ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Completion of the Business Combination
On December 21, 2018, Stellar held a
special meeting at which Stellar’s stockholders considered and approved, among other matters, the Merger Agreement. On December
26, 2018, the parties consummated the Business Combination.
In connection with the consummation of
the Business Combination, holders of 1,813,487 shares of Stellar common stock sold in its initial public offering (“
Public
Shares
”) exercised their right to redeem their Public Shares for cash at a price of $10.64 per share, for an aggregate
amount of approximately $19.3 million. As a result of these redemptions, the Stellar trust account had approximately $0.4 million immediately prior to Closing.
In addition, 6,000 shares for aggregate
cash proceeds of $6.0 million from the Series A 8% convertible preferred stock financing (“
Series A Financing
”),
as more completely described in Item 3.02 below, were issued in conjunction with the Business Combination. In connection with the Series A Financing, the Sponsors (defined below) transferred an aggregate of 250,000
shares of Stellar common stock to the Series A Financing investor, and 181,391 shares to certain service providers.
Immediately after giving effect to the Business
Combination (including the redemptions and the issuance of shares in the Series A Financing, both described above), there were
approximately 27.9 million shares of common stock and warrants to purchase approximately 18.2 million shares of common stock of
Phunware issued and outstanding.
In addition, in connection with the Closing,
Astra Maritime Corp., Dominium Investments Inc., Magellan Investments Corp. and Firmus Investments Inc. (the “
Sponsors
”)
transferred to the former stockholders of Phunware 3,985,244 warrants to purchase shares of Stellar common stock, in exchange for a
promissory note in the principal amount of approximately $2.0 million, which shall mature on December 26, 2019. The Sponsors also transferred to Stellar 627,864 shares
of Stellar common stock, which shall be retained in treasury and available for issuance from time to time by Stellar.
Upon consummation of the Business Combination, the
former stockholders of Phunware owned approximately 92% of the issued and outstanding shares of common stock of the Successor.
This percentage excludes the impact of outstanding stock options and warrants.
The Merger Agreement contains representations
and warranties of the parties thereto, certain of which are limited by materiality and material adverse effect. The parties have
also each agreed to certain covenants contained in the Merger Agreement. The representations, warranties and covenants of the parties
contained in the Merger Agreement terminated at the Closing, notwithstanding that any covenant that, by its terms, provides for
performance following the consummation of the Business Combination shall survive until such covenant is performed. A copy of the
Merger Agreement is filed as Exhibit 2.1 to this Current Report on Form 8-K.
For more information about the Business
Combination, including the Merger Agreement and Merger consideration, and certain agreements relating to the Business Combination,
including those certain lock-up agreements dated as of December 26, 2018, see the section titled “
The Stellar Business
Combination Proposal
” in the Prospectus.
There will be no accounting effect or change in
the carrying amount of the consolidated assets and liabilities of the Successor as a result of the domestication. The Business
Combination will be accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles
(“
GAAP
”). Accordingly, Stellar is the legal acquirer and Phunware is the accounting acquirer and predecessor
whereby the Successor’s historical financial statements will reflect the financial position, results of operations and cash
flows of Phunware, and the net cash proceeds obtained from Stellar in the Business Combination will be reflected as a capital infusion.
Furthermore, the historical capitalization of Phunware immediately before the Business Combination will be adjusted based on the
exchange ratio of 0.459 Successor shares for every one share of Phunware capital stock.
FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if
the predecessor registrant was a shell company, as Stellar was immediately before the Business Combination, then the registrant
must disclose the information that would be required if the registrant were filing a general form for registration of securities
on Form 10. Accordingly, Phunware, Inc. as the successor issuer to Stellar, is providing the information below that would be included
in a Form 10 if Phunware were to file a Form 10 under the Securities Exchange Act of 1934, as amended (the “
Exchange
Act
”), by incorporating by reference the information contained in the Prospectus, including the following sections listed
below. Please note that the information provided below relates to the combined company after Stellar’s acquisition of Phunware
in connection with the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise
requires.
Business
The business of the Company is described
in the Prospectus in the section entitled “
Information about Phunware
.”
Risk Factors
The risk factors related to our business
operations are described in the Prospectus in the section entitled “
Risk Factors
,” which are incorporated herein
by reference.
Financial Information
Our financial information is provided in
the disclosure contained in the Prospectus in the sections entitled “
Selected Historical Consolidated Financial Information
and Other Data of Phunware
,” and “
Management’s Discussion and Analysis of Financial Condition and Results
of Operations of Phunware
,” which is incorporated herein by reference, in addition to Item 9.01 below.
Properties
Our properties are described in the disclosure
in the section titled “
Information about Phunware - Facilities
” in the Prospectus, which is incorporated herein
by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information
regarding the beneficial ownership of shares of Successor’s common stock immediately following the consummation of the Business
Combination by:
|
●
|
each
person known by Stellar to be the beneficial owner of more than 5% of shares of the Successor’s
common stock immediately following the consummation of the Business Combination;
|
|
●
|
each
of the Successor’s named executive officers and directors immediately following
the consummation of the Business Combination; and
|
|
●
|
all
executive officers and directors of the Successor as a group immediately following the
consummation of the Business Combination.
|
Beneficial ownership is determined according
to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses
sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or
exercisable within 60 days.
Applicable percentage ownership is based
on 27,922,027 shares of the Successor’s common stock outstanding on an as converted basis as of immediately following the consummation
of the Business Combination, December 26, 2018. In computing the number of shares of common stock beneficially owned by a person
and the percentage ownership of such person, all shares of the Successor common stock subject to outstanding options held by the
person that are currently exercisable or exercisable within 60 days of December 26, 2018 and warrants exercisable held by the person
that are currently exercisable or exercisable within 60 days of December 26, 2018. However, we did not deem such shares of the
Successor common stock outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, Phunware believes
that all persons named in the table have sole voting and investment power with respect to all shares of the Successor’s
common stock owned by them.
|
|
Beneficial Ownership
|
|
Name of Beneficial Owner
(1)
|
|
Number of Shares
|
|
|
%
|
|
Alan Knitowski
(2)
|
|
|
998,186
|
|
|
|
3.6
|
%
|
Matt Aune
|
|
|
186,632
|
|
|
|
*
|
|
Randall Crowder
(3)
|
|
|
988,642
|
|
|
|
3.5
|
%
|
Luan Dang
(4)
|
|
|
961,367
|
|
|
|
3.4
|
%
|
Barbary Brunner
|
|
|
137,700
|
|
|
|
*
|
|
Prokopios (Akis) Tsirigakis
(5)
|
|
|
2,750,148
|
|
|
|
9.8
|
%
|
George Syllantavos
(6)
|
|
|
3,918,960
|
|
|
|
14.0
|
%
|
Lori Tauber Marcus
|
|
|
—
|
|
|
|
*
|
|
Kathy Tan Mayor
|
|
|
—
|
|
|
|
*
|
|
Keith Cowan
|
|
|
—
|
|
|
|
*
|
|
All directors and executive officers as a group (10 individuals)
|
|
|
9,174,248
|
|
|
|
32.9
|
%
|
*
|
Less than one percent.
|
(1)
|
Unless otherwise indicated, the business address of each of the stockholders is 7800 Shoal Creek Blvd, Suite 230-S, Austin, TX 78757.
|
(2)
|
Includes (i) 338,946 shares and 211,604 warrants exercisable within 60 days held of record by Cane Capital, LLC for which Mr. Knitowski serves as president; (ii) 2,636 shares and 1,624 warrants exercisable within 60 days held of record by Curo Capital Appreciation Fund I, LLC (#1) for which Mr. Knitowski serves as president; (iii) 2,636 shares and 4,336 warrants exercisable with 60 days held of record by Curo Capital Appreciation Fund I, LLC (Fund 1) for which Mr. Knitowski serves as president; (iv) 10,545 shares and 17,349 warrants exercisable within 60 days held of record by Curo Capital Appreciation Fund I, LLC (Fund 2) for which Mr. Knitowski serves as president; (v) 408,510 shares subject to options exercisable within 60 days of which 255,510 have vested as of such date.
|
(3)
|
Includes (i) 286,982 shares and 472,160 warrants exercisable within 60 days held of record by Nove PW I LP for which Mr. Crowder is founder and managing partner; and (ii) 229,500 shares subject to option exercisable within 60 days of which none have vested to date.
|
(4)
|
Includes (i) 683,534 shares and 105,688 warrants exercisable within 60 days held of record by Mr. Dang and (ii) 172,125 shares subject to options exercisable within 60 days of which 82,476 have vested to date.
|
(5)
|
Includes (i) 177,769 shares held of record by Astra Maritime Corp for which Mr. Tsirigakis is the sole shareholder; (ii) 210,128 shares held of record by Dominium Investments, Inc. for which Mr. Tsirigakis is the sole shareholder, and (iii) 2,362,251 warrants exercisable within 60 days held of record by Dominium Investments, Inc and Astra Maritime Corp for which Mr. Tsirigakis is the sole shareholder.
|
(6)
|
Includes (i) 186,174 shares held of record by Magellan Investments Corp of which Mr. Syllantavos is the sole shareholder; (ii) 193,318 shares held of record by Firmus Investments, Inc. of which Mr. Syllantavos is the sole shareholder, and (iii) 3,539,470 warrants exercisable within 60 days held of record by Magellan Investments Corp and Firmus Investments,Inc. of which Mr. Syllantavos is the sole shareholder.
|
Directors and Executive Officers
Our directors and executive officers are
described in the section titled “
Management of the Successor Following the Business Combination
” in the Prospectus,
which is incorporated herein by reference.
Executive Compensation
The disclosure set forth in the section
entitled “
Executive Compensation in Relation to Phunware, Inc.
” in the Prospectus is incorporated herein by
reference.
Certain Relationships and Related Transactions, and Director
Independence
The disclosure set forth in the sections
titled “
Certain Relationships and Related Person Transactions
” and “
Management of the Successor Following
the Business Combination
” in the Prospectus is incorporated herein by reference.
Legal Proceedings
The disclosure set forth in the section
titled “
Information about Phunware - Legal Proceedings
” in the Prospectus is incorporated herein by reference.
Market Price of Dividends on the Registrant’s Common
Equity and Related Stockholder Matters
The Company has not paid any cash dividends
on its common stock to date. The payment of any cash dividends will be dependent upon the revenue, earnings and financial condition
of the Successor from time to time. The payment of any dividends will be within the discretion of the board of directors of the
Successor. It is presently expected that the Successor will retain all earnings for use in the business operations of the Successor
and, accordingly, it is not expected that the board of directors of the Successor will declare any dividends in the foreseeable
future. The ability of the Successor to declare dividends may be limited by the terms of any other financing and other agreements
entered into by the Successor or its subsidiaries from time to time.
The disclosure set forth in the section
titled “
Market Price and Dividend Information
” in the Prospectus is incorporated herein by reference.
Recent Sales of Unregistered Securities
Reference is made to the disclosure set forth in
Item 3.02 of this Current Report on Form 8-K concerning the issuance of 6,000 shares of Series A 8% convertible preferred stock
to a certain accredited investor, which is incorporated herein by reference.
Description of Registrant Securities
The description of Phunware’s securities
contained in the Prospectus in the sections titled “
Description of PHUN Securities”
and
“Comparison
of Corporate Governance and Shareholder Rights
” is incorporated herein by reference.
Indemnification of Directors and Officers
The set forth in the Prospectus in the section titled “
Limitation
of Liability and Indemnification Matters in Relation to Phunware, Inc.”
is incorporated herein by reference.
A copy of the form of indemnification agreement
is filed as Exhibit 10.1 to this Current Report on Form 8-K.
Financial Statements and Supplementary Data
Reference is made to the disclosure set
forth under Item 9.01 of this Current Report on Form 8-K concerning the financial statements and supplementary data of the Successor
and its affiliates.
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Reference is made to the disclosure set
forth under Item 4.01 of this Current Report on Form 8-K, which is incorporated herein by reference.