Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.21.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Leases
We have operating office space leases in Austin, Texas; Irvine, California; San Diego, California; and Miami, Florida. Rent expense under operating leases totaled $843 and $727 for the years ended December 31, 2020 and 2019, 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
2021 $ 836 
2022 725 
2023 622 
2024 609 
2025 208 
Thereafter — 
Total $ 3,000 
Litigation
In 2017, we filed a breach of contract complaint against Uber Technologies, Inc. ("Uber") seeking payment for unpaid invoices for advertising campaign services provided for Uber in the first quarter of 2017. The case, captioned Phunware, Inc. v. Uber Technologies, Inc., Case No. CGC-17-561546 was filed in the Superior Court of the State of California, County of San Francisco. Uber generally denied the allegations in our complaint and also filed a cross-complaint against Phunware and Fetch Media, Ltd., the advertising agency Uber retained to run its mobile advertising campaign for the period 2014 through the first quarter of 2017, asserting numerous fraud and contract-based claims. In 2019, Uber filed its First Amended Cross-Complaint, naming new individual cross-defendants, Alan S. Knitowski, who serves as a director and the Company's Chief Executive Officer and member of our board of directors and former Phunware employees D. Stasiuk, M. Borotsik, and A. Cook, (collectively, the "Individual Defendants") alleging civil RICO violations and civil conspiracy to violate RICO, in addition to fraud, negligence, and unfair competition-based claims, and adding a fraud-based claim against Phunware. Uber’s First Amended Cross-Complaint alleges that cross-defendants fraudulently obtained approximately $17,000 from Uber, and claimed treble damages, general and punitive damages, and attorneys’ fees and costs. On October 9, 2020, we entered into a settlement agreement with Uber and certain other parties related to our complaint against Uber, Uber's cross-complaint against us and Uber's amended cross-complaint against us and the Individual Defendants. As provided in the settlement agreement, both parties have agreed to fully and finally settle, compromise, and resolve all disputes, differences and disagreements that have existed, now exist, or may exist between them that fall within the subject matter lawsuit. Furthermore, each party denies engaging in any wrongdoing whatsoever and specifically denies each and every allegation of wrongdoing alleged in the lawsuit. The settlement agreement provides that Phunware and its insurance carriers will pay a total sum of $6,000 to Uber, of which our insurance carrier will pay $1,500 to settle Uber's claims against the Individual Defendants while we will pay a total of $4,500 to Uber in a series of installments beginning no later than December 31, 2020, and ending no later than September 30, 2021. The settlement agreement further provides that we and the Individual Defendants fully release claims against Uber relating to the lawsuit and upon receipt of the payments, Uber will fully release claims against us and the Individual Defendants relating to the lawsuit. The court will retain jurisdiction over the case until the terms of the settlement agreement have been fully satisfied. The court has set a dismissal review hearing for November 16, 2021. If the terms of the settlement are fulfilled before that date, the parties will file requests to dismiss the action and the hearing will be taken off calendar. On November 5, 2020, Uber filed a request for dismissal with prejudice of claims against the Individual Defendants; Uber’s claims against Phunware remain until the terms of the settlement agreement have been fully satisfied. We recorded a loss of $4,500 for our portion of the settlement in legal settlement in our consolidated statements of operations and comprehensive loss for the year ended December 31, 2020 and $3,000 is recorded in accrued legal settlement in our consolidated balance sheet as of December 31, 2020 related to the settlement.
On December 17, 2019, certain stockholders filed a lawsuit against Phunware. The case, captioned Wild Basin Investments, LLC, et al. v. Phunware, Inc., et al.; Cause No. D-1-GN-19-008846 was filed in the 126th Judicial District Court of Travis County, Texas. The plaintiffs invested in various early rounds of financing while the Company was private and claim Phunware should not have subjected their shares to a 180-day "lock up" period. According to the plaintiffs, the price of our stock dropped significantly during the lock up period. The plaintiffs seek unspecified damages in excess of $1,000. We maintain the plaintiffs' claims are without merit and intends to contest vigorously the claims asserted in the lawsuit, but there can be no guarantees that a favorable resolution will be successful. All defendants have answered. The court has not yet set a trial date or pretrial deadlines. The case is in early stage of discovery. Given the preliminary stage of the case, we are unable to predict the outcome of this dispute, or estimate the loss or range of loss, if any, associated with this matter.
On March 9, 2020, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against us. The complaint, captioned Ellenoff Grossman & Schole LLP versus Stellar Acquisition III, Corp a/k/a Stellar Acquisition III, Inc. ("Stellar") n/k/a Phunware, Inc., was filed in the Supreme Court of the State of New York, New York County (Case No. 152585/2020). Pursuant to the complaint, EGS sought monetary damages in the amount of $690 for alleged unpaid invoices related to legal services rendered for Stellar in conjunction with the reverse merger with Phunware, plus legal and court costs. On September 29, 2020, we entered into a settlement agreement with EGS. The settlement agreement provides that we pay a total sum of $600 to EGS in a series of installments beginning no later than October 15, 2020, and ending no later than October 15, 2023. There is no penalty for prepayments. Pursuant to the terms of the settlement, on September 30, 2020, EGS filed a Stipulation of Voluntary Discontinuance with Prejudice with the court. In conjunction with the execution of the settlement agreement, we also signed an Affidavit of Confession of Judgment ("Confession of Judgment"), which provides that should we default in any payment obligations under the settlement agreement, EGS shall be entitled to enter the Confession of Judgment with the court against us for $690 less any payments already made under the settlement. We reclassified $690 from accounts payable to accrued expenses in the consolidated balance sheet as of December 31, 2020 related to the settlement. In accordance with authoritative guidance, we will defer any settlement gain, if any, until it has fulfilled its payment obligations under the settlement.
On April 24, 2020, Sha-Poppin Gourmet Popcorn, LLC, individually and on behalf of a class of similarly situated parties (the “Popcorn Company”), filed a lawsuit against certain defendants, including Phunware. The case captioned, Sha-
Poppin Gourmet Popcorn, LLC v. JPMorgan Chase Bank, N.A., RCSH Operations, LLC, RCSH Operations, Inc. (together d/b/a Ruth’s Chris Steakhouse) and Phunware, Inc., was filed in the Northern District of Illinois, Eastern Division. The Popcorn Company alleges that we were unjustly enriched by JPMorgan Chase for our loan made pursuant to the PPP under the CARES Act. (See Note 8 for discussion related to our PPP loan). We filed a motion to dismiss the single claim against us and dispute the court's jurisdiction and the basis of the claim. On March 5, 2021, the trial court dismissed all of the Popcorn Company's claims for lack of subject matter jurisdiction.
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.