs Act" signed into law in 2017 (the "Tax Act").

GAAP, the Company is allowed to make an accounting policy election of either (1) treating taxes due on the future U.S.

inclusions in taxable income related to GILTI as a current-period expense when incurred, or the period cost method, or (2) factoring such amounts into the Company's measurement of its deferred taxes, or the deferred method.

The Company has selected the period cost method as its accounting policy with respect to the potential GILTI tax obligations.

We have ownership interest in controlled foreign corporations.

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income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest deduction limitations and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017.

The CARES Act does not have a material impact on our financial results for the year ended December 31, 2020.

The CARES Act did not have a material impact on our financial results for the years ended December 31, 2021 and 2020.

The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the United States on December 27, 2020.

The Act enhances and expands certain provisions of the CARES Act.

The Act does not have a material impact on our financial results for the year ended December 31, 2020.

The Act did not have a material impact on our financial results for the year ended December 31, 2021 and 2020.

Segment and Geographic Information

Our chief operating decision maker is our Chief Executive Officer ("CEO").

Our CEO reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Accordingly, we have determined that the Company operates in a single reporting segment.

Our CEO reviews operating segment information for purposes of allocating resources and evaluating financial performance.

We have determined that the Company operates in a two reporting segments:

Phunware and Lyte.

In 2021, but prior to the acquisition of Lyte, our CEO reviewed the financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Selected information for the Company's operating segments and a reconciliation to the consolidated financial statement amounts are as follows:

As of or for the year ended December 31, 2021

Phunware Lyte Consolidated

Goodwill 25,887 7,373 $ 33,260

Total assets 94,621 4,673 $ 99,294

Net revenues $ 7,548 $ 3,095 $ 10,643

Loss before taxes $ ( 53,339 ) $ ( 609 ) $ ( 53,948 )

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.

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Related-Party Transactions

As consideration for the Private Placement Warrants transferred to Phunware stockholders, a promissory note was issued to certain executives of Stellar, one of which is currently a member of our board of directors.

The amount of the note was approximately $ 1,993 , which represented $ 0.50 per warrant transferred to former stockholders of Phunware.

The note bore no interest and was to mature on December 26, 2019.

The note was waived and forgiven by the noteholders on January 15, 2019.

In connection with the reverse merger with Stellar, we assumed $ 255 in payables for Nautilus Energy Management Corporation, an affiliate of a current member and former member of our board of directors.

This balance is included in accounts payable in our consolidated balance sheets as of December 31, 2020 and 2019.

In connection with the reverse merger with Stellar, in 2018, we assumed $ 255 in payables for Nautilus Energy Management Corporation, an affiliate of two former members our board of directors, one of whom served on our board of directors until December 2, 2021.

On December 29, 2021, we paid $ 171 in full satisfaction of the outstanding payable.

As more fully discussed in Note 9, Debt , the Company entered into a Note and RPBLs (both defined above) with certain related parties.

We repaid the Note and RPBLs in full during 2021 and 2020, respectively.

Subsequent Events

The Company has evaluated subsequent events through March 31, 2021, the date the financial statements were issued.

In January 2021, we issued 2,670,121 shares of our common stock pursuant to the terms of our at-the-market offering and Sales Agreement with Ascendiant, as noted in Note 11 above.

Aggregate net cash proceeds received totaled $ 5,058 and transaction costs were $ 156 .

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 net proceeds totaled $ 24,722 and transaction costs were $ 1,740 .

As a result of the fundraising events above, the holder of our 2020 Convertible Notes elected to require us to use forty percent ( 40 %) of the net proceeds satisfy obligations under the 2020 Convertible Notes.

The redemption obligation satisfied the full balance of the 2020 Convertible Notes outstanding as of the redemption date, notwithstanding future payments the investor could initiate pursuant to the Investor Note that would further result unrestricted Series B Note principal to be due and outstanding.

We paid approximately $ 11,507 , to which $ 5,541 was to pay the then outstanding principal on the 2020 Senior Convertible Notes, $ 349 for interest and make-whole and $ 5,717 to loss on extinguishment of debt.

Furthermore, as a result of the underwritten equity raise, the conversion price of the 2020 Convertible Notes decreased from $ 3.00 to $ 2.25 per share and the exercise price per share of the warrants decreased from $ 4.00 per share to $ 2.25 per share.

In March 2021, the noteholder 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 aforementioned aggregate payments on the Investor Note, there is no unrestricted balance remaining under of the Series B Note.

On March 25, 2021, we delivered a Company Optional Redemption Notice 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.

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 base rent in an initial amount of approximately $ 17 per month, which is subject to certain discounts throughout the lease, as well as rent escalations.

The Company has evaluated subsequent events through the date the financial statements were issued.

On January 31, 2022, we entered into an At Market Issuance Sales Agreement with H.C.

Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell, from time to time, shares of our common stock, par value $ 0.0001 per share, for aggregate gross proceeds of up to $ 100,000 , through or to Wainwright, as agent or principal.

We are not obligated to sell shares of our common stock under the sales agreement with Wainwright.

As of the date noted above, we have not sold any shares of common stock pursuant to the sales agreement with Wainwright.

Sales of shares of our common stock sold under the sales agreement will be made pursuant to an effective shelf registration statement on Form S-3 in the amount of $ 200,000 filed with the SEC on February 1, 2022.

On March 15, 2022, we entered into a lease agreement, in which we will lease approximately 21,830 square feet for a term of five years , which we intend to use as manufacturing and warehouse space for our Lyte computer division.

The term of the lease commences on the earliest of (a) the date we occupy any portion of the Premise and begin conducting business therein, (b) the date on which construction is substantially completed in the building (as defined in the construction addendum) or (c) the date the Landlord would have achieved substantial completion of construction of the building but for a delay caused by us (as defined in the construction addendum).

The lease provides for initial base rent payments of approximately $ 27 per month, subject to escalations.

In addition, we will be responsible for payments equal to our proportionate share of operating expenses, which is currently estimated to be approximately $ 7 per month, which is also subject to adjustment to actual costs and expense according to provisions of the lease.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Reference is made to Item 4.01 on the Company’s Current Report on Form 8-K filed with the SEC on January 2, 2019 regarding changes in accounting firm and is hereby incorporated by reference.

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-K

Item 8. Financial Statements and Supplementary Data