|12 Months Ended|
Dec. 31, 2018
|Stockholders' Deficit [Abstract]|
11. Stockholders’ Equity
Total common stock authorized to be issued as of December 31, 2018 was 1,000,000,000, with a par value of $0.0001 per share. At December 31, 2018 and 2017, there were 27,253,457 and 24,559,771 shares outstanding, respectively.
In 2018 and 2017, the Company completed several closings of stock financing. During 2018 and 2017, the Company issued 1,085,096 and 47,364 shares for cash proceeds of $9,565 and $408, net of issuance costs, respectively.
As a result of the Reverse Merger and Recapitalization, on December 26, 2018, Stellar shareholders held 1,519,937 shares. Shareholders of Phunware forfeited 187,188 shares to receive 3,985,244 Transfer Sponsor Warrants.
Dividends are paid on a when-and-if-declared basis. The Company did not declare any dividends during 2018 or 2017.
In 2012, the Company issued a warrant to purchase an aggregate of 14,866 shares of the Company’s common stock with an exercise price of $5.54 per share to a banking institution with which the Company had a revolving line of credit. These warrants are fully vested. As of December 31, 2018, and December 31, 2017, the holder have warrants to purchase 14,866 shares remain outstanding. At December 31, 2018, the Company has 14,866 shares of common stock reserved to permit exercise of the outstanding warrant.
During 2018, but prior to the Reverse Merger and Recapitalization, the Company issued warrants to purchase an aggregate 1,085,059 shares of the Company’s common stock with an exercise price of $9.22 per share. The term of the warrants is the earlier of (i) the fifth anniversary of the date of issuance, (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 shareholders 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. These warrants are fully vested.
At the time off issuance, the warrants were issued in conjunction with a preferred stock offering from the predecessor entity. The fair value of the warrants was determined using the probability-weighted expected return method at the time of each Series F convertible preferred stock close date. The probability-weighted expected return method is based on an estimate of expected fair value as analyzed through various liquidity scenarios. Fair value is determined for a given scenario at the time of the future liquidity event and discounted back to the valuation date using a risk-adjusted discount rate. To determine fair value, the present values, under each scenario are weighted based on the expected probability of each scenario occurring. The fair value of the warrants at time of issuance, determined using the probability-weighted expected return method, was $396, which was recorded as a reduction to the Series F convertible preferred stock. In addition, the Company continues to assess the fair value of the Series F convertible preferred stock warrants on a periodic basis. Changes to the fair value are recorded in other income (expense) in the consolidated statements of operations and comprehensive loss. The Company recorded $1,329 as a change in fair value of these warrants for year ended December 31, 2018. As a result of the Reverse Merger and Recapitalization, the warrant liability was reclassified into additional paid-in-capital. As of December 31, 2018, warrants for an aggregate of 1,085,059 common shares remain outstanding, for which the Company has reserved this number of shares to permit the exercise of the warrants.
At December 31, 2018 and 2017, the Company had 6,900,610 common stock warrants (the “Public Warrants”) outstanding trading under the Nasdaq ticker symbol PHUNW. Under the terms of the 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 Public Warrants, following the completion of the Reverse Merger and Recapitalization. Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50. No fractional shares will be issued upon exercise of the Public Warrants. As of December 31, 2018 and 2017, the Public Warrants were not exercisable; however, they Public Warrants will become exercisable 30 days after the completion of the Reverse Merger and Recapitalization and will expire five years after the completion of the Reverse Merger and Recapitalization or earlier upon redemption or liquidation. If the Company is unable to deliver registered shares of common stock to the holder upon exercise of Public Warrants during the exercise period, there will be no net cash settlement of these Public Warrants and the Public Warrants will expire worthless. Notwithstanding anything to the foregoing, if any such registration statement has not been declared effective by the 90th day following the closing of the Reverse Merger and Recapitalization, holders of the Public Warrants shall have the right, during the period beginning on the 91st day after the closing of the Reverse Merger and Recapitalization and ending upon such registration statement being declared effective by the Securities and Exchange Commission, and during any other period when the Company shall fail to have maintained an effective registration statement covering the shares of common stock issuable upon exercise of the Public Warrants, the holders may exercise their Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act of 1933, as amended. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis. Once the Public Warrants become exercisable, the Company 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 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 Public Warrant holders.
The Company also has 10,182,060 and 7,970,488 Private Placement Warrants outstanding at December 31, 2018 and 2017, respectively (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of common stock at $11.50 per share. 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 Reverse Merger and Recapitalization. The Private Placement Warrants will be exercisable for cash (even if a registration statement covering the common stock issuable upon exercise of such warrants is not effective) 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. Of the Public Placement Warrants above, 3,985,244 were issued to Phunware shareholders and transferred from certain warrant holders of Stellar in the Reverse Merger and Recapitalization. The Company issued 2,211,572 Private Placement Warrants to the Sponsors as repayment in full for the promissory notes at the closing of the Reverse Merger and Recapitalization. These are also Private Placement Warrants.
Unit Purchase Option
The Company sold to the underwriters for initial public offering in 2016 an option to purchase up to a total of 130,000 units, at an exercise price of $11.50 per unit. The units are comprised of one share of common stock and one warrant to purchase common stock. The unit 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 closing of the Reverse Merger and Recapitalization and terminating on the fifth anniversary of the Reverse Merger and Recapitalization. The units issuable upon exercise of this option are identical to those offered in the Company’s initial public offering in 2016. 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.
As of December 31, 2018, and 2017, there were 130,000 unit purchase options outstanding.
In 2018, the Company issued warrants to receive an aggregate of approximately 27.4 billion PhunCoins to sixty-eight (68) stockholders. Should the Company complete a Token Generation Event, the stockholders would receive their requisite amount of PhunCoin. The Company believes there is no traditional “exercise period” or ‘term” as with other typical embedded features, and the PhunCoin warrants were originally issued in conjunction with the Company’s Series F Preferred Stock financing. The PhunCoin warrants lack characteristics of financial instruments and derivatives. In addition, the PhunCoin warrants do not obligate the Company to achieve the Token Generation Event or launch and distribute the PhunCoins to the warrantholders. Currently, there is no market for PhunCoin, and they do not exist. Accordingly, at the time of the issuance, the Company has determined there is no value assigned to the warrants of PhunCoin issued to the stockholders.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef