(Exact name of registrant as specified in its charter)

7800 Shoal Creek Blvd

Suite 230-S

Austin

78757

(Address of principal executive offices)

(Zip Code)

Title of each class:

Trading Symbol(s)

Name of each exchange on which registered:

Common Stock, par value $0.0001 per share

PHUN

The NASDAQ Capital Market

Warrants to purchase one share of Common Stock

PHUNW

The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

As of ~~November 9, 2020, 49,140,540~~May 10, 2021, 71,662,933 shares of common stock, par value $0.0001 per share, were issued and outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report (the “Report”) includes forward-looking ~~statements.~~statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading ~~“Risk Factors.~~“Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under ~~“Risk Factors”~~“Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

PART I—FINANCIAL INFORMATION

~~(In thousands, except per share information)~~

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

(In thousands, except share and per share information)

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

(In thousands, except per share information)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Net revenues	$	1,646	$	2,640
Cost of revenues	692		1,091
Gross profit	954		1,549

Operating expenses:
Sales and marketing	556		605
General and administrative	2,758		3,945
Research and development	1,052		861

Total operating expenses	4,366		5,411
Operating loss	(3,412)		(3,862)

Other expense:
Interest expense	(2,219)		(101)
Loss on extinguishment of debt	(5,768)		0
Loss on change in fair value of warrant liability	(885)		0
Other expense	(79)		0
Total other expense	(8,951)		(101)
Loss before taxes	(12,363)		(3,963)
Income tax expense	0		0
Net loss	(12,363)		(3,963)
Other comprehensive income (loss):
Cumulative translation adjustment	10		(72)
Comprehensive loss	$	(12,353)	$	(4,035)

Net loss per common share, basic and diluted	$	(0.19)	$	(0.10)

Weighted-average common shares used to compute net loss per share, basic and diluted	64,587		40,095

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


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








Balance - December 31, 2020	56,371	$	6	$	144,156	$	(145,803)	$	(338)	$	(1,979)
Exercise of stock options, net of vesting of restricted shares	120	—		65		—		—		65
Release of restricted stock	183	—		—		—		—		—
Issuance of common stock for payment of board of director fees	99	—		66		—		—		66
Sales of common stock, net of issuance costs	14,431	1		29,704		—		—		29,705
Stock-based compensation expense	—	—		1,055		—		—		1,055
Cumulative translation adjustment	—	—		—		—		10		10
Net loss	—	—		—		(12,363)		—		(12,363)
Balance - March 31, 2021	71,204	$	7	$	175,046	$	(158,166)	$	(328)	$	16,559

Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated
Deficit Other
Comprehensive
Loss Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance - June 30, 2020 0 0 43,555 $ 4 $ 132,045 $ (131,078) $ (457) $ 514
Exercise of stock options, net of vesting of restricted shares — — 33 — 9 — — 9
Vesting of restricted stock units — — 388 — — — — —
Issuance of common stock for payment of legal, earned bonus, and board of director fees — — 164 — 225 — — 225
Sale of common stock — — 1,302 1 1,341 — — 1,342
Stock-based compensation expense — — — — 1,708 — — 1,708
Reacquisition of equity component of Senior Convertible Note — — — — (89) — — (89)
Cumulative translation adjustment — — — — — — 47 47
Net loss — — — — — (8,567) — (8,567)
Balance - September 30, 2020 0 0 45,442 $ 5 $ 135,239 $ (139,645) $ (410) $ (4,811)

Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated
Deficit Other
Comprehensive
Loss Total
Stockholders’
Equity (Deficit)
Shares Amount Shares Amount
Balance - December 31, 2019 0 0 39,811 $ 4 $ 128,008 $ (123,604) $ (382) $ 4,026
Exercise of stock options, net of vesting of restricted shares — — 186 — 96 — — 96
Vesting of restricted stock units — — 1,082 — — — — —
Issuance of common stock for payment of legal, earned bonus, and board of director fees — — 1,297 — 1,239 — 1,239
Sale of common stock — — 1,302 1 1,341 — — 1,342
Stock-based compensation expense — — 3,458 — — 3,458
Issuance of common stock upon partial conversions of Senior Convertible Note — — 1,764 — 2,266 — — 2,266
Reacquisition of equity component of Senior Convertible Notes — — — — (1,388) — — (1,388)
Equity classified cash conversion feature of Senior Convertible Notes — — — — 219 — — 219
Cumulative translation adjustment — — — — — (28) (28)
Net loss — — — — — (16,041) (16,041)
Balance - September 30, 2020 0 0 45,442 $ 5 $ 135,239 $ (139,645) $ (410) $ (4,811)

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity
Shares Amount Shares Amount
Balance - June 30, 2019 0 0 38,902 $ 4 $ 125,854 $ (117,294) $ (421) $ 8,143
Exercise of stock options, net of vesting of restricted shares — — 179 — 113 — — 113
Vesting of restricted stock units — — 23 — — — — —
Stock-based compensation expense — — — — 684 — — 684
Cumulative translation adjustment — — �� — — — (33) (33)
Net loss — — — — — (2,426) — (2,426)
Balance - September 30, 2019 0 0 39,104 $ 4 $ 126,651 $ (119,720) $ (454) $ 6,481

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Loss Total Stockholders’ Equity
Shares Amount Shares Amount
Balance - December 31, 2018 6 5,377 27,253 $ 3 $ 118,062 $ (111,820) $ (418) $ 5,827
Exercise of stock options, net of vesting of restricted shares — — 298 165 — — 165
Vesting of restricted stock units — — 23 — — — — —
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) — — 0
Series A convertible preferred stock redeemed for cash (6) (5,377) — — (863) — — (863)
Waiver of sponsor promissory note originally issued in conjunction with Reverse Merger and Recapitalization — — — — 1,993 — — 1,993
Stock-based compensation expense — — — — 1,111 — — 1,111
Cumulative-effect adjustment resulting from the adoption of ASU 2014-09 — — — — — 1,087 — 1,087
Cumulative translation adjustment — — — — — — (36) (36)
Net loss — — — — — (8,987) — (8,987)
Balance - September 30, 2019 0 0 39,104 $ 4 $ 126,651 $ (119,720) $ (454) $ 6,481


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

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

(In thousands, except share and per share information)

1. The Company and Basis of Presentation

Phunware, Inc. 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 ~~media~~ and ~~data~~media in one login through one procurement relationship. The Company’s MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions. Through its integrated mobile advertising platform of publishers and advertisers, the Company provides in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. Founded in 2009, ~~the Company is~~we are a Delaware corporation headquartered in Austin, Texas.

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the Company’s accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The balance sheet at December 31, ~~2019~~2020 was derived from ~~the Company’s~~our audited consolidated financial statements, but these interim condensed consolidated financial statements do not include all the annual disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with ~~the Company’s~~our audited consolidated financial statements and the notes thereto for the year ended December 31, ~~2019,~~2020, which are referenced herein. The accompanying interim condensed consolidated financial statements as of ~~September 30, 2020~~March 31, 2021 and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited financial statements, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state ~~the Company’s~~our financial position as of ~~September 30, 2020~~March 31, 2021 and the results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The results for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~2021 or for any future interim period.

~~Reclassifications of Prior Year Presentation~~

Certain amounts in the financial statements of prior periods have been reclassified to conform to the current period financial statement presentation. This reclassification had no effect on the Company's reported results of operations. A reclassification was made to the condensed consolidated balance sheet as of December 31, 2019 to identify related parties for debt issuances.

~~Concentrations of Credit Risk~~

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable. Although the Company limits its exposure to credit loss by depositing its cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, its deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable, and the Company believes the carrying value approximates fair value.

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Customer A 26 % 8 % 30 % 3 %
Customer B 9 % 1 % 11 % 7 %
Customer C 21 % 0 % 8 % 0 %

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

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

September 30, 2020 December 31, 2019
Customer A 21 % 15 %
Customer C 0 % 10 %
Customer D 20 % 0 %
Customer E 6 % 11 %
Customer F 0 % 23 %

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

The Company’s assessment included the preparation of a detailed cash forecast that included all projected cash inflows and outflows. The Company continues to focus on growing its revenues. Accordingly, operating expenditures may exceed the revenue it expects to receive for the foreseeable future. Additionally, the Company has a history of operating losses and negative operating cash flows and expects these trends to continue into the foreseeable future.

During the quarter ended September 30, 2020, the Company obtained financings through the issuance of new convertible notes and the sale of its common stock through an at-the-market offering (both more fully described below). Future plans may include obtaining new debt financings and credit lines, utilizing existing or expanding existing credit lines, issuing equity securities, including the exercise of warrants, and reducing overhead expenses. Despite a history of successfully implementing similar plans to alleviate the adverse financial conditions, these sources of working capital are not currently sufficient and assured, and consequently do not mitigate the risks and uncertainties disclosed above.

There can be no assurance that the Company will be able to obtain additional funding on satisfactory terms or at all. In addition, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s capital needs and support its growth. If additional funding cannot be obtained on a timely basis and on satisfactory terms, its operations would be materially negatively impacted. The Company has therefore concluded there is substantial doubt about its ability to continue as a going concern through one year from the issuance of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying

condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

2. Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K ~~filed with the SEC on March 30, 2020~~ for the year ended December 31, ~~2019,~~2020, except as set forth below.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes(Topic 740):Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 includes the removal of certain exceptions to the general principles of ASC 740 and simplifies the accounting for income taxes by clarifying and amending existing guidance. We adopted the update January 1, 2021 and it did not have a material impact on our condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). We adopted ASU 2016-02 effective January 1, 2021. The core principle of ASU 2016-02 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. We have elected certain practical expedients permitted under the transition guidance that allows us to use the beginning of the period of adoption (January 1, 2021) as the date of initial recognition. As a result, prior period comparative financial information was not recast under the new

standard and continues to be presented under the prior lease accounting standards. Other practical expedients include our election to not separate non-lease components from lease components and to not reassess lease classification, treatment of initial direct costs or whether an existing or expired contract contains a lease. We have also elected to apply the short-term lease exception for all leases, which we will not recognize right-of-use assets or lease liabilities for leases that, at the commencement date, have a term of twelve (12) months or less.

The adoption of the new lease standard on January 1, 2021, resulted in the recognition of right-of-use assets and operating lease liabilities of $2,101 on the condensed consolidated balance sheet. In connection with the adoption of this standard, short-term deferred rent of $8, which was previously recorded in accrued expenses and long term deferred rent of $180 previously recorded in deferred rent on the condensed consolidated balance sheet was offset against the right-of-use asset. The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 are set forth below:


	January 1, 2021
Right-of-use asset	$	2,101
Straight-line rent accrual	(188)
	$	1,913

Lease liability, current	$	500
Lease liability, non-current	1,601
	$	2,101

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable. Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value.

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


	March 31, 2021		December 31, 2020
Customer A	20	%	0	%
Customer B	19	%	0	%
Customer C	18	%	16	%
Customer D	0	%	55	%
Customer E	0	%	13	%
Customer F	25	%	0	%

During the three months ended March 31, 2021, we purchased an aggregate of $1,098 in digital assets, comprised solely of bitcoin. We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other. We have ownership of and control over our bitcoin and we may use third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the condensed consolidated balance sheet at cost, net of any impairment losses incurred since acquisition.

We determine the fair value of our bitcoin on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is its principal market for bitcoin (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally

decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest market price of one bitcoin quoted on the active exchange since acquiring the bitcoin. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value.

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other expense in our condensed consolidated statements of operations and comprehensive loss. Impairment loss was immaterial and we did not sell any bitcoin during the three months ended March 31, 2021.

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Items subject to the use of estimates include, but are not limited to, the standalone selling price for our products and services, stock-based compensation, useful lives of long-lived assets including intangibles, fair value of intangible assets and the recoverability or impairment of tangible and intangible assets, including goodwill, reserves and certain accrued liabilities, the benefit period of deferred commissions, ~~fair value of debt component of 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, our incremental borrowing rate in determining the present value of remaining lease payments, and provision for (benefit from) income taxes. Actual results could differ from those estimates and such differences could be material to the condensed consolidated financial statements.

~~Convertible Debt with a Cash Conversion Feature~~Loss per Common Share

~~In March 2020,~~Basic loss per common share is computed by dividing net loss applicable to common stockholders by the ~~Company issued a 7% Senior Convertible Note (defined below) with a principal amount~~weighted average number of ~~$3,000 for gross proceeds at closing~~shares of ~~$2,371. In accounting for~~common stock outstanding during the ~~issuance,~~period. Restricted shares subject to repurchase provisions relating to early exercises under our 2009 Equity Incentive Plan were excluded from basic shares outstanding. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the Company separated the note into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability componentextent dilutive. For all periods presented, these shares were excluded from the ~~par value~~calculation of ~~the notes. The difference represents the debt discount, recorded as a reduction~~diluted loss per share of the senior convertible note on our condensed consolidated balance sheet, and is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability component are being amortized using the effective interest rate method, to interest expense over the term of the notes. The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital.

~~Convertible Debt and Related Derivative Financial Instruments~~

In July 2020, the Company issued a Series A Senior Convertible Note (defined below) with an initial principal amount of $4,320. After the payoff of the Senior Convertible Note and deducting transaction costs, aggregate net cash proceeds to the Company was $1,751. In accordance with ASC Topic 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock, the Company evaluates all of its financial instruments, including warrants to purchase common stock ~~issued in conjunction with convertible debt, to determine if such instruments are derivatives or contain features~~because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

The following table sets forth common stock equivalents that ~~qualify~~have been excluded from the computation of dilutive weighted average shares outstanding as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statement of operations. The Company uses a Black-Scholes option-pricing model to value the warrants at inception and subsequent valuation dates.their inclusion would have been anti-dilutive:

~~Debt Issuance Costs~~

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


	March 31,
	2021	2020
Convertible notes	4,920,000	21,740
Warrants	5,996,112	3,836,112
Options	1,087,033	1,381,173
Restricted stock units	5,545,454	3,124,460
Restricted shares	574	4,689
Total	17,549,173	8,368,174

Fair Value of Financial Instruments

~~The Company follows~~We follow the guidance in ASC 820, Fair Value Measurement, to account for financial assets and liabilities measured on a recurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own

assumptions (unobservable inputs). The guidance requires fair value measurements be classified and disclosed in one of the following three categories:


•			Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
•			Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
•			Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment. ~~The~~Our financial instruments measured at fair value as of March 31, 2021 are set forth below:


	Level 1		Level 2		Level 3		Total
Assets:
Digital currencies	$	1,098	$	0	$	0	$	1,098
Total	$	1,098	$	0	$	0	$	1,098

Liabilities:
Warrant liability	$	0	$	2,499	$	0	$	2,499
Total	$	0	$	2,499	$	0	$	2,499

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


	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	0	$	1,614	$	0	$	1,614
Total	$	0	$	1,614	$	0	$	1,614

The carrying value of accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses are considered to be representative of their respective fair values because of the Company’s warrant issued with the 2020 Convertible Notes at September 30, 2020 was $1,242 and is recorded as Warrant Liability on the accompanying condensed consolidated balance sheets is considered a Level 3 fair value measurement as there are significant unobservable inputs used in the underlying valuations. The fair value measurementsshort-term nature of ~~the warrant are sensitive to changes in the unobservable inputs. Changes in~~ those ~~inputs might result in a higher or lower fair value measurement.~~

~~Loss per Common Share~~

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Restricted shares subject to repurchase provisions relating to early exercises under the Company's 2009 Equity Incentive Plan were excluded from basic shares outstanding. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to the Company's outstanding warrants and stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

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

September 30,
2020 2019
Convertible notes 7,221,740 21,740
Warrants 5,996,112 3,836,112
Options 1,211,828 1,720,339
Restricted stock units 2,223,773 2,103,363
Restricted shares 1,198 13,091
Total 16,654,651 7,694,645

~~Recently Adopted Accounting Pronouncements~~

~~In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ("ASU 2017-04"). ASU 2017-04 simplifies how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step; comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements or disclosures.instruments.

Recent Accounting Pronouncements Not Yet Adopted

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ ("ASU 2016-02"). The core principle of ASU 2016-02 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in

the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Under current U.S. GAAP, the Company recognizes rent expense on a straight-line basis for all operating leases, taking into account fixed accelerations, as well as reasonably assured renewal periods. In November 2019, the FASB issued ASU No. 2019-10 ("ASU 2019-10"). ASU 2019-10 delayed the effective date of ASU 2016-02 for certain types of businesses, including private companies. Under the Jumpstart Our Business Startups ("JOBS") Act, the Company has previously elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an Emerging Growth Company ("EGC"), can adopt the new or revised standard at the time private companies adopt the new or revised standard. The issuance of ASU 2020-05 further delayed the implementation of this guidance of the Company for one year. Although ASU 2020-05 would defer implementation for the Company by an additional year, the Company believes this guidance would still be effective for the Company for fiscal years beginning after December 15, 2020, as it would lose its status as an EGC at the latest on December 31, 2021. Although earlier application is permitted, the Company plans to implement this guidance beginning the first quarter of its fiscal year 2021. The Company currently does not expect the ASU 2016-02 to materially impact our results of operations; although, based upon our current operating leases outstanding, we believe this guidance may have a material impact on our consolidated balance sheet. We do not plan on recasting prior periods.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 introduces a model based on expected losses ~~to estimate credit losses~~ for most financial assets and certain other instruments. In addition, for available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a ~~Smaller Reporting Company ("SRC") as defined by the SEC,~~smaller reporting company, the standard is currently effective for ~~the Company~~us for annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2019. We currently intend to adopt ~~ASU No. 2016-13~~this new standard effective January 1, 2023. ~~Entities will apply the standard’s provisions by recording a cumulative-effect adjustment to retained earnings. The Company~~We currently ~~does~~do not expect the adoption of ASU 2016-13 to have a material impact on our condensed consolidated financial statements and disclosures.

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Income Taxes(Topic 740):Simplifying the Accounting for Income Taxes~~ (“ASU 2019-12”), which simplifies the accounting for income taxes. Should the Company retain its EGC status through the fifth anniversary of the date of its initial public offering, this guidance will be effective for us in our financial statements and consolidated notes thereto for the fiscal year ending December 31, 2021 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for ~~SRCs~~smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. ~~The Company is~~We are currently evaluating the impact of this guidance on ~~its~~our condensed consolidated financial ~~statements.~~statements and disclosures.

Disaggregation of Revenue

The ~~Company~~following table sets forth our net revenues by category:


	Three Months Ended March 31,
	2021		2020
Net Revenues
Platform subscriptions and services	$	1,521	$	2,391
Application transaction	125		249
Net revenues	$	1,646	$	2,640

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity. We derived 99% and ~~96%~~90% of ~~its~~our net revenues from within the United States for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively. The Company derived over 98% of its net revenues from within the United States for each of the three and nine months ended September 30, 2019. During the three and nine months ended September 30, 2020, the Company derived 1% and 4%, respectively, of its net revenues from outside the United States. During the three and nine months ended September 30, 2019, the Company derived less than 2% of its net revenues from outside the United States.

The following table sets forth ~~the Company's~~our concentration of revenue sources as a percentage of total net ~~revenues:~~revenues.

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net Revenues
Platform subscriptions and services $ 2,860 $ 5,152 $ 7,274 $ 15,065
Application transaction 270 485 709 1,397
Net revenues $ 3,130 $ 5,637 $ 7,983 $ 16,462


	Three Months Ended March 31,
	2021		2020
Customer A	13	%	0	%
Customer B	15	%	0	%
Customer F	1	%	31	%
Customer G	17	%	11	%
Customer H	10	%	9	%

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

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers. ~~The Company recognizes~~We recognize deferred revenue as revenue only when revenue recognition criteria are met. During the ~~nine~~three months ended ~~September 30, 2020, the Company~~March 31, 2021, we recognized revenue of ~~$3,971~~$1,279 that was included in its deferred revenue balance as of December 31, ~~2019.~~2020.

Remaining Performance Obligations

Remaining performance obligations were ~~$8,797~~$7,768 as of ~~September 30, 2020,~~March 31, 2021, of which ~~the Company expects~~we expect to recognize ~~55%~~42% as revenue over the next 12 months and the remainder thereafter.

~~As a result of the issuance of the Notes (defined and discussed further below), the Company had $91 and $86 in~~ restricted cash as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020:


Cash and restricted cash	March 31, 2021		December 31, 2020
Cash	$	23,469	$	3,940
Restricted cash	91		91
Total cash and restricted cash	$	23,560	$	4,031

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

Cash and restricted cash September 30, 2020 December 31, 2019
Cash $ 1,143 $ 276
Restricted cash 91 86
Total cash and restricted cash $ 1,234 $ 362

~~5. Factoring Agreement~~

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

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

The amount of factored receivables outstanding was $439 and $1,077 as of September 30, 2020 and December 31, 2019, respectively. There was $2,561 and $1,923 available for future advances as of September 30, 2020 and December 31, 2019, respectively.

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

2020 Convertible Notes

On July 15, 2020, ~~the Company~~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. ~~As noted above, the Company~~We repaid in full the outstanding principal balance, accrued and unpaid interest and make-whole amount on ~~the Senior Convertible Note~~a separate senior convertible note issued on March 20, 2020 to the same investor. After the payoff of the ~~Senior Convertible Note~~senior convertible note and deducting transaction costs, ~~aggregate~~ net cash proceeds to the Company was $1,751.

On the same date, ~~the Company~~we issued a Series B Senior Secured Convertible Note (a “Series B Note,” and together with the Series A Note, the “2020 Convertible Notes”) to the same investor with an initial principal amount of $17,280 (reflecting an original issue discount of $1,280). The investor paid for the Series B Note by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $16,000.

~~The Company will receive~~ We received 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, had the right to voluntarily prepay anthe Investor Note, in whole or in part. ~~In addition,~~Until the Investor Note ~~is subject~~was repaid, the principal (and related original issue discount) of the Series B Note was considered to ~~mandatory prepayment, in whole or in part, upon the occurrence of certain events.~~be "restricted." The ~~equity~~Series B Note and ~~other conditions include minimum price and volume thresholds, a minimum market capitalization at least $40 million. Mandatory prepayments of principal outstanding under~~ the Investor Note ~~that, together with~~were subject to the ~~unrestricted principal may not exceed~~terms of a Master Netting Agreement between us and the ~~lesser of (i) $5,000 and (ii) 10% of the 30 trading day market capitalization of the Company.~~investor. Upon

~~On September 15, 2020, the Company exercised its right under the Investor Note to require a mandatory prepayment~~repayment of the Investor Note, an equal amount of ~~$1,000, of which the Company received in cash. As a result, $1,000 in principal and $80 of original issue discount became unrestricted and owed under~~ the Series B Note ~~after giving effect~~became "unrestricted" and recorded as debt in our condensed consolidated balance sheets.

As a result of multiple offerings of sales of shares of our common stock as more fully described Note 9 below, the investor elected to ~~netting~~require us to use forty percent (40%) of the ~~remainder~~net proceeds from those offerings to satisfy obligations under the 2020 Convertible Notes. During January and February 2021, we paid approximately $11,507, of which $5,717 was recorded as a loss on extinguishment of debt.

In March 2021, the ~~balance~~investor voluntarily prepaid an aggregate of $10,250 pursuant to the terms of the Investor ~~Note~~Note. As a result, we received cash proceeds of $10,250 and ~~Series B Note.~~

The Series A Note and outstanding unrestricted principal balance on the Series B Note each bear interest at a rate of 7% per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021. The restricted principal of the Series B Note, ~~bears interest at a rate~~along with $820 of ~~3% per annum. The 2020 Convertible Notes mature on December 31, 2021.~~

~~Monthly Payments~~

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 ~~interest~~exercising our right to redeem and fully satisfy all obligations under the Series B Note on the 2020 Convertible Notes and make-whole (the "Installment Amount"), which must be satisfied in cash at a redemption price equal to 107% of the Installment Amount. For the three and nine months ended September 30, 2020, the CompanyApril 5, 2021. See Note 13 below.

We recorded ~~$216 in~~ a loss on extinguishment of debt inof $51 for the ~~condensed consolidated statements of operations and comprehensive loss~~three months ended March 31, 2021 related to monthly installment payments ~~for the 2020 Convertible Notes.~~

In addition to the 2020 Convertible Notes, we issued a warrant exercisable for 3 years for the purchase of an aggregate of up to 2,160,000 shares of the Company's common stock, ~~at an~~with a current exercise price of ~~$4.00~~$2.25 per share, ~~to the same investor.~~which decreased from $4.00 in February 2021 as a result of our underwritten public offering. The number of shares and exercise price are each subject to adjustment provided under the warrant. If, at the time of exercise of the warrant, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares, then the warrant may also be exercised, in whole or in part, by means of a “cashless exercise.” The warrant may not be exercised if, after giving effect to the exercise, the investor would beneficially own amounts in excess of those permissible under the terms of the warrant.

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

~~Registration Rights Agreement~~

Participation Rights

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

Paycheck Protection Program ("PPP") Loan

On April 10, 2020, ~~the Company~~we received loan proceeds in the amount of $2,850 from JPMorgan Chase, N.A. pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted on March 27, 2020. The loan, which was in the form of a note dated April 9, 2020, matures on April 9, 2022 and 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

In March 2020, the Company issued a Senior Convertible Note to an institutional investor with an initial principal amount of $3,000 (the “Senior Convertible Note”) for cash proceeds of $2,760 (reflecting an original issue discount of $240) in a private placement. After deducting the placement agent fee and other estimated expenses, net cash proceeds at the closing were approximately $2,371. The Senior Convertible Note bears interest at a rate of 7% per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021.

~~Monthly Payments and Conversion~~

Starting on April 30, 2020 and on the last trading day of the month and on the maturity date, the Company was required to make monthly payments. On each payment date, the Company was required to settle a principal repayment of approximately $143 plus interest thereon (the “Installment Amount”) which was to be satisfied in shares of common stock of the Company at 100% of the Installment Amount, or at the election of the Company, in whole or in part, in cash, at 105% of the Installment Amount. Installment payments made in common stock were subject to customary equity conditions (including minimum floor price and volume thresholds), and were calculated on a conversion price equal to the lower of (x) the conversion price then in effect and (y) the greater of the Floor Price (as defined in the Senior Convertible Note) and 85% of the lowest volume weighted average price in the 10 days prior to the payment date.

In addition to the monthly payments described above, during the second quarter of 2020, the noteholder elected an acceleration of payments of monthly principal, interest and make-whole payments pursuant to certain provisions of the Senior Convertible Note. These accelerated payments were made in the form of shares of common stock of the Company at the rate then in effect per the Senior Convertible Note. As a result, the Company issued an aggregate of 1,763,675 shares for principal, interest and make-whole payments to the noteholder. In accounting for the accelerated conversions, the Company followed the guidance as prescribed in ASC 470 in accounting for derecognition (or conversion) of convertible debt with a cash conversion feature. The Company determined the fair value of the debt immediately prior to its derecognition, with the difference between the consideration transferred to the noteholder and the fair value of the debt representing the reacquisition of the embedded conversion option. A loss on extinguishment of $81 was recorded based on the difference between the calculated fair value of the debt immediately prior to its derecognition and the carrying amount of the debt component, including any unamortized debt discount or issuance costs.

In conjunction with the issuance of the 2020 Convertible Notes, the Company redeemed the Senior Convertible Note in July 2020 at a price equal to 110% of the outstanding principal accrued and unpaid interest and make-whole interest. The cash payment to the noteholder to satisfy the Senior Convertible Note was in the amount $2,084. The redemption of the Senior Convertible Note resulted in a loss on extinguishment of $734.

~~Related-Party Bridge Loans~~

During the first quarter of 2020, various related parties loaned the Company $560. The Related-Party Bridge Loans ("RPBLs") bear an interest of 10% per annum and will mature on November 14, 2024. Payments on or payoff of the RPBLs may be made early with no penalty. The RPBLs and amounts thereof were made by the following related parties: (i) $204 by Cane Capital, LLC, an entity owned in part by our Chief Executive Officer; (ii) $151 by Curo Capital Appreciation Fund, LLC, an entity in which the Company's Chief Executive Officer and Chief Technology Officer serve as co-presidents, (iii) $155 by various individuals associated by familiar relationship with our Chief Executive Officer; and (iv) $50 by Luan Dang, the Company's Chief Technology Officer. Transaction costs related to the RPBLs were not significant.

InDuring April 2019, ~~the Company’s~~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 the Company’s sole discretion, cryptocurrency, such as Bitcoin or Ethereum. The Convertible Notes will be sold in reliance on an exemption from registration. The Company may not issue Convertible Notes under the Purchase Agreement in excess of $20,000, in the aggregate, unless otherwise agreed

~~by the holders of a majority in interest of the principal outstanding under the Convertible Notes. Transaction costs related to the issuance of the Convertible Note were immaterial.~~

. 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~~share and mature on June 3, 2024. Additional information about our Convertible Notes is included in Note ~~will convert voluntarily upon a holder’s election, or automatically upon the closing sale price~~8, "Debt" 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~~notes to the consolidated financial statements included 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.our Annual Report on Form 10-K.

In October 2019, ~~the Company’s~~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 the Company’s sole discretion, cryptocurrency, such as Bitcoin or Ethereum. The Notes will be sold in reliance on an exemption from registration. The Company may prepay the Notes at any time without penalty. The Company may not issue Notes under the Purchase Agreement in excess of $20,000, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Notes. Transaction costs related to the issuance of the Notes were immaterial.

. The Notes bear ordinary interest at a rate of 10% per annum. Interest under the Notes is payable monthly beginning on November 30, 2019. During the term of the Notes, ~~the Company will~~we are required to maintain a restricted bank account with a minimum balance of one year of interest payments on the aggregate principal balance of all Notes, which will be available for use exclusively to satisfy any payments owed by the Company under the Notes. The principal and unpaid accrued interest on the Notes will be due and payable on demand by the majority Note holders on or after the date that is 60 months following November 15, 2019. ~~If an event of default occurs under the~~Additional information about our Notes ~~the majority~~is included in Note holders may cause all principal and unpaid interest under the Notes to become immediately due and payable. In such event, the Notes will thereafter accrue interest at a rate of 12% per annum. Upon agreement between the Company and any senior creditor, the Notes will be subject to subordination in the right of payment to all current and future indebtedness or obligations8, "Debt" of the ~~Company for borrowed money~~notes to ~~banks, commercial finance lenders, and other institutions regularly engaged~~the consolidated financial statements included in ~~the business of lending money, or for factoring arrangements to parties providing such factoring.~~our Annual Report on Form 10-K.

During 2019, ~~the Company~~we issued a Note in the principal amount of $195, in exchange for cash consideration, to Cane Capital, LLC, an entity owned in part by Alan S. Knitowski, ~~the Company’s~~our Chief Executive Officer and a member of ~~its~~our board of directors.

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

~~Table of Contents~~


	Three Months Ended March 31,
	2021		2020
2020 Convertible Notes	$	452	$	0
Accretion of debt discount - issuance costs	620		13
Accretion of debt discount - warrants	1,029		0
All other debt and financing obligations	118		88
Total	$	2,219	$	101

~~7. Commitments and Contingencies~~

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 ~~Company has operating office space leases~~initial terms of our real property lease agreements are generally five years and typically allows for renewals in five-year increments. We may, at times, negotiate a shorter lease renewal term. We generally do not account for any renewals at the lease adoption date. We maintain 4 corporate offices located in Austin, Texas; Irvine, California; San Diego, California; and Miami, Florida. ~~Rent expense under operating~~The earliest of our lease agreements currently ends in March 2022 with the latest terminating in June 2025. Some of our leases ~~totaled $207~~include both lease and ~~$631~~non-lease components, which we have elected not to account for ~~the three~~separately. Lease components generally include rent, taxes and ~~nine months ended September 30, 2020, respectively. Rent expense under operating leases totaled $188 and $519 for the three and nine months ended September 30, 2019, respectively.~~

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

In 2017, the Company filed a breach of contract complaint against Uber Technologies, Inc. ("Uber") seeking approximately $3,000 (plus interest) for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017. The case, captioned Phunware, Inc. v. Uber Technologies, Inc., Case No. CGC-17-561546 was filed in the Superior Court of the State of California County of San Francisco. Uberinsurance, while non-lease components generally denied the allegations in the Company's complaint and also filed a cross-complaint against Phunware and Fetch Media, Ltd., the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017, asserting numerous fraud and contract-based claims. In 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants, Alan S. Knitowski, who serves as a director and the Company's President and Chief Executive Officer and former Phunware employees D. Stasiuk, M. Borotsik, and A. Cook, (collectively, the "Individual Defendants") alleging civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware. Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $17,000 from Uber, and claimed treble damages, general and punitive damages, and attorneys’ fees and costs. On October 9, 2020, the Company entered into a Settlement Agreement and Mutual General Release (the "Settlement Agreement") with Uber and certaininclude common area or other parties related to the Company's complaint against Uber, Uber's cross-complaint against the Company and Uber's amended cross-complaint against the Company and Individual Defendants. As provided in the Settlement Agreement, both parties have agreed to fully and finally settle, compromise, and resolve all disputes, differences and disagreements that have existed, now exist, or may exist between them that fall within the subject matter lawsuit. Furthermore, each party denies engaging in any wrongdoing whatsoever and specifically denies each and every allegation of wrongdoing alleged in the lawsuit. The Settlement Agreement provides that Phunware and its insurance carriers will pay a total sum of $6,000 to Uber, of which the Company's insurance carrier will pay $1,500 to settle Uber's claims against the Individual Defendants while the Company will pay a total of $4,500 to Uber in a series of installments beginning no later than December 31, 2020, and ending no later than September 30, 2021. The Settlement Agreement further provides that the Company and the Individual Defendants fully release claims against Uber relating to the lawsuit and upon receipt of the payments, Uber will fully release claims against the Company and the Individual Defendants relating to the lawsuit. The court will retain jurisdiction over the case until the terms of the Settlement Agreement have been fully satisfied. The court has set a dismissal review hearing for November 16, 2021. If the terms of the Settlement Agreement are fulfilled before that date, the parties will file requests to dismiss the action and the hearing will be taken off calendar. On November 5, 2020, Uber filed a request for dismissal with prejudice of claims against the Individual Defendants; Uber’s claims against Phunware remain until the terms of the Settlement Agreement have been fully satisfied. The Company recorded a loss of $4,500 for its portion of the settlement in Legal Settlement in its condensed consolidated statements of operations for the three and nine months ending September 30, 2020.maintenance.

The weighted-average remaining lease term for operating leases as of March 31, 2021 was 3.79 years. As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying a rate to each lease. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of January 1, 2021 to initially measure our lease liability. The weighted average incremental borrowing rate used to measure our lease liability as of March 31, 2021 was 19.13%.

We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in general and administrative expense in our condensed consolidated statement of operations and comprehensive loss. Lease expense for the three months ended March 31, 2021 was $212.

Future minimum lease obligations are set forth below:


Future minimum lease obligations years ending December 31,	Lease Obligations
2021 (Remainder)	$	636
2022	725
2023	622
2024	609
2025	208
Thereafter	0
	$	2,800
Less: Portion representing interest	(823)
	$	1,977

On March 16, 2021, we entered into a sublease agreement pursuant to which we will sublease our existing office space in Irvine, California. The term of the sublease commences on April 1, 2021 and terminates on March 31, 2025. The subtenant will pay us initial base rent of approximately $17 per month, which is subject to certain discounts throughout the sublease, as well as rent escalations. We recognized an impairment of our right-to-use asset related to the sublease of $77, which is recorded in other expense in our condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2021.

7. Commitments and Contingencies

There have been no changes to the disclosure related to our settlements with Uber Technologies, Inc. and Ellenoff Grossman & Schole LLP, as well as, the dismissal of claims brought by Sha-Poppin Gourmet Popcorn, LLC since the filing of our Annual Report on Form 10-K. See Note 9, "Commitments and Contingencies" in our Annual Report on Form 10-K filed with the SEC on March 31, 2021 for further information on the these matters.

On December 17, 2019, certain stockholders ~~(the "Plaintiffs")~~ filed a lawsuit against ~~the Company.~~Phunware. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al.; Cause No. D-1-GN-19-008846 was filed in the 126th Judicial District Court of Travis County, Texas. The ~~Plaintiffs~~plaintiffs invested in various early rounds of financing while the Company was private and claim ~~the Company~~Phunware should not have subjected their shares to a 180-day "lock up" period. According to the ~~Plaintiffs,~~plaintiffs, the price of ~~Phunware~~our stock dropped significantly during the lock up period. The ~~Plaintiffs~~plaintiffs seek unspecified damages in excess of $1,000. ~~The Company maintains~~We maintain the ~~Plaintiffs'~~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~~court has not yet set a trial date or pretrial deadlines. The case is in early stage of discovery.

On March 9, 2020, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against the Company. The complaint, captioned Ellenoff Grossman & Schole LLP versus Stellar Acquisition III, Corp a/k/a Stellar Acquisition III, Inc. n/k/a Phunware, Inc., was filed in the Supreme Court of the State of New York, New York County (Case No. 152585/2020). Pursuant to the complaint, EGS sought monetary damages in the amount of $690 for alleged unpaid invoices related to legal services rendered for Stellar in conjunction with the reverse merger with the Company, plus legal and court costs. On September 29, 2020, the Company consummated a Settlement Agreement and General Release (the "Settlement Agreement") with EGS. The Settlement Agreement provides that Phunware pay a total sum of $600 to EGS in a series of installments beginning no later than October 15, 2020, and ending no later than October 15, 2023. There is no penalty for prepayments. Pursuant to the Settlement Agreement, on September 30, 2020, EGS filed a Stipulation of Voluntary Discontinuance with Prejudice with the court. In conjunction with the execution of the Settlement Agreement, the Company also signed an Affidavit of Confession of Judgment ("Confession of Judgment"), which provides that should the Company default in any payment obligations under the Settlement Agreement, EGS shall be entitled to enter the Confession of Judgment with the Court against the Company for $690 less any payments made under the Settlement Agreement. The Company reclassified $690 from accounts payable to accrued expenses in the condensed consolidated balance sheet as of September 30, 2020 related to the settlement. In accordance with authoritative guidance, the Company will defer any settlement gain, if any, until it has fulfilled its payment obligations under the settlement.

On April 24, 2020, Sha-Poppin Gourmet Popcorn, LLC, individually and on behalf of a class of similarly situated parties (the “Popcorn Company”), filed a lawsuit against certain defendants, including the Company. The case captioned, Sha-Poppin Gourmet Popcorn, LLC v. JPMorgan Chase Bank, N.A., RCSH Operations, LLC, RCSH Operations, Inc (together d/b/a Ruth’s Chris Steakhouse), and Phunware, Inc., was filed in the Northern District of Illinois, Eastern Division. The Popcorn Company alleges that the Company was unjustly enriched by JPMorgan Chase for the Company's loan made pursuant to the PPP under the CARES Act. (See Note 6 for discussion related to the Company's CARES Act loan.) The Company filed a motion to dismiss the single claim against it and disputes the court's jurisdiction and the basis of the claim. The Company intends to defend the matter vigorously, but there can be no guarantees that a favorable resolution will be successful. Given the preliminary stage of the case, ~~the Company is~~we are unable to predict the outcome of this dispute, or estimate the loss or range of loss, if any, associated with this matter.

On March 30, 2021, Phunware filed an action against its former counsel Wilson Sonsini Goodrich & Rosati, PC (“WSGR”). The matter is Phunware, Inc., v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No. 21CV381517, filed in the Superior Court of the State of California for the County of Santa Clara. The complaint alleges a single cause of action for negligence related to services provided by WSGR to Phunware. We’re seeking compensatory and

consequential damages, attorney’s fees and costs, interest and other relief the Court deems just and proper. The case is in the early stages of litigation; the outcome is not certain.

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

8. PhunCoin & PhunToken

InDuring 2018 and 2019, PhunCoin, Inc., ~~the Company’s~~our wholly-owned subsidiary, launched ~~an offering pursuant to Rule 506(c) of Regulation D (the "Reg D Offering") as promulgated under the Securities Act~~offerings of rights to acquire a token denominated as "PhunCoin" (the "Rights"~~). In addition, in 2019, we commenced an offering of Rights pursuant to Regulation CF (the "Reg CF Offering"~~). PhunCoin, Inc. accepts payment in the form of cash and digital currencies for purchases of the Rights. The amount of PhunCoin to be issued to the purchaser is equal to the dollar amount paid by the purchaser divided by the price of PhunCoin at the time of issuance of PhunCoin during the launch of the Token Ecosystem (as defined below) before taking into consideration an applicable discount rate, which is based on the time of the ~~purchase (early purchasers will receive a larger discount rate).~~purchase.

Through March 31, 2021, we received aggregate net cash proceeds from our Rights offerings of $1,202. Proceeds from the Rights are recorded as PhunCoin deposits in the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020.

PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch of ~~the Company’s~~PhunCoin’s, Inc.’s blockchain technology enabled rewards marketplace and data exchange ("(“Token ~~Ecosystem"~~Ecosystem” or "Token Generation Event"), (ii) one (1) year after the issuance of the Rights to the purchaser or (iii) the date ~~the Company~~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; however,~~refundable if the ~~Company believes it has a contractual obligation~~Token Generation Event is not consummated. We currently anticipate that PhunCoin will be issued to ~~use good faith efforts to issue a token to Rights~~the holders ~~under the token~~

~~rights agreement. Holders~~ of the Rights may be issued PhunCoin even if the Token Ecosystem is not yet operational. PhunCoin will have no usefulness until the Token Ecosystem is operational because PhunCoin is expected to only be useable on the Token Ecosystem. The ongoing coronavirus of 2019 pandemic has resulted in ~~Phunware reducing human capital resources from the development of the Token Ecosystem to other initiatives of the organization. There~~2021; however, there can be no assurance as to when or if ~~the Company will allocate resources to the development of the Token Ecosystem in the future or if the Company~~we will be able to successfully launch the Token Ecosystem.

~~As of September 30, 2020, the Company has received aggregate cash proceeds from the Reg D Offering~~Additional information about PhunCoin is included in Note 10, "PhunCoin and ~~Reg CF Offering of $1,207, pursuant to which the holders~~PhunToken" of the ~~Rights will receive an aggregate of approximately 577.9 million PhunCoin if~~notes to the ~~launch of the Token Ecosystem occurs. The Reg CF Offering closed May 1, 2019. While the Reg D Offering is ongoing, the Company does not anticipate any additional proceeds to be raised.~~consolidated financial statements included in our Annual Report on Form 10-K.

PhunToken ("~~Phun"~~PHTK")

During the second quarter of 2019, Phunware announced the launch of a separate token, ~~Phun,~~PhunToken, which is meant to act as a medium of exchange within the Token Ecosystem. ~~Phun~~PhunToken will be issued through a separate, wholly-owned subsidiary, Phun Token International, available initially only to persons outside of the United States and Canada. Consumers may receive ~~Phun~~PhunToken for actively engaging in marketing campaigns; developers and publishers may receive ~~Phun~~PhunToken for utilizing Phunware’s loyalty software development kit in order to better engage, manage and monetize their consumers; and brands will gain access to more relevant, verifiable data by accessing Phunware’s data exchange and using Phun for their own loyalty programs. As of ~~September 30, 2020, the Company has~~March 31, 2021, we had not issued or sold any ~~Phun.~~PhunToken.

9. Stockholders’ Equity

Total common stock authorized to be issued as of ~~September 30, 2020~~March 31, 2021 was 1,000,000,000 shares, with a par value of $0.0001 per share. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were ~~45,452,422~~71,211,399 and ~~39,817,917~~56,380,111 shares outstanding, respectively, inclusive of ~~1,198 and 6,219~~574 restricted shares subject to repurchase for unvested shares related to early option exercises under the Company’s stock equity ~~plans, respectively.~~plans.


Delaware						~~26-4413774~~30-1205798
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


		PAGE
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	12
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2
	~~Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019~~	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2520
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3830
Item 4.	Controls and Procedures	3830

PART II	OTHER INFORMATION	3932
Item 1.	Legal Proceedings	3932
Item 1A.	Risk Factors	3932
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4132
Item 3.	Defaults Upon Senior Securities	4132
Item 4.	Mine Safety Disclosures	4132
Item 5.	Other Information	4132
Item 6.	Exhibits	4132

	Signatures	4435


	September 30, 2020		December 31, 2019
	(Unaudited)
Assets
Current assets:
Cash	$	1,143	$	276
Accounts receivable, net of allowance for doubtful accounts of $123 and $3,179 at September 30, 2020 and December 31, 2019, respectively	1,153		1,671
Prepaid expenses and other current assets	462		368
Total current assets	2,758		2,315
Property and equipment, net	14		24
Goodwill	25,828		25,857
Intangible assets, net	143		253
Deferred tax asset	241		241
Restricted cash	91		86
Other assets	276		276
Total assets	$	29,351	$	29,052
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	9,067	$	10,159
Accrued expenses	5,555		4,035
Accrued legal settlement	4,500		0
Deferred revenue	3,215		3,360
PhunCoin deposits	1,202		1,202
Factored receivables payable	439		1,077
Current maturities of long-term debt, net	1,693		0
Warrant liability	1,242		0
Total current liabilities	26,913		19,833
Long-term debt	4,272		910
Long-term debt - related party	555		195
Deferred tax liability	241		241
Deferred revenue	2,003		3,764
Deferred rent	178		83
Total liabilities	34,162		25,026
Commitments and contingencies

Stockholders’ equity (deficit)
Common stock, $0.0001 par value	5		4
Additional paid-in capital	135,239		128,008
Accumulated other comprehensive loss	(410)		(382)
Accumulated deficit	(139,645)		(123,604)
Total stockholders’ equity (deficit)	(4,811)		4,026
Total liabilities and stockholders’ equity (deficit)	$	29,351	$	29,052


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net revenues	$	3,130	$	5,637	$	7,983	$	16,462
Cost of revenues	898		2,418		2,757		7,757
Gross profit	2,232		3,219		5,226		8,705

Operating expenses:
Sales and marketing	383		705		1,265		2,094
General and administrative	4,276		3,754		11,981		11,699
Research and development	572		1,052		1,811		3,438
Legal settlement	4,500		0		4,500		0
Total operating expenses	9,731		5,511		19,557		17,231
Operating loss	(7,499)		(2,292)		(14,331)		(8,526)

Other expense:
Interest expense	(1,362)		(145)		(1,923)		(484)
Loss on extinguishment of debt	(950)		0		(1,031)		0
Gain on change in fair value of warrants	1,244		0		1,244		0
Other (expense) income	0		11		0		28
Total other expense	(1,068)		(134)		(1,710)		(456)
Loss before taxes	(8,567)		(2,426)		(16,041)		(8,982)
Income tax expense	0		0		0		(5)
Net loss	(8,567)		(2,426)		(16,041)		(8,987)
Other comprehensive loss:
Cumulative translation adjustment	47		(33)		(28)		(36)
Comprehensive loss	$	(8,520)	$	(2,459)	$	(16,069)	$	(9,023)

Net loss per common share, basic and diluted	$	(0.19)	$	(0.06)	$	(0.38)	$	(0.25)

Weighted-average common shares used to compute net loss per share, basic and diluted	44,304		39,027		42,089		36,034


	March 31, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash	$	23,469	$	3,940
Accounts receivable, net of allowance for doubtful accounts of $122 and $356 at March 31, 2021 and December 31, 2020, respectively	937		664
Digital currencies	1,098		0
Prepaid expenses and other current assets	794		304
Total current assets	26,298		4,908
Property and equipment, net	12		13
Goodwill	25,911		25,900
Intangible assets, net	79		111
Deferred tax asset	537		537
Restricted cash	91		91
Right-of-use asset	1,723		0
Other assets	276		276
Total assets	$	54,927	$	31,836
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	7,781	$	8,462
Accrued expenses	3,190		5,353
Accrued legal settlement	3,000		3,000
Lease liability	530		0
Deferred revenue	2,180		2,397
PhunCoin deposits	1,202		1,202

Current maturities of long-term debt, net	10,012		4,435
Warrant liability	2,499		1,614
Total current liabilities	30,394		26,463
Long-term debt	3,741		3,762
Long-term debt - related party	195		195
Deferred tax liability	537		537
Deferred revenue	2,054		2,678
Lease liability	1,447		0
Deferred rent	0		180
Total liabilities	38,368		33,815
Commitments and contingencies	0		0

Stockholders’ equity (deficit)
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at March 31, 2021 and December 31, 2020; 71,211,399 and 56,380,111 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	7		6
Additional paid-in capital	175,046		144,156
Accumulated other comprehensive loss	(328)		(338)
Accumulated deficit	(158,166)		(145,803)
Total stockholders’ equity (deficit)	16,559		(1,979)
Total liabilities and stockholders’ equity (deficit)	$	54,927	$	31,836


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒


	Preferred Stock		Common Stock			Additional Paid-in Capital		Accumulated Deficit		Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount	Shares	Amount
Balance - June 30, 2020	0	0	43,555	$	4	$	132,045	$	(131,078)	$	(457)	$	514
Exercise of stock options, net of vesting of restricted shares	—	—	33	—		9		—		—		9
Vesting of restricted stock units	—	—	388	—		—		—		—		—
Issuance of common stock for payment of legal, earned bonus, and board of director fees	—	—	164	—		225		—		—		225
Sale of common stock	—	—	1,302	1		1,341		—		—		1,342
Stock-based compensation expense	—	—	—	—		1,708		—		—		1,708
Reacquisition of equity component of Senior Convertible Note	—	—	—	—		(89)		—		—		(89)
Cumulative translation adjustment	—	—	—	—		—		—		47		47
Net loss	—	—	—	—		—		(8,567)		—		(8,567)
Balance - September 30, 2020	0	0	45,442	$	5	$	135,239	$	(139,645)	$	(410)	$	(4,811)


Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	681	$	510	Interest paid	$	567	$	98
Income taxes paid	Income taxes paid	$	0	$	0	Income taxes paid	$	0	$	0
Supplemental disclosures of non-cash financing activities:	Supplemental disclosures of non-cash financing activities:					Supplemental disclosures of non-cash financing activities:
Issuance of common stock for payment of legal, earned bonus and board of director fees		$	1,239	$	0
Issuance of common stock upon partial conversions of Senior Convertible Note		$	2,266	$	0
Reacquisition of equity component of Senior Convertible Note		$	(1,388)	$	0
Issuance of common stock for payment of legal and board of director fees						Issuance of common stock for payment of legal and board of director fees	$	66	$	492

Equity classified cash conversion feature of Senior Convertible Note	Equity classified cash conversion feature of Senior Convertible Note	$	219	$	0	Equity classified cash conversion feature of Senior Convertible Note	$	0	$	219
Waiver of sponsor promissory note		$	0	$	1,993


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Customer A	26	%	8	%	30	%	3	%
Customer B	9	%	1	%	11	%	7	%
Customer C	21	%	0	%	8	%	0	%


	September 30, 2020		December 31, 2019
Customer A	21	%	15	%
Customer C	0	%	10	%
Customer D	20	%	0	%
Customer E	6	%	11	%
Customer F	0	%	23	%


	September 30,
	2020	2019
Convertible notes	7,221,740	21,740
Warrants	5,996,112	3,836,112
Options	1,211,828	1,720,339
Restricted stock units	2,223,773	2,103,363
Restricted shares	1,198	13,091
Total	16,654,651	7,694,645


	September 30, 2020			July 15, 2020
Strike price per share	$	4.00		$	4.00
Closing price per share	$	0.92		$	1.44
Term (years)	2.78			3
Volatility	155		%	177		%
Risk-free rate	0.16		%	0.18		%
Dividend Yield	0			0


Future minimum lease obligations years ending December 31,	Lease Obligations
2020 (Remainder)	$	203
2021	836
2022	725
2023	622
2024	609
Thereafter	208
Total	$	3,203


Warrant Type	Cash Exercise Price per share		Warrants Outstanding September 30, 2020	Warrants Outstanding December 31, 2019

2020 Convertible Note warrants	$	4.00	2,160,000	0
Common stock warrant (Series D-1)	$	5.54	14,866	14,866
Common stock warrants (Series F)	$	9.22	377,402	377,402
Public Warrants (PHUNW)	$	11.50	1,761,291	1,761,291
Private Placement Warrants	$	11.50	1,658,381	1,658,381
Unit Purchase Option Warrants	$	11.50	24,172	24,172
Total			5,996,112	3,836,112


Warrant Type	Cash Exercise Price per share		Warrants Outstanding

2020 Convertible Note warrants	$	2.25	2,160,000
Common stock warrant (Series D-1)	$	5.54	14,866
Common stock warrants (Series F)	$	9.22	377,402
Public Warrants (PHUNW)	$	11.50	1,761,291
Private Placement Warrants	$	11.50	1,658,381
Unit Purchase Option Warrants	$	11.50	24,172
Total			5,996,112


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019		2,436,968	$	3.15
Outstanding as of December 31, 2020					Outstanding as of December 31, 2020	1,677,060	$	1.41
Granted	Granted	2,542,029	1.02		Granted	4,238,176	1.88
Released	Released	(2,380,270)	2.08		Released	(280,788)	1.22
Forfeited	Forfeited	(374,954)	2.96		Forfeited	(88,994)	1.47
Outstanding as of September 30, 2020		2,223,773	$	1.89
Outstanding as of March 31, 2021					Outstanding as of March 31, 2021	5,545,454	$	1.78


		Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2019		1,465,450	$	0.80	6.86	$	771
Outstanding as of December 31, 2020								Outstanding as of December 31, 2020	1,208,740	$	0.80	6.19	$	700
Granted	Granted	—						Granted	—
Exercised	Exercised	(183,753)	0.52					Exercised	(119,268)	0.55
Forfeited	Forfeited	(69,869)	1.40					Forfeited	(2,439)	2.31
Outstanding as of September 30, 2020		1,211,828	$	0.80	6.46	$	340
Exercisable as of September 30, 2020		1,008,747	$	0.75	6.28	$	295
Outstanding as of March 31, 2021								Outstanding as of March 31, 2021	1,087,033	$	0.82	6.38	$	986
Exercisable as of March 31, 2021								Exercisable as of March 31, 2021	991,476	$	0.78	6.33	$	926


	Three Months Ended September 30,				Nine Months Ended September 30,
Stock-based compensation	2020		2019		2020		2019
Cost of revenues	$	104	$	68	$	217	$	106
Sales and marketing	15		30		44		14
General and administrative	1,530		492		3,168		864
Research and development	59		94		29		127
Total stock-based compensation	$	1,708	$	684	$	3,458	$	1,111


			•Enterprise mobile software development kits (SDKs) including content management, location-based services, marketing automation, business intelligence and analytics, alerts, notifications and messaging, audience engagement, and audience monetization;
			•Integration of our SDK licenses into existing applications maintained by our customers, as well as custom application development and support services;
			•Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application portfolios, solutions and services that address: the patient experience for healthcare, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate, the luxury guest experience for hospitality, the student experience for education and the generic user experience for all other verticals and applications; and
			•Application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization.


			•Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;
			•Our non-GAAP financial measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations, and;
			•Other companies in our industry may calculate our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.


	Three Months Ended March 31,
(in thousands, except percentages)	2021			2020
Adjusted gross profit (1)	$	1,168		$	1,607
Adjusted gross margin (1)	71.0		%	60.9		%
Adjusted EBITDA (2)	$	(2,403)		$	(3,178)


		Three Months Ended September 30,						Change					Three Months Ended March 31,						Change
		2020			2019			Amount		%
		(in thousands)
(in thousands, except percentages)												(in thousands, except percentages)	2021			2020			Amount		%
Net Revenues	Net Revenues											Net Revenues
Platform subscriptions and services	Platform subscriptions and services	$	2,860		$	5,152		$	(2,292)	(44.5)	%	Platform subscriptions and services	$	1,521		$	2,391		$	(870)	(36.4)	%
Application transaction	Application transaction	270			485			(215)		(44.3)	%	Application transaction	125			249			(124)		(49.8)	%
Net revenues	Net revenues	$	3,130		$	5,637		$	(2,507)	(44.5)	%	Net revenues	$	1,646		$	2,640		$	(994)	(37.7)	%
Platform subscriptions and services as a percentage of net revenues	Platform subscriptions and services as a percentage of net revenues	91.4		%	91.4		%					Platform subscriptions and services as a percentage of net revenues	92.4		%	90.6		%
Application transactions as a percentage of net revenues	Application transactions as a percentage of net revenues	8.6		%	8.6		%					Application transactions as a percentage of net revenues	7.6		%	9.4		%


	Nine Months Ended September 30, 2020						Change
	2020			2019			Amount		%
	(in thousands)
Net Revenues
Platform subscriptions and services	$	7,274		$	15,065		$	(7,791)	(51.7)	%
Application transaction	709			1,397			(688)		(49.2)	%
Net revenues	$	7,983		$	16,462		$	(8,479)	(51.5)	%
Platform subscriptions and services as a percentage of net revenues	91.1		%	91.5		%
Application transactions as a percentage of net revenues	8.9		%	8.5		%


Exhibit No.						Description
3.1						~~Amended and Restated~~ Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
3.2						Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on January 2, 2019).
~~3.3~~						~~Certificate of Designation (Incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-K (File No. 001-37862) filed with the SEC on January 2, 2019).~~
4.1						Form of Note, dated April 9, 2020, between the Company and JPMorgan Chase (Incorporated by reference to Exhibit 4.1 of the Registrants Form 8-K filed with the SEC on April 16, 2020.
~~4.2~~						Form of Senior Convertible Note, dated March 20, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 4.1 of the Registrants Form 8-K filed with the SEC on March 23, 2020).
10.1						~~Form of Securities Purchase Agreement, dated March 19, 2020 (Incorporated by reference to Exhibit 10.1 of the Registrants Form 8-K filed with the SEC on March 23, 2020).~~
~~10.2~~						~~Form of Registration Rights Agreement, dated March 20, 2020 (Incorporated by reference to Exhibit 10.1 of the Registrants Form 8-K filed with the SEC on March 23, 2020).~~
~~10.3~~						Form of Security Purchase Agreement, dated July 14, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.4~~10.2						Form of Series A Senior Convertible Note , dated July 15, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.5~~10.3						Form of Series B Senior Convertible Note, dated July 15, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.6~~10.4						Form of Note Purchase Agreement , dated July 14, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.7~~10.5						Form of Secured Promissory Note, dated July 14, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.8~~10.6						Form of Master Netting Agreement, dated July 15, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.6 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.9~~10.7						Form of Warrant to Purchase Common Stock, dated July 15, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.7 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.10~~10.8						Form of Registration Rights Agreement, dated July 15, 2020, between the Company and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.8 of the Registrant’s Form 8-K filed with the SEC on July 16, 2020).
~~10.11~~10.9						At-The-Market Issuance Sales Agreement, by and between Phunware, Inc. and H.C. Ascendiant Capital Markets, LLC, dated August 14, 2020 (Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed with the SEC on August 14, 2020).
10.12*10.10						Settlement Agreement and Mutual General Release, dated October 9, 2020, between the Company, Uber Technologies, Inc., and certain Individual Defendants (Incorporated by reference to Exhibit 10.12 of the Registrants Form 10-Q (File No. 001-37862), filed with the SEC on November 12, 2020).
10.11						Underwriting Agreement, dated February 12, 2021 by and among Northland Securities, Inc., Roth Capital Partners, LLC and Phunware, Inc. (Incorporated by Reference to Exhibit 1.1 of the Registrants Form 8-K filed with the SEC on February 16,2021).
10.12						Office Sublease between the Company and Bangarang Enterprises LLC d/b/a Gander Group dated effective as of March 16, 2021 (Incorporated by Reference to Exhibit 10.1 of the Registrant's Form 8-K filed with the SEC on March 19, 2021).
10.13						At Market Issuance Sales Agreement, by and between Phunware, Inc. and B. Riley Securities, Inc., dated April 7, 2021 (Incorporated by Reference to Exhibit 10.1 of the Registrants Form 8-K (File No. 001-37862), filed with the SEC on April 7, 2021).
31.1*						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2*						Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1(1)						Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*


101.INS						XBRL Instance Document*
101.SCH						XBRL Taxonomy Extension Schema*
101.CAL						XBRL Taxonomy Calculation Linkbase*
101.LAB						XBRL Taxonomy Label Linkbase*
101.PRE						XBRL Definition Linkbase Document*
101.DEF						XBRL Definition Linkbase Document*


~~November 12, 2020~~May 14, 2021	Phunware, Inc.

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


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