UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

FORM 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2017

December 31, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-37862

STELLAR ACQUISITION III

PHUNWARE, INC.

(Exact name of registrant as specified in its charter)

Republic of the Marshall IslandsN/A

(Delaware

30-1205798
State or other jurisdiction of


incorporation or organization)

organization

(I.R.S. Employer

Identification Number)

90 Kifissias Avenue,

Maroussi Athens, Greece

N/A
1002 West Avenue, Austin, Texas78701
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number:+30 (210) 876-4858

number, including area code 512-693-4199

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:each classTrading Symbol(s)Name of Each Exchangeeach exchange on Which Registered:which registered
Common Stock, par value $0.0001 per sharePHUNThe NASDAQ StockCapital Market LLC
Warrants to purchase one share of Common StockPHUNWThe NASDAQ StockCapital Market LLC
Units, each consisting of one share of Common Stock and one WarrantThe NASDAQ Stock Market LLC


Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒


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

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

Emerging growth company☒

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


Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect a correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes.Yes ☐ No ☒ No ☐

As

The aggregate market value of May 31, 2017,voting stock held by non-affiliates of the registrant was $100,674,230 as of June 30, 2022, the last business day of the registrant’sregistrant's most recently completed second fiscal quarter the aggregate market value of the common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to(based on the closing sales price for the common stock on May 31, 2017, as reported on the Nasdaq Capital Market was $71.7 millionon such date).


As of February 8, 2018, there were 9,010,177March 27, 2023, 103,969,895 shares of common stock, par value $0.0001 per share, of the registrantwere issued and outstanding.


DOCUMENTS INCORPORATED BY REFERENCE
None.



TABLE OF CONTENTS


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Unless otherwise stated

"Phunware," "Lyte Technology" and the Phunware and Lyte Technology design logos and the trademarks or service marks of Phunware, Inc. and its subsidiaries appearing in this Annual Report on Form 10-K (this “Report”), references to:

●“BCA” are to the Business Corporations Act of the Republic of Marshall Islands;
●“founder shares” are to the 2,003,403 shares of common stock owned by our initial shareholders;
●“initial shareholders” are to holders of our founder shares prior to our initial public offering;
●“management” or our “management team” are to our executive officers and directors;
●“private placement warrants” are to the warrants issued to certain of our sponsors in a private placement simultaneously with the closing of our initial public offering;
●“public shares” are to shares of our common stock sold as part of the units in our initial public offering (whether they are purchased in such offering or thereafter in the open market);
●“public shareholders” are to the holders of our public shares, including our initial shareholders and members of our management team to the extent our initial shareholders and/or members of our management team purchase public shares, provided that each initial shareholder’s and member of our management team’s status as a “public shareholder” shall only exist with respect to such public shares;
●“sponsors” are to Astra Maritime Corp. and Dominium Investments Inc., each a Republic of Marshall Islands company that is a holding company with no operations, affiliates of Mr. Prokopios (Akis) Tsirigakis, our Chairman of the Board, co-Chief Executive Officer and President, and Magellan Investments Corp. and Firmus Investments Inc., each a Republic of Marshall Islands company that is a holding company with no operations, affiliates of Mr. George Syllantavos, our co-Chief Executive Officer, Chief Financial Officer, Secretary and Director; and
●“we,” “us,” “company” or “our company” are to Stellar Acquisition III Inc.

are the property of Phunware, Inc. Trade names, trademarks and service marks of other companies that may appear in this report are the property of their respective holders. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Annual Report on Form 10-K.


CAUTIONARY


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking 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 1934.1934, as amended (the “Exchange Act”). These forward-looking statements canare intended to be identifiedcovered by the usesafe 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 Annual 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 terminology, including thestatements. The words “believes,“anticipate,” “estimates,“believe,” “anticipates,“continue,” “expects,“could,” “intends,“estimate,” “plans,“expect,” “intend,” “may,” “will,“might,” “plan,” “possible,” “potential,” “projects,“predict,” “predicts,“project,” “continue,” or “should,” “will,” “would” and similar expressions that convey uncertainty of future events or in each case, their negative or other variations or comparable terminology. There can be no assuranceoutcomes are intended to identify forward-looking statements, but the absence of these words does not mean that actual results willa statement is not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:

●our ability to complete our initial business combination;
●our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
●our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;
●our potential ability to obtain additional financing to complete our initial business combination;
●our pool of prospective target businesses;
●failure to maintain the listing on, or the delisting of our securities from, Nasdaq or an inability to have our securities listed on Nasdaq or another national securities exchange following our initial business combination;
●the ability of our officers and directors to generate a number of potential investment opportunities;
●our public securities’ potential liquidity and trading;
●the lack of a market for our securities;
●

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

●

foreign currency fluctuations and overall political risk in foreign jurisdictions; or

●our financial performance.

forward-looking.

The forward-looking statements contained in this Annual 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 Annual Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods.


PART I

Item 1. Business

Introduction

We are




























1

SUMMARY OF RISK FACTORS
Below is a blank check company formed pursuant to the lawssummary of the Republic ofprincipal factors that could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the Marshall Islands for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, exchangeable share transaction or other similar business transaction with one or more operating businesses or assets. We have focused our efforts on seeking and completing an initial business combination with a company that has an enterprise value of between $250 million and $500 million, although a target entity with a smaller or larger enterprise value may be considered. While our efforts in identifying a prospective target business for our initial business combination will not be limited to a particular industry or geographic region, we are initially focusing our search on identifying a prospective target business in the international energy logistics industry.

We have assembled a group of directors, including independent directors, who provide public company governance, executive leadership, operations oversight, private equity investment management and capital markets experience. Our Board members have extensive experience, having served as directors, CEO’s or CFO’s, or in other executive and advisory capacities for publicly-listed and privately-owned companies. Our directors have experience with acquisitions, divestitures and corporate strategy and implementation, which we believe will continue to be of significant benefit to us as we evaluate potential acquisition or merger candidates as well as following the completion of our initial business combination.

We believe that the international energy logistics industry presents attractive opportunities for consolidation and growth and a favorable area in which to attempt to consummate a business combination. Our executive officers and directors have an aggregate of over 80 years of experience in the energy logistics industry, as managers, principals or directors of major worldwide maritime companies, where they have sourced, negotiated and structured transactions in these industries. We intend to leverage the industry experience of our executive officers, including their contacts and relationships, by focusing our efforts on identifying a prospective target business in the international energy logistics industry. While the amount of time our executive officers will devote in any time period will vary based on whether a target business has been selected for the initial business combination and the stage of the initial business combination process the company is in, we expect Messrs. Tsirigakis and Syllantavos to devote, in the aggregate, an average of approximately 20 hours per week to our business.

Messrs. Tsirigakis and Syllantavos, our co-Chief Executive Officers, were founders, officers and directors of two blank check companies that consummated business combinations, Nautilus Marine and Star Maritime. Nautilus Marine conducted an initial public offering in June 2011, consummated a business combination in February 2013, was taken private as Nautilus Offshore Services Inc. in October 2013, and in November 2015 was acquired by DryShips, Inc. (Nasdaq:DRYS). Star Maritime conducted an initial public offering in June 2005, consummated a business combination in November 2007, and trades on the Nasdaq Stock Market as Star Bulk Carriers Corp. (Nasdaq:SBLK). Messrs. Tsirigakis and Syllantavos played the leading role throughout the business combination transactions for Nautilus Marine and for Star Maritime, including identifying suitable acquisition candidates including the ultimate targets, and the consummation of such acquisitions. With respect to the above transactions, past performance by Messrs. Tsirigakis and Syllantavos, or any other member of our management team, is not a guarantee that we will be able to locate a suitable candidate for our initial business combination or of success with respect to any business combination we may consummate.

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Management and Board Expertise

Our executive officers and directors have extensive experience in the logistics side of the energy industry as managers, principals or directors of companies involved in ocean transportation dealing with companies in the related logistics infrastructure areas of terminal and port facilities. We intend to leverage the industry experience of our executive officers, including their extensive contacts, relationships and access to acquisition opportunities, by focusing our efforts on identifying a prospective target business or businesses in the energy logistics industry and negotiating the terms of such transaction. 

Subsequent to the consummation of a business combination, we believe that the strengths of our management team, particularly their extensive operations experience in the transportation/logistics field, will be valuable with respect to contributing to the ongoing operations of any business we may acquire.

Significant Activities Since Inception

On August 24, 2016, we consummated our initial public offering of 6,500,000 units. Each unit consists of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $65,000,000. On August 24, 2016, simultaneously with the consummation of such offering, we completed a private placement of an aggregate of 7,650,000 warrants to our sponsors, generating gross proceeds of $3,825,000.

The underwriters exercised their over-allotment option in part and, on September 28, 2016, the underwriters purchased 400,610 units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $4,006,100. On September 28, 2016, simultaneously with the sale of such units, we consummated the private sale of an additional 320,488 private placement warrants to our sponsors, generating gross proceeds of $160,244. In connection with the partial over-allotment exercise, certain of our initial shareholders forfeited an aggregate of 166,758 founder shares.

A total of $70,386,222 of the net proceeds from our initial public offering (including the partial exercise of the over-allotment option) and the private placements was deposited in a trust account established for the benefit of our public shareholders.

On August 24, 2017 and November 24, 2017, we issued unsecured promissory notes (the “Notes”) in the aggregate amount of $303,300 and $301,000, respectively, to our sponsors. The Notes bear no interest and are repayable in full upon consummation of the Company’s initial business combination. The sponsors have the option to convert any unpaid balance of the Notes into warrants exercisable for shares of our common stock based on a conversion price of $0.50 per warrant. The terms of any such warrants shall be identical to the termsdecline. This summary does not address all of the warrants issued pursuant to the private placementrisks that was consummated by us in connection with our initial public offering. On each of August 24, 2017 and November 24, 2017, our sponsors deposited cash (equal to the principal amountwe face. Additional discussion of the promissory note for such extension) intorisks summarized in this risk factor summary, and other risks that we face, can be found below under the Company’s trust accountheading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the Securities and Exchange Commission ("SEC") before making an investment decision regarding our common stock.


Risks Related to Our Business, Operations and Industry

•We have a history of losses, we expect to continue to incur losses and we also instructedmay not achieve or sustain profitability in the trust agentfuture.
•Our consolidated financial statements include an explanatory paragraph expressing substantial doubt about our ability to apply interest earnedcontinue as a going concern.
•Our future performance will depend on the funds available for withdrawal toward the principal heldsuccessful transition of our Chief Executive Officer (CEO).
•We are currently operating in the trust account, representing an aggregate of $402,536, or $0.058 per public share for each extension. As such, we extended thea period of time for us to consummate a business combination twice, each for three months, to February 24, 2018. Our sponsorssignificant macro-economic uncertainty, including supply-chain disruptions, COVID-related disruptions and inflationary pressures. Weakened economic conditions may have the option to further extend the period for consummatingan adverse impact on our business combination and intend to extend such period for another three months prior to May 24, 2018.

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results of operations.

Initial Business Combination

We will have until February 24, 2018 to consummate our initial business combination and may extend such period for another three months to May 24, 2018. Pursuant to the terms of our amended and restated articles of incorporation and the trust agreement entered into between us and Continental Stock Transfer & Trust Company, in order to extend the time available for us to consummate our initial business combination, our sponsors or their affiliates or designees, upon five days advance notice prior to such deadline, must deposit into the trust account $402,536 ($0.058 per unit), on or prior to February 24, 2018 for another three month extension. In the event that we receive notice from our sponsors five days prior such deadline of their intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to such deadline. In addition, we intend to issue a press release the day after such deadline announcing whether or not the funds had been timely deposited. Our sponsors and their affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that some, but not all, of our sponsors, decide to extend the period of time to consummate our initial business combination, such sponsors (or their affiliates or designees) may deposit the entire $402,536 amount. In the event that interest in the trust is available for withdrawal for working capital purposes and has not been used to pay taxes or other working capital expenses, we may apply the accrued interest in the trust account or such withdrawn interest to the sponsors’ obligation to loan us money in connection with such extension, and the amount that our sponsors would be obligated to loan us in connection with such extension would be reduced by the amount of interest so applied (as we have done in the extensions in August and November of 2017). •If we are unable to consummateexpand or renew sales to existing customers, or attract new customers, our initialgrowth could be slower than expected and our business combination withinmay be harmed.

•We have incurred a goodwill impairment charge and goodwill continues to comprise a significant portion of our total assets. In the applicable time period,future, we will, as promptly as reasonably possiblecould incur additional impairment charges, which could result in a material, non-cash write-down and could have a material adverse effect on our results of operations, financial condition and our future operating results.
•Current and future litigation could adversely affect us.
•Our results of operations and ability to grow could be negatively affected if we cannot adapt and expand our technology, product and service offerings in response to ongoing market changes.
•Demand for our technology, product and service offerings could be adversely affected by volatile, negative or uncertain economic conditions, including, but not morelimited to those caused by the COVID-19 pandemic, and the effects of these conditions on our customers' businesses.
•If we fail to maintain the efficiency of our supply chain as we respond to changes in customer demand for our products, our business could be materially adversely affected.
•Global political conditions may adversely affect demand for our products.
•The actual market for our products and services solutions could be significantly smaller than tenestimates.
•Substantial competition could reduce our market share and significantly harm our financial performance.
•Our future results will depend on our ability to continue to focus our resources and manage costs effectively.
•Our business days thereafter, redeemstrategy is evolving. Investments in new services and technologies may not be successful and may involve pursuing new lines of business or strategic transactions and investments, or dispositions of assets or businesses that may no longer help us meet our objectives.
•Future acquisitions could disrupt our business and may divert management’s attention and, if unsuccessful, harm our business.
•We may not be able to recognize revenue in the public sharesperiod in which our services are performed, which may cause our margins to fluctuate.
•Our financial results may be adversely affected by changes in accounting principles applicable to us.
•We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations.
•We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data.
•If we cause disruptions in our customers’ businesses or provide inadequate service, our customers may have claims for substantial damages against us, which could cause us to lose customers, have a pro rata portionnegative effect on our corporate reputation and adversely affect our results of operations.
•Our technology offerings and services could infringe upon the intellectual property rights of others.
•If we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties, our business could be adversely affected.
•If we are unable to collect our receivables from, or bill our unbilled services to, our customers, our business, results of operations or financial condition could be adversely affected.
•Increased costs of labor and employee health and welfare benefits may adversely impact our results of operations.
•Our global operations are subject to complex risks, some of which might be beyond our control.
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•Economic uncertainties or downturns in the global economy or the industries in which our customers operate could disproportionately affect the demand for our products and services solutions and negatively impact our operating results.
•If platform subscription renewal rates decrease, or we do not accurately predict subscription renewal rates, our future revenue and operating results may be harmed.
•If we are unable to attract new customers or sell additional products or services to our existing customers, our revenue growth will be adversely affected.
•Because we recognize revenue from application development services as deliverables are transferred to customers and platform subscriptions over the term of the funds heldrelevant contract, downturns or upturns in sales are not immediately reflected in full in our operating results.
•If we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.
•The length and unpredictability of the sales cycle for our technology, products and services could delay new sales and cause our revenue and cash flows for any given quarter to fail to meet our projections or market expectations.
•If we fail to detect advertising fraud or other actions that impact our advertising campaign performance, we could harm our reputation with advertisers or agencies, which could cause our revenue and business to suffer.
•If we do not maintain and grow a critical mass of advertisers and distribution partners, the value of our services could be adversely affected.
•Any inability to deliver successful mobile advertising campaigns due to technological challenges or an inability to persuasively demonstrate success will prevent us from growing or retaining our current advertiser base.
•We may be unable to deliver advertising in a context that is appropriate for mobile advertising campaigns, which could harm our reputation and cause our business to suffer.
•Activities of our application transaction customers with which we do business could damage our reputation or give rise to legal claims against us.
•Our business depends on our ability to collect and use data to deliver ads and to disclose data relating to the performance of our ads; any limitation on these practices could significantly diminish the value of our solutions and cause us to lose customers and revenue.
•Our business practices with respect to data could give rise to liabilities, restrictions on our business or reputational harm as a result of evolving governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.
•Our agreements with partners, employees and others may not adequately prevent disclosure of trade secrets and other proprietary technology and information.
•We could be subject to additional income tax liabilities.
•Taxing authorities may successfully assert that we should have collected or in the trust accountfuture should collect sales and as promptly as reasonably possible following such redemption,use, value-added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results.
•Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
•Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business.
•If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results.
•If we are unable to obtain and maintain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors may also be adversely affected if we experience difficulty in maintaining adequate directors’ and officers’ liability insurance.
•The requirements of being a public company may strain our systems and resources, divert management’s attention and be costly.
•We are a "smaller reporting company" and, because we have opted to use the reduced reporting requirements available to us, our common stock may be less attractive to investors.
•Our business is subject to the approvalrisks of natural disasters, public health crises, political crises and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.

Risks Related to Capitalization Matters, Corporate Governance and Market Volatility

•We have and may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business. Future sales or issuances of our remaining shareholderscommon stock, or the perception that such sales could occur, could depress the trading price of our common stock.
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•Shares of our common stock may be issued pursuant to the terms of an outstanding warrant, which could cause the price of our common stock to decline.
•The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our boardfinancial condition and results of operations.
•Our business is subject to evolving corporate governance and public disclosure regulations and expectations that have increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on our stock price.
•The Small Business Administration ("SBA") may review our Paycheck Protection Program (“PPP”) forgiveness application and if the SBA disagrees with our certification we could be subject to penalties and the repayment of our PPP loan, which could negatively impact our business, financial condition and results of operations and prospects.
•The price of our common stock and warrants has been, and may continue to be, volatile, and you could lose all or part of your investment.
•It may be difficult for us to retain or attract qualified officers and directors, dissolvewhich could adversely affect our business and liquidate, subject inour ability to maintain the listing of our common stock on the Nasdaq Capital Market.
•If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
•We do not currently intend to pay dividends on our common stock.
•Delaware law and our certificate of incorporation and bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
•Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or Exchange Act, each caseof which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.

Risks Related to our obligations under Marshall Islands lawDigital Asset Holdings

•Our bitcoin acquisition strategy exposes us to provide for claimsvarious risks associated with bitcoin.
•The prices of creditorsdigital assets, including bitcoin and ethereum, may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of bitcoin are likely to influence our financial results and the requirementsmarket price of other applicable law. In such event,our common stock.
•Our historical financial statements do not reflect the warrants will be worthless.  

NASDAQ rules providepotential variability in earnings that our initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balancewe may experience in the trust account (less any deferred underwriting commissionsfuture relating to our digital asset holdings.

•Due to the unregulated nature and taxes payable on interest earned) atlack of transparency surrounding the timeoperations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our signing a definitive agreementdigital asset holdings.
•The concentration of our digital asset holdings enhances the risks inherent in connection with our initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, or a qualified independent accounting firm with respect to the satisfaction of such criteria. If our securities are not listed on NASDAQ, we would notbitcoin treasury strategy.
•We may be required to satisfyaccess our digital assets as a source of liquidity during a time of market volatility, which may result in selling our digital assets at a significant loss.
•If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital asset holdings, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected.
•The loss or destruction of a private key required to access our bitcoin may be irreversible. If we are unable to access our private keys or if we experience a cyberattack or other data loss relating to our digital assets, our financial condition and results of operations could be materially adversely affected.
•A determination that bitcoin or any other digital asset is a "security" could lead to our classification as an “investment company” under the 80% requirement. However,Investment Company Act of 1940 and could adversely affect the market price of our digital asset holdings and the market price of our common stock.

Risks Related to our Token Ecosystem and Tokens

•We have raised capital to fund a token generation event of rights to receive future PhunCoin and, beginning in 2021, we intendcreated and sold PhunToken. There can be no assurance that PhunCoin or PhunToken will ever be issued, and any significant difficulties we may experience with the offerings of PhunCoin or sales of PhunToken could result in claims against us. Additionally, the token generation event and the offerings of PhunCoin and sales of PhunToken could subject us to satisfyvarious other business and regulatory uncertainties.
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•The further development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.
•Because our tokens will be digital assets built and transacted initially on top of existing third-party blockchain technology, we will be reliant on another blockchain network, and users could be subject to the 80% requirement evenrisk of wallet incompatibility and blockchain protocol risks.
•The development and operation of the Token Ecosystem (hereinafter defined) will likely require additional technology and intellectual property rights.
•Our Token Ecosystem is designed to distribute PhunCoin or PhunToken to consumers who provide certain personal information to us. Providing this data exposes us to risks of privacy data breach and cybersecurity attacks.
•Our Token Ecosystem may be the target of malicious cyberattacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of PhunCoin or PhunToken. If our Token Ecosystem’s security is compromised or if our securities are not listedToken Ecosystem is subjected to attacks that frustrate or thwart our users’ ability to access the Token Ecosystem, their PhunCoin or PhunToken or the Token Ecosystem products and services, users may cut back on NASDAQ ator stop using the timeToken Ecosystem altogether.
•Our Token Ecosystem is susceptible to mining attacks.
•There is no trading market for PhunCoin.
•The delay, or perceived delay, in the full development of our initial business combination.

Token Ecosystem may result in declines in PhunToken revenue.

•The regulatory regime governing blockchain technologies, digital assets, digital asset exchanges and offerings of and transactions in digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens.
•The sale of PhunToken or the offerings of PhunCoin may subject us to additional regulatory requirements. We anticipate structuringwill be adversely affected if we are, or any of our initial business combination so that the post-transaction company in which our public shareholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in ordersubsidiaries is, determined to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it nothave been subject to be required to registerregistration as an investment company under the Investment Company ActAct.
•The prices of 1940,digital assets are extremely volatile. Fluctuations in the prices of digital assets and/or waning interest of investors in the digital asset markets could materially and adversely affect our business.
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PART I
Item 1. Business.
General
Phunware, Inc. and its subsidiaries (the “Company”, "we", "us", or "our") offers a fully integrated software platform that equips companies with the products, services and solutions necessary to engage, manage and monetize their mobile application portfolios globally at scale. Our Multiscreen-as-a-Service ("MaaS") platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship. Our MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions. Through our integrated mobile advertising platform of publishers and advertisers, we provide in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. During 2021, we began to sell PhunToken to consumers, developers and brands. PhunToken is an innovative digital asset, which is intended to be used or consumed within our Token Ecosystem to help drive engagement between or among Phunware, its customers and business partners and consumers by unlocking features and capabilities of our MaaS platform (the "Token Ecosystem"). PhunToken is also designed to reward consumers for their activity within our Token Ecosystem, such as amended, watching branded videos, completing surveys and visiting points of interest. In October 2021, we acquired Lyte Technology, Inc. ("Lyte"), a provider of high-performance personal computer systems which we market and sell to individual consumers. Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.
Overviewof Business
Our MaaS platform is a fully integrated cloud platform for mobile that provides companies the products, services and solutions necessary to engage, manage and monetize their mobile application portfolios and audiences at scale. According to eMarketer, adults in the U.S. spend more than four hours daily on mobile internet, of which approximately 90% of that time is spent in mobile apps (versus mobile web). Given this reality, we believe brands must establish a strong identity on mobile, especially on devices and platforms specific to the Apple iOS and Google Android operating systems and ecosystems. Phunware helps brands define, create, launch, promote, monetize and scale their mobile identities as a means to anchor the consumer journey and improve brand interactions. Our MaaS platform provides the entire mobile lifecycle of applications through one procurement relationship.
Our MaaS platform allows for the licensing and creation of category-defining mobile experiences for customers and their application users worldwide. Since our founding in 2009, we have amassed a database of proprietary Phunware IDs. Phunware IDs are unique identifiers assigned to a mobile device when it becomes first visible across our network of mobile application portfolios. We measure and accumulate Phunware IDs through queries that count unique devices that access our mobile application portfolio across our network of mobile applications that we have developed and/or support.
Through our subsidiary Lyte, we also derive revenue by manufacturing and selling custom and pre-packaged personal computer systems.
Business Model
Our business model includes a combination of service, subscription and media transaction offerings that enable customers to engage, manage and monetize their mobile application portfolios throughout the Investment Company Act. Even ifmobile application lifecycle, which occurs in four phases:

•Strategize — We help brands define the application experience and determine the operating systems, feature sets and use cases they want their mobile application to support.
•Create — We help brands build their application portfolio.
•Launch — We help brands launch their applications and build their mobile audience.
•Engage, Monetize and Optimize — We help brands activate, monetize and optimize their mobile application portfolios.
Our product and service offerings include cloud-based recurring software license subscriptions, with terms ranging from one to three years, application development and support services and application transaction-based media. Although a
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majority of our product and service offerings have been sold utilizing an internal sales team, we have also sold our product and service offerings through various sales partners. We continue to invest in these relationships.
Lyte Technology, Inc.
In October 2021, we acquired Lyte Technology, Inc., a provider of high-performance computer systems to individual consumers. Lyte derives its revenue by manufacturing and selling custom and pre-packaged personal computer systems. Total consideration for the post-transaction company owns or acquires 50% or moreacquisition consisted of cash and common stock of the voting securitiesCompany valued at approximately $10.5 million. During second quarter of 2022, we relocated Lyte from Gurnee, Illinois to Round Rock, Texas. Our acquisition of Lyte enabled us to enter the personal computer hardware market. We will continue to pursue a direct to consumer selling strategy. During 2022, we began selling Lyte computers in Canada. We intend to grow Lyte revenue and its customer base by expanding its business to offer laptops and selling into additional international markets. We believe our acquisition of Lyte will also leverage a new distribution network for our blockchain initiatives, which are more fully described below.
In conjunction with the acquisition, we also entered into a note purchase agreement with an original principal amount of $5.22 million in a private placement that closed on October 18, 2021. This note was paid in full in 2022.
Our Products and Services
Our mobile software subscriptions and services, application transaction solutions and hardware product offerings include the following:

•Cloud-based mobile software licenses in software development kits (“SDKs”) form utilized inside mobile applications for the following:
•Analytics (SDK that provides data related to application use and engagement);
•Content Management (SDK that allows application administrators to create and manage app content in a cloud-based portal);
•Alerts, Notifications & Messaging (SDK that enables brands to send messages to app users through the app);
•Marketing Automation (SDK that enables location-triggered messages and workflow);
•Advertising (SDK that enables in-app audience monetization); and
•Location-Based Services (module that include mapping, navigation, wayfinding, workflow, asset management and policy enforcement);
•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;
•Application transactions, including re-occurring and one-time transactional media purchases for application discovery, user acquisition and audience building, audience engagement and audience monetization; and
•Pre-packaged and custom high-end personal computer systems for gaming, streaming and cryptocurrency mining enthusiasts.
Competitive Strengths
Fully integrated and comprehensive solutions: Our comprehensive solutions can be used across mobile application experience definition, application portfolio creation, user discovery, user acquisition, user engagement and user monetization. Data from application analytics and our database of over one petabyte can be used to inform business decisions related to mobile strategy, marketing, operations and more.
Built to be mobile-first, native-first, cloud-based: Phunware was built from the ground up to focus on native mobile development, while other companies in the mobile space have attempted to create shortcuts with “write once, run anywhere” software. The result is almost a decade of platform-specific mobile expertise, a major competitive differentiator.
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Results-driven culture: Our employees are granted restricted stock units upon and from time to time after commencement of their employment and are encouraged to think of Phunware as a company they own rather than a company for which they work. We also promote from within to reward top performers and encourage leadership development. The result is an employee base singularly focused on solving problems and driving results.
Intellectual property portfolio development and world-class engineering resources: Through our world-class in-house technical and engineering organization, we have focused developing our patents and other intellectual property, including methods of accessing wireless account information, rendering content on a wireless device, indoor and outdoor navigation with a mobile device and more. We are developing creative solutions to solve complex technical problems and create competitive advantages for our customers.
Our Growth Strategy
Key elements of our growth strategy include:
Expansion of Lyte customer base and footprint. We plan to grow our Lyte operations, both domestically and internationally, as the gaming and cryptocurrency market expands. We may also offer different technology offerings and computer-builds that keep up with changing demand.
Expansion of mobile products and services. Mobile applications and in-application advertising media are among the fastest-growing and complex technology markets. We have made significant investments in research and development and plan to continue extending the functionality and breadth of our applications in the future, including, but not limited to, our healthcare and luxury hospitality solutions.
Deepening of existing customer relationships. We believe that we are well positioned to identify new opportunities or enhance existing services and solutions within and provide additional products and services to our existing customer base. We expect to create cross and upsell opportunities as our customers seek to deepen their approach to mobile application lifecycle management.
Development of new relationships to expand our customer base. We intend to continue to grow our customer base by developing our indirect sales and distribution relationships. We also have partnered with technology providers, who serve as a referral source and provide us with quality leads for businesses interested in our products and services and enable us to integrate our products into their offerings. We are able to leverage our mobile expertise and capabilities to compete effectively for new customers both directly and indirectly. Primary indirect channels and distributors include hardware, software, carriers and systems integrators/consultancies.
Continued growth of our customer base through targeted marketing and outreach. We intend to continue to opportunistically expand into and within industry verticals that benefit from our integrated solutions, comprehensive lifecycle approach and ability to engage users in both digital and physical worlds, particularly healthcare and hospitality.
Addition of new capabilities and geographic regions through strategic transactions. We operate in a fragmented market that offers significant consolidation opportunities. We plan to continue to evaluate strategic acquisitions, partnerships and other transactions that enhance our capabilities and expand our geographic footprint, both domestically and internationally.
Expansion of our partnership network with third-party providers of products and services. We are able to leverage our mobile expertise and capabilities to compete effectively for new customers both directly and indirectly. Primary indirect channels include hardware, software, carriers and systems integrators/consultancies. We are focused on building our brand to grow within existing and target end markets where there is strong demand for the products and solutions we provide.
Our Customers
Our target customers for our mobile software subscription and services are companies that are looking to enact digital transformation in their business — whether it is retail, healthcare, hospitality, entertainment, real estate, smart living and workspaces or any other industry. We provide technology and solutions to support these organizations through every stage of the target,mobile application lifecycle.
We believe the multi-year nature of our shareholders priorsoftware and managed services projects, agreements and related recurring revenues provides revenue visibility. Our subscription and services agreements with our customers consist of terms relating to length of agreement (for subscriptions and application support), payment, performance, cancellation and termination,
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confidentiality, indemnification obligations and limitation of liability, among other provisions. All of these agreements contain terms of service that are generally consistent across our customers. Our subscription and services agreements generally do not impose obligation upon us, such as exclusivity or other terms.
Our application transaction agreements, also known as insertion orders, are, for the most part, governed by the standard terms and conditions from the Interactive Advertising Bureau’s (“IAB”) Standard Terms and Conditions for Internet Advertising for Media Buys One Year or Less ("IAB Terms"). The IAB Terms provide that in the event that payments are not paid to the agency, then the media company, or us, agrees to hold the advertiser solely liable. We view the agreements as contracts that ordinarily accompany the business combination may collectively ownconducted by Phunware and, because of the lack of any commitments to provide a minority interestcertain amount of business, we are not substantially dependent on the agreements.
We sell our Lyte computer systems directly to individual consumers with a focus on for gaming, streaming and cryptocurrency mining enthusiasts. Lyte customers purchase their systems via Lyte's website. Purchasers of Lyte game systems agree to terms and conditions governing the purchase during the online check-out process.
Concentration of Major Customers
Due to the nature of our business, we have in the post-transaction company, depending on valuations ascribed to the targetpast and usmay, at times, in the business combination transaction.future have a material concentration of our revenue with a small number of customers. However, with the acquisition of Lyte and sales of PhunToken, we expect this to be less frequent. For example, we could pursue athe year ended December 31, 2022, no individual customer represented greater than 10% of our net revenue.
Sales and Marketing
Our internal salesforce is focused on direct sales opportunities for our platform subscription and services and application transaction product lines. They are experienced across all verticals in which we serve and can assist small, mid-sized and large organizations. Our indirect sales function works with our partners to identify sales opportunities, as well as identify new sales partner relationships. Our marketing efforts focus on building brand reputation, expanding market awareness, driving customer demand and enabling our sales team.
Our platform subscription and services sales organization is supported by our customer solutions team, which has deep technical expertise. Once contracted, our program management team collaborates with customers to ensure timely deliverables of contracted licenses and services. Post implementation, customers are supported post-sale by our customer success function managed within our program management team. Our sales cycle can range many months for large organizations.
We market our application transaction product line direct to businesses and agencies. We are also hoping to expand our media offerings by attracting new business from local and national advertising agencies. Our contract term for application transactions can be as short as a few days to three months for larger advertising campaigns. Our sales cycle is typically short for direct to business customers, whereby it may be longer when partnering with agencies.
Our marketing efforts for our Lyte operations currently consist of purchasing advertisements on various social media platforms. We do not maintain an internal salesforce, as sales are e-commerce based and derived from Lyte's website. We also maintain a customer service and success function for our Lyte computer customers.
Research and Development
Our ability to compete depends in large part on our continuous commitment to research and development and our ability to rapidly introduce new applications, technologies, features and functionality into our products, services and solutions. Our research and development efforts are focused on improving and enhancing our existing product and service offerings by working closely with our customers, conducting quality assurance testing and improving our core technology as well as developing new proprietary services and solutions. Performance, security, depth and breadth of functionality and usability of our solutions drive our technology decisions and research and development. Our research and development expenses were $6.1 million and $4.2 million for the fiscal years ended December 31, 2022 and 2021, respectively.


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PhunCoin and PhunToken
Our research and development team is also working to continue our vision of a future in which consumers own, control and are rewarded for the access to and use of their personal data and information. In 2018, we began offering rights to future issuances of PhunCoin, and in 2019 we expanded to a dual token structure by creating PhunToken. The dual-token ecosystem is designed to both empower consumers and brands to engage with each other and other audiences by creating a blockchain-enabled data and engagement exchange that recognizes the value of data and engagement, the Token Ecosystem. PhunCoin is intended to be the “Value of Data” that empowers consumers to take control of and be compensated for their data and will allow holders to participate in the economics of the Token Ecosystem. PhunToken is intended to be the “Value of Engagement” that empowers consumers to monetize their data and to use PhunToken to engage with brands and others in the Token Ecosystem. In 2021, we commenced the selling of PhunToken to third parties. Upon the sale of PhunToken to customers, we transfer the PhunToken purchased to the customers' ethereum-based wallet address. We sell and will continue to sell PhunToken.
During 2018 and 2019, we sold rights to the future issuances of PhunCoin. To date, we have recorded the rights purchases as a liability in our consolidated balance sheets as of December 31, 2022 and 2021, as we have yet to issue any PhunCoin pursuant to our rights offerings. Although we currently do not anticipate the selling of additional PhunCoin rights, we may generate additional funding from sales of PhunCoin in the future.
A multidisciplinary team (design, engineering, quality assurance, crypto, product and legal) is actively developing all aspects of the Token Ecosystem for iOS and Android. PhunCoin security features and compliance protocols have been and continue to be implemented. We are planning for future enhancements of the Token Ecosystem in 2023; however, there can be no assurance as to when (or if) we will be able to successfully complete the development of the Token Ecosystem.
Competition
The market for technology and solutions related to mobile application lifecycle management is evolving, highly competitive and significantly fragmented. With the introduction of new technologies and the potential entry of new competitors into the market, we expect competition to increase and intensify in the future, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices.
We compete primarily with companies offering cloud-based software solutions for location-based services, mobile marketing automation, content management, analytics and audience monetization, as well as data and campaign management for audience building and engagement. We also sometimes compete with application development agencies, in-house mobile teams and products developed by software providers that allow customers to build and scale new mobile applications. Our competitors include Airship, Apadmi, Appcelerator, Mutual Mobile, Pointr, Purple and as well as many competitors in the desktop personal computing business.
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We believe the principal competitive factors in our market include the following:

•product features and functionality;
•location accuracy and latency;
•technology architecture;
•level of customer satisfaction;
•ease of use and integration of products and services;
•deployment options and hardware flexibility;
•breadth and depth of application functionality;
•professional services and customer support;
•total costs of ownership;
•brand awareness and reputation;
•sophistication of technology platform;
•actionable insights through big data analytics;
•capability for customization, configurability, integration, security, scalability and reliability of applications;
•ability to innovate and respond to customer needs rapidly;
•domain expertise;
•global reach;
•size of customer base and level of user adoption; and
•ability to integrate with legacy enterprise infrastructures and third-party applications.
Some of our current competitors have, and future competitors may have, greater financial, technical, marketing and other resources, greater resources to devote to the development, promotion, sale and support of their products and services, more extensive customer bases and broader customer relationships, and/or longer operating histories and greater name recognition. As a substantialresult, these competitors may be better able to respond quickly to new technologies and to undertake more extensive marketing campaigns. In a few cases, some competitors may also be able to offer competing solutions at little or no additional cost by bundling them with their existing suite of solutions.
Government Regulation
We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business. Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business including, but not limited to, privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, and other communications, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions, anti-corruption law compliance and securities law compliance. In particular, we are subject to federal, state and foreign laws regarding privacy and protection of consumer data. Foreign data protection, privacy, content and other laws and regulations can impose different obligations or be more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.
Proposed or new legislation and regulations could also significantly affect our business. For example, the European General Data Protection Regulation (GDPR) took effect in May 2018 and applies to all of our products and services used by people in Europe. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are different from those previously in place in the European Union, and includes significant penalties for non-compliance. Effective August 2020, the Brazilian General Data Protection Law imposes requirements similar to GDPR on products and services offered to users in Brazil. The California Consumer Privacy Act (CCPA), which took effect in January 2020, also establishes certain transparency rules and creates new data privacy rights for users. Furthermore, voters in California approved Proposition 24, which expanded the CCPA by limiting businesses' use of "sensitive business information," such as precise geolocating. Proposition 24 took effect January 1, 2023 for personal data collected after January 1, 2022.
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Following California's lead, Colorado, Connecticut, Utah and Virginia have been or will be enforcing new laws around data privacy and protection in 2023. Similarly, there are a number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interestlegislative proposals in the target. However,European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our business, such as digital assets. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
New laws enacted by government or regulatory authorities could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary remedies), interrupt or require us to change our business practices in a manner materially adverse to our business, divert resources and the attention of management from our business or subject us to other remedies that adversely affect our business.
Intellectual Property
Our ability to protect our intellectual property, including our technologies, is an important factor in the success and continued growth of our business. We protect our intellectual property through trade secrets law, patents, copyrights, trademarks and contracts. We have established business procedures designed to maintain the confidentiality of our proprietary information such as the use of our license agreements with customers and our use of our confidentiality agreements and intellectual property assignment agreements with our employees, consultants, business partners and advisors where appropriate. Some of our technologies rely upon third party licensed intellectual property.
In the United States, we have 15 patents issued and 5 pending non-provisional patent applications. The issued patents expire between the years 2027 and 2037, which are subject to the payment of maintenance fees. We also have one patent in Japan, which expires in 2031, that is subject to the payment of annual fees. In addition, we have registered “Phunware” as a trademark in the United States and Canada. We cannot provide assurance that any of our patent applications will result ofin the issuance of a substantialpatent or whether the examination process will require us to narrow our claims. Furthermore, even if a patent is issued, we cannot assure that such patent will be adequate to protect our business. We also license software from third parties for integration into our solutions, including open source software and other software available on commercially reasonable terms.
Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses and confidentiality agreements, unauthorized parties may still copy or otherwise obtain and use our software and other technology. In addition, if we expand international operations, an effective patent, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.
Our industry is characterized by the existence of a large number of new shares,patents and claims and related litigation regarding patent and other intellectual property rights. In particular, leading companies in our shareholders immediately priormarkets have extensive patent portfolios and are regularly involved in litigation. From time to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% requirement. If the business combination involves more than one target business, the 80% requirement will be based on the aggregate value of all of the target businesses. If our securities are not listed on NASDAQ, we would not be required to satisfy the 80% requirement. However, we intend to satisfy the 80% requirement even if our securities are not listed on NASDAQ at the time, of our initial business combination.

We have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses or asset(s), although we have initially focused our search in the energy logistics industry. The determination of whether a target company or assets is attractive for acquisition is based on our analysis of a variety of factors,third parties, including whether such acquisition would be in the best interests of our security holders, the purchase price, the terms of the sale, our perceived quality of the assets, the financial status or prospects of the company and the likelihood that the transaction will close. We may decide to enter into our initial business combination with a target business that does not meet certain of these factors or guidelines.

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In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financialleading companies, may assert patent, copyright, trade secret and other information which willintellectual property rights against us, our channel partners or our customers. Our standard license and other agreements may obligate us to indemnify our indirect sales partners and customers against such claims. Successful claims of infringement by a third party could prevent us from continuing to offer our solution or performing certain services, require us to expend time and money to develop non-infringing solutions or force us to pay substantial damages, including treble damages if we are found to have willfully infringed patents or copyrights, royalties or other fees. Competitors may also be made availablemore likely to us.

We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsors, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsors, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a member of FINRA or a qualified independent accounting firmclaim that our initial business combination is fairsolutions infringe their proprietary rights and seek an injunction against us from continuing to offer our company from a financial point of view.

Members of our management team own common stock and warrants, and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention platform and/or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.

Each of our officers and directors presently has, and any of themcomponents thereof. We cannot provide assurance that we do not currently infringe, or that we will not in the future mayinfringe, upon any third-party patents or other proprietary rights.

Employees
We leverage our employees’ long-standing, deep customer relationships and strong technical expertise to deliver complex solutions that meet customer needs and advance mobile technology. As of December 31, 2022, we had 106 full-time employees: including 50 software developers, engineers, QA engineers and product managers; a sales and marketing force of approximately 20 professionals and 19 employees at Lyte. In addition, we have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is required to present a business combination opportunity to such entity. Accordingly, if anyteam of 11 individuals responsible for the assembly of Lyte computers. None of our officers or directors becomes awareemployees are currently covered under any collective bargaining agreements. We believe our relations with our employees are good.
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Corporate Information
Our amended and restated articles of incorporation provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.

Our executive officers and directors have agreed, pursuant to a written letter agreement, not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination).

Ourprincipal executive offices are located at 90 Kifissias1002 West Avenue, Maroussi 15125, Athens, GreeceAustin, Texas 78701, and our telephone number is +30 210 876-4858.

Status(512) 693-4199. Our website address is https://www.phunware.com. The information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K. We have included our website address as a Public Company

We believe our structure will make us an attractive business combination partnerinactive textual reference only.

Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to target businesses. As an existing public company, we offer a target business an alternativereports filed or furnished pursuant to the traditional initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stockSections 13(a) and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this process a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a business combination with us.

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Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with shareholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.

While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, without an operating history, and the uncertainty relating to our ability to obtain stockholder approval of our proposed initial business combination and retain sufficient funds in our trust account in connection therewith, negatively.

Until May 31, 2017, we were a “foreign private issuer” as defined in Rule 405, but voluntarily chose to register and report using domestic forms. As of May 31, 2017, we no longer qualified as a “foreign private issuer” (as set forth in Rule 3b-415(d) of the Exchange Act). As a result, weAct are subject toavailable free of charge on the U.S. domestic issuer rules and have the option of conducting redemptions like other blank check companies in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules.

We are an “emerging growth company,” as defined in the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completioninvestor relations section of our initial public offering, (b) inwebsite, which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior May 31st(the end of our second fiscal quarter), and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Financial Position

With funds available in our Trust Account for a business combination in the amount of $71,215,856 assuming no redemptions and before payment of $1,725,153 of deferred underwriting fees, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete our business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.

The Energy Logistics Industry

We were formed to acquire, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more businesses in the international energy logistics industry which we consider as businesses that support the process of moving energy, in the form of crude oil, natural and liquefied petroleum gas and distilled and specialized products (such as petrochemicals), from production to final consumption throughout the world. To date, our efforts have been limited to organizational activities.

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We believe that the international energy logistics industry performs indispensable functions in the supply chain of getting energy from producers to final consumers by moving, storing, distributing petrochemicals or processed petrochemical products. We believe that the needs for energy in today’s global economy are expanding and present opportunities for consolidation and growth in the energy logistics industry. Before the marketplace can consume energy, it must be produced, transported, stored, processed or distilled, transported again and then ultimately distributed. This comprises the largest portion of what is known as the energy midstream industry which processes, stores, markets and transports commodities such as crude oil, distilled products and petrochemicals, natural gas, and natural gas liquids. The midstream provides the vital link between the far-flung crude petroleum producing areas and the population centers where most consumers are located. Additionally, each of these links within the energy chain, particularly terminalling and transportation, is typically fragmented, which our management believes represents a favorable opportunity to consummate a business combination with target companies within the three identified sectors listed below. They include businesses that are part of the following sub-segments of the energy logistics industry:

●Energy Transportation: transportation of crude oil, gas or refined products by ocean going tanker and gas vessels;
●Terminalling (Storage): terminalling facilities, on land or at sea, that are used to accumulate, store and distribute various forms of energy and/or petrochemical products; and
●Pipelines: transportation of crude oil, gas or refined products by pipeline between production areas, refining facilities and storage/distribution terminals.

We cannot assure you that we will be able to locate a target business meeting the criteria described above in these segments or that we will be able to engage in a business combination with a target business on favorable terms.

Maritime Energy Transportation

The transportation of crude oil, gas or refined products by ocean going tanker vessels is an important link in the energy chain. Energy must be transported from producing areas to refineries and then onto locations where consumers reside. 

The world oil tanker fleet is divided into two primary categories, crude oil and product/chemical tankers. As indicated below, crude oil tankers carry only crude oil and are very large ocean going vessels, whereas product tankers carry only refined products and are smaller ocean going vessels than crude oil tankers and chemical tankers carry refined products and chemicals. Tanker charterers of wet cargo will typically charter the appropriate sized tanker based on the length of journey, cargo size and port and canal restrictions. Crude oil tankers are typically larger than product tankers. The four major tanker categories with reference to size are:

●Very Large Crude Carriers, or VLCCs. Tanker vessels that are used to transport crude oil with cargo capacity typically between 200,000 and 320,000 dead weight tons, or dwt, that are more than 300 meters in length. VLCCs are highly automated and their advanced computer systems allow for a minimal crew. The majority of the world’s crude oil is transported via VLCCs.
●Suezmax. Tanker vessels with cargo capacity typically between 120,000 and 200,000 dwt. These vessels are used in some of the fastest growing oil producing regions of the world, including the Caspian Sea and West Africa. Suezmax tankers are the largest ships able to transit the Suez Canal with a full payload and are capable of both long and short haul voyages.
●Aframax. Tanker vessels with cargo capacity typically between 80,000 and 120,000 dwt. These tankers carry crude oil and serve various trade routes from short to medium distances mainly in the North Sea, the Mediterranean and Venezuela. These vessels are able to enter a larger number of ports throughout the world as compared to the larger crude oil tankers.
●Product. Tanker vessels with cargo capacity typically less than 60,000 dwt. Product tankers are capable of carrying refined petroleum products, such as fuel oils, gasoline and jet fuel, as well as various edible oils, such as vegetable and palm oil.
●Chemical. Specialized tanker vessels with cargo capacity typically ranging from 5,000 to 40,000 dwt. The cargo tanks of these vessels are either coated with specialized coatings such as phenolic epoxy or zinc-based paints, or made from stainless steel. The coating or cargo tank material largely determines what types of cargo a particular tank can carry, with stainless steel tanks being the most resistant to aggressive cargoes such as sulfuric and phosphoric acid.

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The world gas tanker fleet is divided into two primary categories, liquid petroleum gas (LPG) vessels and liquefied natural gas (LNG) vessels. We will focus on the LPG vessels which are divided into the following four major LPG vessel categories with reference to size:

●Very Large Gas Carriers, or VLGCs. The VLGC vessels primarily navigate the long routes from the countries in the Middle East region to Asia and from West Africa to the USA and Europe. The VLGCs primarily carry butane and propane and have a capacity of at least 60,000 m3.
●Large Gas Carriers, or LGCs. The LGC vessels have a capacity of between 40,000 and 59,999 m3. The principal routes for LGC vessels are from the Black Sea to the USA and from West Africa to the USA. Most of the LGC fleet is employed for transporting ammonia.
●Medium Gas Carriers, or MGCs. The MGC vessels have a capacity of at least 20,000 m3 and less than 40,000 m3. The MGCs primarily navigate intra-European routes and in the Gulf of Mexico, but also operate from the Arabian Gulf to Asia.
●Small Gas Carriers, or SGCs. The SGC vessels have a capacity of more than 5,000 m3 and less than 20,000 m3. SGCs primarily operate on short distances and often carry olefins.

Terminalling (Storage)

Petroleum terminals are land or sea based facilities that receive, store and re-deliver bulk quantities of crude oil, gasoline and other light petroleum products via pipelines, sea vessels or trucks. These facilities, which are used to store energy before or after it is refined and distributed to consumers, are a vital link in the energy chain. We believe there are several areas in the world where opportunities to locate and identify potential target businesses in terminalling exist. The acquisition of terminals either close to production or consumption areas creates economies of scale, minimizes transportation costs and enables more efficient distribution of energy to end users. These factors present attractive opportunities for consolidation and growth in the following:

●areas of great shipping traffic such as Gibraltar, Fujairah and Singapore, where the demand for bunkering (supplying another vessel with fuel) has increased over the years and we believe will continue to increase in the future;
●areas with numerous small product streams that are accumulated for shipment, such as the Black Sea, the Baltic Sea, the Arctic and the Caribbean; and
●areas with poor distribution infrastructure and storage capacities, including a majority of the world’s emerging and developing markets where the demand for energy has left these markets behind other industrial regions, such as South America, India and China.

Pipelines

Industries in the Pipeline Transportation subsector use transmission pipelines to transport crude oil, natural gas and refined petroleum products. Pipelines move crude oil from oil fields on land and offshore to refineries where it is turned into fuels and other products, then from the refineries to terminals where fuels are trucked to retail outlets. Pipelines operate 24 hours a day, seven days a week. They connect producing areas to refineries and chemical plants while delivering the products consumers and businesses need, where they need them, when they need them.

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Pipelines are identified based on the products transported (i.e., pipeline transportation of crude oil, natural gas, refined petroleum products, and other products). According to pipeline operators, in the United States alone, there were 199,243 miles of liquids pipeline in operation with 66,649 miles devoted to crude oil, 61,681 miles transporting refined petroleum products (gasoline, diesel, jet fuel, etc.) and 65,595 miles delivering gas liquids (propane, ethane, butane, etc.).

Pipelines are among the safest, most cost-effective and efficient was to deliver energy liquids and, because most are buried, they are largely unseen. A barrel of crude oil or petroleum products reaches its destination safely over 99.999% of the time. Delivering crude oil by pipeline can cost on a per barrel basis as little as half of other modes of transportation. Lower costs applied to the billions of barrels of crude oil and petroleum products flowing across pipelines makes them the most efficient means of energy transportation. It is these inherent safety, cost and efficiency characteristics of pipelines that provide an ongoing opportunity for pipeline growth in the continuous quest to connect supply areas to demand locations.

Government, Environmental and Other Regulations

Government regulations and laws will significantly affect the ownership and operation of energy related onshore facilities or vessels. If we consummate our initial business combination within the international energy logistics industry we may become subject to international conventions, national, state and local laws and regulations in force in the countries in which any of the onshore facilities, assets or vessels we acquire may operate or be located or registered and compliance with such laws, regulations and other requirements may entail significant expense.

We believe that the heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards.

Effecting our Initial Business Combination

General

We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the private placement of the private placement warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses. 

If our initial business combination is paid for using stock or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our business combination or used for redemptions of purchases of our common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.

There is no current basis for investors to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial business combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely impact a target business.

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We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. Subject to compliance with applicable securities laws, we would complete such financing only simultaneously with the completion of our business combination. In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law, we would seek shareholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

Origination and Sourcing of Target Business Opportunities

We believe our management team’s extensive target sourcing and transaction experience, including in connection with two previous blank check companies, along with relationships with intermediaries and companies, provides us with a substantial number of potential business combination targets. Over the course of their careers, the members of our board and management team have developed a broad network of contacts and corporate relationships around the world. This network has been developed over the course of an aggregate of over 30 years, in the case of our co-Chief Executive Officers.

We expect that the management team’s network of existing contacts and relationships will continue to deliver a flow of potential platform and add-on acquisition opportunities which are proprietary or where a limited group of established, credentialed buyers have been invited to participate in the sale process. Our officers and directors, as well as their affiliates, also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the track record and business relationships of our officers and directors

In addition, target business candidates are brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this Report and know what types of businesses we are targeting.

We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsors, executive officers or directors, or making the acquisition through a joint venture or other form of shared ownership with our sponsors, executive officers or directors. In the event we seek to complete an initial business combination with a target that is affiliated with our sponsor, executive officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or a qualified independent accounting firm that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.

If any of our executive officers becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. All of our executive officers currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.

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Selection of a target business and structuring of our initial business combination

NASDAQ rules provide that our initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from independent investment banking firm that is a member of FINRA or a qualified independent accounting firm with respect to the satisfaction of such criteria. If our securities are not listed on NASDAQ, we would not be required to satisfy the 80% requirement. However, we intend to satisfy the 80% requirement even if our securities are not listed on NASDAQ at the time of our initial business combination. Subject to this requirement, our management has virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we are not permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.

In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that is owned or acquired by the post-transaction company is what will be valued for purposes of the 80% requirement. There is no basis for investors to evaluate the possible merits or risks of any target business with which we may ultimately complete our business combination.

To the extent we effect our business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

In evaluating a prospective target business, we conduct a thorough due diligence review which will encompasses, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial and other information which will be made available to us.

The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.

Lack of business diversification

For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our business combination with only a single entity, our lack of diversification may:

●subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and
●cause us to depend on the marketing and sale of a single product or limited number of products or services.

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Limited ability to evaluate the target’s management team

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.

Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that the additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

Shareholders may not have the ability to approve our initial business combination

For so long as we are deemed to be a foreign private issuer, we will conduct redemptions in accordance with the SEC’s tender offer rules. However, if we are not a foreign private issuer, we will seek shareholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek shareholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether shareholder approval is currently required under Marshall Islands law for each such transaction.

Type of TransactionWhether Shareholder Approval is Required
Purchase of assetsNo
Purchase of stock of target not involving a merger with the companyNo
Merger of target into a subsidiary of the companyNo
Merger of the company with a targetYes

Under NASDAQ’s listing rules, shareholder approval would be required for our initial business combination (unless we are deemed to be a foreign private issuer at such time) if, for example:

●we issue common stock that will be equal to or in excess of 20% of the number of shares of our common stock then outstanding;
●any of our directors, officers or substantial shareholders (as defined by NASDAQ rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding shares of common stock or voting power of 5% or more; or

●the issuance or potential issuance of common stock will result in our undergoing a change of control.

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Permitted purchases of our securities

In the event we seek shareholder approval of our business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our sponsors, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares in such transactions. They will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading policy which requires insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.

In the event that our sponsors, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.

The purpose of such purchases would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining shareholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our business combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

Our sponsors, officers, directors and/or their affiliates anticipate that they may identify the shareholders with whom our sponsors, officers, directors or their affiliates may pursue privately negotiated purchases by either the shareholders contacting us directly or by our receipt of redemption requests submitted by shareholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsors, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling shareholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against the business combination. Our sponsors, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.

Any purchases by our sponsors, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsors, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.

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Redemption rights for public shareholders upon completion of our initial business combination

We will provide our public shareholders with the opportunity to redeem all or a portion of their shares of common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, including interest (which interest shall be net of taxes payable and working capital released to us) divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is anticipated to be approximately $10.32 per public share (subject to increase of up to an additional $0.058 per share in the event that our sponsors elect to extend the period of time to consummate a business combination for another three months, as described in more detail in this Report). The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our initial shareholders have entered into letter agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may hold in connection with the completion of our business combination.

Manner of Conducting Redemptions

We will provide our public shareholders with the opportunity to redeem all or a portion of their shares of common stock upon the completion of our initial business combination either (i) in connection with a shareholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under the law or stock exchange listing requirement, or whether we will be deemed to be a foreign private issuer (in which case we would be required to conduct a tender offer under SEC rules rather than seeking shareholder approval). Asset acquisitions and stock purchases would not typically require shareholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock (unless we are deemed to be a foreign private issuer at such time) or seek to amend our amended and restated articles of incorporation would require shareholder approval.

If a shareholder vote is not required and we do not decide to hold a shareholder vote for business or other legal reasons, we will, pursuant to our amended and restated articles of incorporation:

●conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
●file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.

Upon the public announcement of our business combination, we or our sponsors will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.

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In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public shareholders not tendering more than a specified number of public shares which are not purchased by our sponsors, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public shareholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.

For so long as we are deemed to be a foreign private issuer, we will conduct redemptions in accordance with the SEC’s tender offer rules.

If, however, shareholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain shareholder approval for business or other legal reasons, we will, pursuant to our amended and restated articles of incorporation:

●conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
●file proxy materials with the SEC.

In the event that we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public shareholders with the redemption rights described above upon completion of the initial business combination.

If we seek shareholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. In such case, our initial shareholders have agreed to vote their founder shares and any public shares purchased during or after our initial public offering in favor of our initial business combination. As a result, we would need only 2,356,452, or 36.25%, of the 6,900,610 public shares outstanding to be voted in favor of our initial business combination in order to have such transaction approved (assuming the over-allotment option is not exercised). Each public shareholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction. In addition, our initial shareholders have entered into letter agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of a business combination.

Our amended and restated articles of incorporation provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination (so that we are not subject to the SEC’s “penny stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of common stock submitted for redemption will be returned to the holders thereof.

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Limitation on redemption upon completion of our initial business combination if we seek shareholder approval

Notwithstanding the foregoing, if we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our amended and restated articles of incorporation provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares. We believe this restriction will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 26% of the public shares could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms.

By limiting our shareholders’ ability to redeem no more than 26% of the public shares, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination.

Tendering stock certificates in connection with a tender offer or redemption rights

We may require our public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public shareholders to satisfy such delivery requirements. Accordingly, a public shareholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for shareholders to use electronic delivery of their public shares.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $35.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the shareholders’ vote on an initial business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business combination was approved, the company would contact such shareholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the shareholder then had an “option window” after the completion of the business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which shareholders were aware they needed to commit before the shareholder meeting, would become “option” rights surviving past the completion of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.

Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the shareholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our business combination.

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If our initial business combination is not approved or completed for any reason, then our public shareholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.

If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report).

Ability to Extend Time to Complete Business Combination

If we anticipate that we may not be able to consummate our initial business combination by February 24, 2018, we may extend the period of time to consummate a business combination by an additional three months (no later than May 24, 2018). Pursuant to the terms of our amended and restated articles of incorporation and the trust agreement entered into between us and Continental Stock Transfer & Trust Company, in order to extend the time available for us to consummate our initial business combination, our sponsors or their affiliates or designees, upon five days advance notice prior to such deadline, must deposit into the trust account $402,536 ($0.058 per unit) on or prior to the date of such deadline for another three month extension. In the event that we receive notice from our sponsors five days prior to such deadline of their intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to such deadline. In addition, we intend to issue a press release the day after such deadline announcing whether or not the funds had been timely deposited. Our sponsors and their affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that some, but not all, of our sponsors, decide to extend the period of time to consummate our initial business combination, such sponsors (or their affiliates or designees) may deposit the entire $402,536 amount. In the event that interest in the trust is available for withdrawal for working capital purposes and has not been used to pay taxes or other working capital expenses, we may apply the accrued interest in the trust account or such withdrawn interest to the sponsors’ obligation to loan us money in connection with such extension, and the amount that our sponsors would be obligated to loan us in connection with such extension would be reduced by the amount of interest so applied (as we have done in the extensions in August and November of 2017).

Redemption of public shares and liquidation if no initial business combination

Our executive officers and directors have agreed that we will have only until February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), to complete our initial business combination. If we are unable to complete our initial business combination within the applicable time period we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less up to $50,000 of interest to pay dissolution expenses (which interest shall be net of taxes payable and working capital released to us) divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Marshall Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination within the applicable time period.

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Our initial shareholders have entered into letter agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report). However, if our initial shareholders acquire public shares, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the applicable time period.

Our executive officers and directors have agreed, pursuant to a written letter agreement with us, that they will not propose any amendment to our amended and restated articles of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), unless we provide our public shareholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us) divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination (so that we are not subject to the SEC’s “penny stock” rules). Prior to acquiring any securities from our initial shareholders, permitted transferees must enter into a written agreement with us agreeing to be bound by the same restriction.

We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $117,000 of proceeds held outside the trust account (as of November 30, 2017), although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes and not released to us to fund working capital expenses, we may request the trustee to release to us an additional amount of up to $50,000 of such accrued interest to pay those costs and expenses.

If we were to expend all of the net proceeds of our initial public offering, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by shareholders upon our dissolution would be approximately $10.32 (or such higher amount then held in trust). The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public shareholders. We cannot assure you that the actual per-share redemption amount received by shareholders will not be substantially less than $10.32 (or such higher amount then held in trust). These claims must be paid or provided for before we make any distribution of our remaining assets to our shareholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.

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Although we seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. In order to protect the amounts held in the trust account, Messrs. Tsirigakis and Syllantavos have agreed that they will be jointly liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.32 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets other than due to the failure to obtain such waiver, in each case net of the amount of interest which may be withdrawn to pay taxes or working capital expenses, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then Messrs. Tsirigakis and Syllantavos will not be responsible to the extent of any liability for such third-party claims. We cannot assure you, however, that Messrs. Tsirigakis and Syllantavos would be able to satisfy those obligations. None of our other officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

In the event that the proceeds in the trust account are reduced below (i) $10.32 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets other than due to the failure to obtain such waiver, in each case net of the amount of interest which may be withdrawn to pay taxes or working capital expenses, and Messrs. Tsirigakis and Syllantavos assert that they are unable to satisfy their indemnification obligations or that they have no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be substantially less than $10.32 per share (or such higher amount then held in trust).

We will seek to reduce the possibility that Messrs. Tsirigakis and Syllantavos will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Messrs. Tsirigakis and Syllantavos will also not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $117,000 from the proceeds of our initial public offering (as of November 30, 2017) with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $50,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, shareholders who received funds from our trust account could be liable for claims made by creditors.

Under the BCA, shareholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public shareholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), may be considered a liquidation distribution under Marshall Islands law. If a corporation complies with certain procedures set forth in Section 105 of the BCA intended to ensure that it makes reasonable provision for all claims against it, including a period of between six months and three years (which may be extended under certain circumstances) during which third party claims can be brought against the corporation before any liquidating distributions are made to shareholders, any liability of shareholders with respect to a liquidating distribution is limited to the lesser of such shareholder’s pro rata share of the claim or the amount distributed to the shareholder, and any liability of the shareholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public sharespost as soon as reasonably possible following February 24, 2018 (or May 24, 2018 ifpracticable after we extendelectronically file such deadline for another three months) in the event we do not complete our business combination and, therefore, we do not intend to complymaterial with, those procedures.

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Furthermore, if the pro rata portion of our trust account distributed to our public shareholders upon the redemption of our public shares in the event we do not complete our business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), is not considered a liquidation distribution under Marshall Islands law and such redemption distribution is deemed to be unlawful, then pursuant to Section 100 of the BCA, the statute of limitations for claims of creditors could then be three years (which may be extended under certain circumstances) after the unlawful redemption distribution. If we are unable to complete our business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equalor furnish it to, the aggregate amount then on deposit in the trust account, including interest (net of the amount of interest which may be withdrawn to pay taxes or working capital expenses and less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Marshall Islands law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following May 24, 2018, and, therefore, we do not intend to comply with those procedures. As such, our shareholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our shareholders may extend well beyond the third anniversary of such date.

Because we will not be complying with Section 106 of the BCA with respect to giving published notice to third party claimants or creditors, based on facts known to us at such timeSEC. The SEC also maintains an Internet website that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the three years (which may be extended under certain circumstances) following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account.

If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.32 per share (or such higher amount then held in trust) to our public shareholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. Furthermore, our board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

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Our public shareholders will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not complete our business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), (ii) in connection with a shareholder vote to amend our amended and restated articles of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), or (iii) if they redeem their respective shares for cash upon the completion of the initial business combination. In no other circumstances will a shareholder have any right or interest of any kind to or in the trust account. In the event we seek shareholder approval in connection with our initial business combination, a shareholder’s voting in connection with the business combination alone will not result in a shareholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such shareholder must have also exercised its redemption rights described above.

Amended and Restated Articles of Incorporation

Our amended and restated articles of incorporation contain certain requirements and restrictions that apply to us until the consummation of our initial business combination. If we seek to amend any provisions of our amended and restated articles of incorporation relating to shareholders’ rights or pre-business combination activity, we will provide public shareholders with the opportunity to redeem their public shares in connection with any such vote. Our initial shareholders have agreed to waive any redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination. Specifically, our amended and restated articles of incorporation provide, among other things, that:

●prior to the consummation of our initial business combination, we shall either (1) seek shareholder approval of our initial business combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us) or (2) provide our shareholders with the opportunity to tender their shares to us by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us) in each case subject to the limitations described herein;
●we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if we seek shareholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
●if our initial business combination is not consummated by February 24, 2018 (or by May 24, 2018 if we extend the period of time to consummate a business combination, as described in more detail in this Report), then our existence will terminate and we will distribute all amounts in the trust account; and
●prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination.

These provisions cannot be amended without the approval of holders of 65% of our common stock. In the event we seek shareholder approval in connection with our initial business combination, our amended and restated articles of incorporation provide that we may consummate our initial business combination only if approved by a majority of the shares of common stock voted by our shareholders at a duly held shareholders meeting.

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Competition

In identifying, evaluating and selecting a target business for our business combination, we encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, humancontains reports and other resources than us. Our ability to acquire larger target businesses willinformation regarding issuers, such as Phunware, that can be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public shareholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.

Employees

We currently have two executive officers. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that Messrs. Tsirigakis and Syllantavos or any other members of our management devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process, but we expect that they will devote approximately 20 hours a week on average to our affairs.

Periodic Reporting and Financial Information

We registered our units, common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reportsfiled electronically with the SEC. In accordance with the requirementsThe SEC's Internet website is located at http://www.sec.gov.

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Table of the Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public auditors.

We will provide shareholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to shareholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with GAAP, however, they may alternatively be prepared in accordance with International Financial Reporting Standards (IFRS). We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with either GAAP or IFRS or that the potential target business will be able to prepare its financial statements in accordance with either GAAP or IFRS. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls. As long as we maintain our status as an emerging growth company, however, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

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Contents

Item 1A. Risk Factors.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation

Risk Factors
An investment in our periodic reports and proxy statements, and exemptions from the requirementssecurities involves a high degree of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior May 31st , and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

Item 1a. Risk Factors

risk. You should consider carefully considerthe risks and uncertainties described below, together with all of the following risk factors and all the other information contained in this Annual Report, including theour consolidated financial statements.statements and related notes, before deciding to invest in our securities. If any of the following risksevents occur, our business, financial condition orand operating results of operations may be materially and adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risk factorsrisks and uncertainties described below are not necessarily exhaustivethe only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

Risks Related to Our Business, Operations and Industry
We have a history of losses, we expect to continue to incur losses and we may not achieve or sustain profitability in the future.
We have incurred significant losses in each fiscal year since our inception. We experienced a consolidated net loss for the years ended December 31, 2022 and December 31, 2021. These losses were due to both a decline in platform revenue in 2021 and 2022, as compared to previous years, losses related to our digital asset holdings and the substantial investments we made to build our products and services, grow and maintain our business, acquire customers and service our various debt obligations. You should not consider our historical revenue levels or operating expenses prior to recent periods as indicative of our future performance. Key elements of our growth strategy include acquiring new customers and continuing to innovate and expand our product offerings. As a result, our operating expenses may continue to increase in the future due to expected increased sales and marketing expenses, operating costs, research and development costs and general and administrative costs and, therefore, our operating losses may continue or even potentially increase for the foreseeable future. In addition, as a public company we incur significant legal, accounting and other expenses, including, but not limited to additional costs in resolving our existing legal matters. Furthermore, to the extent that we are successful in increasing our customer base, we may also incur increased expenses because costs associated with generating and supporting customer agreements are generally incurred up front. Revenue recognition may not occur during the same the same period in which we incur costs associated with our agreements. Our efforts to grow our business may be costlier than we expect and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for many reasons, including the other risks described in this Annual Report and unforeseen expenses, difficulties, complications and delays and other unknown events. You should not rely upon future bookings we may announce or revenue growth as indicative of our future performance. We cannot assure you that we will reach profitability in the future or at any specific time in the future or that, if and when we do become profitable, we will sustain profitability. If we are encouragedultimately unable to generate sufficient revenue to meet our financial targets, become profitable and have sustainable positive cash flows, investors could lose their investment.
Our consolidated financial statements include an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
The notes accompanying our consolidated financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern due to our recurring losses from operations and substantial decline in our working capital. If we are unsuccessful in our efforts to raise outside financing, we may be required to significantly reduce or cease operations. The report of our independent registered public accounting firm on our audited financial statements for the year ended December 31, 2022 included a "going concern" explanatory paragraph.
We current have an effective registration statement on Form S-3 filed with the SEC. We may use the shelf registration statement on Form S-3 to offer from time to time any combination of common stock, preferred stock, warrants and units. Contained therein, is a prospectus supplement in which we may sell up to $100 million of our common stock in an “at the market" offering pursuant to a sales agreement we entered into with H.C. Wainwright & Co., LLC on January 31, 2022. As of the date of this Annual Report on Form 10-K, a total of $95.4 million of shares of our common stock remains issuable pursuant to the sales agreement.
There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. A “going concern” qualification could impair our ability to finance our operations through the sale of equity, to incur debt or to pursue other financing alternatives. Our ability to continue as a going concern will depend upon the availability and terms of future funding, growth in revenue, improved operating margins and our ability to profitably meet our after-sale service
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commitments with existing customers. If we are unable to achieve these goals, our business could be jeopardized and may not be able to continue. If we ceased operations, it is likely that all of our investors would lose their investment.
Our future performance will depend on the successful transition of our Chief Executive Officer (CEO).
In October 2022, our co-founder and CEO, Alan Knitowski, submitted notice of resignation to the Company effective upon the expiration of his employment contract on December 26, 2022. In November 2022, we announced the hiring of Russell Buyse to serve as our Chief Executive Officer effective as of December 28, 2022. If we are unable to execute a timely and orderly transition and successfully integrate our new CEO into our leadership team, revenue, operating results and our financial condition may be adversely impacted.
Our future performance also will continue to depend on the services and contributions of our other senior management and key employees to execute on our business plan and to identify and pursue new opportunities as well as service and product innovations. These changes, and any future changes, in our operations and management team could be disruptive to our operations. Further, if our new CEO formulates different or changed views, the future strategy and plans of our business may differ materially from those of the past.
We are currently operating in a period of significant macro-economic uncertainty, including supply-chain disruptions, COVID-related disruptions and inflationary pressures. Weakened economic conditions may have an adverse impact on our business and results of operations.
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demand for our products and services. Inflationary pressures and supply chain disruptions could impact the price at which we acquire components required in the assembly of Lyte computer systems. Our principal operating expense is compensation related costs. Inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital. The effects of inflation on customer and consumer budgets could result in the reduction of our customers’ spending plans. These and other economic factors could materially adversely affect our business, results of operations and financial condition.
In addition, the effects of macro-economic uncertainty, including, but not limited to the COVID-19 pandemic, may heighten many of the other risks described in this “Risk Factors” section.
If we are unable to expand or renew sales to existing customers, or attract new customers, our growth could be slower than expected and our business may be harmed.
Our future growth depends upon expanding sales and renewals of sales of our technology, products and services to existing customers and expansion of our personal computer offerings. Our customers may not continue to purchase our technology offerings and services, or our customers may reduce their purchase rate of services, if we do not demonstrate the value proposition for their investment and we may not be able to replace existing customers with new customers. In addition, our customers may not renew their contracts with us on the same terms, or at all, because of dissatisfaction with our product or service offerings. If our customers do not renew their contracts, our revenue may grow more slowly than expected, may not grow at all, or may decline.
Additionally, increasing incremental sales to our current customer base may require increasingly sophisticated and costly sales efforts that are targeted at senior management. We plan to continue expanding our sales efforts but we may be unable to hire qualified sales personnel, may be unable to successfully train those sales personnel that we are able to hire and sales personnel may not become fully productive on the timelines that we have projected, or at all. Additionally, although we dedicate significant resources to sales and marketing programs, these sales and marketing programs may not have the desired effect and may not expand sales. We cannot provide assurance that our efforts will increase sales to existing customers or generate additional revenue. If our efforts to upsell to our customers are not successful or we cannot find additional expansion opportunities, our future growth may grow more slowly than expected, may not grow at all, or may decline.
Our ability to achieve significant growth in revenue in the future will also depend upon our ability to attract and sell our technology, products and services to new customers. This may be particularly challenging where an organization has already invested substantial personnel and financial resources to integrate competing technology, products and services. An organization may be reluctant or unwilling to invest in new technology offerings and services. If we fail to attract new
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customers and maintain and expand those customer relationships, our revenue may grow more slowly than expected, may not grow at all, or may decline and our business may be harmed.
We have incurred a goodwill impairment charge and goodwill continues to comprise a significant portion of our total assets. In the future, we could incur additional impairment charges, which could result in a material, non-cash write-down and could have a material adverse effect on our results of operations, financial condition and our future operating results.
The carrying value of our goodwill was $31.1 million, or approximately 57% of our total assets, as of December 31, 2022. We perform your ownan analysis on our goodwill balances to test for impairment on an annual basis or whenever events occur that may indicate impairment possibly exists. Goodwill is deemed to be impaired if the net book value of a reporting unit exceeds the estimated fair value.
We periodically review the carrying values of goodwill and intangible assets to determine whether such carrying values exceed their fair market values. Declines in the profitability of the Company, due to economic or market conditions or otherwise, as well as adverse changes in financial, competitive and other conditions, could adversely affect the values of our reporting units, resulting in an impairment of goodwill or intangible assets. In addition, adverse changes to the key valuation assumptions contributing to the fair value of our reporting units could result in an impairment of goodwill or intangible assets.
We completed our annual goodwill impairment analysis during the fourth quarter of 2022, and we concluded goodwill was impaired. Goodwill impairment charges of $2.1 million were recorded during the year ended December 31, 2022. For additional details, refer to Note 6 "Goodwill" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on our goodwill impairment. We cannot be certain that a future downturn in our business, changes in market conditions or a longer-term decline in the quoted market price of our stock will not result in future impairments of goodwill and the recognition of resulting expenses in future periods, which could adversely affect our results of operations for those periods.
Current and future litigation could adversely affect us.
We, along with certain of our former and current executive officers and certain former and current board members, are parties to litigation with Wild Basin Investments, LLC as further described on our Current Report on Form 8-K filed with the SEC on January 10, 2020. We, along with our officers and directors, may also become subject to other legal proceedings in our ordinary course of business. We cannot predict with certainty the outcome of this legal proceeding. The outcome of this or future legal proceeding could require us to take, or refrain from taking, actions which could negatively affect our operations. Such legal proceedings involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty, or fine. As a smaller company, the collective costs of litigation proceedings represent a drain on our cash resources, and require an inordinate amount of our management’s time and attention. An adverse ruling with respect to usour current or any other litigation could have a material adverse effect on our results of operations and financial condition. Negative publicity surrounding such legal proceedings may also harm our business.

Wereputation and adversely impact our business and results.

Our results of operations and ability to grow could be negatively affected if we cannot adapt and expand our technology and product and service offerings in response to ongoing market changes.
The collaboration and technology solutions business and markets are an early stage company with no operating historycharacterized by rapid technological change, evolving industry standards, changing customer preferences and no revenues,new product and you have no basisservice introductions. Our success depends on which to evaluate our ability to achievecontinue to develop and implement technology, product and service offerings that anticipate or timely respond to rapid and continuing changes in technology and industry developments and offerings by new technology providers to serve the evolving needs of our customers. Examples of areas of significant change in the industry include cloud, software defined infrastructure, virtualization, security, mobility, data analytics and IoT, the continued shift from maintenance to managed services and ultimately to cloud based services, as-a-service solutions, security and information technology automation. In addition, enterprises are continuing to shift from on-premise, hardware infrastructure to software centric hosted solutions. Technological developments such as these may materially affect the cost and use of technology and services by our customers and could affect the nature of how our revenue is generated. These technologies and others that may emerge, could reduce and, over time, replace some of our current business. In addition, customers may delay spending under existing contracts and engagements and may delay entering into new contracts while they evaluate new technologies. If we do not sufficiently invest in new technology, industry developments and our personnel, or evolve and expand our business objective.

We are an early stage company with no operating results. Becauseat sufficient speed and scale, or if we lack an operating history, you have no basis upon whichdo not make the right strategic investments to evaluaterespond to these developments and successfully drive innovation, our technology, products and services, our results of operations and our ability to develop and maintain a competitive advantage and growth could be negatively affected.

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In addition, if we are unable to keep up with changes in technology and new hardware, software and services offerings, for example, by providing the appropriate training to our customer solutions team, sales directors, program management team, channel partners and software development and product engineers to enable them to effectively sell and deliver such new offerings to customers, our business, results of operations, or financial condition could be adversely affected.
Demand for our technology, product and service offerings could be adversely affected by volatile, negative, or uncertain economic conditions, including, but not limited to those caused by the COVID-19 pandemic, and the effects of these conditions on our customers’ businesses.
Our revenue and profitability depend on the demand for our technology, product and service offerings, which could be negatively affected by numerous factors, many of which are beyond our control. Volatile, negative, or uncertain economic conditions, including those caused by the COVID-19 pandemic affect our customers’ businesses and the markets we serve. Such economic conditions in our markets have undermined and could in the future undermine business confidence in our markets and cause our customers to reduce or defer their spending on new technology offerings and services, or may result in customers reducing, delaying or eliminating spending under existing contracts with us, which would negatively affect our business. Growth in the markets we serve could be at a slow rate, or could stagnate or contract, in each case for an extended period of time. Ongoing economic volatility and uncertainty and changing demand patterns affect our business in a number of other ways, including making it more difficult to accurately forecast customer demand and effectively build our revenue and resource plans.
Economic volatility and uncertainty is particularly challenging because it may take some time for the effects and changes in demand patterns resulting from these and other factors to manifest themselves in our business and results of operations. Changing demand patterns from economic volatility and uncertainty could have a significant negative impact on our business, results of operations, or financial condition.
If we fail to maintain the efficiency of our supply chain as we respond to changes in customer demand for our products, our business could be materially adversely affected.
Our ability to meet customer demand for our products depends, in part, on our ability to deliver the products our customers want on a timely basis. For example, we rely on our supply chain for the manufacturing, distribution and fulfillment of Lyte personal computers. As we continue to grow Lyte, expand to international markets and acquire new customers, the efficiency of our supply chain will become increasingly important because many of our customers tend to have specific requirements for Lyte products, and specific time-frames in which they require delivery of these products. If we are unable to consistently deliver the right personal computers to our customers on a timely basis in the right locations, our customers may not order computers from us, which could have a material adverse effect on our business.
Global political conditions may adversely affect demand for our products.
Global political conditions may create uncertainties that could adversely affect our business. The United States has been and may continue to be involved in armed conflicts that could have a further impact on our sales and our supply chain related to acquiring necessary inventory to assemble Lyte computers. The consequences of armed conflict, political instability or civil or military unrest are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us. Terrorist attacks or other hostile acts may negatively affect our operations, or adversely affect demand for our products, and such attacks or related armed conflicts may impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks or hostile acts may make travel and the transportation of our products more difficult and more expensive, which could materially adversely affect us. Any of these events could cause consumer spending to decrease or result in increased volatility in the United States economy and global financial markets.
The actual market for our products and services could be significantly smaller than estimates of total potential market opportunity and if customer demand for our products and services does not meet expectations, our ability to generate revenue and meet our financial targets could be adversely affected.
While we expect growth in the markets for our products, it is possible that the growth in some or all of these markets may not meet our expectations, or materialize at all. The methodology on which our estimate of our total potential market opportunity is based includes several key assumptions based on our industry knowledge and customer experience. If any of these assumptions proves to be inaccurate, then the actual market for our solutions could be significantly smaller than our estimates of our total potential market opportunity. If the customer demand for our products or services or the adoption rate in our target markets does not meet our expectations, our ability to generate revenue from customers and meet our financial targets could be adversely affected.
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Substantial competition could reduce our market share and significantly harm our financial performance.
The markets in which we operate are highly competitive, with relatively low barriers to entry for some software, product or service organizations. Some customers may be hesitant to switch vendors or to adopt cloud-based software such as ours and prefer to maintain their existing relationships. Some of our competitors are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do. We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions, as well as custom-built personal computer hardware vendors. We may also face competition from a variety of vendors of software and products that address only a portion of our platform. In addition, other companies that provide cloud-based software in different target markets may develop software or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal software. With the introduction of new technologies and market entrants, we expect this competition to intensify in the future.
Many of our competitors are able to devote greater resources to the development, promotion and sale of their products and services. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. In addition, many of our competitors have established marketing relationships, access to larger customer bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources. If our technology, products and services do not become more accepted relative to those of our competitors, or if our competitors are successful in bringing their products or services to market earlier than ours, or if the products or services of our competitors are more technologically capable than ours, then our revenues could be adversely affected. In addition, some of our competitors may offer their products and services at lower prices. If we are unable to achieve our business objectivetarget pricing levels, our operating results may be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of completingwhich could adversely affect our initial business combination with one or more target businesses.business.
Our future results will depend on our ability to continue to focus our resources and manage costs effectively.
We are continually focusing on measures intended to further improve cost efficiency. We may be unable to completerealize all expected cost savings in connection with these efforts within the expected time frame, or at all, and we may incur additional and/or unexpected costs to realize them. Further, we may not be able to sustain any achieved savings in the future. Future results will depend on the success of these efforts.
If we are unable to control costs, our operating margins could decrease and we may incur additional losses. Our future profitability will depend on our ability to manage costs or increase productivity. An inability to effectively manage costs could adversely impact our business, combination.results of operations or financial condition.
Our profitability could suffer if we are not able to manage large and complex projects and complete fixed price, fixed timeframe contracts on budget and on time.
Our profitability and operating results are dependent on the scale of our projects and the prices we are able to charge for our technology, products and services. We perform a significant portion of our work through fixed price contracts, in which we assume full control of the project team and manage all facets of execution. As a significant portion of our projects are on a fixed price model, we may be unable to accurately estimate the appropriate project price and successfully manage such projects. Although we use specified technical processes and our past experience to reduce the risks associated with estimating, planning and performing fixed price and fixed timeframe projects, we face the risk of cost overruns, completion delays and wage inflation in connection with these projects. If we fail to completeaccurately estimate the resources or time required for a project or future rates of wage inflation, or if we fail to perform contractual obligations within the contractual timeframe, our profitability could suffer.
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The challenges of managing larger and more complex projects include:

•maintaining high quality control and process execution standards;
•maintaining planned resource utilization rates on a consistent basis;
•maintaining productivity levels and implementing necessary process improvements;
•controlling project costs;
•maintaining close customer contact and high levels of customer satisfaction;
•recruiting and retaining sufficient numbers of skilled engineering, design and program management professionals; and
•maintaining effective customer relationships.
In addition, large and complex projects may involve multiple engagements or stages and there is a risk that a customer may choose not to retain us for additional stages or may cancel or delay additional planned engagements. Such cancellations or delays may make it difficult to plan our project resource requirements and may result in lower profitability levels than we anticipated upon commencing engagements.
Our business combination, we will never generate any operating revenues.

Our public shareholdersstrategy is evolving. Investments in new services and technologies may not be afforded an opportunity to vote on our proposed business combination, which means wesuccessful and may complete our initial business combination even if a majorityinvolve pursuing new lines of our public shareholders do not support such a combination.

We may not hold a shareholder vote to approve our initial business combination unless the business combination would require shareholder approval under the laws of the Republic of Marshall Islands or NASDAQ rules or if we decide to hold a shareholder vote for business or other reasons. For instance, NASDAQ rules currently allowstrategic transactions and investments, or dispositions of assets or businesses that may no longer help us to engage in a tender offer in lieu of a shareholder meeting but would still require us to obtain shareholder approval if we were not a foreign private issuer and were seeking to issue more than 20% ofmeet our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares and we were not a foreign private issuer, we would seek shareholder approval of such business combination. However, except as required by law or NASDAQ rules, the decision as to whether we will seek shareholder approval of a proposed business combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek shareholder approval, or whether we will be deemed to be a foreign private issuer (in which case we would be required to conduct a tender offer under SEC rules rather than seeking shareholder approval). Accordingly, we may consummate our initial business combination even if holders of a majority of the outstanding shares of our common stock do not approve of the business combination we consummate.

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If we seek shareholder approval of our initial business combination, after approval of our board, our initial shareholders have agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote.

Unlike other blank check companies in which the initial shareholders agree to vote their founder shares in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, after approval of our board, our initial shareholders have agreed to vote their founder shares, as well as any public shares purchased during or after our initial public offering, in favor of our initial business combination. Our initial shareholders own 22.2% of our outstanding shares of common stock as of the date hereof. As a result, we would need only 2,356,452 or 36.25% of the 6,900,610 public shares to be voted in favor of our initial business combination in order to have such transaction approved. Accordingly, if we seek shareholder approval of our initial business combination, it is more likely that the necessary shareholder approval will be received than would be the case if our initial shareholders agreed to vote their founder shares in accordance with the majority of the votes cast by our public shareholders.

Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek shareholder approval of the business combination.

At the time of your investment in us, youobjectives. Such efforts may not be provided with an opportunitysuccessful.

We continue to evaluate the specific merits or risks of one or more target businesses. Since our board of directors may complete a business combination without seeking shareholder approval (unless shareholder approval is required by law or stock exchange listing requirement, or we decide to obtain shareholder approval for business or other legal reasons), public shareholders may not have the right or opportunity to vote on the business combination, unless we seek such shareholder vote. Accordingly, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forthinvest in our tender offer documents mailednew services and technologies, including adding additional vertical solutions to our public shareholdersproduct offerings and blockchain. We have expanded our Lyte computer offerings into Canada and may plan additional international expansion. The complexity of these solutions, our learning curve in which we describe our initial business combination.

The ability of our public shareholders to redeem their sharesdeveloping and supporting them and significant competition in the markets for cash may make our financial condition unattractive to potential business combination targets, which maythese solutions could make it difficult for us to enter intomarket and implement these solutions successfully. Additionally, there is a business combination with a target.

Werisk that our customers may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public shareholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination (so that weadopt these solutions widely, which could prevent us from realizing expected returns on these investments. Even if these solutions are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be containedsuccessful in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemptionmarket, they may rely on third-party technology, software, services and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.

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The ability of our shareholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

At the time we enter into an agreement for our initial business combination, we will not know how many shareholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing. Third party financing may not be available to us. Furthermore, raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.

If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.

The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our shareholders.

Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination). Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the time frame described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.

We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate.

Our executive officers and directors have agreed that we must complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination). We may not be able to find a suitable target business and complete our initial business combination by such date. If we have not completed our initial business combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us, and less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Marshall Islands law to provide for claims of creditors and the requirements of other applicable law.

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Our sponsors may decide not to extend the term we have to consummate our initial business combination, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, and the warrants will be worthless.

We will have until February 24, 2018 to consummate our initial business combination. We extended the period of time to consummate a business combination on August 24, 2017 and November 24, 2017, each by an additional three months. We may extend such period for another three months to May 24, 2018 to complete a business combination. In order to extend the time available for us to consummate our initial business combination, our sponsors or their affiliates or designees must deposit into the trust account $402,536 ($0.058 per unit) prior to such deadline for a three month extension. Any such payments would be made in the form of a loan. The letter agreement with our initial shareholders contains a provision pursuant to which our sponsors have agreed to waive their right to be repaid for such loans out of the funds held in the trust account (except from any interest that we are permitted to withdraw as described herein) in the event that we do not consummate a business combination. However, we may repay such loans from funds held outside of the trust account from interest permitted to be withdrawn. In the event that interest in the trust is available for withdrawal for working capital purposes and has not been used to pay taxes or other working capital expenses, we may apply the accrued interest in the trust account or such withdrawn interest to the sponsors’ obligation to loan us money in connection with an extension, and the amount that our sponsors would be obligated to loan us in connection with such extension would be reduced by the amount of interest so applied. Our sponsors and their affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business combination.meet stringent service levels. If we are unable to consummate our initial business combination within the applicable time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro rata portion of the funds held in the trust account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Marshall Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, the warrants will be worthless.

If we seek shareholder approval of our initial business combination, our sponsors, directors, executive officers, advisors and their affiliates may elect to purchase shares from public shareholders, which may influence a vote on a proposed business combination and reduce the public “float” of our common stock.

If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our sponsors, directors, executive officers, advisorsdeploy these solutions successfully or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining shareholder approval of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our business combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain the quotation, listing or trading of our securities on a national securities exchange.

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If a public shareholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our business combination. Despite our compliance with these rules, if a public shareholder fails to receive our tender offer or proxy materials, as applicable, such shareholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. In the event that a public shareholder fails to comply with these procedures, its shares may not be redeemed.

You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.

Our public shareholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) our completion of an initial business combination, and then only in connection with those shares of our common stock that such shareholder properly elected to redeem, subject to the limitations described herein, and (ii) the redemption of our public shares if we are unable to complete an initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination), subject to applicable law and as further described herein. In addition, if our plan to redeem our public shares if we are unable to complete an initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination) is not completed for any reason, compliance with Marshall Islands law may require that we submit a plan of dissolution to our then-existing shareholders for approval prior to the distribution of the proceeds held in our trust account. In that case, public shareholders may be forced to wait beyond February 24, 2018 (or May 24, 2018 if we further extend the period of time to consummate a business combination) before they receive funds from our trust account. In no other circumstances will a public shareholder have any right or interest of any kind in the trust account. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.

You will not be entitled to protections normally afforded to investors of many other blank check companies.

Since the net proceeds of our initial public offering and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means that we will have a longer period of time to complete our business combination than do companies subject to Rule 419. Moreover, if our initial public offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination.

If we seek shareholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of shareholders are deemed to hold in excess of 26% of our common stock, you will lose the ability to redeem all such shares in excess of 26% of our common stock.

If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated articles of incorporation provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 26% of the shares sold in our initial public offering, which we refer to as the “Excess Shares.” However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our business combination. And as a result, you will continue to hold that number of shares exceeding 26% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.

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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust), on our redemption, and our warrants will expire worthless.

We have encountered, and will continue to encounter, intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources are relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable is limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the shares of common stock redeemed and, in the event we seek shareholder approval of our business combination, we make purchases of our common stock, potentially reducing the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust) on the liquidation of our trust account and our warrants will expire worthless.

If the net proceeds of our initial public offering not being held in the trust account are insufficient to allow us to operate until February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination), we may be unable to complete our initial business combination.

The funds available to us outside of the trust account may not be sufficient to allow us to operate until February 24, 2018 (or until May 24, 2018 if we fully extend the period of time to consummate a business combination), assuming that our initial business combination is not completed during that time. We believe that, as of November 30, 2017, the funds available to us outside of the trust account ($117,000), are sufficient to allow us to operate until February 24, 2018 (or until May 24, 2018 if we fully extend the period of time to consummate a business combination); however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust) on the liquidation of our trust account and our warrants will expire worthless.

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If the net proceeds of our initial public offering not being held in the trust account are insufficient,profitably, it could limit the amount available to fundadversely impact our search for a target business, or businesses and complete our initial business combination and we will depend on loans from our sponsors or management team to fund our search, to pay our taxes and to complete our business combination.

Of the net proceeds of our initial public offering, only approximately $117,000 as of November 30, 2017 are available to us outside the trust account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our sponsors, management team or other third parties to operate or may be forced to liquidate. Neither our sponsors, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public shareholders may only receive approximately $10.32 per share (or such higher amount then held in trust) on our redemption of our public shares, and our warrants will expire worthless.

Subsequent to our completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations or financial condition.

Our industry is undergoing significant change and our stock price, which could cause youbusiness strategy is continuing to lose some or all of your investment.

Even if we conduct extensive due diligence on a targetevolve to meet these changes. In order to profitably grow our business, with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forcedneed to later write-down or write-off assets, restructureexpand into new lines of business beyond our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected riskscurrent focus of mobile engagement analytics products, mobile application advertising and services, which may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Although these charges may be non-cash items and would not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any shareholders who choose to remain shareholders following the business combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the business combination contained an actionable material misstatement or material omission.

Shareholders may be liable for claims of third party creditors to the extent you receive distributions in a dissolution.

Under Republic of the Marshall Islands law, shareholders might, in certain circumstances, be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. If we complied with the procedures set forth in Section 106 of the BCA, which are intended to ensure that we make reasonable provision for all claims against us,involve pursuing strategic transactions, including a six month notice period during which any third-party claims can be brought against us before any liquidating distributions are made to shareholders, any liability of a shareholder with respect to a liquidating distribution should be limited to the lesser of such shareholder’s pro rata share of the claim or the amount distributed to the shareholder, and any liability of the shareholder should be barred after the period set forth in such notice. However, it is our intention to make liquidating distributions to our shareholders as soon as reasonably possible after dissolution. As such, our shareholders could potentially be liable for any claims to the extent of distributions received by them in a dissolution and any such liability of our shareholders will likely extend beyond the third anniversary of such dissolution or the settlement of claims, litigation or proceedings begun prior to or during the three year period. Accordingly, third parties may seek to recover from our shareholders amounts owed to them by us.

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If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than $10.32 per share (or such higher amount then held in trust).

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a resultpotential acquisitions of, or arising out of, any negotiations, contractsinvestments in, related or agreements with usunrelated businesses and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the three years (which may be extended under certain circumstances) following redemption. Accordingly, the per-share redemption amount received by public shareholders could be less than the $10.32 per share initially held in the trust account (or such higher amount then held in trust), due to claims of such creditors. Messrs. Tsirigakis and Syllantavos have agreed that they will be jointly liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.32 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes or working capital expenses, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Messrs. Tsirigakis and Syllantavos will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether Mr. Tsirigakis or Mr. Syllantavos has sufficient funds to satisfy their indemnity obligations and, therefore, Messrs. Tsirigakis and Syllantavos may not be able to satisfy those obligations. We have not asked Mr. Tsirigakis or Mr. Syllantavos to reserve for such eventuality. We believe the likelihood of Messrs. Tsirigakis and Syllantavos having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account.

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Our directors may decide not to enforce the indemnification obligations of Messrs. Tsirigakis and Syllantavos, resulting in a reduction in the amount of funds in the trust account available for distribution to our public shareholders.

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.32 per share (or such higher amount then held in trust) or (ii) other than due to the failure to obtain such waiver such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes or working capital expenses, and Messrs. Tsirigakis and Syllantavos assert that they are unable to satisfy their obligations or that they have no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public shareholders may be reduced below $10.32 per share (or such higher amount then held in trust).

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our business combination.

If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:

●restrictions on the nature of our investments, and

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●restrictions on the issuance of securities,

each of which may make it difficult for us to complete our business combination.

assets. In addition, we may have imposed upon us burdensome requirements, including:

●registration as an investment company;
●adoption of a specific form of corporate structure; and
●reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

We do not believeseek divestitures of existing businesses or assets. There can be no assurance that we will be successful with our principal activities subject usefforts to the Investment Company Act. The proceeds held in the trust account may be invested by the trustee only in United States government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds are restricted to these instruments, we believe we meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust) on the liquidation of our trust account and our warrants will expire worthless.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affectevolve our business investmentsstrategy and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changescould suffer significant losses as a result, which could have a material adverse effect on our business, investmentsfinancial condition and results of operations.

If we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. We may also dispose of assets or a business at a price or on terms that are less desirable than we had anticipated. In addition, we may experience greater dis-synergies than expected and the impact of the divestiture on our revenue may be larger than projected.

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Future acquisitions could disrupt our business and may divert management’s attention and, if unsuccessful, harm our business.
We may choose to expand by making additional acquisitions that could be material to our business. We have in the past made several acquisitions of complementary businesses, including acquisitions of Odyssey, Simplikate, Digby, Tapit!, GoTV and our most recently completed acquisition of Lyte.
Acquisitions involve many risks, including the following:

•an acquisition may negatively affect our results of operations and financial condition because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
•we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;
•an acquisition may disrupt our ongoing business, divert resources, increase our expenses, or distract our management;
•an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company;
•we may encounter difficulties in, or may be unable to, successfully sell any acquired technology, products or services;
•an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;
•the challenges inherent in effectively managing an increased number of employees in diverse locations;
•the potential strain on our financial and managerial controls and reporting systems and procedures;
•the potential known and unknown liabilities associated with an acquired company;
•our use of cash to pay for acquisitions would limit other potential uses for our cash;
•if we incur additional debt to fund such acquisitions, such debt may subject us to additional material restrictions on our ability to conduct our business as well as additional financial maintenance covenants;
•the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;
•to the extent that we issue a significant amount of equity or equity linked securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and
•managing the varying intellectual property protection strategies and other activities of an acquired company.
We may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, services, personnel or operations of any acquired business, or any significant delay in achieving integration, could harm our business, results of operations or financial condition.
We may not be able to recognize revenue in the period in which our services are performed, which may cause our margins to fluctuate.
Our services are performed under both fixed-price and time and material contract arrangements. All revenue is recognized pursuant to applicable accounting standards. Our failure to meet all the obligations, or otherwise meet a customer’s
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expectations, may result in us having to record the cost related to the performance of services in the period that services were rendered, but delay the timing of revenue recognition to a future period in which all service obligations have been met.
Our financial results may be adversely affected by changes in accounting principles applicable to us.
U.S. generally accepted accounting principles (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results for periods prior and subsequent to such change. We may adopt changes in accounting standards retrospectively to prior periods and the adoption may result in an adverse change to previously reported results.
To adopt new standards, we may have to implement new modules in our accounting system, hire consultants and increase our spending on audit fees, thereby increasing our general and administrative expense. Any difficulties in implementing changes in accounting standards or adequately accounting after adoption could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

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We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations.
Our quarterly operating results have fluctuated in the past and we expect them to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful. In addition to the other risks described herein, factors that may affect our quarterly operating results include:

•the amount and timing of completion of application development services and other service-related engagements;
•changes in spending on subscriptions, services and application transactions media offerings and services by our current or prospective customers;
•our ability to scale and expand the Lyte business;
•pricing our technology, product, and services effectively so that we are able to attract and retain customers without compromising our operating results;
•one-time, non-recurring revenue events;
•attracting new customers and increasing our existing customers’ use of our technology offerings and services;
•the mix between new contracts and renewals of existing contracts;
•customer renewal rates and the amounts for which agreements are renewed;
•seasonality and its effect on customer demand for Lyte personal computers;
•awareness of our brand;
•changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new technologies and technology enhancements;
•our ability to manage our existing business and future growth;
•unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security;
•customer delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors;
•budgeting cycles of our customers;
•changes in the competitive dynamics of our market, including consolidation among competitors or customers;
•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses (including marketing events and commissions and bonuses associated with performance) and employee benefit expenses;
•changes to the commission plans, quotas and other compensation related metrics for our sales representatives;
•the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;
•the amount and timing of costs associated with recruiting, training and integrating new employees;
•the amount and timing of cash collections from our customers and the mix of quarterly and annual billings;
•unforeseen costs and expenses related to the expansion of our business, operations and infrastructure;
•changes in the levels of our capital expenditures;
•foreign currency exchange rate fluctuations; and
•general economic and political conditions.
We may not be able to accurately forecast the amount and mix of future technology, products and services, size or duration of contracts, revenue and expenses and, as a result, our operating results may fall below our estimates.
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We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data.
In the normal course of business as a seller of personal computers via the internet, we obtain large amounts of personal data, including credit and debit card information. We are also dependent on technology networks and systems to process, transmit and securely store electronic information and to communicate among our locations and with our customers. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and potential loss or unauthorized disclosure of confidential information or data, including personal data. In addition, many of our engagements involve projects that are critical to the operations of our customers’ businesses. The theft and/or unauthorized use or publication of our, or our customers’, confidential information or other proprietary business information as a result of such an incident could adversely affect our competitive position and reduce marketplace acceptance of our products and services. Any failure in the networks or computer systems used by us or our customers could result in a claim for substantial damages against us and significant reputational harm, regardless of our responsibility for the failure.
In addition, we often have access to or are required to manage, utilize, collect and store sensitive or confidential customer or employee data, including personal data. As a result, we are subject to numerous U.S. and non-U.S. laws and regulations designed to protect this information, such as the European Union’s GDPR and various U.S. federal and state laws governing the protection of personal data. If any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data, or otherwise mismanages or misappropriates that data, or if unauthorized access to or disclosure of data in our possession or control occurs, we could be subject to liability and penalties in connection with any violation of applicable privacy laws and/or criminal prosecution, as well as significant liability to our customers or our customers’ clients for breaching contractual confidentiality and security provisions or privacy laws. These risks will increase as we continue to grow our cloud-based product offerings and services and store and process increasingly large amounts of our customers’ confidential information and data and host or manage parts of our customers’ businesses, especially in industries involving particularly sensitive data such as the healthcare industry which we serve. The loss or unauthorized disclosure of sensitive or confidential customer or employee data, including personal data, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, could damage our reputation and cause us to lose customers. Similarly, unauthorized access to or through our information systems and networks or those we develop or manage for our customers, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation, which could in turn harm our business, results of operations, or financial condition.
If we cause disruptions in our customers’ businesses or provide inadequate service, our customers may have claims for substantial damages against us, which could cause us to lose customers, have a negative effect on our corporate reputation and adversely affect our results of operations.
If we make errors in the course of delivering services to our customers or fail to consistently meet our service-level obligations to or other service requirements of our customers, such errors or failures could disrupt our customers' business, which could result in a reduction in our revenue or a claim for substantial damages against us. In addition, a failure or inability by us to meet a contractual requirement could subject us to penalties, cause us to lose customers or damage our brand or corporate reputation and limit our ability to attract new business.
The services we provide are often critical to our customers’ businesses. Certain of our customer contracts require us to comply with security obligations including maintaining network security and backup data, ensuring our network is virus free, maintaining business continuity planning procedures and ensuring our employees conduct their job functions with a high level of integrity. Any failure in a customer’s system, failure of our data center, cloud or other offerings, or breach of security relating to the services we provide to a customer could damage our reputation or result in a claim for substantial damages against us. Any significant failure of our equipment or systems, or any major disruption to basic infrastructure in the locations in which we operate, such as power and telecommunications, could impede our ability to provide services to our customers, have a negative impact on our reputation, cause us to lose customers and adversely affect our results of operations.
Under our customer contracts, our liability for breach of our obligations is in some cases limited pursuant to the terms of the contract. Such limitations may be unenforceable or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our customers, are generally not limited under our contracts. The successful assertion of one or more large claims against us in amounts greater than those covered by our current insurance policies could harm our business, results of operations, or financial condition. Even if such assertions against us are unsuccessful, we may incur reputational harm and substantial legal fees.
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Our technology offerings and services could infringe upon the intellectual property rights of others or we might lose our ability to use intellectual property of others.
We cannot be sure that our brand, software solution and personal computing products and services do not infringe upon the intellectual property rights of third parties, who could claim that we or our customers are infringing upon their intellectual property rights. These claims could harm our reputation, cause us to incur substantial costs or prevent us from offering some products or services in the future, or require us to rebrand. Any related proceedings could require us to expend significant resources over an extended period of time. In most of our contracts, we agree to indemnify our customers for expenses and liabilities resulting from claimed infringements of the intellectual property rights of third parties. In some instances, the amount of these indemnities could be greater than the revenue we receive from the customer. Any claims or litigation in this area, regardless of merit, could be time-consuming and costly, damage our reputation, and/or require us to incur additional costs to obtain the right to continue to offer a product, service or solution to our customers. If we cannot secure this right at all or on reasonable terms, or, alternatively, substitute a non-infringing technology, our business, results of operations, or financial condition could be harmed. Similarly, if we are unsuccessful in defending a trademark claim, we could be forced to re-brand, which could harm our business, results of operations or financial condition. Additionally, in recent years, individuals and firms have purchased intellectual property assets where their sole or primary purpose is to assert claims of infringement against technology providers and customers that use such technology. Any such action naming us or our customers could be costly to defend or lead to an expensive settlement or judgment against us. Moreover, such an action could result in an injunction being ordered against our customer or our own services or operations, causing further damages.
If we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties, our business could be adversely affected.
Our success depends, in part, upon our ability to protect our proprietary methodologies and other intellectual property. Existing laws offer only limited protection of our intellectual property rights and the protection in some countries in which we operate or may operate in the future may be very limited. We rely upon a combination of confidentiality policies, nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect our intellectual property rights. These laws are subject to change at any time and could further limit our ability to protect our intellectual property. There is uncertainty concerning the scope of available intellectual property protection for software and business methods, which are fields in which we rely on intellectual property laws to protect our rights. The validity and enforceability of any intellectual property rights we obtain may be challenged by others and, to the extent we have enforceable intellectual property rights, those intellectual property rights may not prevent competitors from reverse engineering our proprietary information or independently developing technology, products and services similar to or duplicative of us. Further, the steps we take in this regard might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property by competitors, former employees or other third parties and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights. Enforcing our intellectual property rights might also require considerable time, money and oversight and we may not be successful in enforcing our rights.
If we are unable to collect our receivables from, or bill our unbilled services to, our customers, our business, results of operations or financial condition could be adversely affected.
Our business depends on our ability to successfully obtain payment from our customers of the amounts they owe us for products sold or services performed. We typically evaluate the financial condition of our customers and usually bill and collect on relatively short cycles. We maintain allowances against receivables and unbilled services for which we believe collection is doubtful. Actual losses on customer balances could differ from those that we currently anticipate and, as a result, we might need to adjust our allowances. There is no guarantee that we will accurately assess the creditworthiness of our customers. Macroeconomic conditions could also result in financial difficulties for our customers, including limited access to the credit markets, insolvency, or bankruptcy, and, as a result, could cause customers to delay payments to us, request modifications to their payment arrangements that could increase our receivables balance, or default on their payment obligations to us. Timely collection of customer balances also depends on our ability to perform obligations to customers and bill and collect our contracted revenue. If we are unable to meet our contractual requirements, we might experience delays in collection of and/or be unable to collect our customer balances and if this occurs, our business, results of operations, or financial condition could be adversely affected. In addition, if we experience an increase in the time to bill and collect for our services, our cash flows could be adversely affected.
Increased costs of labor and employee health and welfare benefits may adversely impact our results of operations.
Labor related costs represent a significant portion of our expenses and we have experienced increases compensation related expenses. Additional increases in labor costs, for example, as a result of increased competition for skilled labor, or
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employee benefit costs, such as healthcare costs or otherwise, could further impact our business, results of operations or financial condition.
Our global operations are subject to complex risks, some of which might be beyond our control.
Although international revenue currently represents a small portion of our revenue, our business from outside of the United States may expand in the future as we expand our international presence, including but not limited to our subscription, application transaction, Lyte personal computing, services and digital asset offerings. As a result, we may be subject to risks inherently associated with international operations, including risks associated with foreign currency exchange rate fluctuations, difficulties in enforcing intellectual property and/or contractual rights, the burdens of complying with a wide variety of foreign laws and regulations, potentially adverse tax consequences, tariffs, quotas and other barriers, potential difficulties in collecting accounts receivable, international hostilities, terrorism and natural disasters. Expansion of international operations also increases the likelihood of potential or actual violations of domestic and international anti-corruption laws, such as the Foreign Corrupt Practices Act, or of U.S. and international export control and sanctions regulations. We may also face difficulties integrating any new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture. If we are unable to manage the risks of our global operations, our business, results of operations, or financial condition could be adversely affected.
Economic uncertainties or downturns in the global economy or the industries in which our customers operate could disproportionately affect the demand for our products and services solutions and negatively impact our operating results.
Global economic conditions could experience a significant downturn causing market volatility widespread uncertainty. As a result, we and our customers could find it extremely difficult to accurately forecast and plan future business activities. In addition, these conditions could cause our customers or prospective customers to reduce their information technology and other budgets, which could decrease corporate and individual spending on our product and service offerings, resulting in delayed and lengthened sales cycles, a decrease in new customer acquisition and/or loss of customers. Furthermore, during challenging economic times, our customers may face issues with their cash flows and with gaining timely access to sufficient credit or obtaining credit on reasonable terms, which could impair their ability to make timely payments to us, impact customer renewal rates and adversely affect our revenue. If such conditions occur, we may be required to increase our reserves, allowances for doubtful accounts and write-offs of accounts receivable and our operating results would be harmed. In addition, a downturn in the technology-related spend by our customers may disproportionately affect us. We cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets. If the conditions of the global economy or markets in which we operate worsen, our business could be harmed. In addition, even if the global economy does not worsen or improves, the market for product and service offerings may not experience growth or we may not experience growth.
If platform subscription renewal rates decrease, or we do not accurately predict subscription renewal rates, our future revenue and operating results may be harmed.
Our customers have no obligation to renew their subscriptions for our solutions after the expiration of their subscription period, which generally ranges from one to three years. In addition, our customers may renew for lower subscription amounts or for shorter contract lengths. We may not accurately predict renewal rates for our customers. Our renewal rates may decline or fluctuate as a result of a number of factors, including customer usage, pricing changes, number of applications used by our customers, customer satisfaction with our service, increased competition, the acquisition of our customers by other companies and deteriorating general economic conditions. If our customers do not renew their subscriptions for our solutions or decrease the amount they spend with us, our revenue will decline and our business will suffer.
If we are unable to attract new customers or sell additional products or services to our existing customers, our revenue growth will be adversely affected.
To increase our revenue, we must add new customers, encourage existing customers to renew their subscriptions on terms favorable to us, increase their usage of our solutions and sell additional products, services and functionality to existing customers. As our industry matures, as interactive channels develop further, or as competitors introduce lower cost and/or differentiated products or services that are perceived to compete with ours, our ability to sell and renew based on pricing, technology and functionality could be impaired. In addition, attracting, retaining and growing our relationship with customers may require us to effectively employ different strategies than we have historically used with current customers and we may face challenges in doing so. As a result, we may be unable to renew our agreements with existing customers or attract new customers or new business from existing customers on terms that would be favorable or comparable to prior periods, which could have an adverse effect on our revenue and growth.
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Because we recognize revenue from application development services as deliverables are transferred to customers and platform subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our operating results.
We recognize revenue related to application development services upon the transfer of control to the customer of those services. We recognize software subscription revenue over the term of each of our contracts, which, generally ranges from one to three years. As a result, much of the revenue we report each quarter results from contracts entered into during previous quarters. Consequently, a shortfall in demand for our professional services and software solutions or a decline in new, expanded or renewed contracts in any one quarter may not significantly reduce our revenue for that quarter but could negatively affect our revenue in the future. Accordingly, the effect of significant downturns in new or expanded sales or renewals of our professional services or software license solutions will not be reflected in full in our operating results until future periods. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales in any period.
If we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.
The lengthy sales cycle for the evaluation and implementation of our platform software and service solutions, which typically extends for several months, may cause us to experience a delay between increasing operating expenses for such sales efforts, and, upon successful sales, the generation of corresponding revenue. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors. As a result, our operating results in future reporting periods may be significantly below the expectations of the public market, equity research analysts or investors, which could harm the price of our common stock.
The length and unpredictability of the sales cycle for our technology, products and services could delay new sales and cause our revenue and cash flows for any given quarter to fail to meet our projections or market expectations.
The sales cycle between our initial contact with a potential customer and the signing of a contract to provide technology, products and services varies. As a result of the length and unpredictability of the sales cycle, we have a limited ability to forecast the timing of sales. A delay in or failure to complete transactions could harm our business and financial results and could cause our financial results to vary significantly from quarter to quarter. Our sales cycle varies widely, reflecting differences in our potential customers’ decision-making processes, procurement requirements and budget cycles and is subject to significant risks over which we have little or no control, including:
•our customers’ budgetary constraints and priorities;
•the timing of our customers’ budget cycles;
•the impact of the COVID-19 pandemic and related disruptions on our customers; and
•the length and timing of customers’ approval processes.
If we fail to detect advertising fraud or other actions that impact our advertising campaign performance, we could harm our reputation with advertisers or agencies, which could cause our revenue and business to suffer.
Our advertising business relies on our ability to deliver successful and effective advertising campaigns. Some of those campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by machines that are designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given advertising campaign and could harm our reputation. It may be difficult for us to detect advertising-related fraud and other malicious activity because we do not own content and rely in part on our digital media partners to control such activity. These risks become more pronounced as the digital video industry shifts to programmatic buying. Both governmental and industry self-regulatory bodies have increased their scrutiny and awareness of and have taken recent actions to address advertising-related fraud and other malicious activity. While we routinely review the campaign performance, such reviews may not detect or prevent advertising-related fraud or malicious activity. If we fail to detect or prevent fraud or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraud or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, prompt refund or future credit demands or withdrawal of future business. In addition, advertisers increasingly rely on third party vendors to measure campaigns against audience guarantee, viewability and other requirements and to detect fraud. If we are unable to successfully integrate our technology with such vendors, or our measurement and fraud detection differs from their findings, our customers could lose confidence in our solutions, we may not get paid for certain campaigns and our revenues could decrease. If we fail to detect fraud or other
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malicious activities that impact the performance of our brand advertising campaigns, we could harm our reputation with our advertisers or agencies and our revenue and business could suffer. Further, if advertisers demand fraud-free inventory, our supply could fall drastically, making it impossible to sustain our current business model.
If we do not maintain and grow a critical mass of advertisers and distribution partners, the value of our services could be adversely affected.
Our success depends, in large part, on the maintenance and growth of a critical mass of advertisers and distribution partners. Advertisers will generally seek the most competitive return on investment from advertising and marketing services. Distribution partners will also seek the most favorable payment terms available in the market. Advertisers and distribution partners may change providers or the volume of business with a provider, unless the product and terms are competitive. In this environment, we must compete to acquire and maintain our network of advertisers and distribution partners. If our business is unable to maintain and grow our base of advertisers, our current distribution partners may be discouraged from continuing to work with us and this may create obstacles for us to enter into agreements with new distribution partners. Our business also depends in part on certain of our large reseller partners and agencies to grow their base of advertisers, as these advertisers become increasingly important to our business and our ability to attract additional distribution partners and opportunities. Similarly, if our distribution network does not grow and does not continue to improve over time, current and prospective advertisers and distribution partners and agencies may reduce or terminate this portion of their business with us. Any decline in the number of advertisers and distribution partners could adversely affect the value of our services.
Any inability to deliver successful mobile advertising campaigns due to technological challenges or an inability to persuasively demonstrate success will prevent us from growing or retaining our current advertiser base.
It is critical that we deliver successful mobile advertising campaigns on behalf of our advertisers. Factors that may adversely affect our ability to deliver successful mobile advertising campaigns include:

•Inability to accurately process data and extract meaningful insights and trends, such as the failure to accurately process data to place ads effectively at digital media properties;
•Faulty or out-of-date algorithms that fail to properly process data or result in inability to capture brand-receptive audiences at scale;
•Technical or infrastructure problems causing digital video not to function, digital video or impressions to not display properly or be placed next to inappropriate context;
•Inability to control video completion rates, maintain user attention or prevent end users from skipping advertisements;
•Inability to detect and prevent advertising fraud and other malicious activity;
•Inability to fulfill audience guarantee or viewability requirements of advertiser customers;
•Inability to integrate with third parties that measure campaigns against audience guarantee or viewability requirements;
•Unavailability of campaign data for advertisers to effectively measure the success of their campaigns; and
•Access to quality inventory at sufficient volumes to meet the needs of advertisers’ campaigns.
Our ability to deliver successful advertising campaigns also depends on the continuing and uninterrupted performance of our own internal and third party managed systems, which we utilize to place ads, monitor the performance of advertising campaigns and manage advertising inventory. Our revenue depends on the technological ability of our solutions to deliver ads and measure them. Sustained or repeated system failures that interrupt our ability to provide advertising campaigns and solutions to customers, including security breaches and other technological failures affecting our ability to deliver ads quickly and accurately and to collect and process data in connection with these ads, could significantly reduce the attractiveness of our solutions to advertisers, negatively impact operations and reduce our revenue. Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters. In addition, any steps we take to increase the reliability and redundancy of systems may be expensive and may not be successful in preventing system failures. Also, advertisers may perceive any technical disruption or failure in ad performance on digital media partners’ platforms to be attributable to us and our reputation could similarly suffer, or advertisers may seek to avoid payment or demand future credits for disruptions or failures, any of which could harm our business and results of operations. If
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we are unable to deliver successful advertising campaigns, our ability to attract potential advertisers and retain and expand business with existing advertisers could be harmed and our business, financial condition and operating results could be adversely affected.
We may be unable to deliver advertising in a context that is appropriate for mobile advertising campaigns, which could harm our reputation and cause our business to suffer.
It is very important to advertisers that their brand advertisements not be placed in or near content that is unlawful or could be deemed offensive or inappropriate by their customers. Unlike advertising on television, where the context in which an advertiser’s ad will appear is highly predictable and controlled, digital media content is more unpredictable and we cannot guarantee that digital video advertisements will appear in a context that is appropriate for the brand. We rely on continued access to premium ad inventory in high-quality and brand-safe environments, viewable to consumers across multiple screens. If we are not successful in delivering context appropriate advertising campaigns for advertisers, our reputation will suffer and our ability to attract potential advertisers and retain and expand business with existing advertisers could be harmed, or our customers may seek to avoid payment or demand future credits for inappropriately placed advertisements, any of which could harm our business, financial condition and operating results.
Activities of our application transaction customers with which we do business could damage our reputation or give rise to legal claims against us.
We do not monitor or have the ability to control whether our advertising customers’ advertising of their products and solutions complies with federal, state, local and foreign laws. Failure of our advertising customers to comply with federal, state, local or foreign laws or our policies could damage our reputation and expose us to liability under such laws. We may also be liable to third parties for content in the ads we deliver if the content involved violates copyrights, trademarks or other intellectual property rights of third parties or if the content is defamatory, unfair and deceptive or otherwise in violation of applicable laws. A third party or regulatory authority may file a claim against us even if our advertising customer has represented that its ads are lawful and that they have the right to use any copyrights, trademarks or other intellectual property included in an ad. Any of these claims could be costly and time-consuming to defend and could also hurt our reputation within the advertising industry. Further, if we are exposed to legal liability, we could be required to pay substantial fines or penalties, redesign our business methods, discontinue some of our solutions or otherwise expend significant resources. Similarly, we do not monitor or have the ability to control whether digital media property owners with which we do business are in compliance with applicable laws and regulations, or intellectual property rights of others and their failure to do so could expose us to legal liability. Third parties may claim that we should be liable to them for content on digital media properties if the content violates copyrights, trademarks or other intellectual property rights of third parties or if the content is defamatory, unfair and deceptive, or otherwise in violation of applicable laws or other brand protection measures. These risks become more pronounced as the digital video industry shifts to programmatic buying.
Our business depends on our ability to collect and use data to deliver ads and to disclose data relating to the performance of our ads; any limitation on these practices could significantly diminish the value of our solutions and cause us to lose customers and revenue.
When we deliver an ad to an internet-connected device, we are able to collect information about the placement of the ad and the interaction of the device user with the ad, such as whether the user visited a landing page or watched a video. We are also able to collect information about the user’s IP address, device, mobile location and some demographic characteristics. We may also contract with one or more third parties to obtain additional pseudonymous information about the device user who is viewing a particular ad, including information about the user’s interests. As we collect and aggregate this data provided by billions of ad impressions, we analyze it in order to optimize the placement and scheduling of ads across the advertising inventory provided to us by digital media properties.
Although the data we collect does not enable us to determine the actual identity of any individual, our customers or end users might decide not to allow us to collect some or all of the data or might limit our use of it. For example, a digital media partner might not agree to provide us with data generated by interactions with the content on its apps, or device users might not consent to share their information about device usage. Any limitation on our ability to collect data about user behavior and interaction with content could make it more difficult for us to deliver effective advertising programs that meet the demands of our customers. This in turn could harm our revenue and impair our business.
Although our contracts with advertisers generally permit us to aggregate data from advertising campaigns, sometimes an advertiser declines to permit the use of this data, which limits the usefulness of the data that we collect. Furthermore, advertisers may request that we discontinue using data obtained from their campaigns that have already been aggregated with
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other advertisers’ campaign data. It would be difficult, if not impossible, to comply with these requests and complying with these kinds of requests could cause us to spend significant amounts of resources. Interruptions, failures or defects in our data collection, mining, analysis and storage systems, as well as privacy concerns and regulatory restrictions regarding the collection, use and processing of data, could also limit our ability to aggregate and analyze the data from our customers’ advertising campaigns. If that happens, we may not be able to optimize the placement of advertising for the benefit of our advertising customers, which could make our solutions less valuable, and, as a result, we may lose customers and our revenue may decline.
Our business practices with respect to data could give rise to liabilities, restrictions on our business or reputational harm as a result of evolving governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.
In the course of providing our solutions, we collect, transmit and store information related to and seeking to correlate internet-connected devices, user activity and the ads we place. Federal, state and international laws and regulations asgovern the collection, use, processing, retention, sharing and security of data that we collect across our advertising solutions. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data collection, processing use and disclosure. However, the applicability of specific laws may be unclear in some cases and domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, not clearly defined and rapidly evolving. In addition, it is possible that these requirements may be interpreted and applied in a manner that is new or inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any actual or perceived failure by us or our customers or partners to comply with U.S. federal, state or international laws, including laws and regulations regulating privacy, data, security or consumer protection, or disclosure or unauthorized access by third parties to this information, could result in investigations, proceedings or actions against us by governmental entities, competitors, private parties or others. Any investigations, proceedings or actions against us alleging violations of consumer or data protection laws or asserting privacy-related theories could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand for our solutions and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our customers from the costs or consequences of litigation resulting from using our solutions or from the unauthorized disclosure of confidential information, which could damage our reputation among our current and potential customers, require significant expenditures of capital and other resources and cause us to lose business and revenue.
The regulatory framework for privacy issues is evolving worldwide. It is possible that new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that could affect our business, particularly with regard to collection or use of data to target ads and communication with consumers and the international transfer of data from Europe to the U.S. In particular, the GDPR extends the jurisdictional scope of European data protection law. As a result, we are subject to the GDPR when we provide our targeting services in Europe. The GDPR imposes stricter data protection requirements that may necessitate changes to our services and business practices. Potential penalties for non-compliance with the GDPR include administrative fines of up to 4% of annual worldwide revenue.
While we have not collected data that is traditionally considered identifiable personal data, such as name, email address, physical address, phone numbers or social security numbers, we typically collect and store IP addresses, geolocation information and device or other persistent identifiers that are or may be considered personal data in some jurisdictions or otherwise may be subject to applicable laws or regulations. For example, some jurisdictions in the EU regard IP addresses as personal data and certain regulators have advocated for including IP addresses, GPS-level geolocation data and unique device identifiers as personal data. Moreover, with the effectiveness of the CCPA in California on January 1, 2020, the use of geolocation gathering in California should be approached with care to ensure compliance. Furthermore, the GDPR makes clear that online identifiers (such as IP addresses and other device identifiers) will be treated as “personal data” going forward and therefore subject to stricter data protection rules.
Evolving definitions of personal data within the United States, European Union and elsewhere, especially relating to the classification of IP addresses, machine or device identifiers, geolocation data and other such information, may cause us to change our business practices, diminish the quality of our data and the value of our solution and hamper our ability to expand our offerings.
Complying with any new legal requirements relating to privacy and data protection could force us to incur substantial costs or require us to change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy. Our failure to comply with evolving interpretations of applicable laws and regulations relating to privacy and data protection, or to adequately protect personal data, could result in enforcement action against us or reputational harm, which could have a material adverse impact on our business, financial condition and results of operations.
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In addition to compliance with applicable laws and regulations, we voluntarily participate in trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct addressing the provision of internet advertising. We could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with our practices or in conflict with the laws and regulations of U.S. or international regulatory authorities. For instance, new guidelines, codes, or interpretations, by self-regulatory organizations or government agencies, may require additional disclosures, or additional consumer consents, such as “opt-in” permissions to share, link or use data, such as health data obtained from third parties, in certain ways. If we fail to abide by, or are perceived as not operating in accordance with, industry best practices or any industry guidelines or codes with regard to privacy, our reputation may suffer and we could lose relationships with advertisers and digital media partners.
Our agreements with partners, employees and others may not adequately prevent disclosure of trade secrets and other proprietary technology and information.
We rely in part on confidentiality agreements and other restrictions with our customers, partners, employees, consultants and others to protect our proprietary technology and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Despite our efforts to protect our proprietary technology, processes and methods, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. Moreover, policing unauthorized use of our trade secrets, technologies, products, intellectual property and proprietary information is difficult, expensive and time-consuming, particularly in foreign countries where applicable laws may be less protective of intellectual property rights than those in the United States and where enforcement mechanisms for intellectual property rights may be weak. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We could be subject to additional income tax liabilities.
We are generally subject to income taxes in the United States. We use significant judgment in evaluating our worldwide income-tax provision. In the ordinary course of business, we conduct many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets and liabilities or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income-tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.
Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value-added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results.
We do not collect sales and use, value-added or similar taxes in all jurisdictions in which we have sales and for all products and services that we sell, based on our belief that such taxes are either not applicable or an exemption from such taxes applies. Sales and use, value-added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future, including as a result of a change in law. Such tax assessments, penalties and interest or future requirements may adversely affect our business, financial condition and results of operations.
Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
We may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. Federal income tax purposes, including any limitations that may be imposed under Section 382 of the Code as a result of our past ownership changes or an ownership change in connection with our reverse merger and recapitalization on December 26, 2018. As of December 31, 2022, we had federal net operating loss carryforwards of approximately $195.0 million, of which $109.4 million will never expire and $85.7 million will expire at various dates beginning in 2030. At December 31, 2022, we had state and local net operating loss carryforwards of approximately $95.9 million, with the majority beginning to expire in 2030 if not utilized.
We periodically assess the likelihood that we will be able to recover net deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of
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future taxable income and ongoing prudent and feasible profits. As a result of this analysis of all available evidence, both positive and negative, we concluded that a valuation allowance against our net U.S. deferred tax assets should be applied as of December 31, 2022. To the extent we determine that all or a portion of our valuation allowance is no longer necessary, we will recognize an income tax benefit in the period this determination is made for the reversal of the valuation allowance. Once the valuation allowance is eliminated or reduced, its reversal will no longer be available to offset our current tax provision. These events could have a material impact on our reported results of operations.
Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business.
Our large customers have substantial purchasing power and leverage in negotiating contractual arrangements with us. These customers may request for us to develop additional features without providing us additional revenue, may require penalties for failure to deliver such features, may seek discounted product or service pricing and may seek more favorable contractual terms. As we sell more products and services to this class of customer, we may be required to agree to such terms and conditions. Such large customers also have substantial leverage in negotiating the resolution of any disagreements or disputes that may arise between us. Any of the foregoing factors could have a material adverse effect on our business, financial condition and results of operations.

If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results.
We have not registereda diverse customer base and, at any given time, one or more customers may experience financial distress, file for bankruptcy protection, go out of business, or suffer disruptions in their businesses. If a customer with whom we do a substantial amount of business experiences financial difficulty or suffers disruptions in its business, it could delay or jeopardize the sharescollection of common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time,accounts receivable, result in significant reductions in services provided by us and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants and causing such warrants to expire worthless.

We have not registered the shares of common stock issuable upon exercise of the warrants issued in our initial public offering under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than thirty (30) days after the closing of our initial business combination, to use our best efforts to file a registration statement under the Securities Act covering such shares and no later than ninety (90) days after the closing of our initial business combination to have a current prospectus relating to the common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants issued in our initial public offering are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, unless an exemption is available. Notwithstanding the above, if our common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in our initial public offering. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of common stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws and we are unable to effect such registration or qualification, subject to our obligation in such case to use our best efforts to register or qualify the shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in our initial public offering.

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The grant of registration rights to our initial shareholders and holders of our private placement warrants may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our common stock.

Pursuant to an agreement entered into concurrently with the issuance and sale of the securities in our initial public offering, our initial shareholders and their permitted transferees can demand that we register the founder shares, holders of our private placement warrants and their permitted transferees can demand that we register the private placement warrants and the shares of common stock issuable upon exercise of the private placement warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have anmaterial adverse effect on the market price of our common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the shareholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our common stock that is expected when the securities owned by our initial shareholders, holders of our private placement warrants or their respective permitted transferees are registered.

Because we are not limited to a particular industry or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.

We seek to complete a business combination with an operating company in the international energy logistics industry, but may also pursue acquisition opportunities in other industries, except that we will not, under our amended and restated articles of incorporation, be permitted to effectuate our business, combination with another blank check company or similar company with nominal operations. Because we have not yet entered into a definitive agreement with any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations,financial condition and results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or an early stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our shares will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a potential business combination target. Accordingly, any shareholders who choose to remain shareholders following the business combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer or proxy statement materials relating to the business combination contained an actionable material misstatement or material omission.

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operations.

We may seek investment opportunities in industries outside of the international energy logistics industry (which industries may or may not be outside of our management’s area of expertise).

Although we are focused on identifying business combination candidates in the international energy logistics industry, and we are not initially actively seeking to identify business combination candidates in other industries (which industries may be outside our management’s area of expertise), we will consider a business combination outside of such sectors if a business combination candidate is presented to us and we determine that such candidate offers an attractive investment opportunity for our company or we are unable to identify a suitable candidate in such sectors after having expended a reasonable amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not ultimately prove to be less favorable to investors in our company than a direct investment, if an opportunity were available, in a business combination candidate.

In the event we elect to pursue an investment outside of the international energy logistics industry, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained herein regarding the energy logistics industry would not be relevant to an understanding of the business that we elect to acquire.

Although we have identified general guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general guidelines.

Although we have identified general guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these guidelines. If we complete our initial business combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general guidelines, a greater number of shareholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if shareholder approval of the transaction is required by law, or we decide to obtain shareholder approval for business or other legal reasons, it may be more difficult for us to obtain shareholder approval of our initial business combination if the target business does not meet our general guidelines. If we are unable to completeobtain and maintain adequate insurance, our initial business combination, our public shareholdersfinancial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors may receive only approximately $10.32 per share (or such higher amount then heldalso be adversely affected if we experience difficulty in trust) on the liquidation of our trust accountmaintaining adequate directors’ and our warrants will expire worthless.

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officers’ liability insurance.

We may seek investment opportunities with a financially unstablenot be able to obtain and maintain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss or an entity lacking an established record of revenue or earnings.

claims by third parties. To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of salesproperty suffers any damages, losses or earnings, weclaims by third parties that are not covered or adequately covered by insurance, our financial condition may be affected by numerous risks inherent in the operations of the business with whichmaterially adversely affected. We currently have directors’ and officers’ liability insurance. If we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Althoughare unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors, endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertainretain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.

We are not required to obtain an opinion from an independent investment banking or accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.

Unless we complete our business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking or accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our shareholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial business combination.

We may issue additional common or preferred shares to complete our initial business combination or under an employee incentive plan after completion of our initial business combination, any one of which would dilute the interest of our shareholders and likely present other risks.

Our amended and restated articles of incorporation authorizes the issuance of up to 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. There are currently 175,858,725 authorized but unissued shares of common stock available for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants and the underwriter’s unit purchase option. There are currently no shares of preferred stock issued and outstanding. We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. However our amended and restated articles of incorporation provide, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. These provisions of our amended and restated articles of incorporation, like all provisions of our amended and restated articles of incorporation, may be amended with a shareholder vote. Our executiverecruit qualified officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated articles of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination), unless we provide our public shareholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us), divided by the number of then outstanding public shares. The issuance of additional shares of common or preferred stock:

●may significantly dilute the equity interest of existing investors;
●may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
●could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
●may adversely affect prevailing market prices for our units, common stock and/or warrants.

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Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust) on the liquidation of our trust account and our warrants will expire worthless.

We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.32 per share (or such higher amount then held in trust) on the liquidation of our trust account and our warrants will expire worthless.

We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate.

Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our executive officers and directors, at least until we have completed our business combination. In addition, our executive officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.

Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.

Our ability to successfully effect our business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements and take time away from oversight of our operations.

Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.

Our key personnel may be able to remain with the company after the completion of our business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.

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We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.

When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any shareholders who choose to remain shareholders following the business combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer or proxy statement materials relating to the business combination contained an actionable material misstatement or material omission.

The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a potential business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidates’ key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.

Our executive officers and directors allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.

Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our business combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation and our executive officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors also serve as officers and board members for other entities. If our executive officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination.

Certain of our executive officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented to our company, or to another entity.

Until we consummate our initial business combination, we will continue to engage in the business of identifying and combining with one or more businesses. Our executive officers and directors are, or may in the future become, affiliated with entities that are engaged in a similar business.

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Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have conflicts of interest in determining whether a particular business opportunity should be presented to our company or to another entity. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated articles of incorporation provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.

Members of our management team directly or indirectly own common stock and warrants, and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.

We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our executive officers, directors or existing holders which may raise potential conflicts of interest.

In light of the involvement of our sponsors, executive officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsors, executive officers and directors. Our directors also serve as officers and board members for other entities. Such entities may compete with us for business combination opportunities. Although we are not specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business combination and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our executive officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public shareholders as they would be absent any conflicts of interest.

Since our initial shareholders, executive officers and directors will lose their entire investment in us if our business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.

Our initial shareholders currently own 2,003,403 shares of common stock (initially purchased by Messrs. Tsirigakis and Syllantavos in January 2016 for an aggregate of $25,000). In addition, Dominium Investments Inc. and Firmus Investments Inc. purchased an aggregate of 7,970,488 private placement warrants, each exercisable for one share of our common stock at $11.50 per share, for a purchase price of $3,985,244, or $0.50 per warrant, that will also be worthless if we do not complete a business combination.

The founder shares are identical to the shares of common stock included in the units sold in our initial public offering. However, the holders have agreed (A) to vote any shares owned by them in favor of any proposed business combination and (B) not to redeem any shares in connection with a shareholder vote to approve a proposed initial business combination.

The personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.

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Since our sponsors, executive officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if our business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.

At the closing of our initial business combination, our sponsors, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. In the event our business combination is completed, there is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities on our behalf. However, our sponsors, executive officers and directors, or any of their respective affiliates will not be eligible for any such reimbursement if our business combination is not completed. These financial interests of our sponsors, executive officers and directors may influence their motivation in identifying and selecting a target business combination and completing an initial business combination.

We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.

On each of August 24, 2017 and November 24, 2017, we issued unsecured promissory notes (the “Notes”) in the aggregate amount of $303,300 and $301,000, respectively, to our sponsors. The Notes bear no interest and are repayable in full upon consummation of the Company’s initial business combination. Although we have no other commitments as of the date of this Report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur additional debt to complete our business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:

●default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
●acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
●our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
●our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
●our inability to pay dividends on our common stock;
●using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
●limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
●increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
●limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

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We may only be able to complete one business combination with the proceeds of our initial public offering and the sale of the private placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.

The net proceeds from our initial public offering and the private placement of warrants, along with the extension related funds and interest generated from trust account funds, have provided us with approximately $71,215,855 (not including approximately $117,000 held outside the trust as of November 30, 2017) that we may use to complete our initial business combination and pay deferred underwriting commissions being held in the trust account.

We may effectuate our business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:

●solely dependent upon the performance of a single business, property or asset, or
●dependent upon the development or market acceptance of a single or limited number of products, processes or services.

This lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our business combination.

We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.

If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.

We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all.

In pursuing our acquisition strategy, we may seek to effectuate our initial business combination with a privately held company. By definition, very little public information exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.

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Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.

We may structure a business combination so that the post-transaction company in which our public shareholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our shareholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our shareholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority shareholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a business combination with which a substantial majority of our shareholders do not agree.

Our amended and restated articles of incorporation do not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our business combination (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our business combination even if a substantial majority of our public shareholders do not agree with the transaction and have redeemed their shares or, if we seek shareholder approval of our initial business combination and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsors, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

The exercise price for the public warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the warrants are more likely to expire worthless.

The exercise price of the public warrants is higher than is typical in many similar blank check companies in the past. Historically, the exercise price of a warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our public warrants is $11.50 per share. As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.

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The provisions of our amended and restated articles of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated articles of incorporation to facilitate the completion of an initial business combination that some of our shareholders may not support.

Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business combination activity, without approval by a certain percentage of the company’s shareholders. In those companies, amendment of these provisions requires approval by between 90% and 100% of the company’s public shareholders. Our amended and restated articles of incorporation provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of our initial public offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public shareholders as described herein) may be amended if approved by holders of 65% of our common stock, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock. In all other instances, our amended and restated articles of incorporation may be amended by holders of a majority of our common stock, subject to applicable provisions of the BCA or NASDAQ rules. Our initial shareholders, who collectively beneficially own 22.2%, will participate in any vote to amend our amended and restated articles of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated articles of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete a business combination with which you do not agree. Our shareholders may pursue remedies against us for any breach of our amended and restated articles of incorporation.

Our executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated articles of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 24, 2018 (or by May 24, 2018 if we fully extend the period of time to consummate a business combination), unless we provide our public shareholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (net of the interest which may be withdrawn to pay taxes or working capital expenses) divided by the number of then outstanding public shares. These agreements are contained in letter agreements that we have entered into with our sponsors, executive officers and directors. Prior to acquiring any securities from our initial shareholders, permitted transferees must enter into a written agreement with us agreeing to be bound by the same restriction. Our shareholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our sponsors, executive officers, or directors for any breach of these agreements. As a result, in the event of a breach, our shareholders would need to pursue a shareholder derivative action, subject to applicable law.

Our letter agreement with our sponsors, directors and officers may be amended without shareholder approval.

Our letter agreement with our sponsors, directors and officers contains provisions relating to transfer restrictions of our founder shares and sponsor warrants, indemnification of the trust account, waiver of redemption rights and participation in liquidation distributions from the trust account. This letter agreement may be amended without shareholder approval. While we do not expect our board to approve any amendment to this agreement prior to our initial business combination, it may be possible that our board, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to such agreement. Any such amendment may have an adverse effect on the value of an investment in our securities.

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We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.

Although we believe that the net proceeds of our initial public offering and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination, because we have not yet entered into a definitive agreement with any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of our initial public offering and the sale of the private placement warrants prove to be insufficient, either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from shareholders who elect redemption in connection with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business. In addition, even if we do not need additional financing to complete our business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or shareholders is required to provide any financing to us in connection with or after our business, combination. If we are unable to complete our initial business combination, our public shareholders may only receive approximately $10.32 per share (or such higher amount then held in trust) on the liquidationfinancial condition and results of our trust account, and our warrants will expire worthless.

Our initial shareholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support.

Our initial shareholders owns 22.2% of our issued and outstanding shares of common stock. Accordingly, they may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support, including amendments to our amended and restated articles of incorporation. If our initial shareholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Neither our initial shareholders nor, to our knowledge, any of our officers or directors, have any current intention to purchase additional securities, other than as disclosed in this Report. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our common stock. In addition, our board of directors, whose members were elected by our sponsors, is divided into two classes, each of which will generally serve for a term of two years with only one class of directors being elected in each year. We may not hold an annual meeting of shareholders to elect new directors prior to the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial shareholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial shareholders will continue to exert control at least until the completion of our business combination.

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding public warrants.

Our warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.

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operations.

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $21.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws and we are unable to effect such registration or qualification, subject to our obligation in such case to use our best efforts to register or qualify the shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in our initial public offering. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.

Our warrants may have an adverse effect on the market price of our common stock and make it more difficult to effectuate our business combination.

We issued warrants to purchase 6,900,610 shares of our common stock as part of the units offered in our initial public offering, and, simultaneously with the closing of our initial public offering, we issued in a private placement an aggregate of 7,970,488 private placement warrants, each exercisable to purchase one share of common stock at $11.50 per share. In addition, we issued a unit purchase option to the underwriters of our initial public offering, pursuant to which the underwriters have the option to purchase 130,000 units consisting of common stock and warrants to purchase an additional 130,000 shares of our common stock. To the extent we issue shares of common stock to effectuate a business combination, the potential for the issuance of a substantial number of additional shares of common stock upon exercise of these warrants could make us a less attractive acquisition vehicle to a target business. Such warrants, when exercised, will increase the number of issued and outstanding shares of our common stock and reduce the value of the shares of common stock issued to complete the business combination. Therefore, our warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business.

The private placement warrants are identical to the warrants sold as part of the units in our initial public offering except that, so long as they are held by the initial purchasers or their permitted transferees, (i) they will not be redeemable by us, (ii) they (including the common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the sponsor until 30 days after the completion of our initial business combination and (iii) they may be exercised by the holders on a cashless basis.

The requirements of being a public company may strain our systems and resources, and divert management’s attention.

attention and be costly.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, (the “Sarbanes Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act and the listingrules and regulations of Nasdaq Capital Market. The requirements of NASDAQ and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming ortime consuming and costly and increase demandmay also place undue strain on our personnel, systems and resources, particularly after we are no longer an “emerging growth company.”resources. The Sarbanes-OxleyExchange Act requires, among other things, that we maintain effective disclosure controlsfile annual, quarterly and procedurescurrent reports with respect to our business and internal control over financial reporting. In orderresults of operations.
We are required to maintain various other control and if required, improvebusiness systems related to our disclosure controlsequity, finance, treasury, information technology, other recordkeeping systems and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required.other operations. As a result of these maintenance obligations, management’s attention may be diverted from other business concerns, which could adversely affect our businessbusiness. Furthermore, we supplement our internal team with third party software and operating results.system providers to support our reporting obligations to achieve effective internal controls.

To the extent we do not sufficiently manage third party service providers, and they fail to provide us with adequate service, we may not effectively manage our future growth which may result in ineffective internal controls over financial reporting and an increased cost of compliance. The Sarbanes-Oxley Act requires, among other things, that we maintain
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effective disclosure controls and procedures and internal control over financial reporting. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We may needintend to hire more employees in the future or engage outside consultantsinvest resources to comply with these requirements, which will increaseevolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our costsefforts to comply with new laws, regulations and expenses.

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A market for our securities may not develop, which would adversely affectstandards differ from the liquidity and price of our securities.

The price of our securities may vary significantlyactivities intended by regulatory or governing bodies due to one or more potentialambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business combinations and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be establishedadversely affected.

In addition, compliance with new laws, rules and sustained.

NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability toregulations would make transactions in our securitiesit more difficult and subjectmore expensive for us to additional trading restrictions.

Our securities are currently listed on NASDAQ. However, we cannot assure you that our securities will continue to be, listed on NASDAQ in the future or prior to our initial business combination. In order to continue listing our securities on NASDAQ prior to our initial business combination, we must maintain certain financial, distributionobtain director and stock price levels. Generally, we must maintain a minimum amount in shareholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with NASDAQ’s initial listing requirements, which are more rigorous than NASDAQ’s continued listing requirements, in order to continue to maintain the listing of our securities on NASDAQ. For instance, our stock price would generally be required to be at least $4 per share and our shareholders’ equity would generally be required to be at least $5 millionofficer liability insurance, and we will be required to have a minimum of 300 public holders. We cannot assure you that we will be able to meet those initial listing requirements at that time.

If NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

●a limited availability of market quotations for our securities;
●reduced liquidity for our securities;
●a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
●a limited amount of news and analyst coverage; and
●a decreased ability to issue additional securities or obtain additional financing in the future.

Because we must furnish our shareholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.

The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciledincur substantial costs to accounting principles generally accepted in the United Statesmaintain appropriate levels of America, or GAAP, or international financing reporting standards, or IFRS, depending on the circumstances and the historical financial statements will be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB.coverage. These financial statements mayfactors could also be required to be prepared in accordance with GAAP in connection with our current report on Form 8-K announcing the closing our initial business combination within four business days following such closing. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.

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We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult for us to compareattract and retain qualified executive officers and members of our performance withboard of directors, particularly members to serve on our audit committee.

As a result of disclosure of information in this Annual Report and in other filings required of a public companies.

company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation by third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the time and resources of our management and adversely affect our business and results of operations.

We are an “emerging growth company” withina "smaller reporting company" and, because we have opted to use the meaning of the Securities Act,reduced reporting requirements available to us, our common stock may be less attractive to investors.
We are a "smaller reporting company" as modifieddefined by the JOBS Act, andSEC. For as long as we continue to be a smaller reporting company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growthsmaller reporting companies, including but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation and corporate governance in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any May 31 before that time, in which case we would no longer be an emerging growth company as of the following November 30. statements.
We cannot predict whetherif investors will find our securitiescommon stock less attractive because we willmay rely on these exemptions. If some investors find our securitiescommon stock less attractive as a result, of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securitiescommon stock and the trading prices of our securitiesstock price may be more volatile.

Further, Section 102(b)(1)

Our business is subject to the risks of natural disasters, public health crises, political crises and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.
Our systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. For example, a significant natural disaster, such as a tornado, earthquake, hurricane, mudslides, fire, flood, snow, ice or extreme temperatures could have a material adverse effect on our business, results of operations and financial condition and our insurance coverage may be insufficient to compensate us for losses that may occur. We have an office and at least one data center located in California, a region known for earthquakes and mudslides. A significant amount of our development and ad operations work is also located in California. We also have corporate offices in Texas and Florida, both of which are susceptible to floods, hurricanes and extreme temperatures and Texas is an area that is vulnerable to heavy winds, ice, snow and tornadoes. In addition, acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could cause disruptions in our or our advertisers’ businesses or the economy as a whole. Our servers may also be vulnerable to computer viruses, break-ins, denial-of-service attacks and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting California, Texas or Florida. In late 2019, a strain of the JOBS Act exempts emerging growth companies from being requiredcoronavirus was reported to comply with newhave surfaced and spread to the United States. The ongoing extent to which COVID-19 and its variants impact on our results is unknown. As we rely heavily on our data centers, computer and communications systems and the internet to conduct our business and provide high-quality customer service, such disruptions could negatively impact our ability to run our business and either directly or revisedindirectly disrupt our customers’ business, which could have a material adverse effect on our business, results of operations and financial accounting standards until private companies (that is, thosecondition.

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Risks Related to Capitalization Matters, Corporate Governance and Market Volatility
We have and may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business. Future sales or issuances of our common stock, or the perception that have not hadsuch sales could occur, could depress the trading price of our common stock.
In February 2022, we filed a Securities Act registration statement on Form S-3, which was subsequently declared effective by the SEC, pursuant to which we may issue up to $200 million in common stock, preferred stock, warrants and units, and contained therein was a prospectus supplement in which we may sell up to $100 million in sales of our common stock deemed to be an “at the market" offering. During 2022, we issued common stock in various sales of our common stock via at-the-market offerings. Additional capital may be needed in the future to continue our planned operations, and we may seek additional funding through a combination of equity offerings, debt financings, strategic alliances, licensing and collaboration arrangements, or other third-party business arrangements. These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations and may require us to relinquish rights to some of our technologies, intellectual property or products, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us. Any sale or issuance of securities pursuant to a registration statement or otherwise may result in dilution to our stockholders and may cause the market price of our stock to decline, and new investors could gain rights superior to our existing stockholders.
In addition, any debt financings that we may enter into in the future may impose restrictive covenants or otherwise adversely affect the holdings or the rights of our stockholders, and any additional equity financings will be dilutive to our stockholders. The perception that such sales or issuances may occur could also negatively impact the market price of our common stock. Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all.
Shares of our common stock may be issued pursuant to the terms of an outstanding warrant, which could cause the price of our common stock to decline.
On July 15, 2020 we issued a Series A Senior Convertible Note (a "Series A Note") and a Series B Senior Convertible Note (a "Series B Note," and together with the Series A Note, the "2020 Convertible Notes") to an institutional investor. We paid the 2020 Convertible Notes in full in April 2021. However, in connection with the issuance of the 2020 Convertible Notes, we issued a warrant to the holder. As of December 31, 2022, 2,811,315 shares may be issued under the warrant at an exercise price of $1.4246 per share. The issuance of these shares will dilute our other equity holders, which could cause the price of our common stock to decline.
The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations.
On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. However, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all.
Although we do not have a class of securities registered under the Exchange Act) are required to complyany funds deposited with the new or revisedSVB and Signature Bank, we regularly maintain cash balances with other financial accounting standards. The JOBS Act provides that a company can elect to opt outinstitutions in excess of the extended transition periodFDIC insurance limit. Access to our cash and complycash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures. In addition, investor concerns regarding the requirements that applyU.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revisedcredit and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Compliance obligations under the Sarbanes-Oxley Act may makeliquidity sources, thereby making it more difficult for us to effectuateacquire financing on acceptable terms or at all. Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws, any of which could have material adverse impacts on our operations and liquidity.

Furthermore, should our customers have relationships with financial institutions that fail, this may result in a delay of collecting outstanding receivables, if at all, which could have a material adverse affect on our business.
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The SBA may review our Paycheck Protection Program (“PPP”) forgiveness application and if the SBA disagrees with our certification we could be subject to penalties and the repayment of our PPP loan, which could negatively impact our business, combination, requirefinancial condition and results of operations and prospects.
During 2021, we received notification of forgiveness of our $2.85 million PPP loan received in calendar year 2020. We must retain PPP loan documentation in our files for six years after the date of forgiveness. We believe we met the SBA’s certification requirement based on our weakened business operations during the COVID-19 pandemic and small market value. However, no assurance can be given as to the outcome if the SBA re-evaluates our loan certification. The SBA could determine we did not qualify in whole or in part for loan forgiveness. In addition, it is unknown what type of penalties could be assessed against us if the SBA disagrees with our certification. We could be required to repay the PPP loan. Any penalties in addition to the potential repayment of the PPP loan could negatively impact our business, financial condition and results of operations and prospects.
The price of our common stock and warrants has been, and may continue to be, volatile, and you could lose all or part of your investment.
Technology stocks have historically experienced high levels of volatility. The trading price and volume of our common stock and warrants have fluctuated, and may continue to fluctuate, substantially due to a variety of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock.
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock and/or warrants could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our common stock and warrants might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, results of operations and financial condition.

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Specifically, while we cannot state for certainty what circumstances are causing volatility in our stock price, such volatility may be attributable in part to the following factors:

•price and volume fluctuations in the overall stock market from time to time;
•the announcement of new products, solutions or technologies, investments, commercial relationships, acquisitions or other events by us or our competitors;
•changes in how customers perceive the benefits of our products and future offerings;
•the addition or departure of key personnel, including, but not limited to the successful transition of our Chief Executive Officer;
•the public’s reaction to our press releases, other public announcements and filings with the SEC;
•sales of large blocks of our common stock or warrants;
•developments concerning intellectual property rights;
•changes in legal, regulatory and enforcement frameworks impacting our products;
•variations in our and our competitors’ results of operations;
•whether our results of operations meet the expectations of securities analysts or investors;
•actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;
•the failure of securities analysts to publish research about us, or shortfalls in our results of operations compared to levels forecast by securities analysts;
•actual or perceived significant data breach involving our products or website;
•litigation involving us, our industry or both;
•governmental or regulatory actions or audits;
•general economic conditions and trends;
•"flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed; and
•major catastrophic events in our domestic and foreign markets, such as, but not limited to, natural disasters, terrorist attacks, cyber-attacks or disease outbreak, epidemic or pandemic, including the ongoing effects of COVID-19 and its variants.
Furthermore, the trading price of our Common Stock has recently been volatile during relatively short time periods. For example, on December 28, 2022 our Common Stock traded at an intraday low of $0.75, whereas on February 2, 2023 our Common Stock traded at an intraday high of $1.15. We believe the volatility in the trading price and management resources,price range of our Common Stock may be the result of a number of factors, many of which are outside our control. Any increase in the trading price of our Common Stock may not be sustained. In the event of a rapid decrease in the trading price of our Common Stock, investors could lose a significant portion of their investment.
Our failure to meet the continued listing requirements of the Nasdaq Capital Market could adversely affect our business and our ability to maintain the listing of our common stock on the Nasdaq Capital Market.
If we fail to satisfy the continued listing requirements of Nasdaq Capital Market, such as corporate governance requirements or the minimum bid requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair our stockholders' ability to sell or purchase shares of our common stock when they wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to be listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq listing requirements.

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
The trading market for our common stock may be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We currently have a limited number of securities and industry analysts who publish research on us. If we are unable to increase our analysts coverage or these current analysts cease to publish research on us, our stock price and trading volume could be negatively impacted. If any of the analysts who cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock could decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared nor paid any cash dividends on our capital stock. We do not expect to declare or pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment, if any.

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Delaware law and our certificate of incorporation and bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our certificate of incorporation, bylaws and the Delaware General Corporation Law ("DGCL") contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore could depress the trading price of our common stock and warrants. These provisions could also make it difficult for stockholders to take certain actions, including effecting changes in our management. Among other things, our certificate of incorporation and bylaws include provisions regarding:

•a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
•the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•the limitation of the liability of, and the indemnification of, our directors and officers;
•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
•the requirement that directors may only be removed from our board of directors for cause;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors;
•the requirement that a special meeting of stockholders may be called only by our board of directors, the chairperson of our board of directors, chief executive officer or president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
•controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;
•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
•the ability of our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our board of directors or management.
In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the DGCL, which may generally prohibit certain stockholders holding 15% or more of our outstanding capital stock from engaging in certain business combinations with us for a specified period of time unless certain conditions are met.
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Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and also provides that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or Exchange Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or agent to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws, or (v) any action asserting a claim against us governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.

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Risks Related to our Digital Asset Holdings
Our bitcoin acquisition strategy exposes us to various risks associated with bitcoin.
During the fourth quarter of 2021, our board of directors approved certain purchases by the Company of bitcoin, which we currently hold.
We are continually examining the risks and rewards of our bitcoin acquisition strategy. This strategy has not been tested over time or under various market conditions. Some investors and other market participants may disagree with this strategy or actions we undertake to implement it. If the price of bitcoin falls or our bitcoin acquisition strategy otherwise proves unsuccessful, it would adversely impact our financial condition, results of operations, and the market price of our common stock.
As of December 31, 2022, we held approximately 605 bitcoins that were acquired at an aggregate purchase price of approximately $35 million and an average purchase price of approximately $57,804 per bitcoin, inclusive of fees and expenses. As part of our overall corporate strategy, we may purchase additional bitcoin in future periods, and may also sell bitcoin in future periods as needed to generate cash for operating purposes.
While our bitcoin is currently owned directly by us, we may investigate other potential approaches to holding our bitcoin assets. If we change the means by which we hold our bitcoin assets, the accounting treatment for our bitcoin may correspondingly change. A change in the accounting treatment of our bitcoin holdings could have a material impact on our results of operations in future periods and could increase the timevolatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, which in turn could have a material adverse effect on our financial results and coststhe market price of completing an acquisition.

Section 404our common stock.

Bitcoin is a highly volatile asset that has traded below $16,000 and above $48,000 per bitcoin during 2022.Bitcoin does not pay interest or other returns and so our ability to generate cash from our bitcoin holdings depends on sales or implementing strategies that we may consider to create income streams or otherwise generate funds using our bitcoin holdings, including financing our bitcoin with loans from third parties. Furthermore, the impact of our bitcoin holdings on our financial results and the market price of our common stock may be impacted by the trading price of bitcoin at any given time.
The prices of digital currencies, including bitcoin and ethereum, may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of bitcoin are likely to influence our financial results and the market price of our common stock.
Fluctuations in the trading prices of digital assets are likely to influence our financial results and the market price of our common stock. Our financial results and the market price of our common stock would be adversely affected and our business and financial condition could be negatively impacted if the price of bitcoin decreased substantially, including as a result of:

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•decreased user and investor confidence in digital assets;
•investment and trading activities of highly active retail and institutional users, speculators, miners and investors;
•negative publicity or events relating to digital assets;
•negative or unpredictable media or social media coverage on digital assets;
•public sentiment related to the actual or perceived environmental impact of bitcoin, ethereum and related activities, including environmental concerns raised by private individuals and governmental actors related to the energy resources consumed in the bitcoin mining process;
•changes in consumer preferences and the perceived value of bitcoin or ethereum;
•competition from other crypto assets that are believed to exhibit better speed, security, scalability, or other characteristics, or that are backed by governments, including the U.S. government;
•correlations between the prices of digital assets, including the potential that a crash in one digital asset or widespread defaults on one digital asset exchange or trading venue may cause a crash in the price of bitcoin, or a series of defaults by counterparties on bitcoin asset exchanges or trading venues;
•the identification of Satoshi Nakamoto, the pseudonymous person or persons who purportedly developed bitcoin, or the transfer of Satoshi’s bitcoin;
•interruptions in service or failures of the principal markets for or market participants active in trading involving bitcoin, ethereum or other digital assets;
•further reductions in mining rewards of bitcoin, including block reward halving events, which are events that occur after a specific period of time that reduce the block reward earned by “miners” who validate bitcoin and ethereum transactions;
•transaction congestion and fees associated with processing transactions on the bitcoin or ethereum network;
•changes in the level of interest rates and inflation, monetary policies of governments, trade restrictions, and fiat currency devaluations;
•developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography being used by digital assets becoming insecure or ineffective; and
•national and international economic and political conditions.
In addition, bitcoin, ethereum and other digital assets are relatively novel and are subject to various risks and uncertainties that may adversely impact their prices. The application of securities, commodities and other laws and other regulations to such assets is unclear in certain respects, and it is possible that new laws and regulations, or interpretations of existing laws and regulations, in the United States or foreign countries may adversely affect the price of our bitcoin, ethereum and other digital assets. For example, foreign government authorities have recently expanded their efforts to restrict certain activities related to bitcoin and other digital assets. In China, the People’s Bank of China and the National Development and Reform Commission have outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal within the country. In India, based on statements made by government personnel, including the Finance Minister, one can conclude that cryptocurrency is illegal in the country. In July 2022, Russia enacted a law banning payments in cryptocurrency for goods and services. Moreover, the risks of engaging in a bitcoin-focused treasury strategy are relatively novel and have created, and may create further, complications due to the lack of experience that third parties have with companies engaging in such a business, such as the unavailability of director and officer liability insurance on acceptable terms.
The growth of the Sarbanes-Oxley Act requiresdigital assets industry in general, and the use and acceptance of bitcoin and ethereum in particular, may also impact the price of our digital asset holdings and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of bitcoin may depend, for instance, on public familiarity with digital assets, ease of buying and accessing bitcoin, institutional demand for bitcoin as an investment asset or store of value, consumer demand for bitcoin as a means of payment or store of value, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term.
Because bitcoin and ethereum have no physical existence beyond the record of transactions on their respective blockchains, a variety of technical factors related to the bitcoin blockchain could also impact the price of bitcoin. For example, malicious attacks by miners, inadequate mining fees to incentivize validating of transactions, hard “forks” of the blockchain into multiple blockchains, and advances in digital computing, algebraic geometry and quantum computing could undercut the integrity of the blockchain and negatively affect the price of our digital asset holdings. The liquidity of bitcoin and ethereum may also be reduced and damage to the public perception of bitcoin and ethereum may occur, if financial institutions were to
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deny banking services to businesses that hold digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings.
Our historical financial statements do not reflect the potential variability in earnings that we evaluatemay experience in the future relating to our digital asset holdings.
Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of digital assets.
The prices of bitcoin and report onethereum have historically been subject to dramatic price fluctuations and are highly volatile. As explained more fully in Note 2 to our system of internal controls beginning with ourconsolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K, as required by current accounting standards, we determine the fair value of our digital assets based on quoted (unadjusted) prices. We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices of digital assets on an active exchange, indicate that it is more likely than not that any of our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest price of one digital asset quoted on an active exchange at any time since acquiring the specific asset. If the carrying value exceeds that lowest price at any time during the quarter, an impairment loss is deemed to have occurred with respect to that digital asset in the amount equal to the difference between its carrying value and such lowest price, and subsequent increases in the price will not be adjusted upward. Gains (if any) are not recorded until realized upon sale. In determining the gain to be recognized upon sale, we calculate the difference between the sale price and carrying value of the specific digital asset sold immediately prior to sale.
As a result, any decrease in the fair value of our digital assets below their respective carrying value for such assets at any time since their acquisition requires us to incur an impairment charge, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings and decrease the carrying value of our digital assets, which in turn could have a material adverse effect on the market price of our common stock.
As of December 31, 2022, we held $10.1 million of digital assets on our balance sheet and recognized $22.9 million digital asset impairment losses during the year ending November 30, 2017. Onlyended December 31, 2022, which represented 45% of our net losses.
We have purchased and may purchase from time to time additional digital assets, and we may engage in other non-traditional treasury strategies in future periods. As a result, the proportion of our total assets represented by digital asset holdings may increase in the future, and volatility in our earnings in future periods may be significantly more than what we experienced in prior periods.
Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our digital asset holdings. In the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.
Digital asset trading venues are relatively new and, in some cases, unregulated or subject to regulatory uncertainty. Furthermore, many digital asset trading venues do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in these trading venues, including prominent digital asset exchanges that handle a significant volume of trading, in the event we are deemedone or more trading venues experience fraud, security failures or operational problems.
For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, FTX, the third largest digital asset exchange by volume at the time, halted customer withdrawals and shortly thereafter, FTX and its subsidiaries filed for bankruptcy.
In response to these events, the digital asset markets, including the market for bitcoin specifically, have experienced extreme price volatility and several other entities in the digital asset industry have been, and may continue to be, a large accelerated filer or an accelerated filer will we be required to comply withnegatively affected, further undermining confidence in the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply withdigital assets markets and in bitcoin. If the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirementsliquidity of the Sarbanes-Oxley Act particularly burdensome on us as compareddigital assets markets continues to other public companies because a target company with which we seekbe negatively impacted by these events, digital asset prices (including the price of bitcoin) may continue to complete our business combinationexperience significant volatility and confidence in the digital asset markets may be further undermined. These events are continuing to develop, and it is not be in compliance with the provisionspossible to predict at this time all of the Sarbanes-Oxley Act regarding adequacyrisks that they may pose to us, our service providers or on the digital asset industry as a whole.
A perceived lack of its internal controls. The development ofstability among digital asset exchanges and the internal controlclosure or temporary shutdown of any such entitysignificant digital asset exchanges due to achieve compliance withbusiness failure, hackers or malware, government-mandated regulation, or fraud, may reduce
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confidence in digital asset networks and result in greater volatility in digital asset values. To the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

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Provisions in our amended and restated articles of incorporation may inhibit a takeover of us, which could limit the priceextent investors might be willing to pay in the future forview our common stock and could entrench management.

Our amended and restated articlesas linked to the value of incorporation contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve paymentour digital asset holdings, particularly bitcoin, these potential consequences of a premium over prevailingtrading venue’s failure could have a material adverse effect on the market pricesprice of our common stock.

Furthermore, the treatment of bitcoins held by custodians that file for our securities.

Risks Associatedbankruptcy protection is uncharted territory in U.S. Bankruptcy law. We cannot say with Acquiringcertainty whether bitcoin held in custody by a bankrupt custodian would be treated as property of a bankruptcy estate and, Operating a Business outside ofaccordingly, whether the United States

We are currently a passive foreign investment company, or “PFIC,” for U.S. federal tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our securities that is for U.S. federal income tax purposes (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or (iv) a trust if (A) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (B) it has a valid election in effect under applicable U.S. Treasury regulations tobitcoin would be treated as a U.S. person.

If we are determined to begeneral unsecured creditor.

The concentration of our digital asset holdings enhances the risks inherent in our digital asset treasury strategy.
As of December 31, 2022, the carrying value of our digital asset holdings represented approximately 18% of our total assets, a PFIC for any taxable year (or portion thereof) thatmajority of which is includedheld in bitcoin and ethereum. We may purchase additional digital assets and increase our overall holdings of bitcoin and ethereum in the holding periodfuture, as well as, accept bitcoin and ethereum as payment for PhunToken and our products and services.The concentration of our digital asset holdings limit the risk mitigation that we could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent of a U.S. holder (as defined below)traditional treasury strategy. If there is a significant decrease in the price of bitcoin or ethereum, we will experience a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
We have sold a portion of our sharesbitcoin holdings as a source of common stock or warrants, the U.S. Holder may be subject to increased U.S. federal income tax liabilityliquidity and may be subjectrequired to additional reporting requirements. Since we did not complete our initial business combination by the end of our taxable year ending November 30, 2017, we were not able to satisfy a certain “start-up” exception to the PFIC rules, and therefore we will be treated as a PFIC since the date of our incorporation. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. In addition, we may not provide timely financial information that would be required for U.S. investors to make a potentially favorable “qualified electing fund” election, and such election would be unavailable with respect to our warrants in all cases. We urge U.S. investors to consult their own tax advisors regarding the possible application of the PFIC rules.

A foreign (i.e., non-U.S.) corporation will be a PFIC for U.S. tax purposes if at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

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Because we are a blank check company, with no current active business, we believe that it is likely that we have been treated as a PFIC since the date of our incorporation.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares or warrants and, in the case of our ordinary shares, the U.S. Holder did not make either a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) ordinary shares or a timely “mark-to-market” election, in each case as described below, such holder generally will be subject to special rules with respect to:

●any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants;

●any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares);

●the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares or warrants;

●the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we are a PFIC, will be taxed as ordinary income;

●the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and

●the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above in respect to our ordinary shares (but not our warrants) by making a timely QEF election (if eligible to do so) to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.

In order to comply with the requirements of a QEF election, a U.S. Holder must receive a PFIC annual information statement from us. If we determine we are a PFIC for any taxable year, we will endeavor to provide to a U.S. Holder such information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFICcontinue this in the future orduring a time of the required information to be provided.

Alternatively, if a U.S. Holder makes a timely, valid “mark-to-market” election for the first taxable year of the U.S. Holder inmarket volatility, which the U.S. Holder holds (or is deemed to hold) ordinary shares in us and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its ordinary shares. Notwithstanding the foregoing, U.S. Holders who do not make a timely, valid mark-to-market election for such first taxable year but make a mark-to-market election with respect to a subsequent taxable year may be subject to special tax rules, and the discussion below does not address any mark-to-market election consequences to such U.S. Holders.

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If a U.S. Holder makes a timely, valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) ordinary shares in us and for which we are determined to be a PFIC, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to our warrants.

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission, including the Nasdaq Capital Market, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our ordinary shares under their particular circumstances.

Although a determination as to our PFIC status will be made annually, an initial determination that we are a PFIC will generally apply for subsequent years to a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status in those subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) our ordinary shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such shares for any taxable year of us that ends within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to such shares unless the holder makes a purging election, as described above, and pays the tax and interest charge with respect to the gain inherent in such shares attributable to the pre-QEF election period.

An investment in our securities may result in uncertain or adverse United States federal income tax consequences.

An investment inselling our securities may result in uncertain United States federal income tax consequences. For instance, because there are no authorities that directly address instruments similar to the unitsdigital assets at a significant loss.

We have currently adopted bitcoin as our primary treasury reserve asset. During 2022, we issued in our initial public offering, the allocation an investor made with respect to the purchase price of the unit between the share of common stock and the warrant to purchase one share of common stock included in each unit could be challenged by the IRS or the courts. Furthermore, the United States federal income tax consequences of a cashless exercise of a warrant included in the units is unclear under current law. Finally, it is unclear whether the redemption rights with respect to our shares of common stock suspend the running of a U.S. holder’s holding period for purposes of determining whether any gain or loss realized by such holder on the sale or exchange of common stock is long-term capital gain or loss. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences when purchasing, holding or disposingsold some of our securities.

An investor may be subjectbitcoin holdings as a source of liquidity to adverse U.S. federal income tax consequencesfund operations. Historically, the digital asset markets have been characterized by more price volatility, a relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, and various other risks inherent in the event the Internal Revenue Service (“IRS”) were to disagree with the U.S. federal income tax consequences described herein.

We have not sought a ruling from the IRS as to any U.S. federal income tax consequences described in our public filings. The IRS may disagree with the descriptionsits entirely electronic, virtual form and decentralized network. During times of U.S. federal income tax consequences contained therein, and its determination may be upheld by a court. Any such determination could subject an investor or our company to adverse U.S. federal income tax consequences that would be different than those described herein. Accordingly, each prospective investor is urged to consult a tax advisor with respect to the specific tax consequences of the acquisition, ownership and disposition of our shares of common stock and units, including the applicability and effect of state, local or non-U.S. tax laws, as well as U.S. federal tax laws.

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A majority of our directors and officers lives outside the United States and all of our assets may be located outside the United States after our initial business combination; therefore investorsmarket instability, we may not be able to enforce federal securities lawssell our bitcoin or their other legal rights.

All of our directors and officers, and their assets, are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon usdigital asset holdings at reasonable prices or any of these persons. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. Federal or state securities laws. You may also have difficulty bringing an original action in the appropriate court of the Marshall Islands or any other foreign jurisdiction in which our directors or officers may reside to enforce liabilities against us or any person based upon the U.S. federal securities laws.

at all. If we effectare unable to sell our initialdigital assets, or if we are forced to sell our digital assets at a significant loss in order to meet our working capital requirements, our business combination with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.

If we effect our initial business combination with a company located outside of the United States, we would be subject to any special considerations or risks associated with companies operating in the target business’ home jurisdiction, including any of the following:

●rules and regulations or currency redemption or corporate withholding taxes on individuals;
●laws governing the manner in which future business combinations may be effected;
●exchange listing and/or delisting requirements;
●tariffs and trade barriers;
●regulations related to customs and import/export matters;
●longer payment cycles;
●tax issues, such as tax law changes and variations in tax laws as compared to the United States;
●currency fluctuations and exchange controls;
●rates of inflation;
●challenges in collecting accounts receivable;
●cultural and language differences;
●employment regulations;
●crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
●deterioration of political relations with the United States. We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer.

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Because of the costs and difficulties inherent in managing cross-border business operations, our results of operations mayfinancial condition could be negatively impacted.

Managing

If we or our third-party service providers experience a business, operations, personnelsecurity breach or assets in another country is challengingcyberattack and costly. Any management thatunauthorized parties obtain access to our digital asset holdings, we may have (whether based abroadlose some or in the U.S.) may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively impact our financial and operational performance.

If social unrest, acts of terrorism, regime changes, changes in laws and regulations, political upheaval, or policy changes or enactments occur in a country in which we may operate after we effect our initial business combination, it may result in a negative impact on our business.

Political events in another country may significantly affect our business, assets or operations. Social unrest, acts of terrorism, regime changes, changes in laws and regulations, political upheaval, and policy changes or enactments could negatively impact our business in a particular country.

Many countries have difficult and unpredictable legal systems and underdeveloped laws and regulations that are unclear and subject to corruption and inexperience, which may adversely impact our results of operations and financial condition.

Our ability to seek and enforce legal protections, including with respect to intellectual property and other property rights, or to defend ourselves with regard to legal actions taken against us in a given country, may be difficult or impossible, which could adversely impact our operations, assets or financial condition.

Rules and regulations in many countries are often ambiguous or open to differing interpretation by responsible individuals and agencies at the municipal, state, regional and federal levels. The attitudes and actions of such individuals and agencies are often difficult to predict and inconsistent.

Delay with respect to the enforcement of particular rules and regulations, including those relating to customs, tax, environmental and labor, could cause serious disruption to operations abroad and negatively impact our results.

If relations between the United States and foreign governments deteriorate, it could cause potential target businesses or their goods and services to become less attractive.

The relationship between the United States and foreign governments could be subject to sudden fluctuation and periodic tension. For instance, the United States may announce its intention to impose quotas on certain imports. Such import quotas may adversely affect political relations between the two countries and result in retaliatory countermeasures by the foreign government in industries that may affect our ultimate target business. Changes in political conditions in foreign countries and changes in the state of U.S. relations with such countries are difficult to predict and could adversely affect our operations or cause potential target businesses or their goods and services to become less attractive. Because we are not limited to any specific industry, there is no basis for investors in our initial public offering to evaluate the possible extent of any impact on our ultimate operations if relations are strained between the United States and a foreign country in which we acquire a target business or move our principal manufacturing or service operations.

If any dividend is declared in the future and paid in a foreign currency, you may be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually ultimately receive.

If you are a U.S. holder of our shares of common stock, you will be taxed on the U.S. dollar value of your dividends, if any, at the time you receive them, even if you actually receive a smaller amount of U.S. dollars when the payment is in fact converted into U.S. dollars. Specifically, if a dividend is declared and paid in a foreign currency, the amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the payments made in the foreign currency, determined at the spot rate of the foreign currency to the U.S. dollar on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Thus, if the value of the foreign currency decreases before you actually convert the currency into U.S. dollars, you will be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually ultimately receive.

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If our management following our initial business combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.

Following our initial business combination, our management will likely resign from their positions as officers or directors of the company and the management of the target business at the time of the business combination will remain in place. Management of the target business may not be familiar with United States securities laws. If new management is unfamiliar with our laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues, which may adversely affect our operations.

After our initial business combination, substantially all of our assets will likely be located in a foreign country and substantially all of our revenue will be derived from our operations in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political and legal policies, developments and conditions in the country in which we operate.

The economic, political and social conditions, as well as government policies, of the country in which our operations are located could affect our business. The economies in developing countries differ from the economies of most developed countries in many respects. For the most part, such economies have grown at a rate in excess of the United States; however (1) such economic growth has been uneven, both geographically and among various sectors of the economy and (2) such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate our initial business combination and if we effect our initial business combination, the ability of that target business to become profitable.

Currency policies may cause a target business’ ability to succeed in the international markets to be diminished.

In the event we acquire a non-U.S. target, all revenues and income would likely be received in a foreign currency, the dollar equivalent of our netdigital assets and distributions, if any, could be adversely affected by reductions in the value of the local currency. The value of the currencies in our target regions fluctuate and are affected by, among other things, changes in political and economic conditions. Any change in the relative value of such currency against our reporting currency may affect the attractiveness of any target business or, following consummation of our initial business combination, our financial condition and results of operations. Additionally, ifoperations could be materially adversely affected.

Security breaches and cyberattacks are of particular concern with respect to digital assets. Bitcoin, ethereum and other digital assets have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. A successful security breach or cyberattack could result in:
•a partial or total loss of our holdings in a manner that may not be covered by insurance;
•harm to our reputation and brand;
•improper disclosure of data and violations of applicable data privacy and other laws; or
•significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.
Further, any actual or perceived security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks or exchanges, whether or not we are directly impacted, could lead to a currency appreciatesgeneral loss of confidence in valuethe broader digital asset ecosystem or in the use of networks to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to digital assets, are increasing in frequency, persistence and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against the dollar prior to the consummationa target. These attacks may occur on our systems or those of our initial business combination, the cost of a target business as measured in dollars will increase, whichthird-party service providers or partners. We may make it less likely that we are able to consummate such transaction.

Because foreign law could govern almost allexperience breaches of our material agreements,security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, unauthorized parties have attempted, and we may not be ableexpect that they will continue to enforceattempt, to gain access to our rights within such jurisdiction or elsewhere, which could result in a significant loss of business, business opportunities or capital.

Foreign law could govern almost allsystems and facilities, as well as those of our material agreements. Thepartners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers,

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hacktivists, state-sponsored intrusions, industrial espionage and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target business may not be able to enforce any of its material agreements or that remedies will be available outside of such foreign jurisdiction’s legal system.

The system of laws and the enforcement of existing laws and contracts in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The judiciaries in developing countries are relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. As a result, the inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business and business opportunities.

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We may re-incorporate in another jurisdiction in connection with a business combination, and the laws of such jurisdiction will likely govern all of our material agreements and we may not be able to enforce our legal rights.

In connection withimplement adequate preventative measures. Further, there has been an increase in such activities as a business combination, we may relocateresult of the home jurisdictionCOVID-19 pandemic, and there could be additional breaches as a result of the ongoing conflicts involving Ukraine and other countries. Any future security breach of our businessoperations or those of others in the digital asset industry, including third-party services on which we rely, could materially and adversely affect our digital asset holding and financial condition.

The loss or destruction of a private key required to access our digital asset wallets may be irreversible. If we are unable to access our private keys or if we experience a cyberattack or other data loss relating to our digital asset holdings, our financial condition and results of operations could be materially adversely affected.
Our digital assets are controllable only by the possessor of both the unique public keys and private keys relating to the local or online digital wallets in which our digital assets are held. While the blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the Republicassets held in such wallet. To the extent our private key is lost, destroyed, or otherwise compromised and no backup of the Marshall Islandsprivate key is accessible, we will be unable to another jurisdiction. Ifaccess our digital assets held in the related digital wallet. Furthermore, we determinecannot provide assurance that our digital wallets will not be compromised as a result of a cyberattack. The blockchain ledger, as well as digital assets and blockchain technologies, have been, and may in the future be, subject to do this,security breaches, cyberattacks or other malicious activities.
A determination that bitcoin or any other digital asset is a "security" could lead to our classification as an “investment company” under the lawsInvestment Company Act of such jurisdiction would likely govern all1940 and could adversely affect the market price of our material agreements. We cannot assure youdigital asset holdings and the market price of our common stock.

The SEC has stated that certain digital assets may be considered “securities” under the federal securities laws. The test for determining whether a particular digital asset is a “security” is complex and the outcome is difficult to predict. It is possible that the systemSEC could take a contrary position to the one taken by its senior officials or a federal court could conclude that bitcoin or any other digital assets we hold are securities. Such a determination could lead to our classification as an “investment company” under the Investment Company Act of laws and the enforcement of existing laws in such jurisdiction1940, as amended (the "Investment Company Act"), which would be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital. Any such reincorporation and the international nature of our business will likely subject us to foreign regulation.

Ifsignificant additional regulatory controls, potential fines and regulatory charges, all of which could have a material adverse effect on our business and operations and also may require us to substantially change the companymanner in which we acquire is in breach of any environmental regulations or has not obtained necessary certificates or permits will negatively affectconduct our profitability.

The company we acquire,business.

In addition, if bitcoin or any other digital asset we hold are determined to be securities for purposes of its subsidiaries, as partthe federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of bitcoin or such other digital assets and in turn adversely affect the market price of our business combinationcommon stock.
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Risks Related to our Token Ecosystem and Tokens
We have raised capital to fund a Token Generation Event of rights to receive future PhunCoin, and beginning in 2021 we shall ensure to have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations currently in force. However, therecreated and sold PhunToken. There can be no assurance that PhunCoin will ever be issued, and any companysignificant difficulties we may experience with the offerings of PhunCoin or sales of PhunToken could result in claims against us. Additionally, the Token Generation Event and the offerings of PhunCoin and sales of PhunToken could subject us to various other business and regulatory uncertainties.
In June 2018, we raised capital by offering investors rights to acquire PhunCoin ("Rights") pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act. In addition, in 2019, PhunCoin, Inc. commenced an offering of Rights pursuant to Regulation CF, which closed May 1, 2019. As of December 31, 2022, a total of $1.2 million has been raised in both Rights offerings.
During the second quarter of 2019, Phunware announced the launch of a separate token, PhunToken, by our wholly owned subsidiary, Phun Token International, which enables holders to participate in our blockchain-enabled data exchange and mobile loyalty engagement ecosystem. As of December 31, 2022, we sold an aggregate of $2.6 million of PhunToken. Upon sale of PhunToken to customers, we deliver PhunToken to the respective customer's Etherum-based wallet.
We will use commercially reasonable efforts to develop the Token Ecosystem, deliver PhunCoin and PhunToken, respectively, but there is no assurance that such efforts will be in such compliance atsuccessful. If the timeToken Generation Event, defined as the launch of the Token Ecosystem, is not consummated, our sales of PhunCoin and additional sales of PhunToken may not result in substantial proceeds. If the Token Generation Event is not consummated and/or PhunCoin or PhunToken is not adopted commercially, we may have to reduce our planned expenditures. Also, any significant difficulties we may experience with the Token Generation Event, the delivery of PhunCoin or the continued sales and delivery of PhunToken could result in claims against us which could have a material adverse effect on our financial condition.
The further development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets could have a material adverse effect on our business combination or thatplans, which may have a material adverse effect on the Company and our stockholders.
The growth of the blockchain industry in general, as well as the networks on which we will rely to consummate the Token Generation Event, is subject to a high degree of uncertainty. The digital asset and digital asset industries as a whole have been characterized by rapid changes and innovations and are constantly evolving. The slowing or stopping of the development, general acceptance and adoption and usage of blockchain networks and digital assets may materially adversely affect our business plans to launch and maintain allPhunCoin, sell PhunToken and continue to develop the Token Ecosystem. For example, given the regulatory complexity and uncertainty with respect to digital assets, complying with such material permits, licenses, certificates or other authorizations. Moreover, additional legislation or regulation applicable to the operation of our vessels that may be implementedlaws and regulations, which could change in the future or be subject to new interpretations, could have a material and adverse effect on our ability to develop, launch and continue to operate PhunCoin, PhunToken and the Token Ecosystem. In addition, the tax and accounting consequences to us of the Token Generation Event, PhunCoin, PhunToken and the Token Ecosystem could lead to incorrect reporting, classification or liabilities. If the Token Generation Event occurs and PhunCoin is launched and developed and PhunToken is further developed, the structural foundation of PhunCoin and PhunToken, and the software applications and other interfaces or applications upon which PhunCoin, PhunToken and the Token Ecosystem rely or on which PhunCoin, PhunToken and the Token Ecosystem may rely in the future, are and will be unproven. There can be no assurances that PhunCoin or PhunToken will be fully secure, which may result in impermissible transfers, a complete loss of users’ PhunCoin or PhunToken, or an unwillingness of users to access, adopt and utilize PhunCoin or PhunToken or the Token Ecosystem, whether through system faults or malicious attacks. Any such faults or attacks on PhunCoin or PhunToken may materially and adversely affect our business.
Because our tokens will be digital assets built and transacted initially on top of existing third-party blockchain technology, Phunware is reliant on another blockchain network, and users could be subject to the risk of wallet incompatibility and blockchain protocol risks.
Reliance upon another blockchain technology to create, develop and maintain the Token Ecosystem subjects us and Token Ecosystem users to the risk of digital wallet incompatibility, or additional ecosystem malfunction, unintended function, unexpected functioning of, or attack on, the providers' blockchain protocol, which may cause PhunCoin or PhunToken to malfunction or function in an unexpected manner, including, but not limited to, slowdown or complete cessation in functionality of the Token Ecosystem.
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The development and operation of the Token Ecosystem will likely require additional technology and intellectual property rights.
Our ability to develop and operate the Token Ecosystem may depend on technology and intellectual property rights that we may license from unaffiliated third parties. If for any reason we were to fail to comply with our obligations under any applicable license agreement, or were unable to provide or were to fail to provide the technology and intellectual property that the Token Ecosystem requires, it would be unable to operate, which could have a material adverse effect on the Company’s operations and financial condition and its ability to develop, enhance, and maintain the Token Ecosystem.

Some of our Token Ecosystem code and protocols rely on open source code publicly available. The open-source structure of some of the Token Ecosystem protocols means that the Token Ecosystem may be susceptible to developments by users or contributors that could damage the Token Ecosystem and our reputation and could affect the sale and utilization of PhunCoin, PhunToken and he Token Ecosystem.

The open-source nature of the Token Ecosystem protocol also means that it may be difficult for the Company or contributors maintain or develop the Token Ecosystem and the Company may not have adequate resources to address emerging issues or malicious programs that develop within the Token Ecosystem or expand functionality of the Token Ecosystem adequately or in a timely manner. Third parties not affiliated with us may introduce weaknesses or bugs into the core infrastructure elements of the Token Ecosystem and open-source code which may negatively impact the Token Ecosystem. Such events may result in a loss of trust in the security and operation of the Token Ecosystem and a decline in user activity and could negatively impact the sale and utilization of and development, acceptance and adoption of the Token Ecosystem, PhunCoin and PhunToken.

Open source software is generally freely accessible, usable and modifiable. Certain open source licenses may, in certain circumstances, require us to offer the components of our Token Ecosystem that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software we use were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, including being enjoined from the offering of the components of our Token Ecosystem that contained the open source software and being required to comply with the foregoing conditions, which could disrupt our ability to offer the affected software. We could also be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to change our products.
The Token Ecosystem is designed to distribute PhunCoin or PhunToken to consumers who provide certain personal information to us. Providing this data exposes us to risks of privacy data breach and cybersecurity attacks.
We utilize a substantial amount of electronic information. This includes transaction information and sensitive personal information of the users of the Token Ecosystem. The service providers used by us, may also use, store, and transmit such information. We intend to implement detailed privacy and cybersecurity policies and procedures and an incident response plan designed to protect such sensitive personal information and prevent data loss and security breaches.
There can be no assurances that PhunCoin, PhunToken or a user’s data will be fully secure, which may result in impermissible transfer, a complete loss of users’ PhunCoin, PhunToken or data on the Token Ecosystem, whether through system faults or malicious attacks, or an unwillingness of users to access, adopt and utilize PhunCoin and PhunToken. Any such faults or attacks on PhunCoin, PhunToken or users’ data may materially and adversely affect our profitability.

We face risks relatedPhunCoin, PhunToken and the Token Ecosystem. There are a number of data protection, security, privacy and other government- and industry-specific requirements, including those that require companies to companiesnotify individuals of data security incidents involving certain types of personal data. Security compromises could harm the Token Ecosystem’s reputation, erode user confidence in the maritime transport industry.

Messrs. Tsirigakiseffectiveness of its security measures, negatively impact its ability to attract new users, or cause existing users to stop using the Token Ecosystem, or purchasing and Syllantavos were founders, officersusing or consuming PhunCoin and directorsPhunToken. We may be compelled to disclose personal information about a user or users of two prior blank check companies, eachthe Token Ecosystem to federal or state government regulators or taxation authorities.  Accordingly, certain information concerning users may be shared outside Phunware.


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The Token Ecosystem may be the target of malicious cyberattacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of PhunCoin or PhunToken. If Token Ecosystem’s security is compromised or if the Token Ecosystem is subjected to attacks that frustrate or thwart our users’ ability to access the Token Ecosystem, their PhunCoin, PhunToken or the Token Ecosystem products and services, users may cease using the Token Ecosystem altogether.
The Token Ecosystem uses and will use new technology. There are no guarantees that such technology will be bug-free or accepted by the marketplace. Thus, even if the Token Ecosystem is operational, our tokens may be subject to the risk of theft, loss, malfunction, or reputational risk, any of which consummatedcan significantly degrade the potential use of PhunCoin and PhunToken.
The Token Ecosystem structural foundation, the open-source protocols, the software application and other interfaces or applications built upon the Token Ecosystem are still in an early development stage and are unproven, and there can be no assurances that the Token Ecosystem and the creation, transfer or storage of PhunCoin and PhunToken will be uninterrupted or fully secure which may result in a business combinations with a companycomplete loss of users’ PhunCoin or PhunToken or an unwillingness of users to access, adopt and utilize the Token Ecosystem. Further, the Token Ecosystem may also be the target of malicious attacks seeking to identify and exploit weaknesses in the maritime transport industry. Business combinations with companiessoftware or the Token Ecosystem which may result in the maritime transport industry,loss or theft of PhunCoin or PhunToken. For example, if our tokens and the Token Ecosystem are subject to unknown and known security attacks (such as double-spend attacks, 51% attacks, or other malicious attacks), such attacks may materially and adversely affect the Token Ecosystem. In any such event, if the Token Ecosystem is not widely adopted, Purchasers of PhunCoin may lose all of their investment and customers of PhunToken may hold a coin for which there is no market to transact.

The Token Ecosystem is susceptible to mining attacks.
As with other decentralized digital assets, the blockchain used in connection with PhunCoin, PhunToken and the Token Ecosystem may be susceptible to mining attacks, including target companies suchdouble-spend attacks, majority mining power attacks, selfish-mining attacks, and race condition attacks. Any successful attacks present a risk to the Token Ecosystem and our tokens. Despite efforts by us, the risk of known or novel mining attacks exists.
Alternative platforms or networks may be established that compete with or are more widely used than the Token Ecosystem. It is possible that alternative platforms or networks could be established that utilize the same or similar protocols underlying the Token Ecosystem or attempt to facilitate services or strategies that are materially similar to the Token Ecosystem’s services or strategies. The introduction of these alternative networks and the potential entry of new competitors into the market could harm our ability to increase sales, which could negatively impact the Token Ecosystem, PhunCoin and PhunToken.

There is no trading market for PhunCoin.
There is no established public market for PhunCoin. Peer-to-peer transfers will not be permitted unless and until rights holders are notified otherwise by us and informed of the requirements and conditions to do so. There can be no assurance that a secondary market will develop or, if a secondary market does develop, that it will provide the holders of the PhunCoin rights with liquidity of investment or that it will continue for the life of PhunCoin. The liquidity of any market will depend on a number of factors, including, but not limited: (i) the number of holders; (ii) the performance of PhunCoin; (iii) the market for similar crypto assets; (iv) the interest of traders in making a market for PhunCoin; (v) regulatory developments in the digital token or cryptocurrency industries and (vi) legal restrictions on transfer. In the event that PhunCoin remains untradeable for a significant period of time or indefinitely, their value could be materially adversely affected.
The delay, or perceived delay, in the full development of our Token Ecosystem may result in declines in PhunToken revenue.
PhunToken is intended to be used or consumed within our Token Ecosystem. We can provide no assurance, as to when, or if, we will be able to successfully complete the ones previously acquired by our management, entail special considerations and risks, in particular with tanker vessels which may carry crude oil, petroleum products or liquefied gases.development of the Token Ecosystem. If we are successfulunable to fully develop the Token Ecosystem, PhunToken customers or potential PhunToken customers may seek to find alternate methods to use, consume or transact their PhunToken. Secondary markets, some of which we may not be aware of, may develop as a result. The development of an alternative “marketplace” in completingwhich consumers can, or believe they can, purchase PhunToken at a business combinationprice lower than our current sales price, may result in lower sales and harm our financial performance.

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The regulatory regime governing blockchain technologies, digital assets, digital asset exchanges and offerings of and transactions in digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens.
Regulation of digital assets, like PhunCoin and PhunToken, blockchain technologies and digital asset exchanges, is currently expanding and likely to rapidly evolve and increase as government agencies take greater interest in them. Regulation also varies significantly among U.S. federal, state and foreign jurisdictions and is subject to significant uncertainty at this time. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or digital asset trasnactions. In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with PhunCoin and PhunToken could subject us to fines, penalties or other regulatory actions, as well as to civil actions by affected parties. Any such violations could adversely affect our ability to maintain PhunCoin and PhunToken, which could have a target business, we willmaterial adverse effect on our operations and financial condition. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and possiblyfines.
The sale of PhunToken or the offerings of PhunCoin may subject us to additional regulatory requirements. We will be adversely affected by,if we are, or any of our subsidiaries is, determined to have been subject to registration as an investment company under the following risks:

●if our business involves the ownership of tanker vessels, such vessels could be arrested by maritime claimants, which could result in the interruption of business and have an adverse effect on revenue and profitability;
●governments could requisition vessels during a period of war or emergency, resulting in a loss of earnings;
●if we experience a catastrophic loss and our insurance is not adequate to cover such loss, it could have a material adverse effect on our operations;
●the dangers inherent in the transporting of energy could cause disruptions and could expose us to potentially significant losses, costs or liabilities;
●the maritime transport of energy industry is subject to intense governmental regulation;
●we may incur significant costs in complying with environmental, safety and other governmental regulations and our failure to comply with these regulations could result in the imposition of penalties, fines and restrictions on our operations;

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Investment Company Act.

●our operations may harm the environment;
●inherent in our operations may be hazards which require continual oversight and control;
●conservation measures and technological advances could reduce demand for oil and gas;
●political instability could harm our business;
●our business may be subject to foreign currency risks;
●charterhire rates for tanker vessels are volatile and remain significantly below their high in 2008, which may have an adverse effect on our revenues, earnings and profitability and our ability to comply with our loan covenants;
●an over-supply of tanker vessels capacity may affect or depress charter rates and, in turn, adversely affect our profitability;
●the market values of our vessels may decrease, which could limit the amount of funds that we can borrow or cause us to breach certain covenants in our credit facilities and we may incur a loss if we sell vessels following a decline in their market value;
●a further economic slowdown or changes in the economic and political environment in the Middle East region may have a material adverse effect on our business, financial condition and results of operations;
●the current state of global financial markets and current economic conditions may adversely impact our ability to obtain additional financing on acceptable terms which may hinder or prevent us from expanding our business;
●charterers have been placedWe are currently not deemed an “investment company” subject to regulation under significant financial pressure, thereby increasing our charter counterparty risk;
●acts of piracy on ocean-going vessels may have an adverse effect on our business;
●political instability, terrorist attacks and international hostilities can affect the seaborne transportation industry, which could adversely affect our business;
●our revenues may be subject to seasonal fluctuations, which could affect our operating results and our ability to pay dividends, if any, in the future;
●rising fuel prices may adversely affect our profits;
●we would be subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in our vessels being denied access to, or detained in, certain ports;
●we would be subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business;
●increased inspection procedures and tighter import and export controls could increase costs and disrupt our business;
●maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow;
●governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings;

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●in the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources and, as a result, we may be unable to employ our vessels profitably; and
●risks associated with operating ocean-going vessels could affect our business and reputation, which could adversely affect our revenues and stock price.

Any of the foregoingInvestment Company Act. There is no guarantee we will continue to be exempt from registration under the Investment Company Act and were we to be deemed to be an investment company under the Investment Company Act, and thus subject to regulation under the Investment Company Act, the increased reporting and operating requirements could have a negativean adverse impact on our operations followingbusiness, operating results and financial condition.

In addition, if the SEC or a business combination. However, our effortscourt of competent jurisdiction were to find that we are in identifying prospective target businesses willviolation of the Investment Company Act for having failed to register as an investment company thereunder, possible consequences include, but are not be limited to, the maritime transport industry. Accordingly, iffollowing: (i) the SEC could apply to a district court to enjoin the violation; (ii) we acquire a target businesscould be sued by investors in another industry, these risks will likely not affect us and in our securities for damages caused by the violation; and (iii) any contract to which we willare a party that is made in, or whose performance involves a, violation of the Investment Company Act would be subjectunenforceable by any party to other risks attendantthe contract unless a court were to find that under the circumstances enforcement would produce a more equitable result than nonenforcement and would not be inconsistent with the specific industry in whichpurposes of the Investment Company Act. Should we operatebe subjected to any or target business which we acquire, none of which can be presently ascertained.

We face risks related to companies in the energy storage industry.

Business combinations with companies in the energy storage industry entail special considerations and risks. If we are successful in completing a business combination with such a target business, we will be subject to, and possibly adversely affected by, the following risks:

●our customers may experience significant interruptions, which could harm our business;

●our financial results could depend on the market fundamentals surrounding the price volatility and supply of and demand for crude oil, petroleum products and chemicals, among other factors;
●we might depend on a relatively limited number of customers for a significant portion of our revenues;

●the carrying values of our terminals may be impaired and could be required to recognize non-cash charges in future periods;
●our operations may be subject to operational hazards and unforeseen interruptions, including interruptions from hurricanes, floods or earthquakes, for which we may not be adequately insured;
●if our services agreements are terminated and we are unable to secure comparable alternative arrangements, our business, financial condition and results of operations could be harmed;
●we may experience competition from other terminals that are able to supply our customers with comparable logistics and storage capacity at a lower price;
●any reduction in the capability of our customers to utilize third-party pipelines and railroads that interconnect with our terminals or to continue utilizing them at current costs could cause a reduction of volumes transported through our terminals;
●our facilities may have been in service for many years, which could result in increased maintenance expenditures or remediation projects, which could adversely affect our business, results of operations and financial condition;
●we may incur significant costs and liabilities in complying with environmental, health and safety laws and regulations, which are complex and frequently changing;
●we could incur significant costs and liabilities in responding to contamination that occurs at our facilities;
●we could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits and authorizations or otherwise comply with health, safety, environmental and other laws and regulations;

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●our operations may be subject to federal and state laws and regulations relating to product quality specifications, and we could be subject to damages based on claims brought against us by our customers or lose customers as a result of the failure of products we distribute to meet certain quality specifications;
●mergers among our customers and competitors could result in lower levels of activity at our terminals, thereby reducing the amount of cash we generate; and
●terrorist attacks aimed at our facilities or surrounding areas could adversely affect our business.

Anyall of the foregoing, our business would be materially and adversely affected.

The prices of digital assets are extremely volatile. Fluctuations in the prices of digital assets and/or waning interest of investors in the digital asset markets could materially and adversely affect our business.

The prices of blockchain assets such as bitcoin and ethereum have a negative adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses will not be limited to the energy storage industry. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and we will behistorically been subject to other risks attendant withdramatic fluctuations and are highly volatile. Several factors may influence the specific industryinterest in which we operate or target business which we acquire, nonedigital assets such as PhunCoin and PhunToken, including, but not limited to:
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●
•global digital asset supply;
•businesses’ acceptance of digital assets like cryptocurrencies as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold blockchain assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use;
•purchasers’ expectations with respect to the rate of inflation;
•changes in petroleum demand and distribution and weaknessthe software, software requirements or hardware requirements underlying the Token Ecosystem;
•changes in the global economy may adversely affect our business;rights, obligations, incentives, or rewards for the users of and other participants in the Token Ecosystem;
•interest rates;
●a significant decline in production
•currency exchange rates, including the rates at certain refineries served by certain of our pipelines and terminals, or a fundamental change in the primary source of supply of petroleum products to a region, could materially reduce the volume of liquid petroleum products we transport and adversely impact our operating results;which digital assets may be exchanged for fiat currencies;
•fiat currency withdrawal and deposit policies of digital asset exchanges on which users may trade digital assets and liquidity on such exchanges;
●competition could adversely affect our operating results;
•interruptions in service from or failures of major digital asset exchanges in which users may trade digital assets;
•investment and trading activities of large investors, including private and registered funds, that may directly or indirectly puchase PhunCoin or other digital assets;
●mergers among our customers
•monetary policies of governments, trade restrictions, currency devaluations and competitors could result in lower volumes being shipped on our pipelines and stored in our terminals, thereby reducing the amount of cash we generate;revaluations;
•regulatory measures that may affect the purchase or use of digital assets, including PhunCoin and PhunToken;
●we may incur unknown
•the maintenance and contingent liabilities from assets we have acquired;development of the open-source software protocol of certain digital assets;
•global or regional political, economic or financial events and conditions; or
●climate change legislation or regulations restricting emissions of “greenhouse gases” or setting fuel economy or air quality standards could result in increased operating costs or reduced demand for
•expectations among the liquid petroleum products and other hydrocarbon products that we transport, store or otherwise handle in connection with our business;
●environmental regulation may impose significant costs and liabilities on us;
●existing or future government regulations relating to certain chemicals or additives in gasoline or diesel fuel could require capital expenditures or result in lower pipeline volumes and thereby adversely affect our results of operations and cash flows;
●terrorist attacksToken Ecosystem or other security threats could adversely affect our business;
●our business may be exposed to customer credit risk, and we may not be able to fully protect ourselves against such risk;
●pipeline operations may be subject to operational hazards and unforeseen interruptions for which we may not be insured digital asset market participants that the value and/or entitled to indemnification; and
●hurricanes and other severe weather conditions could have a material adverse effect on our business, financial results and cash flow.

55utility of certain digital assets will soon change.

Any of the foregoing could have a negative adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses will not be limited to the energy pipeline industry. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and we will be subject to other risks attendant with the specific industry in which we operate or target business which we acquire, none of which can be presently ascertained.

Item 1B. Unresolved Staff Comments

Comments.

None.

48

Item 2. Properties

.

Our corporate headquarters is located in Austin, Texas, where, in June 2022, we entered into a lease agreement for approximately 7,458 square feet of professional office space. In March 2022, we entered into a lease agreement for approximately 21,830 square feet of manufacturing and warehouse space for our Lyte operations in Round Rock, Texas, and we relocated our Lyte operations from Gurnee, Illinois to Round Rock during the second quarter of 2022. We also currently lease professional office facilities in Irvine, California; San Diego, California; and Miami, Florida. We are currently subleasing our Irvine, California and Miami, Florida office facilities. We may also further sublease certain of these facilities where space is not fully utilized.
We currently do not ownanticipate difficulty in either retaining occupancy of any real estate or other physical properties materially important to our operation. Our executive offices are located at 90 Kifissias Avenue, Maroussi 15125, Athens, Greece. The cost for this space is included in the $10,000 per month fee that we pay Nautilus Energy Management Corp., an affiliate of our co-Chief Executive Officers, for office space, utilitiesfacilities through lease renewals prior to expiration or through month-to-month occupancy arrangements or replacing them with equivalent facilities. We believe that our existing facilities are suitable and secretarial and administrative services. We consider our current office space adequate for our current operations.

present purposes.

Item 3. Legal Proceedings

ToProceedings.

The information set forth under the knowledgesubheading "Litigation" in Note 10, "Commitments and Contingencies" of our management, therethe notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

incorporated herein by reference.

Item 4. Mine Safety Disclosures

Disclosures.

Not applicable.

49
PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Securities.

Market Information

Our units, common stock, and warrants are each traded on the NASDAQ Capital Market under the symbols “STLRU,” “STLR” and “STLRW,” respectively. Our units commenced public$0.0001 par value, began trading on August 19, 2016, and our common stock and our warrants commenced public trading on October 10, 2016.

The table below sets forth, for the calendar quarter indicated, the high and low bid prices of our units, common stock and warrants as reported on the Nasdaq forCapital Market on December 28, 2018 under the fiscal year ended November 30, 2017 and the period from August 19, 2016 through November 30, 2016.

  Units  Common Stock  Warrants 
Year Ended November 30, 2017 Low  High  Low  High  Low  High 
December 1, 2016 through February 28, 2017 $10.04  $10.35  $9.9  $10.16  $0.19  $0.36 
March 1, 2017 through May 31, 2017 $10.25  $10.43  $10.00  $10.20  $0.325  $0.38 
June 1, 2017 through August 31, 2017 $10.34  $10.55  $10.00  $10.28  $0.29  $0.47 
September 1, 2017 through November 30, 2017 $10.52  $10.58  $10.01  $10.23  $0.31  $0.40 

56
symbol “PHUN”.

Holders

  Units  Common Stock  Warrants 
Year Ended November 30, 2016 Low  High  Low  High  Low  High 
August 19, 2016 through September 30, 2016 $9.93  $10.00   -   -   -   - 
October 1, 2016 through November 30, 2016 $9.97  $10.30  $9.87  $10.00  $0.10  $0.50 

On February 8, 2018 our common stock had a closing price of $10.24, our warrants had a closing price of $0.4403 and our units had a closing price of $10.70. 

(b)Holders

On February 8, 2018,March 27, 2023, there was one holder of record of our units, 15were approximately 171 holders of record of our common stock. We believe the number of beneficial owners of our common stock and three holdersis substantially greater than the number of record holders because a large portion of our warrants. 

(c) outstanding common stock is held of record in broker “street name” for the benefit of individual investors.

Dividends

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination.date. The payment of any cash dividends subsequentwill be dependent upon our revenue, earnings and financial condition from time to our initial business combination will betime. The payment of any dividends is within the discretion of our board of directors at such time. In addition,directors. It is presently expected that we will retain all earnings for use in our business operations and, accordingly, it is not expected that our board of directors is not currently contemplating and does not anticipate declaringwill declare any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

(d)

Securities Authorized for Issuance Under Equity Compensation Plans.

None.

(e) Plans

The information set forth under the subheading "Securities Authorized for Issuance Under Equity Compensation Plans" included in Part III, Item 12 of this Annual Report on Form 10-K is incorporated herein by reference.
Recent Sales of Unregistered Securities

None.

(f)

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.  

57

None.

Item 6. Selected Financial Data

Not required.

[Reserved]

50

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operations.

References in this section to “we,” “us,” "our" or “the Company” refer to Phunware, Inc. References to the “Company,” “us”“management” or “we”“management team” refer to Stellar Acquisition III Inc. our officers and directors.
The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with theour consolidated financial statements and the related notes thereto containedappearing elsewhere in this report.

Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward-Looking Statements,

All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “Management’s Discussion" the following discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Suchanalysis contains forward-looking statements are based on the beliefsthat involve risks, uncertainties and assumptions. Our actual results and timing of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results couldselected events may differ materially from those contemplated by theanticipated in these forward-looking statements as a result of certainmany factors, detailedincluding, but not limited to, those discussed in the section titled “Risk Factors” and elsewhere in this Annual Report.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our filingsconsolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Key Events and Recent Developments
In October 2022, Alan S. Knitowski, our Chief Executive Officer, submitted notice of resignation to the Company effective December 27, 2022.
In November 2022, we entered into an employment agreement with Russell Buyse to serve as our Chief Executive Officer effective December 28, 2022. Our board of directors also appointed Mr. Buyse to serve as a Class III director until the 2024 annual meeting of stockholders. Mr. Buyse filled the vacancy on our board of directors created by the resignation of Randall Crowder, which occurred in September 2022.
In addition, in January 2023, we announced that we had entered into a separation agreement with Luan Dang, our Chief Technology Officer.

Overview
Phunware, Inc. offers a fully integrated software platform that equips companies with the SEC.

Overview

products, solutions and services necessary to engage, manage and monetize their mobile application portfolios globally at scale. Our MaaS platform provides the entire mobile lifecycle of applications, media and data in one login through one procurement relationship. Our offerings include:

•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 monetization, including our engagement-driven digital asset PhunToken.

We are a blank check company incorporated pursuant to the laws of the Republic of the Marshall Islands on December 8, 2015also offer and sell pre-packaged and custom high-end personal computer systems for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses. gaming, streaming and cryptocurrency mining enthusiasts.
We intend to effectuatecontinue investing for long-term growth. We have invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We also expect to continue investing in the development and improvement of new and existing products and services to address customers' needs. We currently do not expect to be profitable in the near future.
51

Key Business CombinationMetrics
Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important of these measures include backlog and deferred revenue.
Backlog and Deferred Revenue. Backlog represents future amounts to be invoiced under our current software subscription and services customer agreements. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue, accounts receivable or elsewhere in our consolidated financial statements, and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals. We reasonably expect approximately 40% of our backlog as of December 31, 2022 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.
In addition, our deferred revenue consists of amounts that have been invoiced but have not yet been recognized as revenues as of the end of a reporting period. Together, the sum of deferred revenue and backlog represents the total billed and unbilled contract value yet to be recognized in revenue, and provides visibility into future revenue streams.
The following table sets forth our backlog and deferred revenue:


December 31,
20222021
(in thousands)
Backlog$3,824 $3,316 
Deferred revenue4,178 5,272 
Total backlog and deferred revenue$8,002 $8,588 
For further information regarding our deferred revenue balances, refer to Note 4 “Revenue” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Non-GAAP Financial Measures
Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA
We report our financial results in accordance with GAAP. We also use certain non-GAAP financial measures that fall within the meaning ascribed in SEC Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit, adjusted gross margin and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") (our "non-GAAP financial measures"). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.
Our non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net loss, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Our non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include:
52


•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.
We compensate for these limitations to our non-GAAP financial measures by relying primarily on our GAAP results and using cashour non-GAAP financial measures only for supplemental purposes. Our non-GAAP financial measures include adjustments for items that may not occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other peer companies over time. For example, it is useful to exclude non-cash, stock-based compensation expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly across periods due to timing of new stock-based awards. We may also exclude certain discrete, unusual, one-time, or non-cash costs in order to facilitate a more useful period-over-period comparison of our financial performance. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.
The following table sets forth the non-GAAP financial measures we monitor.

Year Ended December 31,
20222021
(in thousands, except percentages)
Adjusted gross profit (1)
$5,286 $4,670 
Adjusted gross margin (1)
24.3 %43.9 %
Adjusted EBITDA (2)
$(23,480)$(11,662)
(1)Adjusted gross profit and adjusted gross margin are non-GAAP financial measures. We believe that adjusted gross profit and adjusted gross margin provide supplemental information with respect to gross profit and gross margin regarding ongoing performance. We define adjusted gross profit as net revenues less cost of revenue, adjusted to exclude one-time revenue adjustments, stock-based compensation and amortization of intangible assets. We define adjusted gross margin as adjusted gross profit as a percentage of net revenues.
(2)Adjusted EBITDA is a non-GAAP financial measure. We believe adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define adjusted EBITDA as net loss plus (i) interest expense, (ii) income tax expense (benefit), (iii) depreciation, (iv) amortization, and further adjusted for (v) one-time adjustments and (vi) stock-based compensation expense.

53

Reconciliation of Non-GAAP Financial Measures
The following tables set forth a reconciliation of the most directly comparable GAAP financial measure to each of the non-GAAP financial measures discussed above.
Year Ended December 31,
20222021
(in thousands, except percentages)
Gross profit$5,076 $3,613 
Add back:  Amortization of intangibles— 7 
Add back:  Stock-based compensation210 1,050 
Adjusted gross profit$5,286 $4,670 
Adjusted gross margin24.3 %43.9 %
Year Ended December 31,
20222021
(in thousands)
Net loss$(50,894)$(53,522)
Add back:  Depreciation and amortization739 240 
Add back:  Interest expense2,406 4,481 
Add back (Less):  Income tax expense (benefit)4 (426)
EBITDA(47,745)(49,227)
Add back: Stock-based compensation3,009 4,941 
Add back: Loss on extinguishment of debt— 7,952 
Add back: Impairment of digital assets22,911 9,383 
Add back: Impairment of goodwill2,061 — 
Less (Add back): Fair value adjustment for warrant liabilities(3,349)18,139 
Less: Gain on forgiveness of Paycheck Protection Program loan    — (2,850)
Less: Gain on sale of digital assets(367)— 
Adjusted EBITDA$(23,480)$(11,662)

54

Components of Results of Operations
Revenue and Gross Profit
There are a number of factors that impact the revenue and margin profile of the product, service and technology offerings we provide, including, but not limited to, solution and technology complexity, technical expertise requiring the combination of products and types of services provided, as well as other elements that may be specific to a particular client solution.
Platform Revenue and Gross Profit
Our platform revenue consists of software subscriptions, application development services and support, application transactions (which are comprised of in-app advertising) and PhunToken sales.
Subscription revenue is derived from software license fees, which comprise subscription fees from customers licensing our Software Development Kits (SDKs), that includes accessing the MaaS platform. Subscription revenue from SDK licenses gives the customer the right to access our MaaS platform.
Application development revenue is derived from development services around designing and building new applications or enhancing existing applications. Support revenue is comprised of support and maintenance fees of customer applications, software updates and technical support for application development services for a support term. From time to time, we may also provide professional services by outsourcing employees’ time and materials to customers.
We generate application transaction revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads. Fees from advertisers are commonly based on the number of ads delivered or views, clicks or actions by users on mobile advertisements delivered, and we recognize revenue at the time the user views, clicks or otherwise acts on the ad. We sell ads through several offerings: cost per thousand impressions and cost per click. During 2021, we announced the commencement of PhunToken sales. PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest. We recognize revenue related to PhunToken at time of delivery to a customer's ethereum-based wallet.
Platform gross profit is equal to subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of Phunware’s MaaS platform are expensed in research and development. Furthermore, gross profit related to application transactions is equal to application transaction revenue less cost of revenue associated with application transactions, which is impacted by the cost of advertising traffic we pay to our suppliers, the amount of traffic which we can purchase from those suppliers and ethereum blockchain fees paid to deliver PhunToken.
As a result, platform gross profit may fluctuate from period to period.
Hardware Revenue and Gross Profit
We acquired Lyte in October 2021. Revenue from Lyte is primarily derived from the proceedssale of high-performance personal computers. Lyte computers are sold with a variety of pre-packaged solutions, as well as customizable solutions selected by our customers. A majority of Lyte's customers pay us via credit card payments, which is managed through a third party processor. We recognize revenue at the time a completed unit ships from our facility.
Hardware gross profit is equal to hardware revenue less the costs associated with the assembly of computers. Hardware gross profit is impacted by the costs that we pay for parts incorporated into a Lyte computer system, as well as labor costs of our employees directly attributable to building computer systems and shipping. Demand may exceed available supply at times, which may hamper our ability to deliver computer systems timely and may increase the costs at which we can obtain inventory needed for computer builds. Customizable solutions we offer our customers may also vary from time to time. As a result, computer hardware revenue and gross profit may fluctuate from period to period. Although we plan to invest in Lyte for future growth, we may experience revenue and gross profit fluctuations as a result of seasonality.
55

Gross Margin
Gross margin measures gross profit as a percentage of revenue. Gross margin is generally impacted by the same factors that affect changes in the mix of platform and hardware revenue.
Operating Expenses
Our operating expenses include sales and marketing expenses, general and administrative expenses, research and development expenses, depreciation and amortization of acquired intangible assets. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation and, in sales and marketing expense, commissions. Legal settlements pertaining to litigation brought as a result of the Company's operations is also included in operating expenses.
Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. Our sales and marketing expense may increase in absolute dollars as we increase our sales and marketing organizations as we plan to increase revenue but may fluctuate as a percentage of our total revenue from period to period.
General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative function to support the growth of our business. As a result, our general and administrative expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.
Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, our research and development expenses may increase in absolute dollars as our business grows but may fluctuate as a percentage of revenue from period to period.
Impairment of Goodwill. Goodwill impairment consists of non-cash impairment charges related to goodwill. We review goodwill for impairment annually on October 1 and more frequently if events or changes in circumstances indicate an impairment may exist. If the carrying value of the reporting unit continues to exceed its fair value, the fair value of the Company’s goodwill is calculated and an impairment charge equal to the excess is recorded.
Interest Expense

Interest expense includes interest related to our outstanding debt, including amortization of discounts and deferred issuance costs.

Refer to Note 8 "Debt" of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on debt offerings.

We also may seek additional debt financings to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

Income Tax Expense
We are subject to U.S. Federal income taxes, state income taxes net of federal income tax effect and nondeductible expenses. Our effective tax rate will vary depending on permanent non-deductible expenses and other factors.
Refer to Note 14 "Income Taxes" of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
56

Results of Operations
Comparison of Fiscal Years Ended December 31, 2022 and 2021
Net Revenue
Year Ended December 31,Change
(in thousands, except percentages)20222021Amount%
Net Revenue
Platform revenue$6,521 $7,548 $(1,027)(13.6)%
Hardware revenue15,273 3,095 12,178 393.5 %
Total revenue$21,794 $10,643 $11,151 104.8 %
Platform revenue as percentage of total revenue29.9 %70.9 %
Hardware revenue as percentage of total revenue70.1 %29.1 %
Total revenue increased $11.2 million, or 104.8%, in the year ended December 31, 2022 compared to the corresponding period in 2021.
Platform revenue decreased $1.0 million, or (13.6)% as a result of a public offering (the “Public Offering”)$1.5 million decrease of development, licensing and support services provided to two customers, one of which whose contract has expired. These decreases were minimally offset by an increase in PhunToken revenue of $0.5 million.
Computer hardware revenue increased by $12.2 million, which was the result of the acquisition of Lyte in October 2021.
57

Cost of Revenue, Gross Profit and Gross Margin

Year Ended December 31,Change
(in thousands, except percentages)20222021Amount%
Cost of Revenue
Platform revenue$3,012 $4,013 $(1,001)(24.9)%
Hardware revenue13,706 3,017 10,689 354.3 %
Total cost of revenue$16,718 $7,030 $9,688 137.8 %
Gross Profit
Platform revenue$3,509 $3,535 $(26)(0.7)%
Hardware revenue1,567 78 1,489 1,909.0 %
Total gross profit$5,076 $3,613 $1,463 40.5 %
Gross Margin
Platform revenue53.8 %46.8 %
Hardware revenue10.3 %2.5 %
Total gross margin23.3 %33.9 %
Total gross profit increased $1.5 million, or 40.5%, in the year ended December 31, 2022, compared to the corresponding period of 2021 primarily due to revenue items discussed above. The decrease in platform revenue noted above was offset by a decrease of $0.8 million of stock-based compensation.
Increase in platform gross margin is the result of higher PhunToken revenue in 2022, as compared to 2021. Increase in Lyte gross margin is the result of operational efficiencies captured as we integrated Lyte during 2022. Total gross margin percentage decreased primarily due to product mix between platform and hardware revenue, as Lyte comprised of larger percentage of our revenue mix in 2022, as compared to 2021.
Operating Expenses

Year Ended December 31,Change
(in thousands, except percentages)20222021Amount%
Operating expenses
Sales and marketing$6,814 $3,022 $3,792 125.5 %
General and administrative19,554 13,256 6,298 47.5 %
Research and development6,149 4,179 1,970 47.1 %
Impairment of goodwill2,061 — 2,061 100.0 %
Total operating expenses$34,578 $20,457 $14,121 69.0 %
Sales and Marketing
Sales and marketing expense increased $3.8 million, or 125.5% for the year ended December 31, 2022 compared to the corresponding period of 2021, primarily due to an increase of $3.1 million of marketing related expenditures mostly related to Lyte and PhunToken. Other increases of $0.9 million of employee compensation costs were due to higher headcount. These increases were minimally offset by the decrease in stock-based compensation of $0.3 million.
General and Administrative
General and administrative expense increased $6.3 million, or 47.5%, for the year ended December 31, 2022 compared to the corresponding period of 2021, as a result of an increase of $1.8 million in legal fees attributable to legal matters more fully described under the subheading "Litigation" in Note 10, "Commitments and Contingencies" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. We also experienced an increase of $1.2 million in payroll costs, as a result of an higher headcount in our general and administrative function and employee retention credit received during 2021. Increases in these payroll-related items were partially offset by a decrease in accruals for employee bonuses. Other increases are the result of $0.8 million of facility expenses for new corporate office space
58

in Austin, Texas and the Lyte warehouse facility, $0.6 million in audit and other professional services, $0.6 million in bad debt recoveries and accounts payable settlements that occurred in 2021, $0.6 million in other general and administrative expenses, $0.4 million related to amortization of trade name related to the Lyte acquisition and a sale$0.3 million increase in credit card processing fees for Lyte.
Research and Development
Research and development expense increased $2.0 million, or 47.1% for the year ended December 31, 2022, compared to the corresponding period of Warrants2021, primarily resulting from increased headcount dedicated to research and development projects. This increase was minimally offset by in a private placement that occurred simultaneously withdecrease in stock-based compensation.
Impairment of Goodwill
We recorded an impairment of goodwill of $2.1 million related to the completionLyte operating segment of our business for the year ended December 31, 2022. Refer to Note 6 "Goodwill" of the Public Offering (the “Private Placement Warrants”),notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on our capital stock,goodwill impairment.
Other income (expense)

Year Ended December 31,
(in thousands, except percentages)20222021
Other income (expense)
Interest expense$(2,406)$(4,481)
Loss on extinguishment of debt— (7,952)
Impairment of digital assets(22,911)(9,383)
Fair value adjustment for warrant liabilities3,349 (18,139)
Gain on forgiveness of Paycheck Protection Program ("PPP") loan— 2,850 
Other income, net580 1 
Total other expense$(21,388)$(37,104)

During 2022, we recorded other expense of $21.4 million, which primarily consisted of impairment charges related to our digital asset holdings. Refer to Note 2, "Summary of Significant Accounting Policies" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion regarding our digital asset holdings. We also recorded interest expense related to our 2021 Promissory Note and 2022 Promissory Note (defined elsewhere herein) and accretion of debt ordiscounts thereunder. These expenses were offset by a combination of cash, stock and debt.

The issuance of additional sharesgain related to the change in the fair value of our stockwarrants issued in connection with our 2020 Convertible Notes. Reference is made to Note 8 "Debt" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on our debt holdings.

During 2021, we recorded other expense related to a Business Combination:

-may significantly dilute the equity interest of our stockholders;
-may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
-could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
-may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
-may decrease prevailing market prices for our common stock and/or Warrants.

Similarly, iffair value adjustment of the warrants issued in connection with our 2020 Convertible Notes, which included a fair value adjustment related to a partial exercise of the warrant. We also recorded interest expense and losses on extinguishment of debt related to payments and the payoff of our 2020 Convertible Notes. These expenses were partially offset by the gain on forgiveness of our Paycheck Protection Program loan.


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Liquidity and Capital Resources
As of December 31, 2022, we issue debt securities, it could result in:

-a decrease in the prevailing market prices for our common stock and/or Warrants.
-default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;

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-acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
-our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
-our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
-our inability to pay dividends on our common stock;
-using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
-limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
-increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
-limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

As indicatedheld total cash of $2.0 million, all of which was held in the accompanying financial statements,United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

We may, if needed, sell our digital asset holdings for cash to fund our ongoing operations. As of December 31, 2022, we held 605 bitcoins and 400 ethereum, of which consist of the majority of the digital assets recorded on our balance sheet. The digital asset market historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of instability in the digital asset market, we may not be able to sell our digital asset holdings at November 30, 2017,reasonable prices, or at all. As a result, our digital assets are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the Trust Account consisted of US treasury bills yielding interest of approximately 1.3% per annum, with a total value of $71,215,004 and another $852 heldsame extent as cash and cash equivalents. We expect
On February 1, 2022, we filed a registration statement on Form S-3, which was subsequently declared effective by the SEC on February 9, 2022, pursuant to incur significant costswhich we may issue up to $200 million in the pursuit of our acquisition plans. We cannot assure you that our planscommon stock, preferred stock, warrants and units. Contained therein, was a prospectus supplement in which we may sell up to complete our initial Business Combination will be successful.

Results of Operations

For the period from December 8, 2015 (inception) through November 30, 2017 our activities consisted of formation and preparation for the Public Offering and subsequent to the Public Offering, and efforts directed toward locating and completing a suitable Business Combination. Our operating costs for those periods include our search for a Business Combination and are largely associated with our governance and public reporting, and charges of $10,000 per month payable to an affiliate of our Sponsors for administrative services.

Liquidity and Capital Resources

In August 2016, we consummated the Public Offering of an aggregate of 6,500,000 units at a price of $10.00 per unit generating gross proceeds of approximately $65,000,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the private placement of 7,650,000 Private Placement Warrants, each exercisable to purchase one share$100 million of our common stock at $11.50 per share,in an “at the market" offering pursuant to the Sponsor, at a pricean At Market Issuance Sales Agreement we entered into with H.C. Wainwright & Co., LLC on January 31, 2022. As of $0.50 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $3,825,000. We received net proceeds from the Public Offering and the sale of the Private Placement Warrants of approximately $66,906,000, net of the non-deferred portion of the underwriting commissions of $1,300,000 and offering costs and other expenses of approximately $619,000. Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Company sold an additional 400,610 units at a price of $10.00 per unit generating gross proceeds of approximately $4,006,100 before underwriting discounts and expenses. Simultaneously, the Sponsor purchased an additional 320,488 Private Placement Warrants at a price of $0.50 per Private Placement Warrant, generating gross proceeds, of approximately $160,244. The non-deferred portion of the underwriting commissions paid by the Company amounted to $80,122, while the Company incurred additional expenses related to the partial exercise of the overallotment option of $11,709. On each of August 24, 2017 and November 24, 2017, our sponsors deposited cash (equals to the principal amount of the promissory note for such extension) into the Company’s trust account and we also instructed the trust agent to apply interest earned on the funds available for withdrawal toward the principal held in the trust account, representing an aggregate of $402,536, or $0.058 per public share for each extension. Of the aforementioned proceeds $71,191,294, deposited in the Trust Account is not available to us for operations (except amounts designated for working capital and amounts to pay taxes and working capital). At November 30, 2017, we had approximately $117,000 of cash available outside of the Trust Account to fund our activities to search for a Business Combination.

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Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase ofDecember 31, 2022, 2,623,460 shares of our common stock (“Founder Shares”)have been sold for $25,000 by Messrs. Tsirigakisaggregate cash proceeds of $4.6 million, net of transaction costs of $0.1 million. We also incurred additional transaction costs paid outside of closing of $0.2 million.

On July 6, 2022, we entered into a note purchase agreement and Syllantavos, and a total of approximately $208,000 loaned by three ofcompleted the Company’s Sponsors, Firmus Investments Inc., Astra Maritime, Inc. and Magellan Investments Corp. against the issuancesale of an unsecured promissory note with an original principal amount of $12.8 million in a private placement (the “Note”"2022 Promissory Note"). These loansAfter deducting all transaction fees paid by us at closing, net cash proceeds to us at closing were non-interest bearing$11.8 million. No interest will accrue on the 2022 Promissory Note unless and wereuntil the occurrence of an event of default (as defined in the 2022 Promissory Note). Beginning on November 1, 2022 and on the same day of each month thereafter until the promissory note is paid in full, we are required to make monthly amortization payments in the amount of $1.6 million until the maturity date of July 1, 2022, which is subject to adjustment for any payment deferrals we elect. We may prepay any or all outstanding balance of the 2022 Promissory Note earlier than it is due with a prepayment premium of 110%. The prepayment premium also applies to the monthly amortization payments. On March 15, 2023, we entered into a waiver agreement with the holder of our 2022 Promissory Note, waiving the Payment Deferral Conditions, as defined in the 2022 Promissory Note. For agreeing to waive the Payment Deferral Conditions, we agreed to compensate the noteholder an amount equal to 5% of the outstanding balance immediately before entering into the waiver agreement. In connection therewith, we elected to defer the monthly payments under the 2022 Promissory Note for the months of April, May, June and July 2023. As a result of our election to defer the monthly payments, the outstanding balance of the 2022 Promissory Note will be increased by 1.85% on August 24, 2016the first day of each month beginning on April 1, 2023 and concluding on July 1, 2023. The waiver fee and the additional principal will be paid in connection with our monthly installment payments once the closingdeferral period concludes. Beginning on August 1, 2023 and on the same day of each month thereafter, we will be required to pay to the Public Offering.

Asnoteholder the new monthly amortization payment in the amount of $1,769 until the new maturity date of November 30, 20171, 2023.

Our expectation to generate operating losses and negative operating cash flows in the Company had a total outstanding loan of $604,300 owed to three offuture and the Company’s Sponsors, Firmus Investments Inc., Astra Maritime, Inc. and Magellan Investments Corp. against the issuance of unsecured promissory notes (the “Notes”). These loans were non-interest bearing and will be paid back in full immediately after the closing of our business combination.

We expect that the Company has sufficient resources to fund its operations up to February 23, 2018 andneed for additional funding to support our planned operations, raise substantial doubt regarding our ability to continue as a going concern. Management believes that our existing cash and liquidation of some, or all, of our digital asset holdings are not sufficient to satisfy our operating cash needs for the year after the filing of this Annual Report on Form 10-K, and substantial doubt exists about our ability to continue as a going concern for a period of at one year following the filing date of this Annual Report on Form 10-K.

Additional plans may include selling shares of our common stock in our "at the market" offering, and as of the date of this Annual Report on Form 10-K, a total of $95.4 million may be madesold pursuant to the sales agreement. We may also issue shares of our common stock, preferred stock, warrants and units in orderother offerings pursuant to extend until May 2018.

Off-balance sheetour effective registration statement.

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the pace at which we can scale Lyte, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financings, or issue securities under our effective registration statement described above. In the event that additional financing arrangements

We have no obligations, assetsis required from outside sources, we may not be able to raise it on terms

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acceptable to us, or liabilities which wouldat all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities oradversely affected.
The accompanying consolidated financial partnerships, often referred to as variable interest entities, which wouldstatements have been establishedprepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the ordinary course of business.
The following table summarizes our cash flows for the purposeperiods presented:
Year Ended December 31,
(in thousands, except percentages)20222021
Consolidated statement of cash flows
Net cash used in operating activities$(26,827)$(22,514)
Net cash used in investing activities(2,287)(46,385)
Net cash provided by financing activities8,055 88,019 
Operating Activities
Our primary source of facilitating off-balance sheet arrangements.

cash from operating activities is receipts sales for our various product and service offerings as further described elsewhere in this Annual Report. Our primary uses of cash from operating activities are payments to employees for compensation and related expenses, publishers and other vendors for the purchase of digital media inventory and related costs, vendors for costs of inventory related to the assembly of Lyte computers, sales and marketing expenses and general operating expenses.

We have not entered into any off-balance sheetutilized $26.8 million of cash from operating activities during 2022 resulting from a net loss of $50.9 million. The net loss included non-cash charges of $27.1 million, primarily consisting of the change in fair value of warrants, impairment of digital assets, impairment of goodwill, amortization of debt issuance costs primarily related to our 2022 Promissory Note, as well as stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in significant cash (decreases) as follows: $(0.1) million from a decrease in accounts payable, accrued expenses and an installment payments to Uber related to the settlement of our lawsuit, as well as $(2.9) million from other working capital changes, primarily related to a decrease in deferred revenue and lease liability payments.    
We utilized $22.5 million of cash from operating activities during 2021 resulting from a net loss of $53.5 million. The net loss included non-cash charges of $40.0 million, primarily consisting of the change in fair value of warrants, impairment of digital assets, the loss on the extinguishment and amortization of debt issuance costs related to our 2020 Convertible Notes, as well as stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in significant cash (decreases) as follows: $(5.7) million from a decrease in accounts payable, accrued expenses and an installment payments to Uber related to the settlement of our lawsuit, as well as $(3.3) million from other working capital changes, primarily related to a decrease in post-acquisition deferred revenue and inventory purchases.
Investing Activities
Our investing activities during 2022 consisted of the purchase of digital assets and cash payments for the acquisition of Lyte. This was partially offset by proceeds from the sale of digital assets.
Our investing activities during 2021 consisted of the purchase of digital assets and the acquisition of Lyte.

Financing Activities
Our financing arrangements, established any special purpose entities, guaranteed anyactivities during 2022 consisted of proceeds from equity financings and debt or commitmentsborrowings offset by payments on debt. We acquired $8.1 million of other entities, or entered into any non-financial assets.

cash from financing activities resulting primarily from $11.8 million in proceeds from our 2022 Promissory Note and $4.3 million in proceeds from the sale of our common stock. These sources of financings were partially offset by $8.1 million of payments on debt.

Our financing activities during 2021 consisted of proceeds from equity financings and debt borrowings offset by payments on debt. We acquired $88.0 million of cash from financing activities resulting primarily from $94.7 million in proceeds from the sale of our common stock, $14.7 million in proceeds from our Series B Convertible Note and 2021 Promissory Note and $4.6 million from a partial exercise of a warrant held by the holder of our 2020 Convertible Notes. These
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sources of financing were partially offset by $26.2 million of payments on debt, a majority of which related to payments on the 2020 Convertible Notes.

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Contractual Obligations
We lease various office facilities, including our corporate headquarters in Austin, Texas, our Lyte warehouse facility in Round Rock, Texas, as well as offices in California and Florida, under non-cancellable operating lease agreements that expire through 2027. The terms of the lease agreements provide for rental payments on a graduated basis. We recognize rent expense on a straight-line basis over the lease periods. Rent expense under operating leases totaled $1.1 million and $0.8 million for the years ended December 31, 2022 and 2021, respectfully.
The following table sets forth our contractual obligations

At November 30, 2017, as of December 31, 2022 (in thousands):

Payments due by period
Contractual obligationsTotal
Less than
1 year
1-3
years
3-5
years
More than
5 years
Operating lease obligations$4,782 $1,296 $2,234 $1,252 $— 

Off-Balance Sheet Arrangements
During the years ended December 31, 2022 and 2021, we did not have any long-term debt, capital lease obligations, operating lease obligationsoff-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or long-term liabilities. The Company has agreedvariable interest entities.
Indemnification Agreements
In the ordinary course of business, we provide indemnifications of varying scope and terms to pay $10,000 a month for office space, administrative servicescustomers, vendors, lessors, business partners and secretarial supportother parties with respect to Nautilus Energy Management Corp., an affiliatecertain matters, including, but not limited to, losses arising out of our co-Chief Executive Officers. Services commenced on the date the securities were first listed on the NASDAQ Capital Market on August 19, 2016 and will terminate upon the earlierbreach of the consummationsuch agreements, solutions to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain current and former officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of, an initial Business Combination or the liquidation of the Company.

are related to, their status or service as directors, officers or employees.

Critical Accounting Policies

and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires managementus to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are set forth below. For further information on all significant accounting policies, refer to Note 2 “Summary of Significant Accounting Policies” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Revenue
We derive our revenue primarily from MaaS subscription fees, application development and support fees, as well as revenue from the sale of high-performance personal computer systems. Revenue is recognized when control of these products or services are transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Our revenue recognition policy follows guidance from Accounting Standards Codification ("ASC") No. 606, Revenue from Contracts with Customers (Topic 606).
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We determine revenue recognition through the following five-step framework:

•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract or contracts;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, we satisfy a performance obligation.
Our software subscription and services contracts often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. When a customer contract consists of licensing, application development and support services, we consider these separate performance obligations, which would require an allocation of consideration. For contracts with multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required. Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time.
Digital Assets
We account for our digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services or self-custody solutions to secure them. The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.
We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is the principal market for bitcoin and ethereum (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest intra-day market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value.
The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. In determining the gain or loss to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other expense in our consolidated statements of operations and comprehensive loss.
Goodwill
We review goodwill for impairment annually during the fourth quarter or more frequently if events or changes in circumstances would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. As of December 31, 2022, we identified an impairment related to our Lyte computer division of approximately $2.1 million. Refer to Note 6 "Goodwill" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on our goodwill impairment.
Derivative Liabilities
When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and Hedging - Contracts in the Entity’s Own Equity (“ASC 815-40”), we classify a warrant as equity if it is indexed to our equity and several specific conditions for equity classification are met. A warrant is not considered indexed to our equity, in general, when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to our equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations. As
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of December 31, 2022 and 2021, we had a warrant that was classified as a liability and other warrants that were classified as equity.
We used a Black-Scholes option-pricing model to value the warrant classified as a liability at inception and subsequent valuation dates. Furthermore, the holder partially exercised its warrant for 2,060,000 shares of our common stock, in October 2021, which resulted in a revaluation of the warrant at the time of exercise. The initial and subsequent valuations of the warrant require significant judgment. For the assumptions used to value at warrant as of December 31, 2022, refer to Note 8 “Debt” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Business Combination

We account for business combinations using the acquisition method of accounting as prescribed in ASC 805, "Business Combinations (Topic 805)." We record the assets acquired, liabilities assumed and acquisition-related contingent consideration at fair value on the date of acquisition. The difference between the purchase price, including any contingent consideration, and the fair value of net assets acquired is recorded as goodwill. We may adjust the preliminary purchase price and purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as we obtain more information as to facts and circumstances that impact the determination of fair value at the acquisition date. Any change in fair value of acquisition-related contingent consideration resulting from events after the acquisition date is recognized in earnings. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
Recent Accounting Standards
Recent accounting standards applicable to our business are described under the subheading "Recently Adopted Accounting Policies" in Note 2 "Summary of Significant Accounting Policies" of the notes to consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, we are not required to provide the information required under this Item.
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Item 8. Financial Statements and Supplementary Data.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
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69
70
71
72
74

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of
Phunware, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Phunware, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2022, and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the Accounting for and Disclosure of Digital Assets

Description of the Matter

As described in Note 2 to the financial statements, the Company’s digital assets held as of December 31, 2022, which consist mainly of Bitcoin and Ethereum, are accounted for as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet. The Company’s digital assets as of December 31, 2022 were approximately $10.1 million.
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For the year ended December 31, 2022, the Company generated revenue of $1.5 million from the sale of PhunToken for which they received both cash and digital currency from customers. The Company’s management has exercised significant judgment in their determination of how existing accounting principles generally accepted in the United States of America (“GAAP”) should be applied to the accounting for digital assets held, the associated financial statement presentation and accompanying footnote disclosures.

We identified the accounting for and disclosures of digital assets held and sold as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the valuation, existence and rights and obligations of digital assets held and sold. The nature and extent of audit effort required to address the matter included significant involvement of more experienced engagement team members and subject matter experts related to the matter.

How We Addressed the Matter in Our Audit

Our audit procedures included, amongst others:

•We obtained an understanding of management’s process with regards to the methodology used, and the factors considered in determining the appropriate accounting for and disclosure of its digital assets held;
•Evaluated management’s rationale for the application of Accounting Standards Codification (“ASC”) 350 to account for its digital assets held, including management’s processes for evaluating its digital assets for impairment;
•Evaluated management’s rationale for inclusion of digital assets as a current asset on the balance sheet;
•Evaluated management’s disclosures of its digital assets activity, including risks related to PhunToken in the notes to the financial statements;
•In connection with the sales of digital assets, we traced and agreed the details of the transactions to the underlying documents, examined supporting sale and cash receipt evidence, tested the fair value of the assets received and determined that the sales transactions were in accordance with ASC 606;
•Tested the existence of the Company’s digital assets by evaluating the Company’s self-custody wallet and reconciling the Company’s internal records of digital asset positions for specific wallet addresses to the quantities of digital assets held on those addresses per the Bitcoin ledger; and
•Tested the pricing sources used to value the digital assets held and tested the Company’s write-downs by reperforming an independent pricing on the digital assets held using various independent pricing sources for the full year.

/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2018.
Houston, Texas
March 31, 2023
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Phunware, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31,
2022		December 31,
2021
Assets
Current assets:
Cash$1,955 $23,137 
Accounts receivable, net of allowance for doubtful accounts of $198 and $10 at December 31, 2022 and 2021, respectively958 967 
Inventory2,780 2,636 
Digital assets10,137 32,581 
Prepaid expenses and other current assets1,033 686 
Total current assets16,863 60,007 
Property and equipment, net221 — 
Goodwill31,113 33,260 
Intangible assets, net2,524 3,213 
Right-of-use asset3,712 1,260 
Other assets402 276 
Total assets54,835 98,016 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$7,699 $6,589 
Accrued expenses2,895 9,621 
Lease liability954 399 
Deferred revenue2,904 3,973 
PhunCoin deposits1,202 1,202 
Current maturities of long-term debt, net9,667 4,904 
Warrant liability256 3,605 
Total current liabilities25,577 30,293 
Deferred revenue1,274 1,299 
Lease liability3,103 1,147 
Total liabilities29,954 32,739 
Commitments and contingencies (Note 10)
Stockholders’ equity
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at December 31, 2022 and 2021; 103,153,337 and 96,751,610 shares issued and outstanding as of December 31, 2022 and 2021, respectively10 10 
Additional paid-in capital275,562 264,944 
Accumulated other comprehensive loss(472)(352)
Accumulated deficit(250,219)(199,325)
Total stockholders’ equity24,881 65,277 
Total liabilities and stockholders’ equity54,835 98,016 

The accompanying notes are an integral part of these consolidated financial statements.
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Phunware, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share information)
Year Ended December 31,
20222021
Net revenues$21,794 $10,643 
Cost of revenues16,718 7,030 
Gross profit5,076 3,613 
Operating expenses:
Sales and marketing6,814 3,022 
General and administrative19,554 13,256 
Research and development6,149 4,179 
Impairment of goodwill2,061 — 
Total operating expenses34,578 20,457 
Operating loss(29,502)(16,844)
Other income (expense):
Interest expense(2,406)(4,481)
Loss on extinguishment of debt— (7,952)
Impairment of digital assets(22,911)(9,383)
Fair value adjustment for warrant liabilities3,349 (18,139)
Gain on forgiveness of Paycheck Protection Program ("PPP") loan— 2,850 
Other income, net580 1 
Total other expense(21,388)(37,104)
Loss before taxes(50,890)(53,948)
Income tax (expense) benefit(4)426 
Net loss(50,894)(53,522)
Cumulative translation adjustment(120)(14)
Comprehensive loss$(51,014)$(53,536)
Loss per share, basic and diluted$(0.51)$(0.71)
Weighted-average common shares used to compute loss per share, basic and diluted98,982 75,447 
The accompanying notes are an integral part of these consolidated financial statements.
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Phunware, Inc.
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(In thousands)
Additional
Paid-in
Capital		Accumulated DeficitOther
Comprehensive
Loss		Total
Stockholders’
Equity (Deficit)
Common Stock
SharesAmount
Balances as of December 31, 202056,371 $6 $144,156 $(145,803)$(338)$(1,979)
Exercise of stock options, net of vesting of restricted shares261 — 179 — — 179 
Release of restricted stock2,494 — — — — — 
Issuance of common stock under the 2018 employee stock purchase plan84 — 100 — — 100 
Issuance of common stock for payment of board of director fees99 — 66 — — 66 
Sales of common stock, net of issuance costs35,383 4 94,733 — — 94,737 
Common stock issued pursuant to warrant exercises2,060 — 20,782 — — 20,782 
Stock-based compensation expense— — 4,928 — — 4,928 
Cumulative translation adjustment— — — — (14)(14)
Net loss— — — (53,522)— (53,522)
Balances as of December 31, 202196,752 $10 $264,944 $(199,325)$(352)$65,277 
Exercise of stock options, net of vesting of restricted shares46 — 28 — — 28 
Release of restricted stock1,803 — — — — — 
Issuance of common stock under the 2018 employee stock purchase plan205 — 214 — — 214 
Issuance of common stock in connection with acquisition of Lyte Technology, Inc.    1,724 — 3,064 — — 3,064 
Sales of common stock, net of issuance costs2,623 — 4,298 — — 4,298 
Stock-based compensation expense— — 3,014 — — 3,014 
Cumulative translation adjustment— — — — (120)(120)
Net loss— — — (50,894)— (50,894)
Balances as of December 31, 2022103,153 $10 $275,562 $(250,219)$(472)$24,881 
The accompanying notes are an integral part of these consolidated financial statements.
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Phunware, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
20222021
Operating activities
Net loss$(50,894)$(53,522)
Adjustments to reconcile net loss to net cash provided by operating activities:
Accretion of debt discount and amortization of deferred financing costs1,034 2,942 
(Gain) loss on change in fair value of warrant liability(3,349)18,139 
Loss on extinguishment of debt— 7,952 
Impairment of digital assets22,911 9,383 
Impairment of goodwill2,061 — 
Gain on forgiveness of PPP loan— (2,850)
Stock-based compensation3,009 4,941 
Other adjustments1,466 (478)
Changes in operating assets and liabilities:
Accounts receivable4 (16)
Inventory(412)(949)
Prepaid expenses and other assets(476)(383)
Accounts payable1,111 (1,568)
Accrued expenses(1,258)(1,131)
Accrued legal settlement— (3,000)
Lease liability payments(905)(802)
Deferred revenue(1,129)(1,172)
Net cash used by operating activities(26,827)(22,514)
Investing activities
Proceeds received from sale of digital assets1,282 — 
Purchases of digital assets(923)(41,284)
Acquisition payments, net of cash acquired(2,375)(5,101)
Capital expenditures    (271)— 
Net cash used in investing activities(2,287)(46,385)
Financing activities
Proceeds from borrowings, net of issuance costs11,795 14,711 
Payments on borrowings(8,066)(26,243)
Proceeds from sales of common stock, net of issuance costs4,298 94,737 
Proceeds from warrant exercises— 4,635 
Proceeds from exercise of stock options28 179 
Net cash provided by financing activities8,055 88,019 
Effect of exchange rate on cash and restricted cash(123)(14)
Net (decrease) increase in cash and restricted cash(21,182)19,106 
Cash and restricted cash at the beginning of the period23,137 4,031 
Cash and restricted cash at the end of the period$1,955 $23,137 
Supplemental disclosure of cash flow information
Interest paid$957 $1,364 
Income taxes paid$— $— 

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



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Phunware, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
20222021
Supplemental disclosure of non-cash information
Right-of-use assets obtained in exchange for operating lease obligations$3,053 $— 
Non-cash exchange of digital assets$906 $— 
Issuance of common stock in connection with acquisition of Lyte Technology, Inc.    $3,064 $— 
Issuance of common stock under the 2018 employee stock purchase plan$214 $100 
Issuance of common stock for payment of legal, earned bonus and board of director fees$— $66 
Non-cash issuance of common stock upon partial exercise of a warrant$— $16,147 

The accompanying notes are an integral part of these consolidated financial statements.
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Phunware, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share information)
1. The Company and Basis of Presentation
The Company
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. Our Multiscreen-as-a-Service ("MaaS") platform provides the entire mobile lifecycle of applications and media in one login through one procurement relationship. Our MaaS technology is available in software development kit form for organizations developing their own application, via customized development services and prepackaged solutions. Through our integrated mobile advertising platform of publishers and advertisers, we provide in-app application transactions for mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. During 2021, we began to sell PhunToken to consumers, developers and brands. PhunToken is an innovative digital asset utilized within our token ecosystem to help drive engagement by unlocking features and capabilities of our MaaS platform. PhunToken is designed to reward consumers for their activity, such as watching branded videos, completing surveys and visiting points of interest. In October 2021, we acquired Lyte Technology, Inc. ("Lyte"), a provider of high-performance computer systems to individual consumers. Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.
Basis of Presentation
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), and include the Company’s accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Reclassification of Prior Year Presentation
Certain amounts in the consolidated balance sheet of the prior period have been reclassified to conform to the current period presentation. A reclassification was made to the consolidated balance sheet as of December 31, 2021 to net deferred tax assets with deferred tax liabilities. The reclassification had no impact on previously reported net income or cash flows.
Going Concern, Liquidity and Management’s Plan
Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern ("ASC 205-40") requires management to evaluate whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued. As required by this standard, management’s evaluation shall initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued.
We have a history of losses in each fiscal year since our inception. For the year ended December 31, 2022, we incurred a net loss of $50,894, used $26,827 in cash for operations and have a working capital deficiency. Total backlog and cash-on-hand for the period then ended did not meet our expectations. The foregoing conditions raise substantial doubt about our ability to meet our financial obligations as they become due.
In performing the second step of this assessment, we are required to evaluate whether our plans to mitigate the conditions above alleviate the substantial doubt. Our assessment included the preparation of a detailed cash forecast that included projected cash inflows and outflows. We continue to focus on growing our revenues, and accordingly, we expect operating expenditures to exceed future revenue for the foreseeable future. Future plans may include reducing operating expenses, liquidating our digital asset holdings, sales of our common stock under a sales agreement in an at-the-market offering, issuing additional shares of common stock, preferred stock, warrants or units pursuant to an effective shelf registration statement.
Despite a history of successfully implementing similar plans, these sources of working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above. There can be no assurance that we 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 our capital needs and support our growth. If additional funding cannot be
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obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted. We have therefore concluded there is substantial doubt about our ability to continue as a going concern through one year from the issuance of these financial statements.
The accompanying 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.
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2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and incomethe reported amounts of revenue and expenses during the periods reported.reporting period. Items subject to the use of estimates include, but are not limited to, the standalone selling price for our products and services, our various digital asset transactions, stock-based compensation, useful lives of long-lived assets including intangibles, fair value of intangible assets and the recoverability or impairment of tangible and intangible assets, including goodwill, contingent consideration for our business combination with Lyte and periodic reassessment of fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in our business combination, reserves and certain accrued liabilities, the benefit period of deferred commissions, assumptions used in Black-Scholes valuation method, such as the current trading price of our common stock at time of exercise of our warrant, expected volatility, risk-free interest rate and expected dividend rate and provision for (benefit from) income taxes. Actual results could materially differ from those estimates. The Company has identifiedestimates and such differences could be material to the following as its critical accounting policies:

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consolidated financial statements.

Risks and Uncertainties

Emerging Growth Company

Section 102(b)(1)

Regulation governing blockchain technologies, cryptocurrencies, digital assets, digital asset exchanges, utility tokens, security tokens and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the JOBS Act exempts emerging growth companies from being requireddevelopment and the value of our tokens and token ecosystem. Regulation of digital assets, like PhunCoin and PhunToken, cryptocurrencies, blockchain technologies and digital asset exchanges, is evolving and likely to continue to evolve. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or the means of transaction or in transferring them. Any such laws, regulations, guidance or other actions could adversely affect our ability to maintain PhunCoin and PhunToken, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with any such laws and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could also result in a material adverse effect on our operations and financial condition.
Revenue Recognition
On January 1, 2019, we adopted ASC 606, Revenue from Contracts with Customers ("ASC 606"). Generally, the provisions of ASC 606 state that revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct, distinct within the context of the contract and accounted for as separate performance obligations.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing for contracts with customers. When the timing of revenue recognition differs from the timing of invoicing, we use judgment to determine whether the contract includes a significant financing component requiring adjustment to the transaction price. Various factors are considered in this determination including the duration of the contract, payment terms and other circumstances. Generally, we determine that contracts do not include a significant financing component. We apply a practical expedient for instances where, at contract inception, the expected timing difference between when promised goods or services are transferred and associated payment will be one year or less. Payment terms vary by contract type; however, contracts typically stipulate a requirement for the customer to pay within 30 days.
The transaction price may be allocated to performance obligations that are unsatisfied or are partially unsatisfied. Amounts relating to remaining performance obligations on non-cancelable contracts include both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods.
Significant Judgments
When selling our platform subscriptions and services, our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance
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obligations that should be accounted for separately versus together may require significant judgment. For contracts with multiple performance obligations, the contract price is allocated to separate performance obligations on a relative standalone basis for which significant judgment is required. Judgment is required to determine whether a software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software support and services and recognized over time. Significant judgment is also required relating to the timing of the satisfaction of performance obligations.
Platform Revenue
Our platform revenue consists of software subscriptions, application development services and support, application transactions, which are comprised of in-app advertising and PhunToken sales. Excluding PhunToken sales, in which we are paid in advance, typically our platform revenue customers pay us on net-30 day terms.
Subscriptions and Services. We derive subscription revenue from software license fees, which comprise subscription fees from customers licensing our Software Development Kits (SDKs), which include accessing the MaaS platform and/or MaaS platform data; application development service revenue from the development of customer applications, or apps, which are built and delivered to customers; and support fees. Our contract terms generally range from one to three years. License fees are typically billed annually in advance.
Subscription revenue from SDK licenses gives the customer the right to access our MaaS platform. In accordance with ASC 606, a ‘right to access’ license is recognized over the license period. Support and maintenance revenue is comprised of support fees for customer applications, software updates and technical support for application development services for a support term. Support revenue is recognized ratably over the support term. We typically bill subscriptions and support and maintenance annually in advance.
Application development revenue is derived from development services around designing and building new applications or revisedenhancing existing applications. We recognize application development revenue upon the transfer of control of the completed application or application development services. We typically bill for application development revenue in advance at contract signing, but may at times, bill one-half in advance at contract execution and one-half upon completion.
When a customer contract consists of licensing, application development and support and maintenance, we consider these separate performance obligations, which would require an allocation of consideration, of which significant judgement is required.
From time to time, we may also provide professional services by outsourcing employees to customers on a time and materials basis. Revenues from these arrangements are recognized as the services are performed. We typically bill professional service customers in the month in which the services are performed.
Application Transaction Revenue. We also generate revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads. Fees from advertisers are commonly based on the number of ads delivered or views, clicks or actions by users on mobile advertisements delivered, and we recognize revenue at the time the user views, clicks or otherwise acts on the ad. We sell ads through several offerings: cost per thousand impressions, on which advertisers are charged for each ad delivered to 1,000 consumers; cost per click, on which advertisers are billed monthly for each ad clicked or touched on by a user; and cost per action, on which advertisers are charged each time a consumer takes a specified action, such as downloading an app.
In the normal course of business, we may act as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in our transactions with advertisers. Control is a determining factor in assessing principal versus agent relation. The determination of whether we are acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. ASC 606 provides indicators of when an entity controls specified goods or services and is, therefore, acting as a principal. Based on the indicators of control, we have determined that we are the principal in all advertising arrangements because we are responsible for fulfilling the promise to provide the specified advertisements to advertising agencies or companies; establishing the selling prices of the advertisements sold; and credit risk with its advertising traffic providers. Accordingly, we act as the principal in all advertising arrangements and, therefore, report revenue earned and costs incurred related to these transactions on a gross basis.
PhunToken. During 2021, we announced the commencement of the selling of PhunToken to consumers, developers and brands. PhunToken is an innovative digital asset utilized within our token ecosystem to help drive engagement by
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unlocking features and capabilities of our MaaS platform. We follow the guidance of ASC 606 in determination the revenue recognition of our PhunToken sales. PhunToken customers pay us at the time of purchase of PhunToken. We recognize revenue related to PhunToken at the time of delivery of PhunToken to a customer's ethereum-based digital wallet.
Hardware Revenue
We acquired Lyte Technology in October 2021. Revenue from Lyte is primarily derived from the sale of high-performance personal computers. Lyte computers are sold with a variety of pre-packaged solutions, as well as customizable solutions selected by our customers. Customers pay us in advance of shipment of their computer via the Lyte website. A majority of Lyte's customers pay us via credit card payments, which are managed through a third party processor. We recognize computer hardware revenue, including shipping, at the time a completed unit ships from our facility.
Deferred Commissions

    We defer commission costs and amortize them in a manner consistent with how we recognize revenue. Key judgments that impact our commission expense include estimating our customer life and the determination of the impairment of commission assets we deem to be unrecoverable. The Company applies a practical expedient and expenses these costs as incurred if the amortization period is one year or less.

Deferred commissions are recorded in prepaid and other current assets in our consolidated balance sheets. Changes in deferred commissions for the years ended December 31, 2022 and 2021 are as follows:
20222021
Balance, beginning of the year$148 $210 
Deferral of commissions earned55 73 
Recognition of commission expense(67)(135)
Balance, end of the year$136 $148 
Business Combination
We account for business combinations using the acquisition method of accounting as prescribed in ASC 805, "Business Combinations (Topic 805)." We record the assets acquired, liabilities assumed and acquisition-related contingent consideration at fair value on the date of acquisition. The difference between the purchase price, including any contingent consideration, and the fair value of net assets acquired is recorded as goodwill. We may adjust the preliminary purchase price and purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as we obtain more information as to facts and circumstances that impact the determination of fair value at the acquisition date. Any change in fair value of acquisition-related contingent consideration resulting from events after the acquisition date is recognized in earnings. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
Concentrations of Credit Risk
Our financial accounting standardsinstruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable and our digital asset holdings.
Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed federally insured limits.
There is currently no clearing house for our digital assets, including our bitcoin holdings, nor is there a central or major depository for the custody of our digital assets. There is a risk that some or all of our digital asset holdings could be lost or stolen. There can be no assurance that the custodians will maintain adequate insurance or that such coverage will cover losses with respect to our digital asset holdings. Further, transactions denominated in digital assets are irrevocable. Stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed transactions could adversely our financial condition. The aggregate cost basis of our digital asset holdings is $37,737 at December 31, 2022.
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.
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December 31,
20222021
Customer A23 %— %
Customer B7 %20 %
Customer C5 %18 %
Cash, Cash Equivalents, and Restricted Cash
We consider all investments with a maturity of three months or less from the date of acquisition to be cash equivalents. The Company had no cash equivalents or restricted cash at December 31, 2022 or 2021.
Accounts Receivable and Reserves
Accounts receivable are presented net of allowances. We consider receivables past due based on the contractual payment terms. We make judgments as to our ability to collect outstanding receivables and record a bad debt allowance for receivables when collection becomes doubtful. The allowances are based upon historical loss patterns, current and prior trends in our aged receivables, credit memo activity and specific circumstances of individual receivable balances. Accounts receivable consisted of the following:

December 31,
20222021
Accounts receivable$1,156 $977 
Less allowances for doubtful accounts(198)(10)
Accounts receivable, net$958 $967 
Changes in the allowance for doubtful accounts are as follows:

December 31,
20222021
Balance, beginning of year$10 $356 
Provision for doubtful accounts, net of recoveries198 (286)
Write offs(10)(60)
Balance, end of year$198 $10 
Inventory
Our inventory consists of computer hardware materials and finished computers available-for-sale and are stated at the lower of cost or net realizable value, determined using the first-in first-out (“FIFO”) method. We purchase inventory from suppliers both domestically and internationally. We believe that our products are generally available from more than one supplier and seek to maintain multiple sources for materials, both internationally and domestically. We may, at times, purchase products in bulk quantities to take advantage of quantity discounts and to ensure inventory availability. We recognize provisions for obsolete and slow-moving inventory primarily based on judgments about expected disposition of inventory, generally, through sales, or liquidations of obsolete inventory, and expected recoverable values based on currently available or historical information.
Digital Assets
Payments by customers in and purchases by us of digital assets were primarily of bitcoin and ethereum. We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services or self-custody solutions to secure them. The digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.
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We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is the principal market for bitcoin, ethereum and other digital asset holdings (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 intra-day market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value. The fair value of our digital asset holdings at December 31, 2022 is $10,808.
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 private companies (thatrealized upon sale. In determining the gain or loss to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within other expense in our consolidated statements of operations and comprehensive loss. Impairment loss was $22,911 and $9,383 for the years ended December 31, 2022 and 2021, respectively.
The following table sets forth our digital asset holdings as of December 31, 2022:
AssetGross Carrying AmountAccumulated Digital Asset ImpairmentDigital Asset Carrying
Value
Bitcoin$34,994 $(25,534)$9,460 
Ether1,506 (1,156)350 
Other1,237 (910)327 
Total$37,737 $(27,600)$10,137 
The following table sets forth our digital asset holdings as of December 31, 2021:
AssetGross Carrying AmountAccumulated Digital Asset ImpairmentDigital Asset Carrying
Value
Bitcoin$36,963 $(8,554)$28,409 
Ethereum4,714 (670)4,044 
Other287 (159)128 
Total$41,964 $(9,383)$32,581 
Gross carrying amount and accumulated digital asset impairment noted above represent carrying amount and impairment, respectively, on the remaining cost lots as of the respective dates. Changes in our digital asset holdings for the year ended December 31, 2022 were as follows:
BitcoinEthereumOtherTotal
Net balance at December 31, 2021$28,409 $4,044 $128 $32,581 
Received from customers, net of expenses37 378 44 459 
Purchases of digital assets923 — — 923 
Exchanges of digital assets— (906)906 — 
Disposal proceeds(796)(486)— (1,282)
Gain on sale of digital assets69 298 — 367 
Impairment expense(19,182)(2,978)(751)(22,911)
Net balance at December 31, 2022$9,460 $350 $327 $10,137 

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Goodwill and Intangible Assets
Goodwill arises from purchase business combinations and is thosemeasured as the excess of the cost of the business acquired over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed. In accordance with ASC 350, Intangibles — Goodwill and Other, we do not amortize goodwill or intangible assets with indefinite lives but rather assesses their carrying value for indications of impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired.
Our business is classified into two reporting units: Phunware and Lyte. In testing goodwill for impairment, we have the option to begin with a qualitative assessment, commonly referred to as “Step 0,” to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, entity-specific financial performance and other events, such as changes in our management, strategy and primary user base. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative goodwill impairment analysis by comparing the carrying amount to the fair value of the reporting unit. If the carrying amount exceeds the fair value, goodwill will be written down to the fair value and recorded as impairment expense in the consolidated statements of operations. We perform our impairment testing annually and when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company performed its annual impairment assessment of goodwill as of October 1, 2022 and concluded that goodwill was impaired. Refer to Note 6, Goodwill, for further discussion on our goodwill impairment.
Identifiable intangible assets consist of acquired trade names, customer lists, technology, in-process research and development and order backlog associated with the acquired businesses. Amortization of finite-lived intangible assets is calculated using either the straight-line or accelerated amortization model based on our best estimate of the distribution of the economic value of the identifiable intangible assets.
Long-Lived Assets
Long-lived assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. In accordance with authoritative guidance, we evaluate the recoverability of each of our long-lived assets, including property and equipment, by comparing its carrying amount to the undiscounted future cash flows expected to be generated. If the total of undiscounted future cash flows is less than the carrying amount of an asset, an impairment would be recognized for the amount by which the carrying amount of the asset exceeds its fair value.
We did not recognize any impairment losses relating to our long-lived assets during the years ended December 31, 2022 or 2021.
Debt Issuance Costs and Discount
Debt discounts and direct costs incurred to issue non-revolving debt instruments are recognized as a reduction to the related debt balance in the accompanying consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method.
Derivative Liabilities
When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and Hedging - Contracts in the Entity’s Own Equity (“ASC 815-40”), we classify a warrant as equity if it is indexed to our equity and several specific conditions for equity classification are met. A warrant is not considered indexed to our equity, in general, when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to our equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations. As of December 31, 2022 and 2021, we had a Securities Act registration statement declared effectivewarrant that was classified as a liability and other warrants that were classified as equity.
We used a Black-Scholes option-pricing model to value the warrant classified as a liability at inception and subsequent valuation dates. The initial and subsequent valuations of the warrant require significant judgment.
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Leases
We adopted ASU 2016-02, Leases (Topic 842), as of January 1, 2021, in which we recognize a right-of-use asset and lease liability for all operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease.
We have elected certain practical expedients permitted under the guidance. We have elected to apply the short-term lease exception for all leases, which we will not recognize right-of-use assets or do notlease liabilities for leases that, at the commencement date, have a classterm of securities registered under the Exchange Act) are required to comply with the newtwelve (12) months or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company hasless. We have also elected not to opt outseparate non-lease components from lease components. Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.
We lease our corporate offices under operating leases and determine if an arrangement is or contains a lease at inception. The initial terms of our real property lease agreements are generally five years and typically allow for renewals in five-year increments. We may, at times, negotiate a shorter lease renewal term. We generally do not account for any renewals at the lease adoption date. We did not enter into any financing leases for the year ended December 31, 2022.
Stock-Based Compensation
Compensation expense related to stock-based transactions, including employee and non-employee director awards, is measured and recognized in the financial statements based on fair value on the grant date of the award. We recognize stock-based compensation expense for awards with only service conditions on a ratable basis over the requisite service period of the related award, generally the vesting period of the award. We have not granted any awards with market or performance conditions. Forfeitures of all stock-based awards are accounted for when they occur.
Research and Development Expense
Research and development expenses consist primarily of personnel costs for our engineering, product, design and quality assurance teams, including stock-based compensation for individuals dedicated to our research and development function. Additionally, research and development expenses include contractor fees and allocated overhead costs. Research and development costs are expensed as incurred.
Retirement Plan
At December 31, 2022, we administered one employee retirement plan that qualified as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the retirement plan, participating employees may contribute a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. No employer matching contributions were made to the retirement plan during the years ended December 31, 2022 or 2021.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"). Under ASC 740, deferred tax assets and liabilities reflect the future tax consequences of the differences between the financial reporting and tax bases of assets and liabilities using current enacted tax rates. Valuation allowances are recorded when the realizability of such extended transitiondeferred tax assets does not meet the more-likely-than-not threshold under ASC 740.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event of a change in the determination as to the amount of deferred tax assets that can be realized, an adjustment of the valuation allowance with a corresponding impact to the provision for income taxes will be made in the period in which means that whensuch determination was made.
The guidance on accounting for uncertainty in income taxes prescribes a standard is issuedrecognition threshold and measurement attribute criterion for financial statement recognition and measurement of tax positions taken or revisedexpected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

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Comprehensive Loss
We apply the guidance in ASC 220, Comprehensive Income, for the reporting and it has different application dates for public or private companies,display of comprehensive loss and its components in the Company, as an emerging growth company, can adopt the new or revised standardconsolidated financial statements. Comprehensive loss comprises net loss and cumulative foreign currency translation adjustments. Accumulated comprehensive loss at the time private companies adopt the new or revised standard.

December 31, 2022 and 2021 was due to foreign currency translation adjustments.

Loss Perper Common Share

Net

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, plusperiod. Restricted shares subject to the extent dilutive the incremental number ofrepurchase 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 settle Warrants, as calculated usingour outstanding warrants and stock equity plans, to the treasury stock method. At November 30, 2017 and 2016, the Company had outstanding Warrants to purchase 14,871,098 shares of common stock.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 period.

computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:

December 31,
20222021
Warrants6,632,561 5,636,801 
Options961,779 925,467 
Restricted stock units2,957,995 3,576,270 
Total10,552,33510,138,538

Fair Value Measurements
We follow the guidance in ASC 820, Fair Value Measurement, to measure certain assets and liabilities on a recurring and nonrecurring 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. We use a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires fair value measurements be classified and disclosed in one of the following three categories:
•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. Our assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 are set forth below:
Level 1Level 2Level 3Total
Liabilities:
Warrant liability$— $256 $— $256 
Total$— $256 $— $256 


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    Our assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 are set forth below:
Level 1Level 2Level 3Total
Liabilities:
Warrant liability$— $3,605 $— $3,605 
Total$— $3,605 $— $3,605 

    
    The carrying value of accounts receivable, inventory, prepaid expenses, other current assets, accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.
Loss Contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We accrue for loss contingencies when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If we determine that a loss is possible and the range of the loss can be reasonably determined, then we disclose the range of the possible loss. We regularly evaluate current information available to us to determine whether an accrual is required, an accrual should be adjusted or a range of possible loss should be disclosed.
From time to time, we are involved in disputes, litigation and other legal actions. However, there are many uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to incur substantial settlement charges, which are inherently difficult to estimate and could adversely affect our results of operations. The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust our liability and record additional expenses.
Smaller Reporting Company
We are a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act, which qualifies the Company for reduced disclosure requirements and, if permitted, additional time to implement new or revised financial accounting standards. Smaller reporting company status is determined on an annual basis.
Recent Accounting Pronouncements Not Yet Adopted
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 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, the standard is currently effective for us for annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2019. We currently intend to adopt this new standard effective January 1, 2023. We currently do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements and disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We did not have any convertible debt outstanding as of December 31, 2022; accordingly, we do not expect the adoption of ASU 2020-06 to have a material impact on our consolidated financial statements and disclosures.
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3. Business Combination
On October 18, 2021, we consummated the acquisition of 100% of the outstanding equity shares of Lyte, in which we paid to the seller of Lyte consideration in the form of cash and shares of our common stock valued at approximately $10.5 million. This acquisition was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged was recorded at estimated fair values on the date of acquisition.
The following table summarizes our current allocation of the October 18, 2021 purchase price:

Initial AllocationAdjustmentsFinal Allocation
Cash$4 $— $4 
Inventory1,687—1,687
Intangible assets3,340—3,340
Accrued expenses—(436)(436)
Deferred revenue(1,369)(35)(1,404)
Goodwill6,937356,972
Total purchase price10,599 (436)10,163 
Fair value adjustments382 — 382 
Total consideration paid$10,981 $(436)$10,545 

The initial fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions at the time of acquisition. Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available. The trade name represents the rights to the "Lyte Technology, Inc." brand name, which we believe is well known in the marketplace. The useful life of the identified amortizable intangible assets acquired is five years. Goodwill was recorded to reflect the excess purchase consideration over net assets acquired and primarily consists of the future economic benefits that we expect to receive as a result of the acquisition. The amount of goodwill expected to be deductible for federal and state income tax purposes is $437. Consideration paid to the seller included $382 of fair value adjustments, which were recorded in Other expense in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. Expenses we incurred as a result of the acquisition of Lyte were not material and recorded in general and administrative expenses in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.
During 2021 and 2022, we paid to the seller of Lyte cash and stock consideration at various dates, including a final payment for an earn-out provision in October 2022 for the achievement of certain revenue milestones in the first year following closing, as provided in the stock purchase agreement.
For the year ended December 31, 2021, we generated computer hardware revenue of $3,095 and an operating loss of $609, since the acquisition closing date. The following table summarizes the unaudited pro forma condensed financial information of Phunware, Inc for the year ended December 31, 2021 as if the acquisition of Lyte had occurred on January 1, 2021:

Year Ended December 31, 2021
(in thousands)(unaudited)
Net revenues$18,175 
Net loss(53,935)

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4. Revenue
Disaggregation of Revenue
The following table sets forth our net revenues by category:

Year Ended December 31,
20222021
Net revenues
Platform revenue$6,521 $7,548 
Hardware revenue15,273 3,095 
Net revenues$21,794 $10,643 
For the years ended December 31, 2022 and 2021, we sold $1,535 and $1,063, respectively, of PhunToken for which we received both cash and digital assets from customers. Revenue from sales of PhunToken is recorded within platform revenue in the table above.
We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity. We derived 97% and 93% of our net revenues from within the United States for the years ended December 31, 2022 and 2021, respectively. Revenue by geographic location is as follows:

Year Ended December 31,
20222021
Net revenues
United States$21,137 $9,939 
International657 704 
Net revenues$21,794 $10,643 
Deferred Revenue
Our deferred revenue balance consisted of the following:

December 31,
20222021
Current deferred revenue
Platform revenue$1,531 $1,824 
Hardware revenue$1,373 $2,149 
Total current deferred revenue$2,904 $3,973 
Non-current deferred revenue
Platform revenue$1,274 $1,299 
Total non-current deferred revenue$1,274 $1,299 
Total deferred revenue$4,178 $5,272 

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under arrangements with customers. We recognize deferred revenue as revenue only when revenue recognition criteria are met. During the year ended December 31, 2022, we recognized revenue of $4,028 that was included in our deferred revenue balance as of December 31, 2021.

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Remaining Performance Obligations
Remaining performance obligations consist of gross deferred revenue and backlog. Remaining performance obligations were $8,002 as of December 31, 2022, of which we expect to recognize 47% as revenue over the next 12 months and the remainder thereafter.
PhunToken
In May 2021, we announced the commencement of the selling of PhunToken. PhunToken is our innovative digital asset intended to be utilized within our token ecosystem, once developed, to help drive engagement by unlocking features and capabilities of our MaaS platform. For the years ended December 31, 2022 and 2021, we recognized revenue from PhunToken sales of $1,535 and $1,063, respectively, for which we received both cash and digital assets from customers. Sales of PhunToken are recorded within platform revenue in the table above.
In March 2022, certain members of our senior management team purchased 827.5 million PhunToken pursuant to Restricted Token Purchase Agreements, at an aggregate purchase price of approximately $7. The PhunToken would have been transferred to employees over a time-based delivery schedule ranging from one to four years. In October 2022, our board of directors terminated the PhunToken Restricted Purchase Agreements, with no further PhunToken to be delivered to the employees after April 1, 2022.
As of December 31, 2022 and 2021, issued PhunToken were 377.2 million and 131.7 million, respectively. Total supply of PhunToken is capped at 10 billion.
5. Inventory
Our inventory balance on the dates presented consisted of the following:

December 31, 2022December 31, 2021
Raw materials$2,968 $2,075 
Work-in-process— 207 
Finished goods50 138 
Other30 216 
Inventory reserve(268)— 
Total inventory$2,780 $2,636 
6. Goodwill and Other Intangible Assets
Goodwill
Changes in the Company’s goodwill balance for the years ended December 31, 2022 and 2021, are summarized in the table below:

20222021
Balance, beginning of period$33,260 $25,900 
Acquisition of Lyte35 7,374 
Foreign currency translation(121)(14)
Impairment of goodwill(2,061)— 
Balance, end of period$31,113 $33,260 
We test goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value.

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We performed quantitative testing on our Lyte reporting unit as of October 1, 2022, using a combination of the discounted cash flow (income approach) utilizing Level 3 unobservable inputs and the Guideline Public Company Method (market approach). Based on the analysis performed, we concluded that the carrying amount of the reporting unit exceeded its fair value resulting in a non-cash goodwill impairment charge of $2,061 included in Impairment of goodwill in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. Higher than expected losses during our first full year of operations of Lyte resulted in the impairment.
We also performed quantitative testing on our Phunware reporting unit as of October 1, 2022, and determined that no further goodwill impairments existed.
The goodwill impairment analysis referenced above used the discounted cash flow model (income approach) utilizing Level 3 unobservable inputs. Significant assumptions in this analysis included, but were not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate and the tax rate. Estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from estimates. If the Company’s ongoing estimates of future cash flows are not met or if discount rates change, the Company may have to record additional impairment charges in future periods. We also used the Guideline Public Company Method (market approach). The significant assumptions used in this analysis include, but are not limited to, the derived multiples from comparable market transactions and other market data. The selection of comparable businesses is based on the markets in which the reporting unit operates giving consideration to risk profiles, size, geography, and diversity of products. We applied an overall probability-weighting to the income and market approaches to determine the concluded fair value of the reporting unit. We believe the current assumptions and estimates utilized in the income and market approaches are both reasonable and appropriate.
Intangible Assets
Our intangible assets, excluding goodwill, consist of intangible assets acquired in business combinations and were recorded at their estimated fair values on the date of acquisition. The finite-lived intangible assets that are being amortized are summarized in the table below:
Weighted Average Useful Life
(years)
December 31, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trade name5.0$3,986 $(1,462)$2,524 $3,990 $(799)$3,191 
Acquired technology5.14,828 (4,828)— 4,828 (4,828)— 
In-process research and development5.094 (94)— 94 (94)— 
Customer relationships5.74,535 (4,535)— 4,626 (4,604)22 
Order backlog1.5329 (329)— 329 (329)— 
$13,772 $(11,248)$2,524 $13,867 $(10,654)$3,213 
Amortization expense for the years ended December 31, 2022 and 2021, was approximately $689 and $238, respectively.
Expected future annual amortization expense for finite-lived intangible assets is as follows:
Future amortization expense for the years ending December 31,Amortization
2023$668 
2024668 
2025668 
2026520 
Total$2,524 

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7. Accrued Expenses
Accrued expenses consisted of the following:

December 31,
20222021
Acquisition and earn out payable$— $5,531 
Payroll related expenses899 2,801 
Interest payable618 203 
Accounts payable settlement231 446 
Taxes457 259 
Other690 381 
Total accrued expenses$2,895 $9,621 
8. Debt
2022 Promissory Note
On July 6, 2022, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the "2022 Promissory Note") with an original principal amount of $12,809 in a private placement with the same investor of our 2021 Promissory Note, discussed further below. The 2022 Promissory Note was sold with an original issue discount of $492 and we paid at closing issuance costs totaling $522. After deducting all transaction fees paid by us at closing, net cash proceeds to the Company at closing were $11,795. No interest will accrue on the 2022 Promissory Note unless and until the occurrence of an event of default, as defined in the 2022 Promissory Note. Beginning on November 1, 2022 and on the same day of each month thereafter until the 2022 Promissory Note is paid in full, we are required to make a monthly amortization payments in the amount of $1,566 until the maturity date of July 1, 2023, which is subject to adjustment for any payment deferrals we elect. We have the right to defer any monthly payment by one month up to twelve times so long as certain conditions, as defined in the 2022 Promissory Note, are satisfied. In the event we exercise the deferral right for any given month: (i) the outstanding balance will automatically increase by 1.85%; (ii) we will not be obligated to make the monthly payment for such month; and (iii) the maturity date will be extended for one month. We may prepay any or all outstanding balance of the 2022 Promissory Note earlier than it is due with a prepayment premium of 110%. The prepayment premium also applies to the monthly amortization payments. The effective interest rate of the 2022 Promissory Note is 15.34%.
The 2022 Promissory Note had a principal balance of $9,962 and debt discount of $295 as of December 31, 2022.
On March 15, 2023, we entered into a waiver agreement with the noteholder. See Note 17 below for further discussion.
2021 Promissory Note
In connection with the acquisition of Lyte, we entered into a note purchase agreement and completed the sale of an unsecured promissory note (the "2021 Promissory Note") with an original principal amount of $5,220 in a private placement that closed on October 18, 2021. The promissory note was sold with an original issue discount of $200 and we paid at closing issuance costs totaling $280. After deducting all transaction costs, net cash proceeds to the Company were $4,740. No interest will accrue on the 2021 Promissory Note unless and until the occurrence of an event of default, as defined in the 2021 Promissory Note. We may prepay any or all outstanding balance of the 2021 Promissory Note earlier than it is due with a prepayment premium of 110%. The prepayment premium also applies to the monthly amortization payments, which amounts to an effective interest rate of approximately 18%. Beginning on January 15, 2022 and on the same day of each month thereafter until the promissory note is paid in full, we are required to make a monthly amortization payments in the amount of $574 until the maturity date of October 15, 2022.
The 2021 Promissory Note had a principal balance of $5,220 and debt discount $316 as of December 31, 2021. In October 2022, we paid the final payment amount of $574 on the 2021 Promissory Note.

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2020 Convertible Notes
On July 15, 2020, we issued a Series A Senior Convertible Note (a “Series A Note”) to an institutional investor with an initial principal amount of $4,320 (reflecting an original issue discount of $320) in a private placement. On the same date, we issued a Series B Senior Secured Convertible Note (a “Series B Note,” and together with the Series A Note, the “2020 Convertible Notes”) to the same investor with an initial principal amount of $17,280 (reflecting an original issue discount of $1,280). The investor paid for the Series B Note by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $16,000.

    We received cash under the Series B Note only upon cash repayment of the corresponding Investor Note. The investor, at its option and at any time, had the right to voluntarily prepay the Investor Note, in whole or in part. Until the Investor Note was repaid, the principal (and related original issue discount) of the Series B Note was considered to be "restricted." The Series B Note and the Investor Note were subject to the terms of a Master Netting Agreement between us and the investor. Upon repayment of the Investor Note, an equal amount of the Series B Note became "unrestricted" and recorded as debt in our consolidated balance sheets.
The Series A Note and outstanding unrestricted principal balance on the Series B Note each bore interest at a rate of 7% per annum and includes a make-whole of interest from the date of issuance through the maturity date of December 31, 2021. The restricted principal of the Series B Note bore interest at a rate of 3% per annum. The 2020 Convertible Notes were scheduled to mature on December 31, 2021.
As a result of multiple offerings of sales of shares of our common stock in 2021, the investor elected to require us to use forty percent (40%) of the net proceeds from those offerings to satisfy obligations under the 2020 Convertible Notes. During the first quarter of 2021, we paid approximately $11,507, of which $5,717 was recorded as a loss on extinguishment of debt. We also recorded a loss on extinguishment of debt of $51 related to monthly installment payments made to the investor during the same time period.
In March 2021, the investor voluntarily prepaid an aggregate of $10,250 pursuant to the terms of the Investor Note. As a result, we received cash proceeds of $10,250 and this amount of principal of the Series B Note, along with $820 of original issue discount became "unrestricted" and outstanding.
On March 25, 2021, we delivered a Company Optional Redemption Notice (as defined in the Series B Note) to the holder of our Series B Note exercising our right to redeem and fully satisfy all obligations under the Series B Note on April 5, 2021. On April 5, 2021, we paid $13,902 in cash to the noteholder of our 2020 Convertible Notes in full satisfaction of all obligations under our Series B Note, which amounted to $11,718 of principal, interest and make-whole and $2,184 for the loss on extinguishment of debt.
Warrant
In addition to the 2020 Convertible Notes, we issued a warrant exercisable for three (3) years for the purchase, initially, of up to an aggregate of 2,160,000 shares of the Company's common stock at an initial exercise price of $4.00 per share. The number of shares and exercise price are each subject to adjustment provided under the warrant. As a result of our underwritten public offering in February 2021, the exercise price of each share decreased to $2.25 per share, while the number of shares for which the warrant is exercisable increased proportionately such that the total exercise price remained unchanged. In October 2021, we issued shares to the seller of Lyte as purchase consideration at a price of $1.4246 per share, and as a result, the exercise price of the warrant adjusted accordingly and the number of shares exercisable thereunder increased to 2,811,315.
If, at the time of exercise of the warrant, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares, then the warrant may also be exercised, in whole or in part, by means of a “cashless exercise.” The registration statement registering 2,160,000 shares of our common stock issuable pursuant to the terms of the warrant was declared effective by the SEC on October 27, 2020. In February 2022, we filed a registration statement registering an additional 4,200,000 warrant shares. The warrant may not be exercised if, after giving effect to the exercise, the investor would beneficially own amounts in excess of those permissible under the terms of the warrant. As more fully discussed in Note 12, the holder partially exercised its warrant during 2021.


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

December 31, 2022December 31, 2021
Strike price per share$1.42 $2.25 
Closing price per share$0.77 $2.63 
Term (years)0.531.53
Volatility102 %186 %
Risk-free rate4.70 %0.56 %
Dividend Yield——

Upon issuance of the warrant, we recorded a warrant liability as a discount to the 2020 Convertible Notes of $2,486. A summary of the change in fair value of the warrant liability is set forth below:
20222021
Balance, beginning of year$3,605 $1,614 
Warrant issued— — 
Warrant Exercised— (16,148)
Change in fair value of warrant liability(3,349)18,139 
Balance, end of year$256 $3,605 

Participation Rights

In addition, the Company granted the 2020 Convertible Notes investor participation rights in future equity and equity-linked offerings of securities, subject to certain limited exceptions, during the two years after the later of (a) the closing or (b) the date the 2020 Convertible Notes no longer remain outstanding, in an amount of up to 30% of the securities being sold in such offerings.

Paycheck Protection Program ("PPP") Loan

On April 10, 2020, we received loan proceeds in the amount of $2,850 from JPMorgan Chase, N.A. pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted on March 27, 2020. The loan, which was in the form of a note dated April 9, 2020, was originally scheduled to mature on April 9, 2022 and bore interest at a rate of 0.98% per annum. The Paycheck Protection Flexibility Act of 2020, extended the deferral period for loan payments to either (i) the date that the U.S. Small Business Administration ("SBA") remits the borrower’s loan forgiveness amount to the lender or (ii) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period. The note may be prepaid by us at any time prior to the maturity with no prepayment penalties.

The principal amount of our PPP loan was subject to forgiveness under the PPP. On July 7, 2021, we submitted our request to the SBA to forgive the full principal amount of the loan and on August 16, 2021, we received notification that the SBA approved our PPP loan forgiveness application. We recorded a gain on the forgiveness of the PPP loan and related interest for the year ended December 31, 2021.
Promissory Notes
In October 2019, our board of directors authorized the issuance of $20,000 of promissory notes (the “Notes”), which may be paid by investors in the form of cash or, in our discretion, cryptocurrency, such as bitcoin or ethereum. The Notes were sold in reliance on an exemption from registration. We may prepay the Notes at any time without penalty. We 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.
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The Notes bore ordinary interest at a rate of 10% per annum. Interest under the Notes was payable monthly beginning on November 30, 2019. During the term of the Notes, we were required to maintain a restricted bank account with a minimum balance of one year of interest payments on the aggregate principal balance of all Notes, which will be available for use exclusively to satisfy any payments owed by us under the Notes. The principal and unpaid accrued interest on the Notes were due and payable on demand by the majority Note holders on or after the date that is 60 months following November 15, 2019.
During 2019, the Company issued a Note in the principal amount of $195, in exchange for cash consideration, to Cane Capital, LLC, an entity owned in part by Alan S. Knitowski, who at the time of issuance of the Note was our Chief Executive Officer and a member of its board of directors. Interest expense recognized for this Note was not significant.
On October 27, 2021, we paid $905 in cash to each Note holder in full satisfaction of all obligations under the Notes.
Interest Expense
The following table sets forth interest expense for our various debt obligations included in the consolidated statements of operations and comprehensive loss:

Year Ended December 31,
20222021
2022 Promissory Note$903 $— 
2021 Promissory Note318 203 
2020 Convertible Notes— 1,111 
Accretion of debt discount - issuance costs1,034 1,913 
Accretion of debt discount - warrants— 1,029 
All other debt and financing obligations151 225 
Total$2,406 $4,481 

9. Leases
We lease four corporate offices located in Austin, Texas; Irvine, California; San Diego, California; and Miami, Florida and a warehouse facility in Round Rock, Texas for our Lyte operations. As of December 31, 2022, the earliest lease agreement currently ends in June 2023 with the latest terminating in September 2027.
On March 15, 2022, we entered into a lease agreement, in which we lease approximately 21,830 square feet in Round Rock, Texas, which we intend to use as manufacturing and warehouse space for our Lyte computer division. The term of the lease is five years and commenced in July 2022. The lease provides for initial base rent payments of approximately $27 per month, subject to escalations. In addition, we are responsible for payments equal to our proportionate share of operating expenses, which is currently estimated to be approximately $7 per month, which is also subject to adjustment to actual costs and expenses according to provisions of the lease. During the third quarter of 2022, we recorded a right-of-use asset and corresponding lease liability of $1,545.
On June 3, 2022, we entered into a lease agreement pursuant to which we lease approximately 7,458 square feet in Austin, Texas, which we intend to use as professional office space for our corporate headquarters. The lease commenced on June 10, 2022 and has a term of sixty-four (64) months, with an option to renew the lease for an additional five-year term at the conclusion of the initial term. The lease provides for rent abatement until September 30, 2022. Beginning on October 1, 2022, initial base rent payments are approximately $28 per month, subject to escalations contained therein. In addition, we will be responsible for payments equal to our proportionate share of operating expenses, which is currently estimated to be approximately $9 per month, plus electrical and janitorial services, which are to be contracted and paid separately by us. As a result of entering into this lease agreement, we recorded a right-of-use asset and corresponding lease liability of $1,508 on the commencement date noted above.

The weighted-average remaining lease term for our operating leases as of December 31, 2022 and 2021 was 3.98 years and 3.14 years, respectively. 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. This approach requires significant judgment. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis at the time we enter into the lease to initially measure our lease liability. The weighted average
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incremental borrowing rate used to measure our lease liability was 9.80% and 19.13% at December 31, 2022 and 2021, respectively.
We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in general and administrative expense in our consolidated statement of operations and comprehensive loss. Rent expense under operating leases totaled $1,102 and $809 for the years ended December 31, 2022 and 2021, respectively.
Future minimum annual lease payments under the Company’s operating leases are as follows:

Future minimum lease obligations for the years ending December 31,Lease obligations
2023$1,296 
20241,305 
2025929 
2026744 
2027508 
$4,782 
Less: Portion representing interest$(725)
$4,057 
In 2021, we entered into two sublease agreements for our Miami, Florida and Irvine, California office spaces, in which the subtenants will pay us monthly base rent, subject to escalations throughout the term of the sublease. The sublease agreements terminate on June 30, 2023 and March 31, 2025, respectively. We recognized an impairment of our right-of-use assets related to the subleases of $77 and liabilities,$51 in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2022 and 2021, respectively. We recognized sublease income of $300 and $154 for the year ended December 31, 2022 and December 31, 2021, respectively.
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10. Commitments and Contingencies
Litigation
On March 30, 2021, Phunware filed an action against its former counsel Wilson Sonsini Goodrich & Rosati, PC (“WSGR”). The matter is Phunware, Inc., v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No. 21CV381517, filed in the Superior Court of the State of California for the County of Santa Clara. On July 30, 2021, we filed a second action against WSGR in the Superior Court of the State of California for the County of Santa Clara. This matter is captioned Phunware, Inc., v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Does 1-25, Case No. 21CV386411. The two actions are pending in arbitration. The outcome is not certain. The relief sought, as stated in the complaints, are damages according to proof, interest and costs of suit. WSGR filed a crossclaim in arbitration related to services provided to Phunware. WSGR seeks to recover fees related to the services at issue in Phunware’s actions against WSGR, of which qualify$4,321 is recorded in accounts payable in our consolidated balance sheets as of December 31, 2022 and 2021.
On February 18, 2022, certain stockholders filed a lawsuit against Phunware and its individual officers and directors. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al., was filed in the Court of Chancery of the State of Delaware (Cause No. 2022-0168-LWW). Plaintiffs alleged that they invested in various early rounds of financing while the Company was private and that Phunware should not have subjected their shares to a 180-day “lock up” period. Plaintiffs also allege that Phunware’s stock price dropped significantly during the lock up period and seek damages, costs and professional fees. We filed a motion to dismiss the complaint on May 27, 2022 and on July 15, 2022, Plaintiffs filed their answering brief in opposition to the motion to dismiss and a partial motion for summary judgement. All briefing on the motion to dismiss and motion for partial summary judgement is complete. The Court of Chancery has scheduled a hearing on the motions for April 4, 2023. We intend to vigorously defend against this lawsuit and any appeals. We have not recorded an expense related to this matter because any potential loss is not currently probable or reasonably estimable. Additionally, we cannot presently estimate the range of loss, if any, that may result from the matter. It is possible that the ultimate resolution of the foregoing matter, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity.
From time to time, we are and may become involved in various legal proceedings in the ordinary course of business. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular reporting period. 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.
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11. PhunCoin
In June 2018, we launched an offering pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of rights to acquire PhunCoin (the "Rights). In 2019, we commenced an offering of additional Rights to acquire PhunCoin pursuant to Regulation CF promulgated under the Securities Act, which closed May 1, 2019. For both offerings of Rights, we accepted payment in the form of cash and digital assets. The amount of PhunCoin to be issued to the purchaser is equal to the dollar amount paid by the purchaser divided by the price of the PhunCoin at the time of issuance of the PhunCoin during the launch of the Token Ecosystem (as defined below) before taking into consideration any applicable discount rate, which is based on the time of the purchase.
Through December 31, 2022, we received aggregate net cash proceeds from our Rights offerings of $1,202. Proceeds from the Rights are recorded as PhunCoin deposits in the consolidated balance sheet as of December 31, 2022 and 2021. We currently do not plan to raise additional material proceeds through the sales of PhunCoin Rights.
Issuance of PhunCoin
PhunCoin is expected to be issued to Rights holders the earlier of (i) the launch of our blockchain technology enabled rewards marketplace and data exchange (“Token Ecosystem” or "Token Generation Event"), (ii) one (1) year after the issuance of the Rights to the purchaser or (iii) the date we determine that we have the ability to enforce resale restrictions with respect to PhunCoin pursuant to applicable federal securities laws. Proceeds from the Rights offerings are generally not refundable if the Token Generation Event is not consummated.
In 2021, we notified holders of the PhunCoin Rights to request they complete additional information needed for issuance and we currently anticipate that PhunCoin will be transferred to the holders of the Rights in 2023. Holders of the Rights may be transferred PhunCoin even if the Token Ecosystem is not yet fully developed. PhunCoin may not be able to be fully utilized until the Token Ecosystem is fully developed.
There can be no assurance as to when (or if) we will be able to successfully issue PhunCoin or complete the development of the Token Ecosystem. The Company is currently developing multiple aspects of the Token Ecosystem, as well as coordinating with trading platforms to support compliant transfer and trading of PhunCoin. The continued adjustment of dates to complete the development of the Token Ecosystem have been and may be adjusted based on user feedback, additional aspects of the Token Ecosystem currently under development and the ability to meet evolving applicable requirements; therefore, a specific development completion date for the Token Ecosystem is difficult to determine at this time, as it is based on many external factors outside of our control.
Termination of the Token Rights Agreement
Termination of the Token Rights Agreement occurs on the earlier of (i) PhunCoin being issued to the Rights holder pursuant to the provisions noted above, (ii) the payment, or setting aside of payment with respect to a dissolution event (as described below) or (iii) twelve months from the date of the Token Rights Agreement with the Rights holder, which we may extend at our sole discretion for six months if a Token Generation Event has not occurred. Upon termination of the Token Rights Agreement, we have no further obligation to the Rights holder. While the Token Rights Agreement has terminated in accordance with its terms (with respect to all Rights holders), as of the date of this Annual Report, we have determined to continue our obligations under the Token Rights Agreement and transfer of PhunCoin to the holders of rights.
Dissolution Event
A dissolution event occurs if there has been (i) a voluntary termination of our operations, (ii) a general assignment for the benefit of creditors, (iii) a change of U.S. laws that make the use or issuance of PhunCoin or the Token Generation Event impractical or unfeasible or (iv) any other liquidation, dissolution or winding up of the Company.
In the event a dissolution event occurs prior to the termination of the Token Rights Agreement, if there are any remaining proceeds from the Rights offering that have not been utilized by us in our operations or for the development of the Token Ecosystem, such remaining proceeds would be distributed pro rata to purchasers in the Rights offering following any distributions to holders of our capital stock or debt, if any.
No Voting Rights or Profit Share
Rights holders (and eventual PhunCoin holders) have no voting rights and are not entitled to share in the profits or residual interest of Phunware or any subsidiaries of the Company. However, PhunCoin holders will be provided fractional economic interests in the Token Ecosystem, including monthly PhunCoin or other distributions to PhunCoin holders, based on
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their respective ownership percentage of and other elections with respect to PhunCoin, totaling 2.5% or more of certain Token Ecosystem revenues.
PhunCoin Warrants
In 2018, we issued warrants to receive PhunCoin to sixty-eight (68) stockholders. At the time of issuance, we determined there should be no value assigned to the rights to receive PhunCoin under these warrants issued to the stockholders, for the following reasons: (i) the PhunCoin-related rights in these warrants (x) lacked characteristics of financial instruments and derivatives, and (y) did not obligate us to achieve the Token Generation Event or launch and distribute PhunCoin to the warrant holders and (ii) there was not a market for PhunCoin and they did not exist.
Should we complete a Token Generation Event, the warrant holders would receive their requisite amount of PhunCoin.
12. Stockholders’ Equity
Common Stock
Total common stock authorized to be issued as of December 31, 2022 was 1,000,000,000 shares with a par value of $0.0001 per share. At December 31, 2022 and 2021, there were 103,153,337 and 96,751,610 shares outstanding, respectively.
On January 31, 2022, we entered into an At Market Issuance Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell, from time to time, shares of our common stock, par value $0.0001 per share, for aggregate gross proceeds of up to $100,000, through or to Wainwright, as agent or principal. We are not obligated to sell shares of our common stock under FASB ASC 820, “Fair Value Measurementsthe sales agreement with Wainwright. The Company and Disclosures,” approximatesWainwright may each terminate the carrying amounts representedsales agreement at any time with five days prior written notice. As of December 31, 2022, 2,623,460 shares of our common stock have been sold for aggregate cash proceeds of $4,562, net of transaction costs of $101. We also incurred additional transaction costs paid outside of closing of $163. Sales of shares of our common stock sold under the sales agreement will be made pursuant to an effective shelf registration statement on Form S-3 in the accompanying balance sheets.

Income Taxes

amount of $200,000 filed with the SEC on February 1, 2022.

On August 14, 2020, we entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”), as sales agent, pursuant to which the Company would offer and sell, from time to time, through Ascendiant shares of our common stock for an aggregate offering price of up to $15,000. During 2021, 2,670,121 shares of our common stock were sold for aggregate net cash proceeds of $5,058. Transaction costs were $156. We terminated the Sales Agreement with Ascendiant effective as of March 28, 2021.
In February 2021, we entered into an underwriting agreement with Northland Securities, Inc. and Roth Capital Partners, LLC, relating to an underwritten public offering to which we issued 11,761,111 shares of our common stock at an offering price of $2.25 per share. Aggregate cash proceeds at closing, net of transaction costs of $1,740, totaled $24,722. We incurred additional transaction costs paid outside of closing of $75.
On April 7, 2021, we entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. ("B. Riley"), pursuant to which we offered and sold, from time to time, shares of our common stock through or to B. Riley. We paid B. Riley a commission of 3% of the gross proceeds of the sales price per share for sales of our common stock sold through or to B. Riley. During 2021, 20,951,043 shares of our common stock had been sold and we had received aggregate net cash proceeds of $65,210. Transaction costs were $2,017. We also incurred additional transaction costs paid outside of closing of $178. We terminated the sales agreement with B. Riley on February 4, 2022, with an effective date of February 9, 2022.
Dividends
Dividends are paid on a when-and-if-declared basis. We did not declare any dividends during 2022 or 2021.


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Warrants
We have various warrants outstanding. A summary of our outstanding warrants is set forth below:
December 31, 2022December 31, 2021
Warrant TypeCash Exercise
Price per
share		Number of warrantsCash Exercise
Price per
share		Number of warrants
2020 Convertible Notes warrant$1.42 2,811,315 $2.25 1,780,000 
Common stock warrant (Series D-1)$— — $2.25 35,555 
Common stock warrants (Series F)$9.22 377,402 $9.22 377,402 
Public Warrants (PHUNW)$11.50 1,761,291 $11.50 1,761,291 
Private Placement Warrants$11.50 1,658,381 $11.50 1,658,381 
Unit Purchase Option Warrants$11.50 24,172 $11.50 24,172 
Total6,632,561 5,636,801 

Refer to Note 8, Debt, for details of our warrant issued in connection with our 2020 Convertible Notes. During 2021, the holder of our 2020 Convertible Notes partially exercised its warrant for 2,060,000 shares of common stock with an exercise price of $2.25 per share for net proceeds of $4,635.
In 2012, we issued a Series D-1 warrant to initially purchase an aggregate of 14,866 shares of the Company’s common stock with an initial exercise price of $5.54 per share to a banking institution with which we previously had a revolving line of credit. As a result of our underwritten public offering in February 2021, the exercise price of each share decreased to $2.25 per share, and the number of shares for which the warrant is exercisable increased to 35,555 shares. The warrant expired December 21, 2022.
In 2018, but prior to our reverse merger with Stellar, we issued warrants (Series F above) to purchase an aggregate of 1,085,059 shares of common stock with an exercise price of $9.22 per share. The term of the warrants is the earlier of (i)
June 5, 2023, (ii) an acquisition, merger, or consolidation of the Company or a sale, lease or other disposition of all or substantially all of the assets of Phunware and its subsidiaries, except (a) any sale of stock for capital raising purposes, (b) purpose of changing the Company’s state of incorporation, and (c) where the stockholders of Phunware immediately before such transaction retain at least a majority of the voting power immediately following such transaction; or (iii) immediately prior to an initial public offering. The reverse merger with Stellar did not trigger an expiration of the warrant pursuant to term (ii) or (iii) above. These warrants are fully vested.
We have common stock warrants trading under the Nasdaq ticker symbol PHUNW (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share and are fully exercisable by the holder. No fractional shares will be issued upon exercise of the Public Warrants. We may redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of shares of our common stock equals or exceeds $21.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the Public Warrant holders. The Public Warrants will expire December 26, 2023 or earlier upon redemption or liquidation.
The Private Placement Warrants entitle the holder to purchase one share of common stock at an exercise price of $11.50 per share and are fully exercisable by the holder. The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option and will not be redeemable in each case so long as they are still held by the initial purchasers or their affiliates. The Private Placement Warrants will expire December 26, 2023.
The Unit Purchase Option Warrants noted in the table above have the same terms as the Private Placement Warrants as described above.
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13. Stock-Based Compensation
2018 Equity Incentive Plan
In 2018, our board of directors adopted, and our stockholders approved, the 2018 Equity Incentive Plan, as amended (the “2018 Plan”). The purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to employees, directors and consultants who perform services for the Company, and to promote the success of our business. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares. Shares will be delivered electronically to the holder shortly after exercise or vest date pursuant to an effective registration statement.
The number of shares of common stock available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year, equal to the lesser of 5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or such other amount as our board of directors may determine.
In addition, the shares of common stock reserved for issuance under the 2018 Plan also will include any shares of common stock subject to stock options, restricted stock units or similar awards granted under the 2009 Equity Incentive Plan (the “2009 Plan”), that, on or after the adoption of the 2018 Plan, expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that are forfeited to or repurchased by us. As of December 31, 2022, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing is 874,279. Not including the maximum number of shares from the 2009 Plan that may be added to the 2018 Plan, the 2018 Plan had 4,382,662 and 762,038 shares of common stock reserved for future issuances as of December 31, 2022 and December 31, 2021, respectively.
Restricted Stock Units
A summary of our restricted stock unit activity is set forth below:

SharesWeighted Average Grant Date Fair Value
Outstanding as of December 31, 20213,576,270 $1.94 
Granted1,728,598 1.67 
Released(1,803,212)1.82 
Forfeited(543,661)2.12 
Outstanding as of December 31, 20222,957,995 $1.75 

During the first quarter of 2021, we granted 3,488,262 restricted stock unit awards to team members with an average grant date fair value of $2.03 per share. The awards granted to team members vest over a range of 10 to 51 months with various installment and vesting dates, and are subject to service conditions. We also granted 652,170 restricted stock units to non-employee directors, each with a grant date fair value of $1.22. The awards vest in four equal installments on March 4, 2021, June 4, 2021, September 4, 2021, and December 4, 2021, and are subject to service conditions. We also granted 97,744 restricted stock units to non-employee directors, with a grant date fair value of $1.22 per share in lieu of cash compensation board fees for services provided. These awards vested immediately.
During the second quarter of 2021, we granted 54,000 restricted stock unit awards to team members with an average grant date fair value of $1.23 per share. The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.
During the third quarter of 2021, we granted 54,000 restricted stock unit awards to team members with an average grant date fair value of $1.09 per share. The awards granted to team members vest over a range of 47 months with various installment and vesting dates, and are subject to service conditions.
During the fourth quarter of 2021, we granted 170,000 restricted stock unit awards to team members with an average grant date fair value of $3.97 per share. The awards granted to team members vest over a range of 47 months with various
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installment and vesting dates, and are subject to service conditions. We also granted 368,672 restricted stock units to non-employee directors, each with a grant date fair value of $1.35. The awards vest in four equal installments throughout 2022 and are subject to service conditions.
During the third quarter of 2022, we granted 1,267,000 restricted stock unit awards to team members with an average grant date fair value of $1.57 per share. The awards granted to team members vest over a range of 39 to 49 months with various installment and vesting dates, and are subject to service conditions. We also granted 25,000 restricted stock units to a non-employee consultant with a grant date fair value of $1.70. The award vests on March 31, 2023 and is subject to service conditions.
During the fourth quarter of 2022, we granted 39,000 restricted stock unit awards to team members with an average grant date fair value of $1.52 per share. The awards granted to team members vest over a range of 48 months with various installment and vesting dates, and are subject to service conditions. We also granted 397,598 restricted stock units to non-employee directors, each with a grant date fair value of $1.48. The awards granted to non-employee directors generally vest quarterly over 12 months, and are subject to service conditions.
The restricted stock unit grants were valued based on the fair value of our common stock on the date of grant.
Pursuant to an agreement entered into by us with our former Chief Executive Officer, we modified the remaining vesting schedule related to the unvested portion of the individual's outstanding equity awards as of December 2022. The original equity awards were made at multiple occurrences, each of which contained various vesting share amounts on various dates, with the last vesting period originally scheduled to occur in May 2025. As additional compensation under the agreement, we modified the vesting schedule with respect to the unvested portion of restricted stock units under the individual's awards, such that 39,438 restricted stock units will vest on each of the last day of each month from January 2023 through November 2023 and 39,445 restricted stock units will vest on December 31, 2023. Incremental costs associated with this modification was not significant for the year ended December 31, 2022.
Stock Options
A summary of our stock option activity under the 2018 Plan and related information is as follows:
Number of SharesWeighted Average
Exercise Price		Weighted Average
Remaining
Contractual Term
(years)		Aggregate Intrinsic
Value
Outstanding as of December 31, 202150,000 $1.08 1.37$78 
Granted50,000 1.70 
Exercised— — 
Forfeited(12,500)1.08 
Outstanding as of December 31, 202287,500 $1.43 5.6$— 
Exercisable as of December 31, 202287,500 $1.43 5.6$— 
During third quarter of 2022, we granted options to purchase 50,000 shares of our common stock to two non-employee consultants with an exercise price of $1.70 per share. The options vested in various increments with the final vesting date occurring on December 30, 2022. The weighted average grant date fair value of options granted during 2022 and 2021 was $0.54 and $0.51, respectively. The total fair value for options vested during the years ended December 31, 2022 and 2021 was $42 and $11, respectively. Stock based compensation related to this grant was not significant.

2018 Employee Stock Purchase Plan
Also, in 2018, our board of directors adopted, and our stockholders approved, the 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The purpose of the 2018 ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock at a discount through accumulated contributions generally in the form of payroll deductions of up to 15% of eligible compensation, subject to caps of $25 in any calendar year and 4,000 shares on any purchase date. The 2018 ESPP provides for 24-month offering periods, generally beginning in June and December of each year, and each offering period
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consists of four six-month purchase periods. The first purchase under the 2018 ESPP was in December 2021. Participation ends automatically upon termination of employment with the Company.
On each purchase date, participating employees will purchase shares of our common stock at price per share equal to 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. If the price per share of our common stock on any purchase date in the offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period. Shares will be delivered electronically to the participant shortly after the purchase date pursuant to an effective registration statement.
We use a Black-Scholes option pricing model to determine the fair value of shares to be purchased under the 2018 ESPP. Stock-based compensation expense related to our 2018 ESPP for the years ended December 31, 2022 and 2021 was not significant.
The number of shares of common stock that may be made available for sale under the 2018 ESPP also includes an annual increase on the first day of each fiscal year beginning for the fiscal year following the fiscal year in which the first enrollment date (if any) occurs equal to the lesser of (i) 818,825 shares of common stock; (ii) 1.5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year; or such other amount as the administrator may determine.

The 2018 ESPP had 802,893 and 189,215 shares of common stock available for sale and reserved for issuance as of December 31, 2022 and 2021, respectively.
2009 Equity Incentive Plan
In 2009, we adopted the 2009 Plan, which allowed for the granting of incentive and non-statutory stock options, as defined by the Internal Revenue Code, to employees, directors and consultants. The exercise price of the options granted was generally equal to the value of our common stock on the date of grant, as determined by our board of directors. The awards are exercisable and vest, generally over four years, in accordance with each option agreement. The term of each option is no more than ten years from the date of the grant. The 2009 Plan allowed for options to be immediately exercisable, subject to the Company’s right of repurchase for unvested shares at the original exercise price. There were no unvested shares subject to repurchase provisions outstanding as of December 31, 2022 and 2021. Upon exercise, shares will be delivered electronically to the holder pursuant to an effective registration statement. Effective with the adoption of the 2018 Plan, no additional grants will be made under the 2009 Plan.
A summary of our stock option activity under the 2009 Plan and related information is set forth below:

Number of SharesWeighted Average Exercise Price
Weighted Average Remaining
Contractual Term (years)
Aggregate Intrinsic Value
Outstanding as of December 31, 2021925,467 $0.80 5.59$1,692 
Granted— — 
Exercised(45,707)0.62 
Cancelled/Expired(5,481)2.00 
Outstanding as of December 31, 2022874,279 $0.80 4.22$130 
Exercisable as of December 31, 2022873,627 $0.80 4.22$130 
The Company followsdid not grant any options under the asset2009 Plan during the year ended December 31, 2022 or 2021. We have historically used the Black-Scholes option pricing model to estimate the fair value of our stock option awards.
The aggregate intrinsic value is based on our stock price trading price on the Nasdaq Capital Market. The aggregate intrinsic value of options exercised was $50 and liability method$1,168 for the years ended December 31, 2022 and 2021, respectively, and is calculated based on the difference between the estimated fair value of accountingour common stock at the date of exercise and the exercise price.
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The total fair value for options vested during the years ended December 31, 2022 and 2021 was $17 and $66, respectively.
Stock-Based Compensation
Compensation cost that has been included in our consolidated statements of operations and comprehensive loss for all stock-based compensation arrangements is set forth below:
Year Ended December 31,
Stock-based compensation20222021
Cost of revenues$210 $1,050 
Sales and marketing104 437 
General and administrative2,542 2,770 
Research and development153 684 
Total stock-based compensation$3,009 $4,941 
As of December 31, 2022, there was approximately $4,680, $349 and $1 of total unrecognized compensation cost related to the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively. These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.2 years, 1.9 years and 0.7 years for the 2018 Plan, the 2018 ESPP and the 2009 Plan, respectively.

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14. Income Taxes
Deferred income taxes under FASB ASC, 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable toin future years for differences between the financial statements carrying amountstax bases of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured usingfinancial reporting amounts at each year-end based on enacted tax laws and statutory tax rates expectedapplicable to apply to taxable income in the yearsperiods in which those temporarythe differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. At November 30, 2017Income tax expense is the combination of the tax payable for the year and 2016,the change during the year in deferred tax assets and liabilities.
For the years ended December 31, 2022 and 2021, we had net losses before income taxes of $50,890 and $53,948, respectively. Net losses relating to U.S. operations for were $52,415 and $54,907, respectively.
The difference between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax expense (benefit) are summarized as follows:

Year Ended December 31,
20222021
Income tax (benefit) at statutory rate$(10,685)$(11,330)
Valuation allowance12,894 11,500 
State income tax (benefit), net of federal benefit(2,114)(1,978)
Business tax credit net of reserves(575)(190)
Non-deductible expenses794 2,210 
Business combination— (437)
Foreign income taxes at different rate(310)(201)
Income tax expense (benefit)$4 $(426)
Effective tax rate(0.01)%0.79 %
The provision expense (benefit) for income taxes consist of the following:

Year Ended December 31,
20222021
Current:
Federal$— $— 
State4 11 
Foreign— — 
Total current4 11 
Deferred:
Federal— (416)
State— (21)
Foreign— — 
Total deferred— (437)
Total income tax (benefit) expense$4 $(426)
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The components of net deferred income taxes consist of the following:

December 31,
20222021
Deferred tax assets:
Net operating loss$47,662 $40,922 
Unrealized loss on digital assets6,754 2,015 
Tax credits1,940 1,416 
Reserves and accruals332 732 
Leases - lease liability1,019 376 
Amortization of acquired intangibles2,624 232 
Other deferred tax assets686 1,748 
Gross deferred tax assets61,017 47,441 
Less valuation allowance(59,057)(46,163)
Total deferred tax assets1,960 1,278 
Deferred tax liabilities:
Amortization of acquired intangibles— — 
Leases - right of use asset(931)(306)
Other deferred tax liabilities(1,029)(972)
Total deferred tax liabilities(1,960)(1,278)
Net deferred tax liabilities$— $— 
As of December 31, 2022, we had net operating loss ("NOL") carryforwards of $195,027 and $95,867 for federal and state income tax purposes, respectively. The federal net operating losses of $85,674 which were generated in tax years beginning before January 1, 2018, will begin to expire in 2030 if not utilized. The balance of the net operating losses, $109,353 do not expire. The state net operating losses expire at various times depending on the state with a majority beginning to expire in 2030 if not utilized.
As of December 31, 2022, we had research and development ("R&D") credit carryforwards of approximately $2,286 and $1,622 for federal and state income tax purposes, respectively. The federal and Texas R&D credits will begin to expire in 2034, unless previously utilized. California R&D credits carry forward indefinitely.
Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code (IRC) of 1986, as amended (the "Code"), as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than fifty (50) percentage points of the outstanding stock of a company by certain stockholders.
As of December 31, 2022, we had not yet completed an analysis of the deferred tax assets for its NOL and tax credits. The future utilization of our net operating loss to offset future taxable income may be subject to an annual limitation under IRC Section 382 as a result of ownership changes that may have occurred previously or that could occur in the future. We have not yet determined whether such an ownership change has occurred. In order to make this determination, we will need to complete an analysis regarding the limitation of the net operating loss.
We have established a full valuation allowance for our deferred tax assets due to uncertainties that preclude us from determining that it is more likely than not that we will be able to generate sufficient taxable income to realize such assets. We monitor positive and negative factors that may arise in the future as we assess the need for a valuation allowance against our deferred tax assets. As of December 31, 2022 and 2021, we have a valuation allowance of $59,057 and $46,163, respectively, against our deferred tax assets.
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The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate resolution with a taxing authority.
Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, de-recognition, and measurement. Adjustments may result, for example, upon resolution of an issue with the taxing authorities, or expiration of a statute of limitations barring an assessment for an issue.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

December 31,
20222021
Unrecognized tax benefits, beginning of period$1,545 $1,314 
Tax positions taken in prior periods:
Gross increases— — 
Gross decreases— — 
Tax positions taken in current period:
Gross increases212 231 
Settlements— — 
Lapse of statute of limitations— — 
Unrecognized tax benefits, end of period$1,757 $1,545 
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We have no accrual for interest and penalties on the consolidated balance sheets and has not recognized interest and/or penalties in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021.
We are subject to taxation in the United States and various state jurisdictions. Our tax years from inception are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.
We have ownership interest in controlled foreign corporations. During 2022, we analyzed the potential impact of the Global Intangible Low-Taxed Income and the Base Erosion and Anti-Abuse Tax provisions of the Tax Cuts and Jobs Act signed into law in 2017. Based on the foreign subsidiaries' tax position, we will not incur any impact relating to these two provisions.
The CARES Act was enacted in the United States on March 27, 2020. The CARES Act includes several U.S. income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest deduction limitations and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. The CARES Act did not have a material impact on our financial results for the years ended December 31, 2022 and 2021.
The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the United States on December 27, 2020. The Act enhances and expands certain provisions of the CARES Act. The Act did not have a material impact on our financial results for the year ended December 31, 2022 and 2021.
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15. Segment and Geographic Information

Our chief operating decision maker is our Chief Executive Officer ("CEO"). Our CEO reviews operating segment information for purposes of allocating resources and evaluating financial performance. We have determined that the Company had no material deferred tax assets.

Redeemable common stock

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

Selected information for the Company's operating segments and a reconciliation to the consolidated financial statement amounts are as follows:
As of or for the year ended December 31, 2022
PhunwareLyteConsolidated
Goodwill$25,765 $5,348 $31,113 
Total assets$42,349 $12,486 $54,835 
Net revenues$6,521 $15,273 $21,794 
Loss before taxes$(47,482)$(5,469)$(50,890)
As of or for the year ended December 31, 2021
PhunwareLyteConsolidated
Goodwill$25,887 $7,373 $33,260 
Total assets$85,970 $12,046 $98,016 
Net revenues$7,548 $3,095 $10,643 
Loss before taxes$(53,339)$(609)$(53,948)
Identifiable long-lived assets attributed to the United States and international geographies are based upon the country in which the asset is located or owned. As of December 31, 2022 and 2021, all of our identifiable long-lived assets were in the United States.
16. Related-Party Transactions
In connection with the reverse merger with Stellar, in 2018, we assumed $255 in payables for Nautilus Energy Management Corporation, an affiliate of two former members our board of directors, one of whom served on our board of directors until December 2, 2021. On December 29, 2021, we paid $171 in full satisfaction of the 6,900,610outstanding payable.
As more fully discussed in Note 8, Debt, the Company entered into a Note (defined above) with a certain related party. In 2021, we repaid the Note in full.
17. Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were issued.
2022 Inducement Plan
Our board of directors adopted the Phunware, Inc. 2022 Inducement Plan (the "Plan") in January 2023. As permitted by Nasdaq Stock Market rules, our stockholders were not required to approve the Plan. The plan provides of up to 1,470,588 shares of common stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of suchour common stock under the Company’s liquidation or tender offer/stockholder approval provisions. In accordance with ASC 480, redemption provisions not solely within the controlawards granted to newly-hired employees. An "award" is any right to receive common stock of the Company requireconsisting of nonstatutory stock options, stock appreciation rights, restricted stock awards or restricted stock units. In January 2023, we made an inducement grant to a newly-hired employee of 1,470,588 restricted stock units under the securityPlan with a grant date fair value of $0.87 per share.
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One-third, or 490,196, of the restricted stock units will vest on December 28, 2023 and the remainder will vest in equal installments over eight quarterly periods beginning on March 31, 2024 with the final vesting date occurring on December 28, 2025, subject to the employee's continued service on such vesting date. Shares will be delivered electronically to the holder shortly after vest date.
Stock Repurchase Plan
On January 5, 2023, our board of directors authorized and approved a stock repurchase program for the repurchase of outstanding shares of our common stock with an aggregate value of up to $5,000. The authorization permits us to repurchase shares of our common stock from time-to-time through open market repurchases at prevailing market prices, in accordance with federal securities laws. The stock repurchase plan is expected to be classified outsidecompleted over the next twelve (12) months and may be amended or terminated at any time, in the sole discretion of permanent equity. Ordinary liquidation events, which involve the redemptionboard. The exact means, number and timing of stock repurchases will depend on market conditions, applicable legal requirements and other factors, and will be funded through the liquidation of allour bitcoin holdings. As of the entity’s equity instruments, are excluded fromdate of this report we have repurchased 461,500 shares of our common stock at an aggregate repurchase price of $475.
2022 Promissory Note Waiver Agreement
On March 15, 2023, we entered into a waiver agreement with the provisionsholder of ASC 480. Althoughour 2022 Promissory Note, waiving the Company does not specify a maximum redemption threshold, its amended and restated certificate of incorporation provides thatPayment Deferral Conditions, as defined in no event will the Company redeem its Public Shares in2022 Promissory Note. For agreeing to waive the Payment Deferral Conditions, we agreed to compensate the noteholder an amount that would cause its net tangible assets (stockholders’ equity)equal to be less than $5,000,001.

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The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value5% of the securityoutstanding balance immediately before entering into the waiver agreement. In connection therewith, we elected to equaldefer the redemption value atmonthly payments under the end2022 Promissory Note for the months of April, May, June and July 2023. As a result of our election to defer the monthly payments, the outstanding balance of the 2022 Promissory Note will be increased by 1.85% on the first day of each reporting period. Increases or decreasesmonth beginning on April 1, 2023 and concluding on July 1, 2023. The waiver fee and the additional principal will be paid in connection with our monthly installment payments once the deferral period concludes. Beginning on August 1, 2023 and on the same day of each month thereafter, we will be required to pay to the noteholder the new monthly amortization payment in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital.

At$1,769 until the new maturity date of November 30, 2017, 6,192,2211, 2023.


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Table of the 6,900,610 Public Shares were classified outside of permanent equity at redemption value of $10.00 per share.

Recent Accounting Pronouncements

Management does not believe that there are any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

ContentsItem 7A. Quantitative and Qualitative Disclosures about Market Risk

The net proceeds of our initial public offering and the sale of the private placement warrants held in the trust account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Item 8. Financial Statements and Supplementary Data

Reference is made to Pages F-1 through F-14 comprising a portion of this Annual Report on Form 10-K.

Page
Report of Independent Registered Public Accounting FirmF-1
Financial Statements
Balance Sheets as of November 30, 2017 and 2016F-2
Statements of Operations for the year ended November 30, 2017 and the period from December 8, 2015 (inception) to November 30, 2016F-3
Statements of Shareholders’ Equity for the year ended November 30, 2017 and the period from December 8, 2015 (inception) to November 30, 2016F-4
Statements of Cash Flows for the year ended November 30, 2017 and the period from December 8, 2015 (inception) to November 30, 2016F-6
Notes to Financial StatementsF-7

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our co-Chief Executive Officers (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

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Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers (as defined below), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of December 31, 2022.
Management’s Report on Internal Controls Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer,Certifying Officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2017,December 31, 2022, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission for newly public companies (COSO). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of November 30, 2017.

December 31, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is definedidentified in conjunction with the evaluation required by Rules 13a-15(f)13a-15(d) and 15d-15(f)15d-15(d) of the Exchange Act)Act that occurred during the most recent fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitation on the Effectiveness of Controls
Our management, including our Certifying Officers, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information

Information.

None.

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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable.
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PART III

Item 10. Directors, Executive Officers and Corporate Governance

DirectorsGovernance.

The following table sets forth the current ages and Executive Officers

Asthe names and positions of the date of this Report, our directors and executive officers are as follows:

of December 31, 2022:

NameAgeTitle
Prokopios (Akis) TsirigakisName62Age

Chairman of the Board,

co-ChiefPosition

Executive Officers
Russell Buyse58Chief Executive Officer and President

Class III Director
George SyllantavosMatt Aune5347

co-Chief Executive Officer,

Chief Financial Officer Secretary and Director

Alexandros ArgyrosRandall Crowder3742DirectorChief Operating Officer
Tiziano ParavagnaMatt Lull3953DirectorChief Cryptocurrency Officer
Eleonora (Liona) BachaChris Olive5253Chief Legal Officer
Non-Employee Directors
Stephen Chen (1)(2)
40Class I Director
Ryan Costello (2)
46Class II Director, Chairperson
Eric Manlunas (1)(3)
54Class I Director
Kathy Tan Mayor (2)(3)
46Class II Director
Rahul Mewawalla (1)(3)
44Class I Director

Prokopios (Akis) Tsirigakis has served

(1)Member of the Audit Committee
(2)Member of the Compensation Committee
(3)Member of the Nominating and Corporate Governance Committee

Executive Officers and Significant Employees
Each of our executive officers serves at the discretion of our board of directors (the "Board") and will hold office until his successor is duly appointed and qualified or until his earlier resignation or removal. The following biographical descriptions set forth certain information with respect to our executive officers based on information furnished to us by each such officer.
Russell Buyse joined Phunware as our Chairman of the Board of Directors, President and co-Chief Executive Officer since December 2015. From May 2011 until October 2013, Mr. Tsirigakis co-founded and served as Chairman and Co-CEO of Nautilus Marine, a special purpose acquisition company that completed an initial public offering on July 16, 2011 and was listed on Nasdaq. Mr. Tsirigakis has served as the CEO of Nautilus Offshore Services Inc., an offshore service vessel owner and the successor of Nautilus Marine, since October 2013 and as a Vice President of Dryships, Inc. (Nasdaq: DRYS), which acquired Nautilus Offshore Services Inc., since December 2015. From May 2005 to November 2007, he co-founded and served as Chairman of the Board,its Chief Executive Officer in December 2022 and President of, Star Maritime (AMEX:SEA),serves as a blank check company. From November 2007 until February 2011, heClass III director. Mr. Buyse was previously employed as the President and Chief ExecutiveOperating Officer of Star Bulk Carriers Corp.,GlobaliD, a dry-bulk ship-owning company and the successorfocused on building a future where people control every aspect of Star Maritime.their digital identity. From November 2003 until November 2007,December 2019 to December 2020, he served as Managing DirectorClient Services and Chief Operating Officer of Oceanbulk Maritime S.A.,Praxent where he led the client services, project management, design and engineering teams. From 2012 to 2019, Mr. Buyse was vice president of engineering and chief operating officer of Mutual Mobile, in which he led the engineering, design and project management teams in Austin and India. Prior to that, Mr. Buyse, has served in multiple leadership roles in product and engineering across multiple verticals. Mr. Buyse holds a company that operated and managed dry bulk vessels. From November 1998 to November 2007, Mr. Tsirigakis established and served asBachelor’s degree in Computer Science from the Managing Director of Combine Marine Inc., a company providing ship management services to third parties. From 1991 to 1998, Mr. Tsirigakis was the Vice-President and Technical Director of Konkar Shipping Agencies S.A. of Athens, after having served as Konkar’s Technical Director from 1984 to 1991. From 1981 to 1984, Mr. Tsirigakis was the Technical Manager of Konkar’s affiliate, Arkon Shipping Agencies Inc. of New York. From 2011 to 2015, Mr. Tsirigakis served as a director of Ocean Rig UDW Inc. (Nasdaq: ORIG). Mr. Tsirigakis received his Masters Degree (1979) and B.Sc. in Naval Architecture from The University of Michigan, Ann Arbor, USA. Texas at Austin and a Certificate from the Institute for Managerial Leadership of the University of Texas at Austin.
We believe Mr. TsirigakisBuyse is well-qualified to serve as a member of the Board due to his public company experience, business leadership, operational experience, and experience in a prior blank check offering, such as Star Maritime and Nautilus Marine.

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George Syllantavos has served as our co-Chief Executive Officer, Chief Financial Officer, Secretary and Director since December 2015. Mr. Syllantavos co-founded in February 2013, and is Chief Executive Officer of, Nautilus Energy Management Corp. (not affiliated with Nautilus Offshore Services Inc.), a maritime energy services company involved in maritime project business development and ship management focusing on the offshore supply and gas sectors. From September 2009 to December 2016, he was the President, Secretary, Treasurer and sole director of BTHC X, Inc. (OTCBB: BTXI) and has been serving on the company’s board of directors since its merger with iOra Software Ltd.. From May 2011 until February 2013, Mr. Syllantavos co-founded and served as Co-CEO and CFO of Nautilus Marine, a special purpose acquisition company that completed an initial public offering on July 16, 2011 and was listed on Nasdaq. He served as the CFO of Nautilus Offshore Services Inc., an offshore service vessel owner and the successor of Nautilus Marine, from February 2013 until April 2014. From November 2007 to August 2011, he served as Chief Financial Officer, Secretary and Director of Star Bulk Carriers Corp., a dry-bulk ship-owning company. From May 2005 to November 2007, he served as the Chief Financial Officer, Secretary and Director of Star Maritime (AMEX:SEA), its predecessor, which was a blank check company. From May 1999 to December 2007, he was the President and General Manager of Vortex Ltd., an aviation consulting firm specializing in strategic analysis, fleet planning and asset management. From January 1998 to April 1999, he served as a financial advisor to Hellenic Telecommunications Organization S.A., where, on behalf of the Chief Executive Officer, he coordinated and led the company’s listing on the New York Stock Exchange (NYSE:OTE) and where he had responsibilities for the strategic planning and implementation of multiple acquisitions of fixed-line telecommunications companies. Mr. Syllantavos served as a financial and strategic advisor to both the Greek Ministry of Industry & Energy (from June 1995 to May 1996) and the Greek Ministry of Health (from May 1996 to January 1998), where, in 1997 and 1998, he helped structure the equivalent of a US$700 million bond issuance for the payment of outstanding debts to the suppliers of the Greek National Health System. From 1998 to 2004, he served as a member of the Investment Committee of a merchant banking firm, where he reviewed and analyzed many acquisition targets of small or medium sized privately-held manufacturing firms in the U.S. and internationally, of which he assisted in negotiating, structuring and implementing the acquisition of several such firms. Before that, he served for almost 5 years as an aviation consultant specializing in strategic planning and fleet asset management. Mr. Syllantavos has a B.Sc. in Industrial Engineering from Roosevelt University in Chicago and an MBA in Operations Management, International Finance and Transportation Management from the Kellogg Graduate School of Management at Northwestern University (USA). We believe Mr. Syllantavos is well-qualified to serve as a member of the Board due to his public company experience, business leadership, operational experience, and experience in a prior blank check offering, such as Star Maritime and Nautilus Marine. 

Alexandros Argyros has served as one of our independent directors since August 2016. Since March 2010, he has been with Axia Ventures Group serving as Managing Director and Head of the firm’s Investment Banking Division. From May 2011 until February 2013, Mr. Argyros served as a Director of Nautilus Marine, a special purpose acquisition company that completed an initial public offering on July 16, 2011 and was listed on Nasdaq. From early 2009 to March 2010, Mr. Argyros was a director of FiliaGroup, a private equity fund focusing on investments in the Environmental and Alternative Energy sectors. Prior to 2009, he spent seven years, from 2002 to 2009 with Morgan Stanley, three years, from June 2002 to August 2005 with the Global Industrials Group in New York and London and four years, from February 2006 to February 2010 with the Southeastern Europe/Greek coverage team focusing mainly on transactions involving companies, both public and private, in the commercial shipping sector. He currently sits, since 2010 on the Board of Directors of Filia Environmental Industries S.A. and FiliaCom S.A., both private companies active in the Environmental and Alternative Energy fields. Alexandros holds a BA. in Economics from Amherst College (USA). We believe Mr. Argyros is well qualified to serve as a member of theour Board due tobecause digital expertise and his investment banking experience with Axia, Morgan Stanley and other international financial institutions.

64
comprehensive background in information technology. Mr. Buyse has been a member of our Board since November 2022.

Tiziano ParavagnaMatt Aune has served as one of our independent directorsPhunware’s Chief Financial Officer since August 2016.2013. Mr. Aune previously served as the Company's Director of Finance and Accounting from August 2011 to August 2013. Prior to joining Phunware, Mr. Aune was employed by Sony Computer Entertainment America as Senior Business Finance and Operations Analyst from July 2010 to August 2011. From 2003 to 2009, Mr. Aune served in a variety of roles at Midway Games, a video game developer and publisher, with his final role as the Senior Manager of Financial Planning and Analysis for Worldwide Product Development. Mr. Aune holds a B.A. in Economics from the University of California, San Diego and an M.B.A. from San Diego State University.

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Randall Crowder has served as Phunware’s Chief Operating Officer since February 2018, and on our Board between December 2018 and September 2022. In September 2017, he founded and continues to serve as the Managing Partner of Nove Ventures, a venture capital firm, which focuses on investing in established companies like Phunware that are seeking to leverage blockchain technology to complement their core business model. Since August 2009, Mr. Crowder has also been a co-founder and Managing Partner at TEXO Ventures, which focuses primarily on tech-enabled health services. Mr. Crowder holds a B.S. in General Management from the United States Military Academy at West Point and an M.B.A. from the McCombs School of Business at the University of Texas at Austin.
Matt Lull who serves as Phunware's Chief Cryptocurrency Officer has spent 30 years in technology and finance leadership roles, across a wide variety of Fortune 500 companies. Prior to joining Phunware in April 2022, he spent over 17 years, from September 2004 to April 2022, at Citrix Systems (Nasdaq: CTXS), a leader in digital workspace technology. During his tenure at Citrix Systems, Mr. Lull held a number of roles, including the managing director of technology strategy for cloud innovation partners and director of SAP Alliance. From 1992 to 2004, Mr. Lull was employed by Andersen Consulting, now Accenture (NYSE: ACN). Mr. Lull resides in South Florida and holds a BBA in Finance from the University of Miami.
Chris Olive joined Phunware in April 2022 as Chief Legal Officer. Prior to his tenure at Phunware, Mr. Olive was a partner at Bracewell LLP in Dallas, Texas, from 2006 to 2001. Mr. Olive brings to Phunware diverse transactional and regulatory experience, in which he has previously represented clients in various capacities in, among other things, complex, bespoke and customized credit facilities, structured financings, swaps and derivatives, insurance finance, corporate acquisitions, financial instrument and commodity purchase and sale and repurchase transactions and related banking, financial and other regulatory matters. He has also served as an associate at Jones Day and served in the United States Army Judge Advocate General’s Corps. Mr. Olive has a BBA in Finance with honors from the University of Miami, a JD from the Southern Methodist University School of Law and an LLM in Banking & Finance Law with distinction from the University of London.
Non-Employee Directors
The following biographical descriptions set forth certain information with respect our non-employee directors based on information furnished to us by each such director.
Stephen Chen, who was elected to serve as a non-employee Class I director in November 2022, is Heada board-tested operational leader and chief financial officer. Since July 2016, Mr. Chen has served as chief financial officer of Sale and Purchase and Projects department since March 2007 at IFCHOR SA, a major brokerageKent Moore Capital, an investment and advisory company infirm focused on specialty finance, where he also currently sits on the maritime industry headquartered in Lausanne, Switzerland. He specializes in putting together large long-period chartering dealsboard of major international charterers and commodity houses, especially Japanese ones, with international ship-owning groups. He created and established the Sale and Purchase and Projects department with offices in Lausanne, Switzerland and Athens, Greece. From 2004 to March 2007,directors. Also, since 2016, he has served as chief financial officer of BioIntegrate, a regenerative medicine company. Mr. Paravagna was employed as a Sale & Purchase and Projects broker for Genoa Sea Brokers S.p.A., in Genoa, Italy. Due to the nature of his work, Mr. Paravagna has developed an extensive and valuable network within the energy and transportation sectors. Mr. Paravagna has extensive experience in asset transactions in the energy and transportation sector, while during the last 10 years heChen has been involved in numerous transactionsblockchain related projects since 2018, and, in 2021, he co-founded IHBit Global, a diversified blockchain holding company with an aggregate value exceeding $1.2 billion.assets including a crypto exchange, token project, electronic sports team and basketball team. From 2012 to 2016, Mr. Paravagna holdsChen was a Doctorate in Naval Architecture and Engineeringdirector for Hudson International, a global private investment firm. From 2008 to 2012, he led the emerging markets investment banking team at Oppenheimer Investments North America. Prior to joining Oppenheimer, Mr. Chen was a Vice President at J.P. Morgan. Mr. Chen has a B.S. degree from Genoa University (Italy) and was an Erasmus exchange student at Strathclyde University (Glasgow). Brown University.
We believe Mr. ParavagnaChen is well qualified to serve as a member of our Board because of his expertise in financial services and technology, including blockchain.
Ryan Costello was appointed to serve as a non-employee Class II director of Phunware in September 2021 and currently serves as Chairperson of our Board. Mr. Costello founded Ryan Costello Strategies, LLC, which provides strategic counsel and advocacy efforts on behalf of companies, trade associations and other organizations seeking to advance their objectives in the Board duelegislative and regulatory policy process within the federal government. From January 2015 to his experience in top management level of one of the most prominent maritime/energy project development and brokering organizations worldwide. 

Eleonora (Liona) Bacha hasJanuary 2019, Mr. Costello served as one of our independent directors since August 2016. Ms. Bacha founded Hellaschart Ltd. in 2000, where she currently holds the position of Managing Director. Hellaschart is a chartering and brokering company serving charterers, ship owners and terminal operators worldwide. Ms. Bacha was honored with the Lloyds’ List “Shipbroker of the Year 2011” award. Prior to that, since 1990, Ms. Bacha was an executive at Hellastir Shipping Agencies, the exclusive Chartering Partner for Zim Israel Navigation within the Greek market. Ms. Bacha served as secretary of the Greece-Israel Friendship League for 3 years, from 1993 to 1996, while since 1990 she is a member of the Hellenic Shipbrokers Association,U.S. House of Representatives for Pennsylvania's 6th congressional district, where she serves as elected memberhe served on numerous committees and vice presidentsubcommittees, including the Subcommittee on Communications and Technology and the Subcommittee on Digital Commerce and Consumer Protection. Prior to serving in Congress, Mr. Costello was an attorney in private practice representing clients in various facets of law, including regulatory compliance and financing. From September 2021 to June 2022, Mr. Costello served on the Boardboard of Directors since March 2015. Since January 2016 sheRed White & Bloom Brands, Inc. (CSE: RWB and OTCQX: RWBYF), a multi-state cannabis operator. Mr. Costello is a membergraduate of the W.I.B. (women in business) committeeUrsinus College, B.A., with honors, and received a JD from Villanova University Charles Widger School of the Hellenic-American Chamber of Commerce. She is a founding member of the Greek Shipbrokers Shipping Companies Association, a founding member of the Women International Shipping and Trading Association (WISTA), where she served as secretary for 4 years from 1992 to 1996. She is a founding member of the Newbuilding Club, where she served as treasurer from 1988 to 1990 and a member of The Propeller Club of the United States since 1995. Ms. Bacha received her Bachelor in Economics and Political Sciences from Athens University and her Masters in Shipping, Trade and Finance from City University Business School (CASS), London. Law.

We believe Ms. BachaMr. Costello is well qualified to serve as a member of our Board because of his expertise in law, governmental affairs and technology.
Eric Manlunas serves as a non-employee Class I director of Phunware. Mr. Manlunas is the founder and managing partner of Wavemaker Partners, an early-stage cross border venture capital firm he founded in 2003 that’s dual headquartered in
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Los Angeles and Singapore. He is a two-time start-up entrepreneur turned venture capitalist as an early investor in over 300 early-stage businesses. Prior to becoming a venture capitalist Mr. Manlunas founded two technology start-ups, one in e-Commerce (Interfoods.com) in 1996 and the other in Internet services (Sitestar) in 1999, both of which were successfully built and eventually sold to strategic buyers. Mr. Manlunas previously served on Phunware's board from December 2015 until December 2018. Since July 2008, Mr. Manlunas has also served on the board of PhilDev, a civic and social organization enabling success through education, innovation and entrepreneurship. Mr. Manlunas began his career as a consulting associate with Arthur Andersen’s retail management consulting division from 1991-1995. He holds an M.B.A. from Pepperdine University and an undergraduate degree in Communications from Florida International University.
We believe Mr. Manlunas is qualified to serve as a member of our Board due to his vast experience in digital and information technology companies and prior board experience with the Company. Mr. Manlunas rejoined our Board in December 2019.
Kathy Tan Mayor serves as a non-employee Class II director of Phunware. Ms. Mayor has held numerous leadership positions in business development, retail marketing, loyalty marketing, and digital marketing technology. She is currently the Chief Marketing Officer of Transformco, a leading integrated retailer focused on seamlessly connecting the digital and physical shopping experiences for customers. From 2018 to 2020, Ms. Mayor was the Chief Marketing Officer of BoxyCharm, a beauty subscription service company located in South Florida. From 2016 to 2018, Ms. Mayor was the Chief Digital Officer across the 10 portfolio brands of Carnival Corporation and the Chief Marketing Officer of Carnival Cruise Line. From 2008 to 2016, Ms. Mayor held a number of positions at Las Vegas Sands Corporation including a number of vice president and senior vice president roles in strategy and marketing. From 2005 to 2008, she held multiple director positions with Caesar Entertainment Corporation. Prior to that Ms. Mayor worked for McKinsey & Company and Proctor & Gamble in Southeast Asia. Ms. Mayor has a B.S. in Management Engineering from Ateneo de Manila University and an MBA from Harvard Business School.
We believe Ms. Mayor is qualified to serve as a member of our Board due to her high-level experiencemarketing and digital and information technology experience. Ms. Mayor has been a member of our Board since December 2018.
Rahul Mewawalla was appointed to serve as a non-employee Class I director of Phunware in maritime transportationSeptember 2021. Mr. Mewawalla is a product, technology, digital and business leader with extensive strategic and operational leadership expertise across technology, internet, software, telecommunications, financial services, media, consumer, enterprise, digital and blockchain companies. From May 2020 to January 2021, he served as President and Chief Executive Officer of Xpanse Inc., a fintech software company. From March 2020 to January 2021, Mr. Mewawalla served as Chief Digital Officer and executive vice president of platforms and technology businesses at Freedom Mortgage Corporation, a national financial services company. He has held several other executive leadership roles such as serving as President and Chief Executive Officer at Zenplace Inc. from 2014 to 2020, as Vice President at Nokia Corporation from 2010 to 2012, as Vice President at General Electric Company’s NBC Universal from 2008 to 2010, and as Senior Director at Yahoo! Inc. from 2005 to 2008. Mr. Mewawalla has served as a board member, investor and advisor to various public, private and philanthropic companies. In January 2023, he was appointed to the board of Mawson Infrastructure Group, Inc. (Nasdaq: MIGI), a digital infrastructure provider. In December 2022, Mr. Mewawalla was appointed to the board of Lion Group Holding (Nasdaq: LGHL), a financial services technology company. In September 2022, he was appointed to the board of Aquarius II Acquisition Corporation (Nasdaq: AQUB) and in June 2022, he was appointed to the board of Four Leaf Acquisition Corporation (Nasdaq: FORL), both special purpose acquistion companies. From June 2021 to October 2021, Mr. Mewawalla served as an independent director of Rocky Mountain Chocolate Factory Inc. (Nasdaq: RMCF), an e-commerce, consumer and retail company. From November 2019 to May 2020, Mr. Mewawalla served as an independent director at SOS Children’s Villages USA, a philanthropic organization. He has also served as Senior Advisor to the San Francisco Mayor’s Office on Innovation, as Advisor to Stanford University's Persuasive Technology Lab and as Committee Chair of the VC TaskForce SIG on Systems and Services. Mr. Mewawalla earned an MBA from the Kellogg School of Management at Northwestern University and a BBS from the University of Delhi.
We believe Mr. Mewawalla’s extensive digital, technology, products, platforms, mobile, strategic and operational expertise, as well as withhis executive leadership experience, qualify him to serve as a multinational organization involved in port and energy facilities infrastructure and development.

Number and Terms of Office of Officers and Directors

Our board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of shareholders) serving a two-year term. The term of officedirector of the first classCompany.

Additional Information
On February 18, 2022, certain stockholders filed a lawsuit against Phunware and its individual officers and directors. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al., was filed in the Court of directors, consisting of Messrs. Argyros and Paravagna and Ms. Bacha, will expire at our first annual meeting of shareholders. The term of officeChancery of the second classstate of directors, consistingDelaware (Cause No. 2022-0168-LWW). The plaintiffs invested in various early rounds of Messrs. Tsirigakisfinancing while the Company was private and Syllantavos, will expire atclaim the second annual meeting of shareholders. We doCompany should not currently intendhave subjected their shares to hold an annual meeting of shareholders until after we consummate our initial business combination.

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Our officers are elected by the board of directorsa 180-day "lock up" period. Among others, Alan Knitowski, Randall Crowder, Matt Aune, Kathy Tan Mayor and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors.

We do not currently intend to hold an annual meeting of shareholders until after we consummate a business combination, and thus may not be in compliance with Section 64 of the BCA. Therefore, if our shareholders want us to hold an annual meeting prior to our consummation of a business combination, they may attempt to force us to hold one by the holders of not less than 10% of the shares entitled to vote in an election of directors may, in writing, demand the call of a special meeting specifying the time thereof, which shall not be less than two (2) nor more than three (3) months from the date of such call in accordance with Section 64(3) of the BCA.

Committees of the Board of Directors

Our board of directors has two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee are composed solely of independent directors.

Audit Committee

We have established an audit committee of the board of directors. Messrs. Argyros and Paravagna and Ms. Bacha serve as members of our audit committee. Mr. Argyros serves as chairman of the audit committee. Under NASDAQ listing standards and applicable SEC rules, we are required to have three members of the audit committee, allEric Manlunas, each of whom must be independent. Messrs. Argyros and Paravagna and Ms. Bacha are independent.

Each memberserved as executive officers and/or directors as of the audit committee is financially literate and our board of directors has determined that Mr. Argyros qualifiesDecember 17, 2019 have been named as an “audit committee financial expert” as defined in applicable SEC rules.

Responsibilities of the audit committee include:

●the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
●pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
●reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
●setting clear hiring policies for employees or former employees of the independent auditors;
●setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
●obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
●reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

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●reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

Compensation Committee

We have established a compensation committee of the board of directors. The members of our compensation committee are Messrs. Argyros and Paravagna and Ms. Bacha. Mr. Paravagna serves as chairman of the compensation committee. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including: 

●reviewing and approving on an annual basis the corporate goals and objectives relevant to our co-Chief Executive Officers’ compensation, evaluating their performance in light of such goals and objectives and determining and approving their remuneration (if any) based on such evaluation in executive sessions at which they are not present;
●reviewing and approving the compensation of all of our other executive officers;
●reviewing our executive compensation policies and plans;
●implementing and administering our incentive compensation equity-based remuneration plans;
●assisting management in complying with our proxy statement and annual report disclosure requirements;

●approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
●producing a report on executive compensation to be included in our annual proxy statement; and
●reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.

Director Nominations

We do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required to do so by law or NASDAQ rules. In accordance with Rule 5605(e)(2) of the NASDAQ rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who shall participatedefendants in the considerationlawsuit.

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The 200th Judicial District Court of Travis County, Texas appointed a receiver over the non-exempt assets of Randall Crowder to collect a civil judgment entered against Mr. Crowder. Mr. Crowder's counsel has since filed with the Court a motion to vacate such receivership, and recommendation of director nominees are Messrs. Argyros and Paravagna and Ms. Bacha. In accordance with Rule 5605(e)(1)(A) ofis awaiting a ruling on the NASDAQ rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.

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same.

The board of directors will also consider director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of shareholders (or, if applicable, a special meeting of shareholders). Our shareholders that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws.

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.

Compensation Committee Interlocks and Insider Participation

None of our executive officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors.

Delinquent Section 16(a) Beneficial Ownership Reporting Compliance

Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires ourthe Company’s directors, executive officers directors and persons who beneficially own more than ten percent10% of the Company’s common stock (collectively, “Reporting Persons”) to file with the SEC reports regarding their ownership and changes in our ownership of our securities. We believe that, during 2022, our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements, except for late Form 3 filings by each of Chris Olive and Matt Lull on April 22, 2022 and May 6, 2022, respectively, and a late Form 4 filing by Eric Manlunas on December 16, 2022 to report a sale of our common stock, which occurred on December 8, 2021.
CORPORATE GOVERNANCE
Board Composition
Our business affairs are managed under the direction of the Board. The Board currently consists of six members, five of whom qualify as independent within the meaning of the independent director guidelines of the Nasdaq Stock Market ("Nasdaq"). Mr. Buyse, who also serves as our Chief Executive Officer, is not considered independent.
The Board is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to file reportssucceed the same class whose term is then expiring, as follows:

•the Class I directors are currently Stephen Chen, Eric Manlunas and Rahul Mewawalla, and their terms will expire at the 2025 Annual Meeting of ownershipStockholders; and
•the Class II directors are currently Ryan Costello and Kathy Tan Mayor, and their terms will expire at the 2023 Annual Meeting of Stockholders; and
•the Class III director is currently Russell Buyse, and his term will expire at the 2024 Annual Meeting of Stockholders.
Our Certificate of Incorporation and Amended and Restated Bylaws provide that the number of directors shall consist of one or more members and may be increased or decreased from time to time by a resolution of the Board. Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the Board may have the effect of delaying or preventing changes in ownershipcontrol of our Company.
On October 6, 2021, the Board resolved to reduce the size of the Board from eight to seven directors, comprised of three Class I directors, two Class II directors, and two Class III directors, effective as of our 2021 annual meeting of stockholders held on December 2, 2021. Such reduction of the authorized number of directors does not have the effect of removing any director before that director’s term of office expires.
On September 26, 2022, Randall Crowder notified us of his resignation from our Board, effective as of September 27, 2022. On November 17, 2022, the Board appointed Russell Buyse to serve as a director of our Board effective as of November 21, 2022, to fill the vacancy created by the resignation of Mr. Crowder.
On December 13, 2022, we entered into a Confidential Transition, Consulting and General Release Agreement (the "Agreement") with Alan Knitowski. The Agreement provided that Mr. Knitowski's employment terminated with the SEC. These reporting persons are also requiredCompany effective December 27, 2022. In addition, Mr. Knitowski voluntarily resigned his position as a director of the Board. The Board has yet to furnish us with copiesappointment a replacement created by the resignation of all Section 16(a) forms they file. Based solely upon a review of such forms, we believe that during the year ended November 30, 2017 there were no delinquent filers.

Mr. Knitowski.

Corporate Governance Guidelines and Code of Business Conduct and Ethics

We have

Our Board has adopted Corporate Governance Guidelines that address items such as the qualifications and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. In addition, our Board has adopted a codeCode of ethicsBusiness Conduct and Ethics that applies to all of our employees, officers and directors. directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The full text of our Corporate Governance Guidelines and Code of Business Conduct and Ethics is posted on the Governance portion of the investor relations page of our website at https://investors.phunware.com. We will post amendments to our Code
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of Business Conduct and Ethics or waivers of our Code of Business Conduct and Ethics for directors and executive officers that are required to be disclosed by the rules of the SEC or Nasdaq on the same website.
Audit Committee
We have filed copiesestablished a designated standing audit committee. Messrs. Stephen Chen, Eric Manlunas and Rahul Mewawalla, each of whom is a non-employee member of the Board, comprise our Audit Committee. Mr. Mewawalla is the Chairperson of our codeAudit Committee. We have determined that each of ethics,the members of our Audit Committee satisfies the requirements for independence and financial literacy under the rules of Nasdaq and the SEC. During the fiscal year ended December 31, 2022, the committee met four times. The Audit Committee is responsible for, among other things:

•selecting a qualified firm to serve as the independent registered public accounting firm to audit committeeour financial statements;
•helping to ensure the independence and performance of the independent registered public accounting firm;
•discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the independent registered public accounting firm, our interim and year-end financial statements;
•developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
•reviewing the Company’s policies on and overseeing risk assessment and risk management, including enterprise risk management;
•reviewing the adequacy and effectiveness of our internal control policies and procedures and the Company’s disclosure controls and procedures;
•reviewing related person transactions; and
•approving or, as required, pre-approving, all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

The Board has adopted a written charter for the Audit Committee that satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. Our Audit Committee charter can be found on the "Governance Documents" section of our compensation committee charter as exhibitsInvestor Relations website at https://investors.phunware.com/governance-docs.
Audit Committee Financial Expert
For the period of May 1, 2021 until Stephen Chen's appointment to our registration statementAudit Committee in connection with our initial public offering. You may review these documents by accessing our public filings atNovember 2022, we did not have an "audit committee financial expert" as defined under Item 407(d)(5)(ii) of Regulation S-K. The Board believes that the SEC’s web site at www.sec.gov. In addition, a copymembers of the codeAudit Committee are and were able to read and understand the consolidated financial statements of ethics will be providedthe Company, are and were familiar with the Company and its business and are capable of fulfilling the duties and responsibilities of an Audit Committee without charge upon requestthe necessity of having an "audit committee financial expert" during this time period. The Board determined Mr. Chen and Rahul Mewawalla are both independent directors pursuant to us.

Nasdaq's governance listing standards and each meet the qualifications of an "audit committee financial expert," as defined under the applicable rules and regulations of the SEC. In making this determination, our Board has considered prior experience, business acumen and independence.

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Item 11. Executive Compensation.
Phunware’s named executive officers (each a "NEO"), which consist of any person who served as principal executive officer ("PEO") during 2022 and the next two most highly compensated executive officers who served as such in for 2022, are:
Russell Buyse, Chief Executive Officer
Alan Knitowski, Former Chief Executive Officer
Matt Lull, Chief Cryptocurrency Officer
Chris Olive, Chief Legal Officer
Summary Compensation

None Table

The following table sets forth information regarding the total compensation paid to our named executive officers for the last two fiscal years ended December 31, 2022 and 2021:

Name and Principal PositionFiscal Year
Salary ($) (1)
Bonus ($)
Stock Awards ($)(2)
All other Compensation ($)(3)
Total ($)
Russell Buyse, Chief Executive Officer(4)
20223,693 40,000 — — 43,693 
Alan Knitowski, Former Chief Executive Officer(5)
2022550,000 — — 25,693 575,693 
2021375,000 450,000 1,613,570 20,384 2,458,954 
Matt Lull, Chief Cryptocurrency Officer(6)
2022212,500 — 615,000 10,088 837,588 
Chris Olive, Chief Legal Officer(6)
2022225,000 34,907 925,000 19,270 1,204,177 
(1)Reflects actual earnings, which may differ from approved based salaries due to the effective date of salary increases.
(2)Amounts represent the aggregate grant date fair value of stock options or restricted stock unit awards, computed in accordance with FASB ASC 718-10-25. The actual value realized by the named executive officer with respect to stock awards will depend on whether the award vests and, if it vests, the market value of our stock on the date such stock is sold.
(3)Amounts shown in this column include contributions Phunware made on behalf of the named executive officer for inclusion in our medical benefits programs.
(4)
Mr. Buyse was hired as our CEO effective as of December 28, 2022. Mr. Buyse received additional compensation of $6,000 for service on our Board for the period from November 21, 2022 to December 27, 2022, which is excluded above. Subsequent to the date of his appointment as CEO, Mr. Buyse will not receive additional compensation as a member of our Board. See Director Compensation below. Mr. Buyse was further paid a sign-on bonus of $40,000, pursuant to the terms of his employment agreement.
(5)Mr. Knitowski's employment terminated on December 27, 2022.
(6)Mr. Olive joined the Company as its Chief Legal Officer on April 1, 2022.
(7)Mr. Lull joined the Company as its Chief Cryptocurrency Officer on April 18, 2022.


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Executive Employment Agreements
We have entered into employment agreements with each of our named executive officers directors or director nominees have received any cash (or non-cash) compensationnoted above. The employment agreements generally provide for services renderedat-will employment and set forth each named executive officer's base salary, bonus target, severance eligibility and eligibility for other standard employee benefit plan participation.
Pursuant to us. Commencing in August 2016 (which will continue through the earlier of consummation of our initial business combinationemployment agreements, certain current and our liquidation), we have paid an affiliate of ourfuture significant employees, including the named executive officers identified above, are eligible for severance benefits under certain circumstances. The actual amounts that would be paid or distributed as a totalresult of $10,000 per month for office space, utilities and secretarial support. Our sponsors, executive officers and directors, or anya termination of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurredemployment occurring in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our independent directors will review on a quarterly basis all payments that were made to our sponsors, officers, directors or our or their affiliates.

After the completion of our initial business combination, directors or members of our management team who remain with usfuture may be paid consulting, management or other fees fromdifferent than those presented below as many factors will affect the combined company. Allamount of these fees will be fully disclosedany payments and benefits upon a termination of employment. For example, some of the factors that could affect the amounts payable include base salary and annual bonus target percentage. Although the Company has entered into a written agreement to shareholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our shareholdersprovide severance payments and benefits in connection with a proposed business combination. Ittermination of employment under particular circumstances, the Company, or an acquirer, may mutually agree with an executive officer or significant employee to provide payments and benefits on terms that vary from those currently contemplated. In addition to the amounts presented below, each eligible executive officer or significant employee would also be able to exercise any previously-vested stock options that he or she held, in accordance with the terms of those grants and the respective plans pursuant to which they were granted. Finally, the eligible executive officer or significant employee may also receive any benefits accrued under our broad-based benefit plans, in accordance with those plans and policies.

Mr. Buyse's Employment Agreement
On November 11, 2022, we entered into an employment agreement with Russell Buyse to serve as Chief Executive Officer of the Company effective as of December 28, 2022. Mr. Buyse's employment agreement has an indefinite term, subject to termination by either party. We may terminate the employment agreement at any time with or without cause, while Mr. Buyse may terminate the Employment Agreement by providing at least thirty (30) days’ written notice to the Company.
The employment agreement provides for an initial base salary of $325,000, a target annual cash bonus to be between 50% and 200% of the base salary, with the actual award value to be determined by the compensation committee or the Board in its sole discretion based on factors including the strength of Mr. Buyse’s performance and the performance of the Company. Mr. Buyse is unlikelyalso eligible to participate in our employee benefit programs.
Mr. Buyse was paid a sign-on bonus of $40,000 pursuant to the terms of his employment agreement. Furthermore, within thirty (30) calendar days of the date of the Employment Agreement, the Company agreed to provide Mr. Buyse a one-time grant of restricted stock units with a grant date fair value of $1,500,000. The restricted stock units granted to Mr. Buyse will be subject to a separate award agreement, which will outline the specifics of such grant, including but not limited to, the vesting schedule, forfeiture for cause provisions, the Company’s buyback rights and other restrictions and terms.
The Employment Agreement further provides that, if Mr. Buyse’s employment is terminated by the Company without “cause” or by Mr. Buyse for “good reason,” subject to his execution of a release of claims in favor of the Company, he will receive a severance payment of nine (9) months’ of his then-current base salary and certain other accrued benefits.
Messrs. Lull and Olive's Employment Agreements
We entered into employment agreements, as amended and restated in September 2022, with Messrs. Matt Lull, who serves as our Chief Cryptocurrency Officer and Chris Olive, who serves as our Chief Legal Officer. The agreements have an initial term of four years from their April 2022 hire dates and automatically renew for additional one year term, unless either party provides ninety (90) day notice. If a change in control, as defined the agreements, occurs when there are fewer than twelve (12) months remaining during the initial term or an additional term, the term of the employment agreement will extend automatically through the date that is twelve (12) months following the effective date of the change in control.
The employment agreements provide for an initial base salary of $300,000 for each, eligibility in the Company's bonus programs established by the Board or any committee of the Board, an initial equity grant as more fully described elsewhere in this Annual Report and eligibility to participate in our employee benefit programs.
Termination without Cause or Resignation for Good Reason Outside the Change in Control Period
Messrs. Lull and Olive are eligible to receive the following payments and benefits in connection with a termination not in connection with a Change in Control:

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•continuing payments of severance pay at a rate equal to their base salary rate, as then in effect, for six (6) months from the date of termination;
•coverage under our group health insurance plans or payment of the full amount of health insurance premiums as provided under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for up to six (6) months after termination; and
•the immediate vesting of all equity awards granted on or after the effective date of the employment agreement.
Termination Without Cause or Resignation for Good Reason During the Change in Control Period
In the case of a Change in Control, if either Mr. Lull or Mr. Olive is terminated without cause, either during the three months before or in the year after a Change in Control, then he will be entitled to receive the following payments and benefits:
•a lump sum severance payment equal to: (i) the amount of such compensationbase salary in effect on the date of termination that he would have otherwise received had he remained employed by the Company through the twelve (12) month anniversary of the Change in Control, and (ii) an amount equal to the average annualized bonus earned by him for the two (2) calendar years prior to the calendar year during which the Change in Control occurs, but in no event will the amount be less than his annual target bonus for the year during which the termination occurs, or if greater, his annual target bonus for the year during which the closing of the Change in Control occurs;
•the immediate vesting of all equity awards granted on or after the effective date of the employment agreement; and
•coverage under our group health insurance plans or payment of the full amount of health insurance premiums as provided under COBRA for up to twelve (12) months after termination.
Messrs. Aune and Crowder's Employment Agreements
On December 26, 2018, we entered into employment agreements with Messrs. Matt Aune, who serves as our Chief Financial Officer and Randall Crowder, who serves as our Chief Operating Officer, as amended on September 27, 2022. The term of the employment agreements with Messrs. Aune and Crowder is through September 27, 2023. Notwithstanding, if a Change in Control (as defined in the employment agreement) occurs during the term of the employment agreement, the term will be known atextended automatically through the time, becausedate that is twelve (12) months following the directorseffective date of the post-combination businessChange in Control. The employment agreements provide for a base salary, participating in any bonus or incentive arrangement established by the Board (or any committee of the Board) for executives of the Company, generally, and our employee benefit offerings. The current annual target bonus is 50% of the base salary for Messrs. Aune and Crowder. Subject to approval by our Compensation Committee or Board, actual annual bonuses paid may differ from target amounts.
Termination without Cause or Resignation for Good Reason Outside the Change in Control Period
Messrs. Aune and Crowder are eligible to receive the following payments and benefits in connection with a termination not in connection with a Change in Control:

•continuing payments of severance pay at a rate equal to their base salary rate, as then in effect, for the greater of (i) six (6) months from the date of termination or (ii) the remainder of the term of the employment agreement, in accordance with the Company’s normal payroll policies; and
•coverage under our group health insurance plans or payment of the full amount of health insurance premiums as provided under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for up to six (6) months after termination.
Termination Without Cause or Resignation for Good Reason During the Change in Control Period
In the case of a Change in Control, if either Mr. Aune or Mr. Crowder is terminated without cause, either during the three months before or in the year after a Change in Control, then he will be responsibleentitled to receive the following payments and benefits:
•a lump sum severance payment equal to: (i) the amount of base salary in effect on the date of termination that he would have otherwise received had he remained employed by the Company through the twelve (12) month anniversary of the Change in Control, and (ii) an amount equal to the average annualized bonus earned by him for determiningthe two (2) calendar years prior to the calendar year during which the Change in Control occurs, but in no event will the amount be less than his annual target bonus for the year during which the termination occurs, or if greater, his annual target bonus for the year during which the closing of the Change in Control occurs;
•the immediate vesting of all equity awards granted on or after the effective date of the employment agreement; and
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•coverage under our group health insurance plans or payment of the full amount of health insurance premiums as provided under COBRA for up to twelve (12) months after termination.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding outstanding stock options and other equity awards held by each of our named executive officers holding as of December 31, 2022:
Options AwardsRestricted Stock Unit Awards
Grant DateNumber of Securities Underlying Unexercised OptionsOption Exercise PriceOption Expiration DateNumber
of shares or
units of stock
that have
not vested
(#)		Market value
of shares or
units of stock
that have
not vested
($)
NameExercisableUnexercisable
Alan Knitowski1/8/2018233,886 — 0.61 1/8/2028— — 
7/30/2019— — — — 37,500 (1)28,988 
2/4/2021— — — — 435,763 (1)336,845 
Matt Lull9/28/2022— — — — 500,000 (2)386,500 
Chris Olive9/16/2022— — — — 500,000 (3)386,500 

(1)Mr. Knitowski was granted 450,000 restricted stock units on July 30, 2019. The restricted stock units will vest at various rates with of 1/4th vesting on May 18, 2020, and thereafter at a rate of 1/12th on the following vesting dates; August 18 2020, November 18, 2020, May 18, 2021, August 18, 2021, November 18, 2021, May 18, 2022, August 18, 2022, November 18, 2022 and May 18, 2023, subject to his continued employment with the Company on each such vesting date. Mr. Knitowski was also granted 747,023 restricted stock units on February 4, 2021. The restricted stock units vest at various rates with 1/4th vesting on May 9, 2022, and thereafter at a rate of 1/12th on the following vesting dates; August 8, 2022, November 8, 2022, May 8, 2022, August 8, 2022, November 8, 2022, May 8, 2023, August 8, 2023, November 8, 2023 and May 8, 2024, August 8, 2024, November 8, 2024, May 8, 2025, subject to his continued employment with the Company on each such vesting date. As of December 27. 2022, Mr. Knitowski had approximately 473,263 unvested restricted stock units under the aforementioned grants. As additional compensation under the term of a Confidential Transition, Consulting and General Release Agreement, the Company modified the vesting schedule with respect to the unvested portion of restricted stock units, such that 39,438 restricted stock units will vest on each of the last day of each month from January 2023 through November 2023 and 39,445 restricted stock units will vest on December 31, 2023.
(2)Mr. Lull was granted 500,000 restricted stock units on September 28, 2022. The restricted stock units vest at various rates with 135,417 restricted stock units vesting on May 8, 2023, 40,510 restricted stock units vesting on each of August 8, 2023 and November 8, 2023 and 40,509 restricted stock units vesting on each of May 8, 2024, August 8, 2024, November 8, 2024, May 8, 2025, August 8, 2025, November 8, 2025 and April 17, 2026, subject to his continued employment with the Company on each such vesting date.
(3)Mr. Olive was granted 500,000 restricted stock units on September 16, 2022. The restricted stock units vest at various rates with 135,417 restricted stock units vesting on May 8, 2023, 40,510 restricted stock units vesting on each of August 8, 2023 and November 8, 2023 and 40,509 restricted stock units vesting on each of May 8, 2024, August 8, 2024, November 8, 2024, May 8, 2025, August 8, 2025, November 8, 2025 and March 31, 2026, subject to his continued employment with the Company on each such vesting date.


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Director Compensation
We compensate our Board in the form of fees paid in cash. Each outside director compensation. Anyis paid an annual cash retainer of $75,000. The chairperson of our Board is paid an additional $45,000 annually. Chairpersons on committees of our Board range from $15,000 to $25,000 of additional annual cash compensation depending on the committee, while a member of our committees is paid $7,500 to be$12,500 of additional cash compensation, depending on the committee of service. There are no per-meeting attendance fees for attending our Board or committee meeting.
We also compensate members of our Board in the form of annual grants of restricted stock units of our common stock.
The following table sets forth certain information with respect to the compensation paid to our officers will be determined by a compensation committee constituted solely of independent directors.

We do not intend to take any action to ensure that members of our management team maintain their positions with us afterdirectors, excluding reasonable travel expenses, for the consummation of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after the initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment. 

year ended December 31, 2022.
Name (1)
Fees Earned or
Paid in Cash ($)
Stock Awards ($)(2)
Total ($)
Russell Buyse6,000—6,000
Stephen Chen(3)
13,542155,018168,560
Ryan Costello105,000113,368218,368
Keith Cowan(4)
120,556—120,556
Eric Manlunas108,750103,345212,095
Kathy Tan Mayor85,833103,345189,179
Rahul Mewawalla107,500113,368220,868

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(1)
Mr. Buyse was appointed to our Board on November 21, 2022. For the period of November 21, 2022 through December 27, 2022, Mr. Buyse was paid $6,000 cash compensation for services he provided as a director. Commencing on December 28, 2022, the date at which Mr. Buyse was appointed our CEO, and thereafter, he will not receive any additional compensation for the services he provides as a director. For information on Mr. Buyse's compensation, please refer to “Executive Compensation” in this Annual Report.
(2)
This column reflects the aggregate grant date fair value of restricted stock units granted during 2022 computed in accordance with the provisions of ASC 718, Compensation-Stock Compensation. The assumptions that we used to calculate these amounts are discussed in the notes to Phunware’s audited consolidated financial statements for the year ended December 31, 2022. These amounts do not reflect the actual economic value that will be realized by the director upon the vesting of the restricted stock units or the sale of the common stock underlying such restricted stock units.
(3)Mr. Chen was elected to our Board at our 2022 annual meeting of stockholders held on November 11, 2022
(4)Mr. Cowan's term expired at our 2022 annual meeting of stockholders held on November 11, 2022.


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Outstanding Equity Awards as Fiscal Year-End
The following table sets forth the aggregate number of shares subject to outstanding equity awards held by our non-employee directors as of December 31, 2022.
Restricted Stock Unit Awards
Grant dateNumber of shares or units of stock that have not vested (#)Market value of shares or units of stock that have not vested ($)
Stephen Chen (1)
11/14/2022104,742 80,966 
Ryan Costello (2)
11/14/202276,600 59,212 
Eric Manlunas (1)
11/14/202269,828 53,977 
Kathy Tan Mayor (1)
11/14/202269,828 53,977 
Rahul Mewawalla (2)
11/14/202276,600 59,212 
(1)The Restricted Stock Units ("RSUs") vest in four equal installments commencing on February 11, 2023, and quarterly thereafter until the final vesting date of November 11, 2023. Vesting is subject to the continued service on such vesting date.
(2)The RSUs vest in four equal installments commencing on January 1, 2023, and quarterly thereafter until the final vesting date of October 1, 2023. Vesting is subject to the continued service on such vesting date.

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Item 12.12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Matters.

Securities Authorized for Issuance Under Equity Compensation Plans

All of the Company's equity compensation plans outstanding as of December 31, 2022 were previously approved by its stockholders, and on such date the Company maintained no equity compensation plans not approved by stockholders. The following table sets forth our equity compensation plan information as of December 31, 2022.

Number of securities to be issued upon exercise of outstanding options and rights
(a)		Weighted-average exercise price of outstanding options and rights
(b)		Number of securities remaining available for issuance under equity compensation plans
(c)
2018 Equity Incentive Plan (the "2018 Plan") (1)
87,500$1.434,382,662
2018 Employee Stock Purchase Plan (the "2018 ESPP")——802,893
2009 Equity Incentive Plan (the "2009 Plan") (2)
874,279$0.80—

(1)Excludes unvested restricted stock unit awards granted under the 2018 Plan. As of December 31, 2022, 2,957,995 restricted stock unit awards were outstanding. Because there is no exercise price associated with the restricted share awards, such shares are not included in the weighted-average price calculation. The number of shares of Common Stock reserved and available for issuance under the 2018 Plan is subject to an automatic annual increase on each January 1st, by an amount equal to five percent (5%) of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31st or such lesser number of shares of Common Stock as approved by the Administrator (as defined in the 2018 Plan).
(2)The 2009 Plan terminated on December 26, 2018. The shares reserved for issuance under the 2009 Plan that expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that are forfeited to or repurchased by us may be added to the 2018 Plan. The 2009 Plan will continue to govern outstanding awards granted thereunder. As of December 31, 2022, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing is equal to 874, which is not included in the column (c) above. The number of shares of Common Stock reserved and available for issuance under the 2018 ESPP is subject to an automatic annual increase on each January 1st, by the lesser of (i) 818,824 shares of Common Stock, (ii) one and one-half percent (1.5%) of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31st, or (iii) such lesser number of shares of Common Stock as determined by the Administrator (as defined in the 2018 ESPP).

For additional information on the Company's equity compensation plans, refer to Note 13 "Stock-Based Compensation" of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Beneficial Ownership of Principal Shareholders and Management
The following table sets forth information regardingwith respect to the beneficial ownership of our common stock as of February 8, 2018 based on information obtained from the persons28, 2023, for:

•each stockholder known to us to be beneficial owner of more than 5% of our outstanding shares of common stock;
•each of our directors and director nominees;
•each of our named below, with respect to theexecutive officers; and
•all of our current directors, director nominees and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of sharesthe SEC and the information is not necessarily indicative of our common stock, by:

●each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
●each of our executive officers and directors that beneficially owns shares of our common stock; and  
●all our executive officers and directors as a group.  

beneficial ownership for any other purpose. Unless otherwise indicated we believe that allbelow, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially own, subject to community property laws where applicable.

Applicable percentage ownership is based on 102,874,703 shares of our common stock outstanding as of February 28, 2023. In computing the number of shares of our common stock beneficially owned by them.

Name and Address of Beneficial Owner (1) Number of Shares
Beneficially Owned		  Approximate Percentage
of Outstanding
Common Stock		 
Astra Maritime Corp. (2)  423,149   4.7%
Dominion Investments Inc. (2)  500,176   5.6%
Magellan Investments Corp. (3)  443,157   4.9%
Firmus Investments Inc. (3)  460,162   5.1%
Prokopios Tsirigakis (2)  923,325   10.2%
George Sylantavos (2)  903,319   10.0%
Alexandros Argyros  12,740   * 
Tiziano Paravanga  9,555   * 
Eleonora (Liona) Bacha  9,555   * 
Boothbay Absolute Return Strategies LP (4)  811,831   9.0%
AQR Capital Management, LLC(5)  800,000   8.9%
Bulldog Investors LLC (6)  679,400   7.5%
Hudson Bay Capital Management, L.P.(7)  625,000   6.9%
All directors and executive officers as a group (5 individuals)  1,858,494   20.6%

*Less than 1%

a person and the percentage ownership of that person, we included outstanding shares of our common stock subject to options or restricted stock units held by that person that are currently exercisable or releasable or that will become exercisable or releasable within 60 days of February 28, 2023. We did not include these shares as outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed on the table below is c/o Phunware, Inc., 1002 West Avenue, Austin, Texas 78701.

Name of Beneficial Owner(1)
SharesPercentage
Named Executive Officers, Executive Officers and Directors:
Alan S. Knitowski(2)
1,345,177 1.3%
Russell Buyse— —%
Matt Aune(3)
441,094 0.4%
Stephen Chen(4)
26,186 —%
Ryan Costello(5)
150,476 0.1%
Randall Crowder(6)
670,585 0.7%
Matt Lull— —%
Eric Manlunas(7)
1,255,543 1.2%
Kathy Tan Mayor(8)
286,236 0.3%
Rahul Mewawalla(9)
190,476 0.2%
Chris Olive(10)
4,000 —%
All executive officers and directors as a group (11 persons)(11)
4,369,773 4.2%
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(1)Unless otherwise indicated, we believe that all persons named in the business address of each of the shareholders is 90 Kifissias Avenue, Maroussi 15125, Athens, Greece.

(2)Mr. Tsirigakis is thetable have sole shareholder of Astra Maritime Corp. and of Dominium Investments Inc. As a result, Mr. Tsirigakis may be deemed to be beneficial owner of any shares deemed to be beneficially owned by Astra Maritime Corp. and by Dominium Investments Inc.

69

(3)Mr. Syllantavos is the sole shareholder of Magellan Investments Corp. and of Firmus Investments Inc. As a result, Mr. Syllantavos may be deemed to be beneficial owner of any shares deemed to be beneficially owned by Magellan Investments Inc. and Firmus Investments Inc. 

(4)

According to a Schedule 13G/A filed with the SEC on February 15, 2017, on behalf of Boothbay Absolute Return Strategies LP, a Delaware limited partnership, Boothbay Fund Management, LLC, a Delaware limited liability company, acts as investment manager of Boothbay Absolute Return Strategies LP. Ari Glass is Managing Member of Boothbay Fund Management, LLC. By virtue of these relationships, Boothbay Fund Management, LLC and Mr. Glass may be deemed to have shared voting and dispositiveinvestment power with respect to the securities owned directly by Boothbay Absolute Return Strategies LP. The business address of this shareholder is 810 7th Avenue, Suite 615, New York, NY 10019-5818.

(5)According to a Schedule 13G filed with the SEC on February 13, 2017, on behalf of AQR Capital Management, LLC, AQR Capital Management Holdings, LLC and CNH Partners, LLC, each a Delaware limited liability company. AQR Capital Management, LLC is a wholly owned subsidiary of AQR Capital Management Holdings, LLC. CNH Partners is deemed to be controlled by AQR Capital Management, LLC. AQR Capital Management, LLC serves as the investment manager to the AQR Diversified Arbitrage Fund, an open-end registered investment company that holds 6.66% of the securities of the issuer owned by AQR Capital Management, LLC. The business address of this shareholder is Two Greenwich Plaza, Greenwich, CT 06830.
(6)According to a Schedule 13G/A filed with the SEC on January 31, 2017, on behalf of Bulldog Investors LLC, a Delaware limited liability company, Phillip Goldstein, Andrew Dakos and Steven Samuels. Bulldog Investors, LLC is deemed to be the beneficial owner of 679,400all ordinary shares of the issuer by virtue its power to direct the vote of, and dispose of, such shares. Such securities are beneficially owned by certain entities over which Messrs. Goldstein, Dakos and Samuels exercise control, including Opportunity Partners LP, Calapasas West Partners LP, Full Value Special Situations Fund LP, Full Value Offshore Fund Ltd., Full Value Partners LP, Opportunity Income Plus Fund LP, and MCM Opportunity Partners LP(collectively, Bulldog Investors Funds). Bulldog Investors Funds may be deemed to constitute a group. All other shares included in the aforementioned 679,400 shares of the issuer owned by Bulldog Investors, LLC (solely by virtue of its power to sell or direct the vote of these shares) are also beneficially owned by clients of Bulldog Investors, LLC who are not members of any group.  The business address of this shareholder is Park 80 West, 250 Pehle Ave. Suite 708, Saddle Brook, NJ 07663.
them.
(7)
(2)According to a Schedule 13G filed with the SEC on January 30, 2017, on behalfConsists of Hudson Bay(i) 446,826 shares held of record by Mr. Knitowski; (ii) 539,867 shares held of record by Cane Capital, Management, L.P., a Delaware limited partnership and Sander Gerber. Hudson Bay Capital Management, L.P.LLC, for which Mr. Knitowski serves as the investment manager to Hudson Bay Masterpresident; (iii) 12,000 shares held of record by Curo Capital Appreciation Fund Ltd.I, LLC (Fund 1), in whose name the securities reported are held, may be deemed to be the beneficial owner of all shares of common stock of the Company held by Hudson Bay Master Fund Ltd.for which Mr. GerberKnitowski serves as theco-president; (iv) 20,000 shares held of record by Curo Capital Appreciation Fund I, LLC (Fund 2), for which Mr. Knitowski serves as co-president; (v) 11,750 shares held of record by Curo Capital Appreciation Fund I, LLC (Fund 3), for which Mr. Knitowski serves as co-president; (vi) 1,972 shares held of record by Knitowski Childrens Trust, for which Mr. Knitowski serves as president; (vii) 78,876 shares subject to vesting for restricted stock units within 60 days of February 28, 2023 and (viii) 233,886 shares subject to options exercisable and vested.
(3)Consists of (i) 280,444 shares held of record by Mr. Aune; and (ii) 160,650 shares subject to options exercisable and vested.
(4)Consists of (i) 26,186 shares held of record by Mr. Chen.
(5)Consists of (i) 131,326 shares held of record by Mr. Costello; (ii) 19,150 shares subject to vesting for restricted stock units within 60 days of February 28, 2023
(6)Consists of (i) 441,085 shares held of record by Mr. Crowder; (ii) 229,500 shares subject to options exercisable and vested.
(7)Consists of (i) 22,817 shares held directly by Mr. Manlunas; (ii) 555,007 shares held of record by Wavemaker Partners II LP (f/k/a Siemer Ventures II LP), for which Mr. Manlunas serves as managing memberpartner; (iii) 329,037 shares held of Hudson Bay Capital GP LLC,record by Kmeleon International Limited, for which Mr. Manlunas serves as managing partner; (iv) 184,296 shares held of record by Wavemaker Phunware Partners LP, for which Mr. Manlunas serves as managing partner; and (v) 164,386 shares held of record by Wavemaker Partners III LP, for which Mr. Manlunas serves as managing partner. The address for these entities is the general partner1438 Ninth Street, Suite 600, Santa Monica, CA 90401.
(8)Consists of the Hudson Bay Capital Management, L.P.286,236 shares held directly by Ms. Mayor.
(9)Consists of 171,326 shares held directly by Mr. Gerber disclaims beneficial ownershipMewawalla; (ii) 19,150 shares subject to vesting for restricted stock units within 60 days of these securities. The business addressFebruary 28, 2023
(10)Consists of this shareholder is 777 Third Avenue, 30th Floor, New York, NY 10017.4,000 shares held directly by Mr. Olive; and

The table above does not include the shares of common stock underlying the private placement warrants held or to be held by our officers or sponsor because these securities are not exercisable within 60 days of this Report.

Changes in Control

N/A

(11)70Consists of (i) 3,628,561 shares held of record by our current directors and executive officers, (ii) 624,036 shares subject to options exercisable and vested, and (iii) 117,176 shares subject to vesting for restricted stock units within 60 days of February 28, 2023.


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Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain RelationshipsIndependence.

Policy for Related Person Transactions
We have adopted a formal written policy providing that our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our capital stock, any member of the immediate family of any of the foregoing persons and Related Transactions

Our initial shareholders currently own 2,003,403 sharesany firm, corporation or other entity in which any of common stock. 2,300,000 shares were initially purchased by Messrs. Tsirigakisthe foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with us without the approval of our nominating and Syllantavoscorporate governance committee, subject to the exceptions described below.

A related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in January 2016 for an aggregate of $25,000. In January 2016, Messrs. Tsirigakis and Syllantavos collectively transferred an aggregate of 2,099,900 shares to our sponsors and an aggregate of 34,500 shares to our director nominees. In addition, in January 2016, Messrs. Tsirigakis and Syllantavos collectively transferred an aggregate of 165,600 shares to our other initial shareholders. In August 2016, our sponsors returned to us, at no cost, an aggregate of 129,839 founder shares, which we cancelled, leavingand any related person are, were or will be participants in which the amount involves exceeds $120,000. Transactions involving compensation for services provided to the Company as an aggregateemployee or director are not covered by this policy.
The Board has determined that certain transactions will not require the approval of 2,170,161 founder shares outstanding. In connectionthe nominating and corporate governance committee, including certain employment arrangements of executive officers, director compensation, transactions with another company at which a related party’s only relationship is as a director, non-executive employee or beneficial owner of less than 10% of that company’s outstanding capital stock, transactions where a related party’s interest arises solely from the partial over-allotment exercise in October 2016, certain of our initial shareholders forfeited an aggregate of 166,758 shares of common stock.

Dominium Investments Inc. and Firmus Investments Inc. have purchased an aggregate of 7,970,488 private placement warrants for a purchase price of $0.50 per warrant in private placements that occurred simultaneously with the closings of our initial public offering (including the over-allotment exercise). Each private placement warrant entitles the holder to purchase one shareownership of our common stock at $11.50 per share. Warrants may be exercised only for a whole number of shares of common stock. The private placement warrants (including the common stock issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by it until 30 days after the completion of our initial business combination.

If any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then current fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our executive officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

We have entered into an Administrative Services Agreement with Nautilus Energy Management Corp., an affiliate of our executive officers, pursuant to which we pay a total of $10,000 per month for office space, utilities and secretarial support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

Our sponsors, executive officers and directors, or any of their respective affiliates, are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our sponsors, officers, directors or our or their affiliates and determines which expenses and the amount of expenses that are to be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

Three of our sponsors, Firmus Investments Inc., Astra Maritime Corp. and Magellan Investments Corp., loaned us up to $100,000, $75,000 and $75,000, respectively, or up to $250,000 in the aggregate, to be used for a portion of the expenses of our initial public offering. These loans were repaid upon the closing of our initial public offering out of the $725,000 of offering proceeds that was allocated to the payment of offering expenses.

In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsors or an affiliate of our sponsors or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account, including interest permitted to be withdrawn, to repay such loaned amounts but no other proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such loans (including any loans made in connection with the extension of the time available for us to consummate our initial business combination) may be convertible into warrants of the post-business combination entity at a price of $0.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. All other terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

71

 On each of August 24, 2017 and November 24, 2017, we issued unsecured promissory notes (the “Notes”) in the aggregate amount of $303,300 and $301,000, respectively, to our sponsors. The Notes bear no interest and are repayable in full upon consummation of the Company’s initial business combination. Our sponsors have the option to convert any unpaid balance of the Notes into warrants exercisable for sharesholders of our common stock basedreceived the same benefit on a conversion pricepro rata basis and transactions available to all employees generally.

Related Person Transactions
Confidential Transition, Consulting and General Release Agreement with Alan Knitowski. On December 13, 2022, the Company entered into a Confidential Transition, Consulting and General Release Agreement (the "Transition Agreement") with Alan Knitowski. The Transition Agreement provides that Mr. Knitowski's employment terminated effective on the December 27, 2022 (the "Separation Date"). Furthermore, effective the Separation Date, Mr. Knitowski freely and voluntarily resigned his position as a director of $0.50 per warrant.the Company's board of directors. The termsCompany and Mr. Knitowski have agreed that from the period of any such warrants shall be identicalthe Separation Date and continuing through December 31, 2023 (the "Services Period"), Mr. Knitowski serves as a special advisor to the termsCompany. The Company and Mr. Knitowski both agreed to a mutual general release, which excludes certain specified types of claims. Mr. Knitowski also agreed to certain restrictive covenants, including confidentiality, non-compete and non-solicitation provisions.

As compensation for his service as a special advisor during the Services Period, Mr. Knitowski will receive aggregate gross compensation of $225,000, less applicable withholdings, payable in twelve (12) monthly installments of $18,750 (the "Monthly Installment Payment"), beginning January 31, 2023. The Monthly Installment Payment may be made in the form of cash, Bitcoin or the issuance of common stock of the warrants issuedCompany, in the Company's sole discretion. The Company will also reimburse Mr. Knitowski for continuation coverage under the Company's group health plan in accordance with COBRA through December 31, 2023.

During the course of his employment with the Company, Mr. Knitowski was awarded a certain number of grants of restricted stock units pursuant to the private placement that was consummated by us in connection with our initial public offering. OnCompany's 2018 Equity Incentive Plan (the "Knitowski Grants"). As of the Separation Date, Mr. Knitowski had approximately 473,263 unvested restricted stock units under the Knitowski Grants. The Knitowski Grants were made at multiple occurrences, each of August 24, 2017which contained various vesting share amounts on various dates, with the last vesting period scheduled to occur in May 2025. As additional compensation under the Transition Agreement, the Company modified the vesting schedule with respect to the unvested portion of restricted stock units under the Knitowski Grants, such that 39,438 restricted stock units will vest on each of the last day of each month from January 2023 through November 2023 and 39,445 restricted stock units will vest on December 31, 2023.
Assumed Payables.The Company assumed $255,000 in payables from Stellar for Nautilus Energy Management Corporation, an affiliate of Mr. Syllantavos, who served as a member of our board until December 2, 2021. On December 29, 2021, we paid $170,917 in full satisfaction of the outstanding payable.
Promissory Notes. On November 24, 2017, our sponsors deposited cash into15, 2019, the Company’s trust account and we also instructed the trust agent to apply interest earned on the funds available for withdrawal towardCompany issued a promissory note in the principal held in the trust account, representing an aggregate of $402,536, or $0.058 per public share. As such, we extended the period of time for us to consummate a business combination twice, each for three months, to February 24, 2018. Our sponsors have the options to further extend the period for consummating our business combination and intend to extend such period for another three months prior to May 24, 2018.

After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our shareholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our shareholders. It is unlikely the amount of such compensation will be known$195,000, in exchange for cash consideration, to Cane Capital, LLC, an entity owned in part by Alan S. Knitowski, who at the time of distribution of such tender offer materials or atissuance served as the time ofCompany’s Chief Executive Officer and a shareholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.

We have entered into a registration rights agreement with respect to the founder shares and private placement warrants. The holders of the founder shares and private placement warrants have registration rights to require us to register a sale of any of our securities held by them. These holders will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include such securities in other registration statements filed by us and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the costs and expenses of filing any such registration statements.

Our audit committee must review and approve any related person transaction we propose to enter into. Our audit committee charter details the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of our company and our shareholders. A summary of such policies and procedures is set forth below.

Any potential related party transaction that is brought to the audit committee’s attention will be analyzed by the audit committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At its meetings, the audit committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction and the benefits to us and to the relevant related party.

In determining whether to approve a related party transaction, the audit committee must consider, among other factors, the following factors to the extent relevant:

●whether the terms of the transaction are fair to us and on the same basis as would apply if the transaction did not involve a related party;

72

●whether there are business reasons for us to enter into the transaction;
●whether the transaction would impair the independence of an outside director; and
●whether the transaction would present an improper conflict of interest for any director or executive officer.

Any member of its board of directors. On October 27, 2021, we paid the audit committee who has an interestnote in the transaction under discussion must abstain from any voting regarding the transaction, but may, if so requested by the chairman of the audit committee, participate in some or all of the audit committee’s discussions of the transaction. Upon completion of its review of the transaction, the audit committee may determine to permit or to prohibit the transaction.

full with no early payment penalty.

123

Director Independence

NASDAQ listing standards require that

Our common stock and warrants to purchase our common stock are listed on Nasdaq. Under the rules of Nasdaq, independent directors must comprise a majority of oura listed company’s board of directorsdirectors. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent. AnUnder the rules of Nasdaq, a director will only qualify as an “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship whichif, in the opinion of thethat company’s board of directors, that person does not have a relationship that would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. OurAudit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act.
In order to be considered independent for purposes of Rule 10A-3 and Rule 10C-1, a member of an audit committee or compensation committee of a listed company may not, other than in his or her capacity as a member of the committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.
We have undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, we determined that Messrs. ArgyrosStephen Chen, Ryan Costello, Eric Manlunas and ParavagnaRahul Mewawalla and Ms. BachaKathy Tan Mayor, representing five of our six directors, are considered “independent directors” as defined inunder the NASDAQapplicable rules and regulations of the SEC and the listing standardsrequirements and applicable SEC rules.rules of Nasdaq.
Board Leadership Structure / Lead Independent Director
We believe that the structure of our Board and Board committees provides strong overall management. The Chair of our Board and our Chief Executive Officer roles are separate. Mr. Buyse serves as our Chief Executive Officer and Mr. Costello serves as Chair of our Board. This structure enables each person to focus on different aspects of company leadership. Our Chief Executive Officer is responsible for setting the strategic direction of our company, the general management and operation of the business and the guidance and oversight of senior management. The Chair of our Board monitors the content, quality and timeliness of information sent to our Board and is available for consultation with our Board regarding the oversight of its business affairs. Our independent directors bring experience, oversight and expertise from outside of Phunware, while Mr. Buyse brings company-specific experience and expertise.
Limitation on Liability and Indemnification Matters
As permitted under Delaware law, our certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers and may indemnify our employees and other agents, to the fullest extent permitted by Delaware law. Delaware law prohibits our certificate of incorporation from limiting the liability of our directors for any of the following:

• any breach of a director’s duty of loyalty to us or to our stockholders;
• acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
• unlawful payment of dividends or unlawful stock repurchases or redemptions; and
• any transaction from which a director derived an improper personal benefit.
If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our certificate of incorporation will not eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. This provision also will not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Under our amended and restated bylaws, we will also be empowered to purchase insurance on behalf of any person whom we are required or permitted to indemnify.
In addition to the indemnification required in our certificate of incorporation and amended and restated bylaws, we have regularly scheduled meetingsentered into an indemnification agreement with each member of our board of directors. These agreements provide for the indemnification of our directors, officers and some employees for certain expenses and liabilities incurred in connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a
124

director, officer, employee, agent or fiduciary of our company, or any of our subsidiaries, by reason of any action or inaction by them while serving as a director, officer, employee, agent or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by or in the right of our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification. We believe that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. Moreover, a stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which only independent directorsindemnification is being sought, nor are present.

we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.


125

Item 14.14. Principal Accounting Fees and Services.
Principal Accountant Fees and Services.

Services

The following is a summary oftable sets forth aggregate fees paid orbilled to be paid to WithumSmith+Brown, PC, or Withum, for services rendered.

Audit Fees. Audit fees consist of feesthe Company for professional services rendered for the audit ofby our year-end financial statements and services that are normally provided by Withum in connection with regulatory filings. The aggregate fees of Withum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SECindependent registered public accounting firm, Marcum LLP for the fiscal yearyears ended November 30, 2017December 31, 2022 and the period from December 8, 2015 (date of inception) to November 30, 2016 totaled approximately $44,000 and $53,500, respectively. The aggregate fees of Withum related to audit services in connection with our initial public offering totaled approximately $53,500. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.

Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the fiscal year ended November 30, 2017 and the period from December 8, 2015 (date of inception) to November 30, 2016, we did not pay Withum any audit-related fees.

Tax Fees. We did not pay Withum any fees for tax return services, planning and tax advice for the fiscal year ended November 30, 2017 and the period from December 8, 2015 (date of inception) to November 30, 2016.

All Other Fees. We did not pay Withum for any other services for the fiscal year ended November 30, 2017 and the period from December 8, 2015 (date of inception) to November 30, 2016.

2021:

20222021
Audit Fees(1)
$338,815 $246,219 
Audit-related Fees(2)
102,485 98,365 
Tax Fees(3)
— — 
All Other Fees(4)
— — 
Total Fees$441,300 $344,584 


(1)“Audit Fees” consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, including audited financial statements presented in our annual report on Form 10-K, review of our quarterly financial statements presented in our quarterly report on Form 10-Q and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years, including audit services in connection with filing registration statements, and amendments thereto.
(2)“Audit-related Fees” consist of fees related to audit and assurance procedures not otherwise included in Audit Fees, including fees related to the application of GAAP to proposed transactions and new accounting pronouncements.
(3)“Tax Fees” consist of tax return preparation, international and domestic tax studies, consulting and planning.
(4)“All Other Fees” consist of the cost of a subscription to an accounting research tool.
Audit Committee Pre-Approval Policy

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approveAudit Committee pre-approves all auditing services and permitted non-audit services to be performed for us by our auditors,independent auditor, including the fees and terms thereof (subject tothereof. All of the de minimis exceptions for non-audit services described in the Exchange Act which areabove were approved by the audit committee prior to the completionour Audit Committee.
126

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)The following documents are filed as part of this Report:

(1)Financial Statements

(2)Financial Statements Schedule

Schedules.

(a)The following documents are filed as part of this Annual Report:
(1)Consolidated Financial Statements
Our Consolidated Financial Statements are listed in the "Index to the Consolidated Financial Statements" under Part II, Item 8 of this Annual Report on Form 10-K.
(2)Financial Statements Schedule
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements andConsolidated Financial Statements or notes thereto included in isPart II, Item 158 "Financial Statements and Supplementary Data" of Part IV below.

(3)Exhibits

this Annual Report on Form 10-K.

(3)Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website atwww.sec.gov.

www.sec.gov.

EXHIBIT INDEX

Exhibit No.Description
1.1Exhibit No.Description
3.1
3.2
3.3
4.1
4.2
3.14.3Amended and Restated Articles of Incorporation (1)
3.2Bylaws (2)
4.1
4.24.4Form of Unit Purchase Option between the Company and Maxim Group LLC (5)
10.1Promissory Note, dated January 15, 2016, issued to Firmus Investments Inc. (2)
10.2Promissory Note, dated January 15, 2016, issued to Astra Maritime Inc. (2)
10.3Promissory Note, dated January 15, 2016, issued to Magellan Investments Corp. (2)
10.2Letter Agreement, dated August 18, 2016, by and among the Company, the initial shareholders and the officers and directors of the Company (1)
10.3Investment Management Trust Account Agreement, dated August 18, 2016, between Continental Stock Transfer & Trust Company and the Company (1)
10.4Registration Rights Agreement, dated August 18, 2016, between the Company and certain security holders (1)
10.5Form of Securities Subscription Agreement, dated January 29, 2016, among the Company and certain security holders(2)
10.6
10.74.5
10.8Administrative ServicesRegistration Rights Agreement, dated August 18, 2016, between the CompanyRegistrant and Nautilus Energy Management Corp. (1)certain security holders (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K (File No. 001-37862), filed with the SEC on August 24, 2016).
10.94.6
4.7
4.8
4.9
127

Table of Contents
4.10
4.11
4.12
4.13
4.14
4.15
10.1+
10.2+
10.3+
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.1010.17+
128

Table of Contents
10.18+
10.19+
10.20+
10.21
10.22
10.23
10.24
10.25
10.26
10.27
14.1Code of Ethics (3)
31.1Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
31.2Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*
32.1Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**
32.2Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**
101.INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema*
101.CALXBRL Taxonomy Calculation Linkbase*
101.LABXBRL Taxonomy Label Linkbase*
101.PREXBRL Definition Linkbase Document*
101.DEFXBRL Definition Linkbase Document*

* Filed herewith

** Furnished herewith

(1)IncorporatedAlto Opportunity Master Fund, SPC – Segregated Master Portfolio B (Incorporated by reference to Exhibit 10.5 of the Company’sRegistrant’s Form 8-K filed with the SEC on July 16, 2020).
10.28
10.29
10.30
10.31
(2)10.32Incorporated
(3)10.33Incorporated
(4)Incorporated by reference to the Company’s Form S-1/A, filed with the SEC on August 2, 2016.
(5)Incorporated by reference to the Company’s Form S-1/A, filed with the SEC on August 15, 2016.
(6)Incorporated by reference to the Company’sRegistrant's Form 8-K filed with the SEC on August 29, 2017.February 16,2021).
(7)10.34Incorporated
10.35
10.36

Item 16.Form 10-K Summary

Not applicable.

10.3774
10.38

129

STELLAR ACQUISITION III INC.

INDEX TO FINANCIAL STATEMENTS


Table of Contents
Page
10.39
10.40
10.41
10.42+
10.43+
10.44+*
10.45+*
10.46+
10.47+
14.1
21.1*
23.1*F-1
Financial Statements24.1*
31.1*F-2
31.2*F-3
32.1**F-4
Statements of Cash Flows for the year ended November 30, 2017 and the period from December 8, 2015 (inception) to November 30, 2016101.INSF-6XBRL Instance Document*
Notes to Financial Statements101.SCHF-7XBRL Taxonomy Extension Schema*

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Stellar Acquisition III, Inc.

We have audited the accompanying balance sheets of Stellar Acquisition III Inc.(the ‘‘Company’’), as of November 30, 2017 and 2016 and the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended November 30, 2017 and the period from December 8, 2015 (date of inception) through November 30, 2016, and the related notes (collectively referred to as the “financial statements”). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Stellar Acquisition III Inc. as of November 30, 2017 and 2016, and the results of its operations and its cash flows for the year ended November 30, 2017 and the period from December 8, 2015 (date of inception) through November 30, 2016 in accordance with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements if the Company is unable to complete a Business Combination by February 24, 2018 (or by May 24, 2018 if the Company extends the period of time to consummate a Business Combination), then the Company will cease all operations except for the purpose of winding up and liquidating. This mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ WithumSmith+Brown, PC

New York, NY

February 9, 2018

101.CALF-1XBRL Taxonomy Calculation Linkbase*
101.LABXBRL Taxonomy Label Linkbase*
101.PREXBRL Definition Linkbase Document*
101.DEFXBRL Definition Linkbase Document*
104Cover Page Interactive Data File*

Stellar Acquisition III Inc.
Balance Sheets

  November 30, 2017  November 30, 2016 
Assets      
Current assets        
Cash on hand and in Bank $117,205  $490,888 
Prepaid expenses  16,869   32,219 
Total current assets  134,074   523,107 
Cash and investments held in the Trust Account  71,215,856   70,442,615 
Total assets $71,349,930  $70,965,722 
Liabilities and Shareholders’ Equity        
Current liabilities        
Accounts payable $124,931  $24,750 
Accrued liabilities  12,500   25,500 
Unsecured promissory notes -  related parties  604,300     
Total current liabilities  741,731   50,250 
Non-current liabilities        
Deferred underwriting fees  1,725,153   1,725,153 
Total non-current liabilities  1,725,153   1,725,153 
Total Liabilities  2,466,884   1,775,403 
Common stock subject to possible redemption: 6,192,221 and 6,293,168 shares on November 30, 2017 and November 30, 2016, respectively (at a redemption value of approximately $10.32 and $10.20, respectively)  63,883,039   64,190,314 
Shareholders’ Equity        
Preferred shares, $0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding  -   - 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 2,817,956 and 2,717,009 shares issued and outstanding on November 30, 2017 and November 30, 2016, respectively (excluding  6,192,221 and 6,293,168 shares on November 30, 2017 and November 30, 2016, respectively subject to redemption)  282   272 
Additional paid-in capital  5,397,188   5,089,922 
Accumulated deficit  (397,463)  (90,189)
Total shareholders’ equity  5,000,007   5,000,005 
Total liabilities and shareholders’ equity $71,349,930  $70,965,722 

 See accompanying notes to financial statements.

F-2

Stellar Acquisition III Inc.

Statement of Operations

  Year ended November 30, 2017  Period from December 8,
2015 (inception) to November 30, 2016		 
       
Revenue $-  $- 
Operating expenses        
Formation and operating costs  862,228   146,582 
Loss from operations  (862,228)  (146,582)
         
Other income –Trust Account Investment income  554,954   56,393 
         
Net loss attributable to common shares $(307,274) $(90,189)
         
Weighted average number of common shares outstanding (excluding shares subject to possible redemption)  2,737,367   2,093,974 
Basic and diluted net loss per share (excluding shares subject to possible redemption) $(0.11) $(0.04)

See accompanying notes to financial statements.

F-3
*    Filed herewith

Stellar Acquisition III Inc.

Statement of Changes in Shareholders’ Equity

For the year ended November 30, 2017 and period from December 8, 2015 (inception)
through November 30, 2016

  Shares of common stock  Additional
paid-in		  Accumulated  Shareholders’ 
  Shares  Amount  capital  Deficit  Equity 
Balance at December 8, 2015  -  $-  $-  $-  $- 
Shares of common stock issued at $50.00 per share  500   1   24,999   -   25,000 
Effect of 4,600 to 1 stock split  2,299,500   229   (229)  -   - 
Cancellation of Sponsors’shares  (129,839)  (13)  13   -   - 
Sale of August 24, 2016 of 6,500,000 units at $10 per unit,  6,500,000   650   64,999,350   -   65,000,000 
Underwriters' discount and offering expenses          (3,543,852)      (3,543,852)
Issuance of 100,000 shares to underwriters as compensation in connection with the initial public offering on August 24, 2016  100,000   10   (10)  -   - 
Proceeds from sale of warrants to Sponsors  -   -   3,825,000   -   3,825,000 
Proceeds from sale of 400,610 units at $10 per unit due to partial exercise of over-allotment on September 28, 2016  400,610   40   4,006,060   -   4,006,100 
Proceeds from sale of warrants to Sponsors due to over-allotment  -   -   160,244   -   160,244 
Underwriters’ discount and offering expenses (over-allotment)  -   -   (191,984)  -   (191,984)
Issuance of additional shares to underwriters (over-allotment)  6,164   1   (1)  -   - 
Sponsors’ shares cancelled (over-allotment)  (166,758)  (17)  17   -   - 
Change in shares subject to redemption  (6,293,168)  (629)  (64,189,685)  -   (64,190,314)
Net loss  -   -   -   (90,189)  (90,189)
Balance at November 30, 2016  2,717,009   272   5,089,922   (90,189)  5,000,005 
Change in shares subject to redemption  100,947   10   307,266       307,276 
Net loss  -   -   -   (307,274)  (307,274)
Balance at November 30, 2017  2,817,956   282   5,397,188   (397,463)  5,000,007 

See accompanying notes to financial statements.

F-4
**    Furnished herewith

Stellar Acquisition III Inc.
Statement of Cash Flows



 

Year ended

November 30, 2017

  Period from December 8, 2015 (inception) to November 30, 2016 
Cash Flows from Operating Activities      
Net loss $(307,274) $(90,189)
Adjustments to reconcile net loss to net cash used in operating activities:        
Changes in operating assets and liabilities        
Decrease (increase) in prepaid expenses  15,350   (32,219)
Increase in accounts payable  100,181   24,750 
Increase (decrease) in accrued liabilities  (13,000)  25,500 
Net cash used in operating activities  (204,743)  (72,158)
Net cash used in Investing Activities,  -     
Cash deposited in Trust Account  (604,300)  (70,386,222)
Interest income earned on Trust Account  (554,954)  (56,393)
Interest withdrawn from Trust Account  386,014   - 
Net cash used in investing activities  (773,240)  (70,442,615)
Cash Flows from Financing Activities  -     
Proceeds from sale of Sponsors’ shares of common stock  -   25,000 
Proceeds from sale of Public Offering Units, net of offering expenses paid  -   66,995,417 
Proceeds from sale of Private Placement Warrants  -   3,985,244 
Payments to related parties (including loans)  -   (250,535)
Funds from  related parties (including loans)  604,300   250,535 
Net cash provided by financing activities  604,300   71,005,661 
Net (decrease)/increase in cash  (373,683)  490,888 
Cash at beginning of period  490,888   - 
Cash at end of period $117,204  $490,888 
Supplemental disclosure of non-cash investing and financing activities        
Deferred underwriting fees $-  $1,725,153 
Common stock issued for additional underwriter compensation $-  $1,061,640 
Fair value of unit purchase option issued to underwriter $-  $781,385 
Interest contributed for extension $200,772  $- 


The accompanying notes are an integral part of the financial statements.

F-5
+    Indicates a management contract or compensatory plan or arrangement

Notes to Financial Statements

NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Organization and General

Stellar Acquisition III Inc. (the “Company”) was incorporated pursuant to the laws of the Republic of the Marshall Islands on December 8, 2015. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

At November 30, 2017, the Company had not commenced any operations. All activity for the period from December 8, 2015 (inception) through November 30, 2017 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and since August 24, 2016 a search for a target business with which to complete a Business Combination. The Company will not generate any operating revenues until after completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering. The Company has selected November 30th as its fiscal year end.

Going Concern Consideration

Following the Company’s announcements on August 24, 2017, and November 27, 2017 regarding the first and second extension, respectively, the Company has until February 24, 2018 to consummate a Business Combination, however, the Company may extend the period of time to consummate a Business Combination by an additional three months (or until May 24, 2018 to complete a Business Combination). The Company's Sponsors or their affiliates or designees have the option, but not the obligation, to extend the time to consummate a Business Combination. The Sponsors or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account $402,536 ($0.058 per unit, the “Extension Funds”) on or prior to the date of the applicable deadline, for the three month extension.

As of the date of the issuance of these financial statements, the Company's Sponsors intend to utilize these extensions, as and if necessary, in order to extend the period in which the Company has to complete a Business Combination.

In connection with the Company's assessment of going concern considerations in accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 24, 2018.

Sponsors and Public Financing:

The Company’s sponsors are Astra Maritime Inc. and Dominium Investments Inc., affiliated with the Company’s Chairman and co-Chief Executive Officer, and Magellan Investments Corp. and Firmus Investments Inc., affiliated with our co-Chief Executive Officer and Chief Financial Officer. All four companies were incorporated pursuant to the laws of the Republic of the Marshall Islands (the “Sponsors”). The registration statement (the “Registration Statement”) for the Public Offering (as described in Note 3) was declared effective by the United States Securities and Exchange Commission (the “SEC”) on August 18, 2016. The Company intends to finance a Business Combination with the net proceeds from the $69,006,100 raised in the Public Offering (Note 3) and the $3,985,244 private placement in each case including the partial exercise of the underwriter’s overallotment option. Upon the closing of the Public Offering and the private placement, $70,386,222 was deposited in a trust account with Continental Stock Transfer and Trust Company acting as trustee (the “Trust Account”) as discussed below. On August 24, 2017, and November 24, 2017, the period of time the Company has to consummate a business combination was extended by three months by increasing the minimum amount in the Trust Account by $402,536 each time, pursuant to the Company’s prospectus in connection with the Company’s initial public offering.

F-6

Notes to Financial Statements

The Trust Account:

The Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of its initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence expenses for prospective acquisition targets and continuing general and administrative expenses. The proceeds held from the Public Offering were used to invest in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. At November 30, 2017, the Trust Account consisted of US treasury bills yielding interest of approximately 1.3% per annum, with a value of $71,215,004 and another $852 held as cash and cash equivalents.

The Company’s amended and restated articles of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, or working capital expenses, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Business Combination; or (ii) the redemption of 100% of the shares of common stock included in the Units being sold in the Public Offering if the Company is unable to complete a Business Combination by February 24, 2018 (or by May 24, 2018 if the Company extends the period of time to consummate a Business Combination, in accordance with the terms of the Company’s charter) (subject to the requirements of law). On March 17, 2017, May 16, 2017, August 29, 2017 and October 3, 2017, the Company withdrew $55,000, $165,000, $60,000 and $106,000 of interest earned from the Trust Account to pay for working capital expenses, respectively. Additionally, $99,236 and $101,536 of interest was used for the first and second extension on August 24 and November 24, 2017, respectively.

Business Combination:

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although it initially intends to focus its efforts within the international energy logistics industry. Substantially all of the net proceeds of the Public Offering and the private placement are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” means one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of the Company signing a definitive agreement in connection with the Business Combination. There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which shareholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable or amounts released to the Company for working capital, or (ii) provide shareholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable or amounts released to the Company for working capital. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow shareholders to redeem their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as whether the Company is a foreign private issuer, the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by NASDAQ rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of the initial Business Combination. In such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead may search for an alternate Business Combination.

F-7
Item 16. Form 10–K Summary.

Notes to Financial Statements

If the Company holds a shareholder vote or there is a tender offer for shares in connection with a Business Combination, a public shareholder will have the right to redeem its shares for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable or amounts released to the Company for working capital purposes. As a result, such shares of common stock have been recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account is initially $10.20 per public common share ($70,386,222 held in the Trust Account divided by 6,900,610 public common shares), subject to increase of up to an additional $0.175 per unit in the event that the Sponsors elect to extend the period of time to consummate a Business Combination, as described in more detail below. Following the first two extensions, the minimum amount in the Trust Account is $10.32 per public common share ($71,191,294 held in the Trust Account divided by 6,900,610 public common shares).

The Company has until February 24, 2018 to consummate a Business Combination. However, if the Company anticipates that it may not be able to consummate a Business Combination by then, the Company may extend the period of time to consummate a Business Combination by an additional three months (or by May 24, 2018, to complete a Business Combination). Pursuant to the terms of our amended and restated articles of incorporation and the trust agreement entered into between us and Continental Stock Transfer & Trust Company on August 18, 2016, and following the partial exercise of the underwriters’ overallotment option on September 28, 2016 in order to extend the time available for us to consummate our initial Business Combination, our Sponsors or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account $402,536 ($0.058 per unit), on or prior to the date of the applicable deadline, for each three month extension. Our Sponsors and their affiliates or designees are not obligated to fund the Trust Account to extend the time for us to complete our initial Business Combination. To the extent that some, but not all, of our Sponsors, decide to extend the period of time to consummate our initial Business Combinations, such Sponsors (or their affiliates or designees) may deposit the entire $402,536 amount. In the event that interest in the trust is available for withdrawal for working capital purposes and has not been used to pay taxes or other working capital expenses, the Company may apply the accrued interest in the Trust Account or such withdrawn interest to the Sponsors’ obligation to loan the Company money in connection with an extension, and the amount that the Sponsors would be obligated to loan the Company in connection with such extension would be reduced by the amount of interest so applied. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable or amounts released to the Company for working capital (less up to $50,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its remaining shareholders, as part of its plan of dissolution and liquidation. The initial shareholders have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their founder shares; however, if the initial shareholders or any of the Company’s officers, directors or affiliates acquire shares of common stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation with respect to such shares in the event the Company does not complete a Business Combination within the required time period.

In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

The accompanying financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

F-8
None.

130

Notes to Financial Statements

Emerging Growth Company:

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has 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, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Net Loss per Ordinary Share

Net 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, ineligible for redemption, during the period, plus to the extent dilutive the incremental number of shares of common stock to settle Warrants, as calculated using the treasury stock method. At November 30, 2017 and 2016, the Company had outstanding Warrants to purchase 14,871,098 shares of common stock. 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 antidilutive. As a result, diluted loss per common share is the same as basic loss per common share for the period.

Concentration of Credit Risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution in Cyprus, which has no deposit insurance. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Fair Value of Financial Instruments:

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make 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. Actual results could differ from those estimates.

Cash and securities held in Trust Account:

At November 30, 2017 and 2016, the assets held in the Trust Account were held in cash and U.S. Treasury Bills. On March 17, 2017, May 16, 2017, August 29, 2017 and October 3, 2017, the Company withdrew $55,000, $165,000, $60,000 and $106,000 of interest earned from the Trust Account to pay for working capital expenses, respectively. Additionally, $99,236 and $101,536 of interest was used for the first and second extension on August 24 and November 24, 2017, respectively.

F-9

Notes to Financial Statements

Income Taxes:

There is, at present, no direct taxation in the Marshall Islands and interest, dividends, and gains payable to the Company are received free of all Marshall Islands taxes. The Company is registered as an “exempted company” pursuant to the Marshall Islands Business Corporations Act (as amended). As the Company proceeds with making investments in various jurisdictions, tax considerations outside the Marshall Islands may arise. Although the Company intends to pursue tax-efficient investments, it may be subject to income tax, withholding tax, capital gains tax, and other taxes imposed by tax authorities in other jurisdictions. For U.S. tax purposes, the Company expects to be treated as a passive foreign investment company by its U.S. shareholders. The Company does not expect to be subject to direct taxation based on net income in the U.S. as long as it maintains its non-U.S. trade or business status. The Company does not expect to invest in any U.S. obligation that will be subject to U.S. withholding taxes. As of November 30, 2017 and 2016, the Company has not commenced operations and thus has no uncertain tax positions.

The Company follows the provisions of ASC 740-10 which prescribes a recognition threshold and measurement attribute for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its tax return. ASC 740-10 requires that the financial statements reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. There were no adjustments related to uncertain tax positions recognized during the year ended November 30, 2017 and the period December 8, 2015 (inception) to November 30, 2016.

Redeemable Common Stock:

As discussed in Note 3, all common shares sold as part of a Unit in the Public Offering contain a redemption feature which allows for the redemption of common shares under the Company’s Liquidation or Tender offer/stockholder/approval provisions. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of an entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its Public Shares in an amount that would cause its net tangible assets (shareholders’ equity) to be less than $5,000,001.

The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock shall be affected by charges against additional paid-in capital.

Accordingly, at November 30, 2017 and 2016, 6,192,221 and 6,293,168 of the 6,900,410 Public Shares were classified outside of permanent equity at its redemption value.

Recent Accounting Pronouncements:

Management does not believe there are any recently issued, but not yet effective, accounting pronouncements, that if currently adopted, would have a material effect on the Company’s financial statements.

Subsequent Events:

Management has evaluated subsequent events to determine if events or transactions occurring after the date of the financial statements, require potential adjustment to or disclosure in the financial statements and has concluded that all such events that would require adjustment or disclosure have been recognized or disclosed.

NOTE 3 – PUBLIC OFFERING

On August 24, 2016, the Company closed the Public Offering for the sale of 6,500,000 units at a price of $10.00 per unit (the “Units”). Each Unit consists of one share of the Company’s common stock, $0.0001 par value (the “Public Shares”) and one redeemable common stock purchase warrant (the “Warrants”). Under the terms of a warrant agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act to register the shares of common stock underlying the Warrants, following the completion of the Business Combination. Each Warrant entitles the holder to purchase one share of common stock at a price of $11.50. No fractional shares will be issued upon exercise of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the Warrant holder. Each Warrant will become exercisable on the later of 30 days after the completion of the Business Combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its initial Business Combination on or prior to the applicable time period to complete the Business Combination, the Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of common stock to the holder upon exercise of Warrants issued in connection with the Company’s public Units during the exercise period, there will be no net cash settlement of these Warrants and the Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the Company’s shares of common stock equals or exceeds $21.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the Warrant holders.

F-10

Notes to Financial Statements

The Company granted the underwriters an overallotment option to purchase an additional 975,000 Units at $10.00 for 45 days following the closing of the Public Offering. Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Company sold an additional 400,610 Units at a price of $10.00 per unit generating additional gross proceeds of $4,006,100. The Company paid an underwriting fee of $1,300,000, equal to a 2.00% underwriting discount on the per Unit offering price to the underwriters, based on a sale of 6,500,000 Units, at the closing of the Public Offering and $80,122 based on a sale of 400,610 Units, following the partial exercise of the underwriters’ overallotment option on September 28, 2016. The Company will pay an additional fee (the “Deferred Discount”) of 2.5% of the gross offering proceeds payable to underwriters, reduced pro rata for any share redemptions, upon the Company’s completion of a Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.

The Company issued the underwriters, as additional compensation for the Public Offering, 100,000 shares at the close of the Public Offering. Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Company issued the underwriters, as additional compensation for the Public Offering, another 6,164 shares. The Company accounted for the fair value of these shares, as an expense of the Public Offering resulting in a charge directly to shareholders’ equity. The shares were issued at an estimated fair value of $1,061,640.

NOTE 4 – RELATED PARTY TRANSACTIONS

Founder Shares

The Company’s initial shareholders currently own 2,003,403 shares of common stock, following the partial exercise of the underwriters’ overallotment option on September 28, 2016. In January 2016, 2,300,000 shares were initially purchased by Messrs. Tsirigakis and Syllantavos for an aggregate of $25,000, up to 300,000 of which were subject to forfeiture. In January 2016, Messrs. Tsirigakis and Syllantavos collectively transferred an aggregate of 2,099,900 shares to the Sponsors and an aggregate of 34,500 shares to the Company’s director nominees. In addition, in January 2016, Messrs. Tsirigakis and Syllantavos collectively transferred an aggregate of 165,600 shares to the Company’s other initial shareholders. In August 2016, the Sponsors returned to the Company, at no cost, an aggregate of 129,839 founder shares, which the Company cancelled, leaving an aggregate of 2,170,161 founder shares outstanding. Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Sponsors returned to the Company, at no cost, an aggregate of 166,758 founder shares, which the Company cancelled, leaving an aggregate of 2,003,403 founder shares outstanding. The founder shares are identical to the common stock included in the Units sold in the Public Offering except that the founder shares are subject to certain transfer restrictions, as described in more detail below. Our initial shareholders currently own 22.2% of the Company’s issued and outstanding shares of common stock.

The Company’s initial shareholders have agreed not to transfer, assign or sell any of their founder shares until the earlier of (A) one year after the completion of the Business Combination, or earlier if, subsequent to the Business Combination, the last sale price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the initial Business Combination that results in all of the Company’s shareholders having the right to exchange their shares of common stock for cash, securities or other property.

F-11
SIGNATURES

Notes to Financial Statements

Private Placement Warrants

Upon the closing of the Public Offering on August 24, 2016, the Sponsors paid the Company $3,825,000 in a private placement for the purchase of an aggregate of 7,650,000 Warrants at a price of $0.50 per Warrant (the “Private Placement Warrants”). Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Sponsors purchased 320,488 additional Private Placement Warrants for an aggregate price of $160,244. Each Private Placement Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The purchase price of the Private Placement Warrants have been added to the proceeds from the Public Offering held in the Trust Account pending completion of the Business Combination. The Private Placement Warrants (including the common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and they will be non-redeemable so long as they are held by the Sponsors or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsors or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants included in the Units being sold in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Warrants sold as part of the Units in the Public Offering and have no net cash settlement provisions.

If the Company does not complete a Business Combination, then the proceeds will be part of the liquidating distribution to the public shareholders and the Warrants issued to the Sponsors will expire worthless.

Registration Rights

The Company’s initial shareholders and holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement executed on August 18, 2016. The Company’s initial shareholders and holders of the Private Placement Warrants are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There are no penalties associated with delays in registering the securities under the registration rights agreement.

Related Party Loans

As of January 15, 2016, three of the Company’s Sponsors, Firmus Investments Inc., Astra Maritime, Inc. and Magellan Investments Corp., have agreed to loan the Company an aggregate of $250,000 against the issuance of an unsecured promissory note (the “Note”) to cover expenses related to the Public Offering. Between January and August 2016, the Company borrowed approximately $207,985 under this loan from the three Sponsors. These loans were non-interest bearing and were paid in full on August 24, 2016. Additionally, between January and August 2016 Nautilus Energy Management Corp., an affiliate of our co-Chief Executive Officers paid for certain expenses related to the Company’s roadshow and offering amounting to $42,550. Nautilus Energy Management Corp. was reimbursed for these expenses in full on August 24, 2016.

On August 24, 2017 the Company issued unsecured promissory notes (the “First Extension Notes”) in the aggregate amount of $303,300 to three of the Company’s Sponsors, Firmus Investments Inc., Astra Maritime, Inc. and Magellan Investments Corp., affiliates of our co-CEOs, Mr. Prokopios (Akis) Tsirigakis, and of Mr. George Syllantavos. Of the aggregate amount of $303,300 received, $65,000 is held outside of a financial institution in cash on hand at the Company and is expected to be deposited in the Company's operating cash account. The Trust Account was funded properly for the extension. These funds, which were deposited into the Trust Account, were used to extend the period of time the Company has to consummate a business combination by three months to November 24, 2017.

On November 23, 2017 the Company issued unsecured promissory notes (the “Second Extension Notes”) in the aggregate amount of $301,000 to three of the Company’s Sponsors, Firmus Investments Inc., Astra Maritime, Inc. and Magellan Investments Corp., affiliates of our co-CEOs, Mr. Prokopios (Akis) Tsirigakis, and of Mr. George Syllantavos. These funds, which were deposited into the Trust Account, were used to extend the period of time the Company has to consummate a business combination by three months to February 24, 2018.

F-12

Notes to Financial Statements

As of November 30, 2017, the outstanding loans to related parties amounted to $604,300.

Both the First Extension Notes and the Second Extension Notes (the “Extension Notes”) bear no interest and are repayable in full upon consummation of the Company’s initial business combination. The Sponsors have the option to convert any unpaid balance of the Notes into warrants exercisable for shares of the Company’s common stock, based on a conversion price of $0.50 per warrant. The terms of any such warrants shall be identical to the terms of the warrants issued pursuant to the private placement that was consummated by the Company in connection with the Company’s initial public offering.

Administrative Service Agreement and Services Agreement

The Company has agreed to pay $10,000 a month for office space, administrative services and secretarial support to Nautilus Energy Management Corp., an affiliate of our co-Chief Executive Officers. Services commenced on the date the securities were first listed on the NASDAQ Capital Market on August 19, 2016 and will terminate upon the earlier of the consummation by the Company of an initial Business Combination or the liquidation of the Company. For the period from December 5, 2015 (inception) through November 30, 2017, the Company paid $154,194 under this agreement, $120,000 of which was for the year ended November 30, 2017.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

The Company paid an underwriting fee of $1,300,000, equal to a 2.00% underwriting discount on the per Unit offering price to the underwriters, based on a sale of 6,500,000 Units, at the closing of the Public Offering, Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Company paid an additional underwriting fee of $80,122. The Company will pay an additional fee (the “Deferred Discount”) of 2.5% of the gross offering proceeds payable to underwriters, reduced pro rata for any share redemptions, upon the Company’s completion of a Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.

The Company sold to the underwriters for $100, an option to purchase up to a total of 130,000 units, exercisable at $11.50 per unit (or an aggregate exercise price of $1,495,000) upon the closing of the Public Offering. The purchase option may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the later of the first anniversary of the effective date of the Registration Statement and the closing of our initial Business Combination and terminating on the fifth anniversary of such effectiveness date. The units issuable upon exercise of this option are identical to those offered in the Public Offering. The Company accounted for the fair value of the unit purchase option, net of the receipt of the $100 cash payment, as an expense of the Public Offering resulting in a charge directly to shareholders’ equity. The Company estimates the fair value of this unit purchase option is $6.23 per unit (for a total fair value of approximately $781,000) using a Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriter is estimated as of the date of grant using the following assumptions: (1) expected volatility of 37.8% (2) risk-free interest rate of 1.83% and (3) expected life of 5 years. Because the Company’s units do not have a trading history, the volatility assumption is based on information currently available to management. The volatility assumption was calculated using the average volatility of stock prices of a selection of companies within the energy logistics space, which are representative of the sectors on which the company intends to focus for the initial business transaction, including: Arc Logistics Partners LP, Ardmore Shipping Corporation, Blueknight Energy Partners, L.P., Buckeye Partners, L.P., Cheniere Energy, Inc., DHT Holdings, Inc., Dorian LPG Ltd., EnLink Midstream, LLC, GasLog Ltd., Genesis Energy LP, Golar LNG Ltd., Kinder Morgan, Inc., Magellan Midstream Partners LP, Navigator Holdings Ltd., Nordic American Tankers Limited, NuStar GP Holdings, LLC, ONEOK Inc., PBF Logistics LP, Scorpio Tankers Inc., StealthGas, Inc., Teekay Tankers Ltd., Tsakos Energy Navigation Limited. The Company believes that the volatility estimate is a reasonable benchmark to use in estimating the expected volatility of the units. Although an expected life of five years was used in the calculation, if the Company does not consummate a Business Combination within the prescribed time period and it liquidates, the option will become worthless. The unit purchase option may be exercised for cash or on a “cashless” basis, at the holder’s option, such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying ordinary shares) to exercise the unit purchase option without the payment of cash.

F-13

Notes to Financial Statements

The Company issued the underwriters, as additional compensation for the Public Offering, 100,000 shares at the close of the Public Offering. Following the partial exercise of the underwriters’ overallotment option on September 28, 2016, the Company issued the underwriters, as additional compensation for the Public Offering, another 6,164 shares. The Company accounted for the fair value of these shares, as an expense of the Public Offering resulting in a charge directly to shareholders’ equity. The shares were issued at an estimated fair value of $1,061,640.

NOTE 6 – TRUST ACCOUNT AND FAIR VALUE MEASUREMENTS

As of November 30, 2017, investment securities in the Company Trust Account consisted of $71,215,004 in United States Treasury Bills and another $852 held as cash and cash equivalents. As of November 30, 2016, investment securities in the Company Trust Account consisted of $70,441,676 in United States Treasury Bills and another $939 held as cash and cash equivalents. The Company classifies its Treasury Instruments and equivalent securities as held-to-maturity in accordance with FASB ASC 320 "Investments - Debt and Equity Securities". Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying November 30, 2017 and 2016 balance sheets and adjusted for amortization or accretion of premiums or discounts. The following table presents information about the Company's assets that are measured at fair value on a recurring basis as of November 30, 2017 and 2016 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In addition, the table presents the carrying value under ASC 320, excluding accrued interest income and gross unrealized holding gain. Since all of the Company's permitted investments consist of U.S. government treasury bills and cash, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets as follows:

  Carrying Value  Gross Unrealized Holding
Losses		  Quoted prices in Active Markets (Level 1) 
U.S. Government Treasury Securities as of November 30, 2017 (maturing on February 22, 2018) $71,215,004  $(14,157) $71,229,161 
U.S. Government Treasury Securities as of November 30, 2016 $70,441,676  $(5,598) $70,436,078 

NOTE 7 – STOCKHOLDERS’ EQUITY

Common Stock

The authorized common stock of the Company includes up to 200,000,000 shares. Holders of the Company’s common stock are entitled to one vote for each share of common stock. At November 30, 2017 and 2016, there were 9,010,177 shares of common stock issued and outstanding, including 6,192,221 and 6,293,168 shares subject to redemption, respectively.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. At November 30, 2017 and 2016, there were no shares of preferred stock issued and outstanding.

F-14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 9, 2018Stellar Acquisition III Inc.
PHUNWARE, INC.
By: /s/ Prokopios (Akis) Tsirigakis
Date: March 31, 2023By:

Name: Prokopios (Akis) Tsirigakis

/s/ Russell Buyse

Title:  co-ChiefChief Executive Officer
           (co-Principal
(Principal Executive Officer)

Date: March 31, 2023By:/s/ Matt Aune
Title:  Chief Financial Officer
(Principal Accounting and Financial Officer)

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Russell Buyse and Matt Aune, and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities, to act on, sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact, proxy, and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


NamePositionDate
SignatureTitleDate
/s/ Prokopios (Akis) TsirigakisRussell Buyseco-ChiefChief Executive Officer and DirectorFebruary 9, 2018March 31, 2023
Prokopios (Akis) TsirigakisRussell Buyse(co-PrincipalPrincipal Executive Officer)
/s/ George SyllantavosMatt AuneChief Financial Officer and SecretaryFebruary 9, 2018March 31, 2023
George SyllantavosMatt Aune(co-Principal Executive OfficerPrincipal Accounting and Principal Financial and Accounting Officer)
/s/ Alexandros ArgyrosStephen ChenDirectorFebruary 9, 2018March 31, 2023
Alexandros ArgyrosStephen Chen
/s/ Tiziano ParavagnaRyan CostelloDirectorFebruary 9, 2018March 31, 2023
Tiziano ParavagnaRyan Costello
/s/ Eleonora (Liona) BachaEric ManlunasDirectorFebruary 9, 2018March 31, 2023
Eleonora (Liona) BachaEric Manlunas
/s/ Kathy Tan MayorDirectorMarch 31, 2023
Kathy Tan Mayor
/s/ Rahul MewawallaDirectorMarch 31, 2023
Rahul Mewawalla

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