RISK FACTORS

You should carefully consider all the following risk factors, together with all of the other information included or incorporated by reference in this joint proxy statement/prospectus, including the financial information, before deciding whether or how to vote or instruct your vote to be cast to approve the proposals described in this joint proxy statement/prospectus.

The value of your investment following consummation of the Business Combination will be subject to significant risks affecting, among other things, the Successor’s business, financial condition or results of operations. If any of the events described below occur, the Successor’s post-Business Combination business and financial results could be adversely affected in material respects. This could result in a decline, which may be significant, in the trading price of the Successor’s common stock and you therefore may lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the businesses of Stellar and Phunware.

Risk Factors Related to Stellar

Stellar is an early stage company with no operating history and no revenues and you have no basis on which to evaluate Stellar’s ability to achieve its business objective.

Stellar is an early stage company with no operating results. Because Stellar lacks an operating history, you have no basis upon which to evaluate Stellar’s ability to achieve its business objective of completing its initial business combination with Phunware. Stellar may be unable to complete the business combination. If Stellar fails to complete the business combination, it will never generate any operating revenues.

Stellar’s Initial Shareholders have agreed to vote in favor of the initial business combination, regardless of how Stellar’s 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 Stellar’s board, Stellar’s initial shareholders have agreed to vote their founder shares, as well as any public shares purchased during or after Stellar’s initial public offering, in favor of the initial business combination. Stellar’s initial shareholders own 22.2% of Stellar’s outstanding shares of common stock as of the date hereof. As a result, Stellar would need only 2,356,452 or 36.25% of the 6,900,610 public shares to be voted in favor of its initial business combination in order to have such transaction approved. Accordingly, it is more likely that the necessary shareholder approval will be received than would be the case if Stellar’s initial shareholders agreed to vote their founder shares in accordance with the majority of the votes cast by Stellar’s public shareholders.

Stellar may not be able to complete its initial business combination within the prescribed time frame, including the extension of such timeframe, in which case Stellar would cease all operations except for the purpose of winding up and Stellar would redeem its public shares and liquidate, and Stellar’s warrants would be worthless.

Stellar’s executive officers and directors have agreed that Stellar must complete the initial business combination by May 24, 2018 unless Stellar submits and its shareholders approve a further extension. Stellar may not be able to complete its initial business combination by such date. Stellar previously extended the period of time to consummate a business combination on August 24, 2017, November 24, 2017 and February 24, 2018, each by an additional three months. In order for Stellar to extend the time available for it to consummate its initial business combination, Stellar’s sponsors or their affiliates or designees must determine to seek shareholder approval for an extension and Stellar’s shareholders would be required to approve such extension. The seeking of such approval may require Stellar to make certain payments in order to encourage shareholders to approve the extension and shareholders may also have the right to redeem their shares in connection with any solicitation of shareholder approval. Stellar currently has no arrangements in place relating to any payments Stellar may offer its shareholders to encourage shareholders to approve an extension and there is no assurance that any such arrangements can or will be put into place. Should Stellar’s sponsors or any other parties determine to loan funds to Stellar for this purpose, we expect that the lenders would waive their right to be repaid for such loans out of the funds held in the trust account (except from any interest that Stellar is permitted to withdraw) in the event that Stellar does not consummate

38

a business combination. However, Stellar 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, Stellar may apply the accrued interest in the trust account or such withdrawn interest to its obligations with respect to any further extension. Stellar’s sponsors and their affiliates or designees are not obligated to fund the trust account to extend the time for Stellar to complete Stellar’s initial business combination.

If Stellar has not completed its initial business combination within such time period, it will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 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 Stellar 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 of Stellar (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 Stellar’s remaining shareholders and its board of directors, dissolve and liquidate, subject in each case to Stellar’s obligations under applicable law to provide for claims of creditors and the requirements of other applicable law.

In connection with Stellar’s solicitation of shareholder approval of its initial business combination, Stellar’s 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 Stellar’s common stock.

In connection with Stellar’s solicitation of shareholder approval of its initial business combination, Stellar’s sponsors, directors, executive 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 its 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 Stellar’s shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that Stellar’s sponsors, 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 the related transactions and thereby increase the likelihood of obtaining shareholder approval of the business combination and related transaction or to satisfy the closing condition in the Merger Agreement, where it appears that such requirement would otherwise not be met. This may result in the completion of the business combination and the related transactions that may not otherwise have been possible.

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

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

Stellar will comply with the applicable SEC rules when conducting redemptions in connection with the business combination. Despite Stellar’s compliance with these rules, if a public shareholder fails to receive this proxy statement/prospectus or related materials, such shareholder may not become aware of the opportunity to redeem its shares. In addition, this proxy statement/prospectus describes 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.

39

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.

Stellar’s public shareholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) Stellar’s completion of an initial business combination and then only in connection with those shares of Stellar’s common stock that such shareholder properly elected to redeem, subject to the limitations described herein or (ii) the redemption of Stellar’s public shares if Stellar is unable to complete an initial business combination by May 24, 2018 (or a later date, if extended), subject to applicable law and as further described herein. In addition, if Stellar’s plan to redeem its public shares if it is unable to complete an initial business combination by May 24, 2018 (or a later date, if extended) is not completed for any reason, compliance with applicable law and Stellar’s Articles of Incorporation may require that Stellar submit a plan of dissolution to its then-existing shareholders for approval prior to the distribution of the proceeds held in Stellar’s trust account. In that case, public shareholders may be forced to wait beyond May 24, 2018 (or a later date, if extended) before they receive funds from Stellar’s 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 of Stellar, 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 Stellar’s initial public offering and the sale of the private placement warrants were intended to be used to complete an initial business combination with a target business that had not been identified, Stellar may be deemed to be a “blank check” company under the United States securities laws. However, because Stellar has net tangible assets in excess of $5,000,000, Stellar is 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 Stellar has had a longer period of time to complete its business combination than do companies subject to Rule 419. Moreover, if Stellar’s initial public offering had been subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to Stellar unless and until the funds in the trust account were released to Stellar in connection with Stellar’s completion of its initial business combination.

If you or a “group” of shareholders are deemed to hold in excess of 26% of Stellar’s common stock, you will lose the ability to redeem all such shares in excess of 26% of Stellar’s common stock.

Stellar’s 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 Stellar’s initial public offering, which we refer to as the “Excess Shares.” However, Stellar would not be restricting its shareholders’ ability to vote all of their shares (including Excess Shares) for or against the business combination. Your inability to redeem the Excess Shares will reduce your influence over Stellar’s ability to complete the business combination and you could suffer a material loss on your investment in s Stellar if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if Stellar completes the 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.

Stellar’s 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, Stellar’s 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 Stellar complied with the procedures set forth in Section 106 of the BCA, which are intended to ensure that Stellar makes reasonable provision for all claims against Stellar, including a six month notice period during which any third-party claims can be brought against Stellar 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 Stellar’s intention to make liquidating distributions to its shareholders as soon as reasonably possible after dissolution if the initial business

40

combination does not occur. As such, Stellar’s shareholders could potentially be liable for any claims to the extent of distributions received by them in a dissolution and any such liability of Stellar’s 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 Stellar’s shareholders amounts owed to them by Stellar.

If third parties bring claims against Stellar, the proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than $10.375 per share (or such higher amount then held in trust).

Stellar’s placing of funds in the trust account may not protect those funds from third-party claims against Stellar. Although Stellar seeks to have all vendors, service providers, prospective target businesses or other entities with which it does business execute agreements with Stellar waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of Stellar’s 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 Stellar’s 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, Stellar’s 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 Stellar than any alternative.

Examples of possible instances where Stellar 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 Stellar and will not seek recourse against the trust account for any reason. Upon redemption of Stellar’s public shares, if Stellar is unable to complete its business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with the business combination, Stellar will be required to provide for payment of claims of creditors that were not waived that may be brought against Stellar 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 $10.375 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 Stellar if and to the extent any claims by a vendor for services rendered or products sold to Stellar, or a prospective target business with which Stellar has 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 Stellar’s indemnity of the underwriters of its 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. Stellar has not independently verified whether Mr. Tsirigakis or Mr. Syllantavos have sufficient funds to satisfy their indemnity obligations and, therefore, Messrs. Tsirigakis and Syllantavos may not be able to satisfy those obligations. Stellar has not asked Mr. Tsirigakis or Mr. Syllantavos to reserve for such possibility.

Stellar’s 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 Stellar’s public shareholders.

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.375 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

41

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, Stellar’s independent directors would determine whether to take legal action against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations. While Stellar currently expects that its independent directors would take legal action on behalf of Stellar against Messrs. Tsirigakis and Syllantavos to enforce their indemnification obligations to Stellar, it is possible that Stellar’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If Stellar’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to Stellar’s public shareholders may be reduced below $10.375 per share (or such higher amount then held in trust).

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

If, after Stellar distributes the proceeds in the trust account to its public shareholders, Stellar files a bankruptcy petition or an involuntary bankruptcy petition is filed against Stellar 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 Stellar’s shareholders. In addition, Stellar’s board of directors may be viewed as having breached its fiduciary duty to Stellar’s creditors and/or having acted in bad faith, thereby exposing itself and Stellar 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 Stellar’s public shareholders, Stellar files a bankruptcy petition or an involuntary bankruptcy petition is filed against Stellar that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of Stellar’s shareholders and the per-share amount that would otherwise be received by Stellar’s shareholders in connection with Stellar’s liquidation may be reduced.

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

If Stellar is deemed to be an investment company under the Investment Company Act, Stellar may be required to institute burdensome compliance requirements and Stellar’s activities may be restricted, which may make it difficult for Stellar to complete the business combination.

If Stellar is deemed to be an investment company under the Investment Company Act, Stellar’s activities may be restricted, including:

•          restrictions on the nature of Stellar’s investments, and

•          restrictions on the issuance of securities,

•          each of which may make it difficult for Stellar to complete its business combination.

In addition, Stellar may have imposed upon it 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.

42

If Stellar were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which Stellar has not allotted funds and may hinder Stellar’s ability to complete the business combination. If Stellar is unable to complete the initial business combination, Stellar’s public shareholders may receive only approximately $10.375 per share (or such higher amount then held in trust) on the liquidation of Stellar’s trust account and Stellar’s warrants will expire worthless.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect the business, investments and results of operations of Stellar and the Successor.

Stellar is subject to laws and regulations enacted by national, regional and local governments. In particular, Stellar is 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 changes could have a material adverse effect on the business, investments and results of operations of Stellar and the Successor. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on Stellar and the Successor’s business and results of operations.

Stellar has not registered the shares of common stock issuable upon exercise of its warrants under the Securities Act or any state securities laws at this time 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.

Stellar has not registered the shares of common stock issuable upon exercise of the warrants issued in its initial public offering under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, Stellar has agreed, as soon as practicable, but in no event later than 30 days after the closing of the initial business combination, to use its best efforts to file a registration statement under the Securities Act covering such shares and no later than 90 days after the closing of the 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. Stellar cannot assure you that it 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 Stellar’s initial public offering are not registered under the Securities Act, Stellar 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 Stellar 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 Stellar’s 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, Stellar may, at its 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 Stellar so elects, it 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 Stellar does not so elect, Stellar will use its 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 Stellar’s initial public offering. In no event will Stellar be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that it is 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 Stellar, Stellar may exercise its 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 Stellar is unable to effect such registration or qualification, subject to Stellar’s obligation in such case to use it 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 Stellar in its initial public offering.

43

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

Pursuant to an agreement entered into concurrently with the issuance and sale of the securities in Stellar’s initial public offering, Stellar’s initial shareholders and their permitted transferees can demand that Stellar register the founder shares, holders of Stellar’s private placement warrants and their permitted transferees can demand that Stellar register the private placement warrants and the shares of common stock issuable upon exercise of the private placement warrants. Stellar 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 an adverse effect on the market price of the Successor’s common stock. In addition, the existence of the registration rights may make Stellar’s initial business combination more costly or difficult to conclude. This is because the shareholders of Phunware 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 Stellar’s common stock that is expected when the securities owned by Stellar’s initial shareholders, holders of its private placement warrants or their respective permitted transferees are registered.

If Stellar shareholders exercise their registration rights with respect to their securities, it may have an adverse effect on the market price of Stellar Shares and the existence of these rights may make it more difficult to effect a business combination, including the Business Combination.

The Initial Shareholders are entitled to make a demand that Stellar register the resale of their insider shares at any time commencing the consummation of Stellar’s initial business combination. Additionally, the purchasers of the Private Units and the Initial Shareholders, officers and directors are entitled to demand that Stellar register the resale of the Private Units (and the underlying securities) and any securities the Initial Shareholders, officers, directors or their affiliates may be issued in payment of working capital loans made to Stellar at any time after Stellar consummates a business combination, including the Business Combination. The presence of these additional securities trading in the public market may have an adverse effect on the market price of Stellar securities. In addition, the existence of these rights may make it more difficult to effectuate a business combination, including the Business Combination, or increase the cost of acquiring the target business, as the shareholders of the target business may be discouraged from entering into a business combination, including the Business Combination, with Stellar or will request a higher price for their securities because of the potential effect the exercise of such rights may have on the trading market for Stellar Shares.

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

On each of August 24, 2017, November 24, 2017 and February 23, 2018, Stellar issued unsecured promissory notes in the aggregate amount of $303,300, $301,000 and $167,100, respectively, to Stellar’s sponsors and on February 22, 2018, the Company issued a promissory note in the aggregate amount of $201,268 to Phunware (in aggregate the “Notes” ). The Notes bear no interest and are repayable in full upon consummation of Stellar’s initial business combination. Although Stellar has no other commitments as of the date of joint proxy statement/prospectus to issue any notes or other debt securities, or to otherwise incur outstanding debt, Stellar may choose to incur additional debt to complete the business combination. Stellar has agreed that it will not incur any indebtedness unless it has 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 Stellar’s assets if Stellar’s operating revenues after an initial business combination are insufficient to repay Stellar’s debt obligations;

•          acceleration of Stellar’s obligations to repay the indebtedness even if Stellar makes all principal and interest payments when due if Stellar breaches certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

•          Stellar’s immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;

44

•          Stellar’s inability to obtain necessary additional financing if the debt security contains covenants restricting Stellar’s ability to obtain such financing while the debt security is outstanding;

•          Stellar’s inability to pay dividends on Stellar’s common stock;

•          using a substantial portion of Stellar’s cash flow to pay principal and interest on Stellar’s debt, which will reduce the funds available for dividends on Stellar’s common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

•          limitations on Stellar’s flexibility in planning for and reacting to changes in Stellar’s business and in the industry in which it operates;

•          increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

•          limitations on Stellar’s ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of its strategy and other purposes and other disadvantages compared to its competitors who have less debt.

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 company offerings 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 Stellar’s 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.

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

Stellar’s 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 Stellar’s 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 Stellar’s common stock and corresponding provisions of the trust agreement governing the release of funds from Stellar’s trust account may be amended if approved by holders of 65% of Stellar’s common stock. In all other instances, Stellar’s amended and restated articles of incorporation may be amended by holders of a majority of Stellar’s common stock, subject to applicable provisions of the BCA or NASDAQ rules. Stellar’s initial shareholders, who collectively beneficially own 22.2% of Stellar’s common stock, will participate in any vote to amend Stellar’s 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, Stellar may be able to amend the provisions of its amended and restated articles of incorporation which govern Stellar’s pre-business combination behavior more easily than some other blank check companies (which require approval by between 90% and 100% of the company’s public shareholders) and this may increase Stellar’s ability to complete the business combination, even if you do not agree with the business combination. Stellar’s shareholders may pursue remedies against Stellar for any breach of Stellar’s amended and restated articles of incorporation.

Stellar’s executive officers and directors have agreed, pursuant to a written agreement with Stellar, that they will not propose any amendment to Stellar’s amended and restated articles of incorporation that would affect the substance or timing of Stellar’s obligation to redeem 100% of Stellar’s public shares if Stellar does not complete the initial business combination by May 24, 2018 (or a later date, if extended), unless Stellar provides its 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

45

of then outstanding public shares. These agreements are contained in letter agreements that Stellar has entered into with Stellar’s sponsors, executive officers and directors. Prior to acquiring any securities from Stellar’s initial shareholders, permitted transferees must enter into a written agreement with Stellar agreeing to be bound by the same restriction. Stellar’s 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 Stellar’s sponsors, executive officers, or directors for any breach of these agreements. As a result, in the event of a breach, Stellar’s shareholders would need to pursue a shareholder derivative action, subject to applicable law.

Stellar’s letter agreement with its sponsors, directors and officers may be amended without shareholder approval.

Stellar’s letter agreement with its sponsors, directors and officers contains provisions relating to transfer restrictions of Stellar’s 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 Stellar does not expect its board to approve any amendment to this agreement prior to the initial business combination, it may be possible that Stellar’s 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 Stellar’s securities.

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

Stellar’s initial shareholders owns 22.2% of Stellar’s issued and outstanding shares of common stock. Accordingly, they may exert a substantial influence on actions requiring a shareholder vote, including the matters to be considered at the Special Meeting, potentially in a manner that you do not support. If Stellar’s initial shareholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Neither Stellar’s initial shareholders nor, to Stellar’s knowledge, any of Stellar’s officers or directors, have any current intention to purchase additional securities, other than as may be disclosed in this joint proxy statement/prospectus. Factors that would be considered in making such additional purchases would include consideration of the current trading price of Stellar’s common stock. In addition, Stellar’s board of directors, whose members were elected by Stellar’s 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. Stellar will not hold an annual meeting of shareholders to elect new directors prior to the completion of the business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. Accordingly, Stellar’s initial shareholders will continue to exert control at least until the completion of the business combination.

Stellar 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.

Stellar’s warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent and Stellar. 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, Stellar 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 Stellar’s 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 Stellar’s common stock purchasable upon exercise of a warrant.

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

Stellar has 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 Stellar’s 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 Stellar sends the notice of redemption to the warrant holders. If and when the

46

warrants become redeemable by Stellar, Stellar may exercise its 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 Stellar is unable to effect such registration or qualification, subject to Stellar’s obligation in such case to use its 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 Stellar in its initial public offering. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price 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 Stellar so long as they are held by their initial purchasers or their permitted transferees.

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

Stellar issued warrants to purchase 6,900,610 shares of its common stock as part of the units offered in Stellar’s initial public offering, and, simultaneously with the closing of the initial public offering, Stellar 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, Stellar issued a unit purchase option to the underwriters of Stellar’s 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 Stellar’s common stock. To the extent Stellar issues shares of common stock to effectuate the business combination, the potential for the issuance of a substantial number of additional shares of common stock upon exercise of these warrants could have made Stellar a less attractive acquisition vehicle to a target business. Such warrants, when exercised, will increase the number of issued and outstanding shares of Stellar’s common stock and reduce the value of the shares of common stock issued to complete the business combination. Therefore, Stellar’s warrants may have made it more difficult to effectuate a business combination or may have increased the cost of acquiring the target business.

The private placement warrants are identical to the warrants sold as part of the units in Stellar’s 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 Stellar, (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 the initial business combination and (iii) they may be exercised by the holders on a cashless basis.

Stellar is an emerging growth company within the meaning of the Securities Act and Stellar has taken advantage of certain exemptions from disclosure requirements available to emerging growth companies; this could make the Successor’s securities less attractive to investors and may make it more difficult to compare the Successor’s performance with other public companies.

Stellar is an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act and has taken 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 internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in Stellar’s 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, Stellar’s shareholders may not have access to certain information they may deem important. Stellar and the Successor may be an emerging growth company for up to five years, although circumstances could cause the loss of that status earlier, including if the market value of the common stock held by non-affiliates exceeds $700 million as of any May 31 before that time, in which case the Successor would no longer be an emerging growth company as of the following November 30 (or such other date as may be applicable were the Successor to change its fiscal year). Stellar cannot predict whether investors will find its or the Successor’s securities less attractive because Stellar and the Successor rely on these exemptions. If some investors find the securities less attractive as a result of reliance on these exemptions, the trading prices of the Successor’s securities may be lower than they otherwise would be, there may be a less active trading market for the Successor’s securities and the trading prices of the securities may be more volatile.

47

Further, 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 an election to opt out is irrevocable. Stellar has elected 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, Stellar, 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 Stellar’s 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 make it more difficult for us to effectuate the business combination, require substantial financial and management resources and increase the time and costs of completing an acquisition.

Section 404 of the Sarbanes-Oxley Act requires that Stellar evaluate and report on its system of internal controls. Only in the event that Stellar is deemed to be a large accelerated filer or an accelerated filer will Stellar be required to comply with the independent registered public accounting firm attestation requirement on its internal control over financial reporting. Further, for as long as Stellar remains an emerging growth company, it will not be required to comply with the independent registered public accounting firm attestation requirement on its internal control over financial reporting. The fact that Stellar is a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome as compared to other public companies because Phunware may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of Phunware to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete the Business Combination.

Risks Related to the Redomestication and Business Combination

The ability of Stellar’s shareholders to exercise redemption rights with respect to a large number of Stellar’s shares may not allow Stellar to complete the Business Combination or optimize its capital structure.

At the time we entered into the Merger Agreement, we did not know how many shareholders would exercise their redemption rights and therefore Stellar needed to structure the transaction based on its expectations as to the number of shares that will be submitted for redemption. Because the Merger Agreement requires Stellar to have a minimum amount of cash at closing, Stellar 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 Stellar initially expected, Stellar may need to seek 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 Stellar. Furthermore, raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels.

If Stellar’s initial business combination with Phunware is unsuccessful, you would not receive your pro rata portion of the trust account until Stellar liquidates 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 Stellar’s 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 Stellar’s redemption until Stellar liquidates or you are able to sell your stock in the open market.

Be cause of Stellar’s limited resources and the significant competition for business combination opportunities, it may be more difficult for Stellar to complete the initial business combination. If Stellar is unable to complete the initial business combination, Stellar’s public shareholders may receive only approximately $10.375 per share (or such higher amount then held in trust), on Stellar’s redemption and Stellar’s warrants will expire worthless.

Stellar has encountered intense competition from other entities having a business objective similar to Stellar’s, including private investors (which may be individuals or investment partnerships), other blank check companies and

48

other entities, domestic and international, competing for businesses such as Phunware. 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 Stellar does and Stellar’s financial resources are relatively limited when contrasted with those of many of these competitors. Stellar’s ability to compete with respect to the acquisition of certain target businesses has been limited by Stellar’s available financial resources. This inherent competitive limitation has given others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if Stellar is obligated to pay cash for the shares of common stock redeemed (including pursuant to this solicitation and the solicitation of shareholder approval for any further extension of time to completed its initial business combination), Stellar may make purchases of its common stock, potentially reducing the resources available to Stellar for its initial business combination. Any of these obligations may have placed Stellar at a competitive disadvantage in negotiating its proposed business combination with Phunware. If Stellar is unable to complete the initial business combination, Stellar’s public shareholders may receive only approximately $10.375 per share (or such higher amount then held in trust) on the liquidation of Stellar’s trust account and Stellar’s warrants will expire worthless.

The net proceeds of Stellar’s initial public offering not being held in the trust account may be insufficient to allow Stellar to operate and pay taxes and expenses until the completion of the initial business combination or to complete the initial business combination.

The funds available to Stellar outside of the trust account may not be sufficient to allow Stellar to operate until the completion of the initial business combination. Although Stellar believes that, as of November 30, 2017, the funds available outside of the trust account ($117,000), are sufficient to allow Stellar to operate until May 24, 2018 and to complete the initial business combination, Stellar cannot assure you that its estimate is accurate. Stellar has already incurred considerable expenses in connection with its search for a target business, in connection with its negotiation of a letter of intent and the Merger Agreement with Phunware and in connection with its due diligence and other activities. Stellar anticipates that further diligence on Phunware 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. Notwithstanding the execution of the Merger Agreement, the business combination may not occur 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. If Stellar is required to seek additional capital, we may be obligated to borrow funds from the sponsors, management team or other third parties to operate or Stellar may be forced to liquidate. Neither our sponsors, members of Stellar’s 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 the initial business combination.

If Stellar is unable to complete the initial business combination, Stellar’s public shareholders may receive only approximately $10.375 per share (or such higher amount then held in trust) on the liquidation of Stellar’s trust account and Stellar’s warrants will expire worthless.

Stellar may not seek an opinion from an unaffiliated third party as to the fair market value of the target business it acquires, including the Business Combination, or that the price it is paying for the business, including the Business Combination, is fair to its shareholders from a financial point of view.

Stellar is not required to obtain an opinion from an unaffiliated third party that the target business it selects has a fair market value in excess of at least 80% of the balance of the Trust Account unless the Board cannot make such determination on its own. Stellar is also not required to obtain an opinion from an unaffiliated third party indicating that the price it is paying is fair to its shareholders from a financial point of view unless the target is affiliated with its officers, directors, Initial Shareholders or their affiliates. If no opinions are obtained, Stellar’s shareholders will be relying on the judgment of the Board, whose collective experience in business evaluations for blank check companies and whose determination as to fair market value has been based on standards generally accepted by the financial community. Furthermore, Stellar’s directors may have a conflict of interest in analyzing the transaction due to their personal and financial interests.

49

You may be unable to ascertain the merits or risks of Phunware’s operations and the business of Phunware is outside of Stellar management’s area of expertise.

To the extent we complete the initial business combination, we will be affected by numerous risks inherent in Phunware’s business operations. Although Stellar’s management has endeavored to evaluate the risks inherent in the proposed business combination with Phunware, Stellar cannot assure you that it can adequately ascertain or assess all of the significant risk factors. Furthermore, some of these risks may be outside of our control. Stellar also cannot assure you that an investment in Stellar’s securities will not ultimately prove to be less favorable to investors in Stellar than a direct investment, if an opportunity were available, in Phunware. Although Stellar has identified general guidelines that it believes are important in evaluating Phunware, it cannot assure you that Phunware’s business meets such guidelines and as a result, Phunware’s business may not have attributes entirely consistent with Stellar’s general guidelines.

In addition, if Stellar’s shareholders do not believe that the prospects for the business combination are promising, a greater number of shareholders may exercise their redemption rights, which may make it difficult for Stellar to meet any closing condition with Phunware that requires us to have a minimum net worth or a certain amount of cash. In addition, it may be more difficult for Stellar to obtain shareholder approval of the initial business combination if Phunware does not meet Stellar’s general guidelines. If Stellar is unable to complete the initial business combination, its public shareholders may receive only approximately $10.375 per share (or such higher amount then held in trust) on the liquidation of its trust account and its warrants will expire worthless.

Subsequent to the completion of the Business Combination, the Successor may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition and its share price, which could cause you to lose some or all of your investment.

Stellar cannot assure you that the due diligence Stellar has conducted on Phunware will reveal all material issues that may be present with regard to Phunware, or that it would be possible to uncover all material issues through a customary amount of due diligence or that risks outside of Stellar’s control will not later arise. Phunware is aware that Stellar must complete the initial business combination by May 24, 2018, unless Stellar’s shareholders were to approve an extension. Consequently, Phunware may have obtained leverage over us in negotiating the business combination, knowing that if Stellar does not complete the initial business combination with Phunware, Stellar is unlikely to be able to complete an initial business combination with any other target business. In addition, Stellar has had limited time to conduct due diligence. Phunware is a privately held company and Stellar therefore has made its decision to pursue Phunware on the basis of limited information, which may result in a business combination that is not as profitable as expected, if at all. As a result of these factors, the Successor may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in reporting losses. Even if Stellar’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on Stellar’s liquidity, the fact that Stellar reports charges of this nature could contribute to negative market perceptions about Stellar or Stellar’s securities. In addition, charges of this nature may cause Stellar to violate leverage or other covenants to which it may be subject as a result of assuming pre-existing debt held by Phunware or by virtue of it 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 Stellar’s officers or directors of a duty of care or other fiduciary duty owed by them to Stellar, or if they are able to successfully bring a private claim under securities laws that the joint proxy statement/prospectus relating to the Business Combination contained an actionable material misstatement or material omission.

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

Stellar’s 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

50

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. Stellar may issue a substantial number of additional shares of common or preferred stock to complete the initial business combination or under an employee incentive plan after completion of the initial business combination. However, Stellar’s amended and restated articles of incorporation provide, among other things, that prior to the initial business combination, Stellar 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 Stellar’s amended and restated articles of incorporation, like all provisions of Stellar’s amended and restated articles of incorporation, may be amended with a shareholder vote and the Successor’s certificate of incorporation following Redomestication, which does not contain similar restrictions, is also subject to amendment. Stellar’s executive officers and directors have agreed, pursuant to a written agreement with Stellar, that they will not propose any amendment to Stellar’s amended and restated articles of incorporation that would affect the substance or timing of Stellar’s obligation to redeem 100% of its public shares if Stellar does not complete the initial business combination by May 24, 2018 (or such later date if Stellar submits and its shareholders approve a further extension), unless Stellar provides its 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 Stellar’s common stock;

•          could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, Stellar’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of Stellar’s present officers and directors; and

•          may adversely affect prevailing market prices for Stellar’s units, common stock and/or warrants.

Stellar is dependent upon its executive officers and directors and their departure could adversely affect Stellar’s ability to operate and to consummate the initial business combination; Stellar’s executive officers and directors also allocate their time to other businesses, thereby causing potential conflicts of interest that could have a negative impact on Stellar’s ability to complete the initial business combination.

Stellar’s operations and its ability to consummate the initial business combination are dependent upon a relatively small group of individuals and, in particular, its executive officers and directors. Stellar believes that its success depends on the continued service of its executive officers and directors, at least until the completion of the business combination. Stellar does not have an employment agreement with, or key-man insurance on the life of, any of its directors or executive officers. The unexpected loss of the services of one or more of Stellar’s directors or executive officers could have a detrimental effect on Stellar and the ability to consummate the business combination. In addition, Stellar’s executive officers and directors are not required to commit any specified amount of time to its affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including monitoring the due diligence and undertaking the other actions required in order to consummate the initial business combination. Each of Stellar’s executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation and Stellar’s directors also serve as officers and board members for other entities. If Stellar’s 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 Stellar’s affairs which may have a negative impact on Stellar’s ability to consummate the initial business combination.

Stellar does not have an employment agreement with, or key-man insurance on the life of, any of its directors or executive officers. The unexpected loss of the services of one or more of Stellar’s directors or executive officers could have a detrimental effect on Stellar and the ability to consummate the business combination.

51

The Successor’s ability to be successful following the initial business combination will depend upon the efforts of the Successor’s Board of Directors and Phunware’s key personnel and the loss of such persons could negatively impact the operations and profitability of the Successor’s post-combination business.

The Successor’s ability to be successful following the initial business combination will be dependent upon the efforts of the Successor’s Board of Directors and key personnel. Stellar cannot assure you that the Successor’s Board of Directors and key personnel will be effective or successful or remain with the Successor. In addition to the other challenges they will face, such individuals may be unfamiliar with the requirements of operating a public company, which could cause the Successor’s management to have to expend time and resources helping them become familiar with such requirements.

It is estimated that, pursuant to the Merger Agreement, Stellar’s public shareholders will own less than 24% of the equity interests or assets of the Successor and Stellar’s management will not be engaged in the management of the Successor’s business. Accordingly, the future performance of the Successor will depend upon the quality of the post-business combination Board of Directors, management and key personnel of the Successor.

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

Stellar’s key personnel may be able to remain with the Successor after the completion of the business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations may take place prior to the consummation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or Stellar’s securities for services they would render to the Successor after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in connection with the consummation of the business. However, Stellar believes the ability of such individuals to remain with the Successor after the completion of the business combination will not be the determining factor in Stellar’s decisions regarding the consummation of the business combination. There is no certainty, however, that any of Stellar’s key personnel will remain with the Successor after the consummation of the business combination. Stellar cannot assure you that any of its key personnel will remain in senior management or advisory positions with the Successor. Except as described in this joint proxy statement/prospectus, the determination as to whether any of Stellar’s key personnel will remain with the Successor may be made at the time of the initial business combination.

Because Stellar’s initial shareholders, executive officers and directors will lose their entire investment in us if Stellar’s business combination is not completed, and because Stellar’s sponsors, executive officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if the Business Combination is not completed, a conflict of interest may have arisen in determining whether Phunware was appropriate for Stellar’s initial business combination.

Stellar’s 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 Stellar’s 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 Stellar does not complete a business combination.

The founder shares are identical to the shares of common stock included in the units sold in Stellar’s 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 Stellar’s executive officers and directors may have influenced 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. At the closing of Stellar’s initial business combination, its 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 Stellar’s behalf such

52

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

Stellar will only be able to complete one business combination with the proceeds of its initial public offering and the sale of the private placement warrants, which will cause Stellar to be solely dependent on the performance of Phunware. This lack of diversification may negatively impact Stellar’s operations and profitability.

The net proceeds from Stellar’s initial public offering and the private placement of warrants, along with the extension related funds and interest generated from trust account funds, have provided Stellar with approximately $71,215,856 (not including approximately $117,000 held outside the trust as of November 30, 2017) that Stellar may use to complete its initial business combination and pay deferred underwriting commissions being held in the trust account.

Stellar will effectuate its business combination with only a single target business rather than with multiple businesses. By completing its initial business combination with only a single entity, Stellar’s lack of diversification may subject Stellar to numerous economic, competitive and regulatory risks. Further, Stellar will not be able to diversify its 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 Stellar’s success will be solely dependent upon the performance of Phunware and upon the market acceptance of Phunware’s products, processes or services.

This lack of diversification may subject Stellar to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the performance of the Successor.

Stellar does 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 Stellar’s shareholders do not agree.

Stellar’s amended and restated articles of incorporation do not provide a specified maximum redemption threshold, except that in no event will Stellar redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon the consummation of the business combination (such that Stellar is not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement contained in the Merger Agreement. As a result, Stellar may be able to complete the business combination even if a substantial majority of Stellar’s public shareholders do not agree with the transaction and have redeemed their shares or if we have entered into privately negotiated agreements for investors to sell their shares to Stellar’s 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 Stellar, Stellar 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 Stellar will be required to liquidate.

Stellar may be unable to obtain additional financing to complete the initial business combination or to fund the operations and growth of Phunware’s business, which could compel Stellar to restructure or abandon the business combination.

If, following the redemption of shares from shareholders who elect redemption in connection with the initial business combination, the net proceeds of Stellar’s initial public offering and the sale of the private placement warrants prove to be insufficient to enable Stellar to complete the initial business combination, which requires that, after 10 business days has elapsed from the date of the Stellar Special Meeting, Stellar must have no less than $40 million in cash (net of its unpaid expenses and liabilities), then Stellar may be required to seek additional financing or to abandon the proposed business combination. Stellar cannot assure you that such financing will be

53

available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete the initial business combination, Stellar would be compelled to either restructure the transaction or abandon the business combination. It is unlikely that Stellar will be able to identify or consummate an alternative initial business combination. In addition, even if Stellar does not need additional financing to complete the business combination, the Successor may require such financing to fund the operations or growth of Phunware’s business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of Phunware’s business. None of Stellar’s officers, directors or shareholders is required to provide any financing to Stellar in connection with or after the initial business combination. If Stellar is unable to complete the initial business combination, Stellar’s public shareholders may only receive approximately $10.375 per share (or such higher amount then held in trust) on the liquidation of Stellar’s trust account and Stellar’s warrants will expire worthless.

An active market for the Successor’s securities may not develop, which would adversely affect the liquidity and price of the Successor’s securities.

The price of the Successor’s securities may vary significantly due factors specific to the Successor as well as to general market or economic conditions. Furthermore, an active trading market for the Successor’s 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 established and sustained.

NASDAQ may delist the Successor’s securities from trading on its exchange, which could limit investors’ ability to make transactions in the Successor’s securities and subject the Successor to additional trading restrictions.

Stellar’s securities are currently listed on NASDAQ and it is anticipated that, following the business combination, the Successor’s securities will be listed on NASDAQ. However, Stellar cannot assure you that the Successor’s securities will continue to be, listed on NASDAQ in the future. In order to continue listing its securities on NASDAQ, the Successor must maintain certain financial, distribution and stock price levels. Generally, the Successor must maintain a minimum amount in shareholders’ equity (generally $2,500,000) and a minimum number of holders of its securities (generally 300 public holders). Additionally, in connection with the initial business combination, the Successor 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, the Successor’s stock price would generally be required to be at least $4 per share and its shareholders’ equity would generally be required to be at least $5 million and the Successor will be required to have a minimum of 300 public holders. Stellar cannot assure you that the Successor will be able to meet those initial listing requirements at that time.

If NASDAQ delists the Successor’s securities from trading on its exchange and the Successor is not able to list its securities on another national securities exchange, Stellar expects the Successor’s securities could be quoted on an over-the-counter market. If this were to occur, the Successor could face significant material adverse consequences, including:

•          a limited availability of market quotations for its securities;

•          reduced liquidity for its securities;

•          a determination that the Successor’s common stock is a “penny stock” which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the Successor’s securities;

•          a limited amount of news and analyst coverage; and

•          a decreased ability to issue additional securities or obtain additional financing in the future.

The unaudited pro forma financial information included in the section entitled “ Unaudited Pro Forma Condensed Combined Financial Statements ” may not be representative of the Combined Company’s results if the Business Combination is consummated and accordingly, you will have limited financial information on which to evaluate the financial performance of the Combined Company and your investment decision.

Stellar and Phunware currently operate as separate companies. Stellar has had no prior history as a combined entity and its operations have not previously been managed on a combined basis. The pro forma financial

54

information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Business Combination been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of the Combined Company. The pro forma statement of earnings does not reflect future nonrecurring charges resulting from the Business Combination. The unaudited pro forma financial information does not reflect future events that may occur after the Business Combination and does not consider potential impacts of current market conditions on revenues or expenses. The pro forma financial information included in the section entitled “ Unaudited Pro Forma Condensed Combined Financial Statements ” has been derived from Stellar’s and Phunware’s historical financial statements and certain adjustments and assumptions have been made regarding the combined organization after giving effect to the transaction. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have an adverse impact on the pro forma financial information and the Combined Company’s financial position and future results of operations.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect the Combined Company’s financial condition or results of operations following the Closing. Any potential decline in the Combined Company’s financial condition or results of operations may cause significant variations in the stock price of the Combined Company.

Some of the Stellar and Phunware officers and directors may be argued to have conflicts of interest that may influence them to support or approve the Business Combination without regard to your interests.

Certain officers and directors of Stellar and Phunware participate in arrangements that may be argued to provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the Combined Company, severance benefits, continued indemnification and the potential ability to sell an increased number of shares of common stock of the Combined Company. If the Merger is not consummated and Stellar is forced to wind up, dissolve and liquidate in accordance with Stellar’s charter, the 2,003,403 common shares currently held by Stellar’s current management (as transferees from prior management), which were initially acquired prior to Stellar’s IPO by the initial shareholders for an aggregate purchase price of $25,000, will be worthless (as the holders have waived liquidation rights with respect to such shares). Such shares had an aggregate market value of approximately $20.7 million based on the last sale price of $10.34 per share on Nasdaq on April 6, 2018. In addition, Stellar’s current management has loaned approximately $0.77 million to the Company. If the Merger is not consummated and Stellar is forced to wind up, dissolve and liquidate in accordance with Stellar’s charter, Stellar’s current management may not be able to recover the value of such loans. If the Merger is consummated, Stellar’s current management will receive approximately $24 million in value from the Merger. Accordingly, Stellar’s current executive officers and directors, have interests that may be different from, or in addition to, your interests as a shareholder.

These interests, among others, may influence the officers and directors of Stellar and Phunware to support or approve the merger. For more information concerning the interests of Stellar and Phunware executive officers and directors, see the sections entitled “ The Stellar Business Combination Proposal — Interests of Stellar’s Directors and Officers and Others in the Business Combination ” and “ The Phunware Business Combination Proposal — Interests of Phunware Directors and Executive Officers in the Merger ” in this joint proxy statement/prospectus.

The market price of the Successor’s common stock may decline as a result of the Business Combination.

The market price of the Successor’s common stock may decline as a result of the merger for a number of reasons including if:

•          investors react negatively to the prospects of the Combined Company’s business and the prospects of the Merger;

•          the effect of the Merger on the Combined Company’s business and prospects is not consistent with the expectations of financial or industry analysts; or

•          the Combined Company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts.

55

Stellar’s shareholders and Phunware’s stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Business Combination.

If the Combined Company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Stellar’s shareholders and Phunware’s stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the Combined Company is able to realize only part of the strategic and financial benefits currently anticipated from the Business Combination.

During the pendency of the Business Combination, Stellar and Phunware may not be able to enter into a business combination with another party because of restrictions in the Merger Agreement, which could adversely affect their respective businesses. Furthermore, certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

Covenants in the Merger Agreement impede the ability of Stellar and Phunware to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third party. Any such transactions could be favorable to such party’s shareholders.

If the conditions to the Merger are not met, the Business Combination will not occur.

Even if the Merger is approved by the shareholders of Stellar and Phunware, specified conditions must be satisfied or waived to complete the Business Combination. These conditions are described in detail in the Merger Agreement. Stellar and Phunware cannot assure you that all of the conditions will be satisfied. If the conditions are not satisfied or waived, the Business Combination will not occur or will be delayed and Stellar and Phunware each may lose some or all of the intended benefits of the Business Combination.

Because Stellar is currently incorporated under the laws of the Republic of the Marshall Islands, you may face difficulties in protecting your interests and your ability to protect your rights through the U.S. Federal courts may be limited prior to the Redomestication.

Stellar is currently a corporation incorporated under the laws of the Republic of the Marshall Islands. Until the Redomestication is effected, its corporate affairs are governed by the Articles of Incorporation, its Bylaws, the BCA and the common law of the Republic of the Marshall Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of its directors to Stellar under the laws of the Marshall Islands are to a large extent governed by the common law of the Republic of the Marshall Islands. The common law of the Republic of the Marshall Islands is derived in part from comparatively limited judicial precedent in the Republic of the Marshall Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Republic of the Marshall Islands. The rights of Stellar’s shareholders and the fiduciary responsibilities of its directors under Republic of the Marshall Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Republic of the Marshall Islands has a less developed body of securities laws as compared to the United States and certain states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. In addition, Republic of the Marshall Islands corporations may not have standing to initiate a shareholders derivative action in a Federal court of the United States.

Reeder & Simpson, P.C., Stellar’s counsel to the laws of the Republic of the Marshall Islands, have advised us that there is uncertainty as to whether the courts of the Republic of the Marshall Islands would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in the Republic of the Marshall Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

56

Reeder & Simpson, P.C. has further advised us that it is uncertain that Republic of the Marshall Islands courts would enforce: (1) judgments of U.S. courts obtained in actions against us or other persons that are predicated upon the civil liability provisions of the U.S. federal securities laws; or (2) original actions brought against us or other persons predicated upon the Securities Act. Reeder & Simpson, P.C. has informed us that there is uncertainty with regard to Republic of the Marshall Islands law relating to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities laws will be determined by the courts of the Republic of the Marshall Islands as penal or punitive in nature. Furthermore, there is currently no statutory enforcement or treaty between the United States and the Republic of the Marshall Islands providing for enforcement of judgments. However, a judgment obtained in the United States may be recognized and enforced in the courts of the Republic of the Marshall Islands under the provisions of the RMI Uniform Money-Judgments Recognition Act at common law, without any re-examination on the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the High Court of the Republic of the Marshall Islands, provided such judgment: (i) is given by a foreign court of competent jurisdiction; (ii) is final; (iii) is not in respect of taxes, a fine or a penalty; and (iv) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or public policy of the Republic of the Marshall Islands. A judgment obtained in a foreign jurisdiction in connection with the Documents would be recognized unless (a) the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law; (b) the foreign court did not have personal jurisdiction over the defendant; (c) the foreign court did not have jurisdiction over the subject matter; or (d) the foreign country does not recognize or enforce judgments of any other foreign nation. In addition, a foreign judgment need not be recognized if (a) the defendant in the proceedings in the foreign court did not receive notice of the proceedings in sufficient time to enable him to defend; (b) the judgment was obtained by fraud; (c) the cause of action on which the judgment is based is repugnant to the public policy of the RMI; (d) the judgment conflicts with another final and conclusive judgment; (e) the proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in the court; or (f) in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action. If none of the above grounds exist then the RMI High Court will enforce a foreign judgment without a retrial on the merits.

As a result of all of the above, Public Shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board or controlling shareholders than they would as public shareholders of a United States company prior to the Redomestication.

There is a risk that a U.S. Holder may recognize taxable gain with respect to its Stellar Shares at the effective time of the Redomestication.

The Redomestication should qualify as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. However, due to the absence of guidance directly on how the provisions of Section 368(a) apply in the case of a statutory conversion of a corporation with no active business and only investment-type assets such as Stellar, this result is subject to some uncertainty. Accordingly, due to the absence of such guidance, it is not possible to predict whether the IRS or a court considering the issue would take a contrary position. If the Redomestication should fail to qualify as a reorganization under Section 368(a), a U.S. Holder (as that term is defined in the section entitled “ The Redomestication Proposal — Material U.S. Federal Income Tax Consequences of the Redomestication to Stellar Shareholders ” of Stellar Shares generally would recognize a gain or loss with respect to its Stellar Shares in an amount equal to the difference, if any, between the fair market value of the corresponding common stock of the Delaware corporation received in the Redomestication and the U.S. Holder’s adjusted tax basis in its Stellar Shares surrendered in exchange therefor.

As discussed more fully under “ The Redomestication Proposal – Material U.S. Federal Income Tax Consequences of the Redomestication to Stellar Shareholders ” below, it is intended that the Redomestication will constitute a tax-free reorganization within the meaning of Section 368(a)(l)(F) of the Code. Assuming that the Redomestication so qualifies, U.S. holders (as defined in such section) of Stellar Shares will be subject to Section 367(b) of the Code and, as a result:

•          A U.S. holder of Stellar Shares whose Stellar Shares have a fair market value of less than $50,000 on the date of the Redomestication will not recognize any gain or loss and will not be required to include any part of Stellar’s earnings in income;

57

•          A U.S. holder of Stellar Shares whose Stellar Shares have a fair market value of $50,000 or more, but who on the date of the Redomestication owns (actually and constructively) less than 10% of the total combined voting power of all classes of Stellar Shares entitled to vote will generally recognize gain (but not loss) on the exchange of Stellar Shares for shares in the Successor (a Delaware corporation) pursuant to the Redomestication. As an alternative to recognizing gain, such U.S. holders may file an election to include in income as a dividend earnings and profits (as defined in the Treasury Regulations under Section 367) attributable to its Stellar Shares provided certain other requirements are satisfied. Stellar does not expect to have significant cumulative earnings and profits, if any, on the date of the Redomestication.

•          A U.S. Holder of Stellar Shares whose Stellar Shares have a fair market value of $50,000 or more, and who on the date of the Redomestication owns (actually and constructively) 10% or more of the total combined voting power of all classes of Stellar Shares entitled to vote will generally be required to include in income as a dividend earnings and profits (as defined in the Treasury Regulations under Section 367) attributable to its Stellar Shares provided certain other requirements are satisfied. Stellar does not expect to have significant cumulative earnings and profits, if any, on the date of the Redomestication.

Furthermore, even if the Redomestication qualifies as a reorganization under Section 368(a) of the Code, a U.S. Holder of Stellar Shares may still recognize gain (but not loss) upon the exchange of its Stellar Shares for the common stock of the Delaware corporation pursuant to the Redomestication under the “passive foreign investment company,” or PFIC, rules of the Code equal to the excess, if any, of the fair market value of the common stock of the Delaware corporation received in the Redomestication and the U.S. Holder’s adjusted tax basis in the corresponding Stellar Shares surrendered in exchange therefor. In such event, the U.S. Holder’s aggregate tax basis in the common stock of the Delaware corporation received in connection with the Redomestication should be the same as the aggregate tax basis of Stellar Shares surrendered in the transaction, increased by any amount included in the income of such U.S. Holder under the PFIC rules. See the discussion in the section entitled “ The Redomestication Proposal — Material U.S. Federal Income Tax Consequences of the Redomestication to Stellar Shareholders — PFIC Considerations. ”

U.S. federal income tax reform could adversely affect us and holders of the Successor’s Shares.

On December 22, 2017, President Trump signed into law H.R. 1, originally known as the “Tax Cuts and Jobs Act,” which significantly reformed the Internal Revenue Code of 1986, as amended. The new legislation, among other things, changes the U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest, allows the expensing of capital expenditures and puts into effect the migration from a “worldwide” system of taxation to a territorial system. We continue to examine the impact this tax reform legislation may have on us. The impact of this tax reform, or of any future administrative guidance interpreting provisions thereof, on holders of the Successor’s Shares is uncertain and could be adverse. This joint proxy statement/prospectus does not discuss any such tax legislation or the manner in which it might affect holders of the Successor’s Shares. We urge holders of Stellar Shares to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of their ownership of Stellar Shares and the Successor’s Shares.

Following the Business Combination, if securities or industry analysts do not publish or cease publishing research or reports about the Combined Company, its business, or its market, or if they change their recommendations regarding the Successor’s common stock adversely, the price and trading volume of the Successor’s common stock could decline.

The trading market for the Successor’s common stock will be influenced by the research and reports that industry or securities analysts may publish about the Successor, its business, its market, or its competitors. Securities and industry analysts do not currently and may never, publish research on the Successor. If no securities or industry analysts commence coverage of the Successor, the Successor’s stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Successor change their recommendation regarding the Successor’s stock adversely, or provide more favorable relative recommendations about our competitors, the price of the Successor’s common stock would likely decline. If any analyst who may cover Phunware were to cease coverage of the Successor or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause the Successor’s stock price or trading volume to decline.

58

Upon consummation of the business combination, the rights of holders of the Successor’s common stock arising under the DGCL as well as the Successor’s certificate of incorporation and bylaws will differ from and may be less favorable to the rights of holders of Stellar’s common stock arising under the Republic of the Marshall Islands Association Law, as amended, as well as Stellar’s current memorandum and articles of association.

Upon consummation of the business combination, the rights of holders of the Successor’s common stock will arise under the certificate of incorporation and bylaws of the Successor as well as the DGCL. Those new organizational documents and the DGCL contain provisions that differ in some respects from those in Stellar’s current memorandum and articles of association and the Marshall Islands Association Law, as amended, and, therefore, some rights of holders of the Successor’s common stock could differ from the rights that holders of Stellar common stock currently possess. For instance, while class actions are generally not available to shareholders under Marshall Islands Association Law, as amended, such actions are generally available under Delaware law. This change could increase the likelihood that the Successor becomes involved in costly litigation, which could have a material adverse effect on the Successor.

In addition, there are differences between the new organizational documents of the Successor and the current constitutional documents of Stellar. For a more detailed description of the rights of holders of the Successor’s common stock and how they may differ from the rights of holders of Stellar common stock, please see the section entitled “Comparison of Corporate Governance and Stockholder Rights . ” Forms of the certificate of incorporation and the bylaws of the Successor are attached as Annexes A and B, respectively, to this joint proxy statement/prospectus and we urge you to read them.

Delaware law and the Successor’s certificate of incorporation and bylaws will 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.

The Successor’s certificate of incorporation and bylaws that will be in effect upon consummation of the Business Combination, and the DGCL, contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Successor’s board of directors and therefore depress the trading price of the Successor’s common stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Phunware board of directors or taking other corporate actions, including effecting changes in our management. Among other things, the Successor’s 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 the Successor’s board of directors;

•          the ability of the Successor’s 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, the Successor’s directors and officers;

•          the exclusive right of the Successor’s board of directors to elect a director to fill a vacancy created by the expansion of the Successor’s board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Successor’s board of directors;

•          the requirement that directors may only be removed from the Successor’s 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 the Successor’s board of directors, the chairperson of the Successor’s board of directors, the Successor’s chief executive officer or the Successor’s 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;

59

•          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 the Successor’s certificate of incorporation or the Successor’s bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Successor’s 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 the Successor’s board of directors to amend the bylaws, which may allow the Successor’s 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 the Successor’s 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 the Successor’s 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 Successor.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Successor’s board of directors or management.

In addition, as a Delaware corporation, the Successor will be subject to provisions of Delaware law, including Section 203 of the DGCL, which may generally prohibit certain stockholders holding 15% or more of the Successor’s outstanding capital stock from engaging in certain business combinations with us for a specified period of time unless certain conditions are met.

Any provision of the Successor’s 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 the Successor’s capital stock and could also affect the price that some investors are willing to pay for the Successor’s common stock.

The Successor’s bylaws will designate a state or federal court located within the State of Delaware as the sole and exclusive forum for all the types of governance disputes described below between the Successor and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for such disputes with the Successor or its directors, officers, stockholders, employees or agents.

The Successor’s certificate of incorporation that will be in effect upon consummation of the Business Combination provides that, unless the Successor consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:

•          any derivative action or proceeding brought on behalf of the Successor;

•          any action asserting a claim of breach of a fiduciary duty owed to the Successor or the Successor’s stockholders by any of the Successor’s directors, officers or other employees;

•          any action asserting a claim against the Successor or any of the Successor’s directors, officers or employees arising out of or relating to any provision of the DGCL, the Successor’s certificate of incorporation or the Successor’s amended and restated bylaws; or

•          any action asserting a claim against the Successor or any of the Successor’s directors, officers, stockholders or employees that is governed by the internal affairs doctrine of the Court of Chancery.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Successor or any of the Successor’s directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in the Successor’s certificate of incorporation to be inapplicable or unenforceable in an action, the Successor may incur additional costs associated with resolving such action in other jurisdictions, which could harm the Successor’s business, results of operations and financial condition.

60

Risk Factors Relating to Phunware

References in this section under the heading “Risk Factors Relating to Phunware” to “our”, “we”, “us” and “Phunware”, refer to Phunware, Inc., except where the context requires otherwise.

Our revenue has declined, 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 in 2009. We experienced a consolidated net loss of $25.9 million for the year ended December 31, 2017 and a consolidated net loss of $16.3 million for the year ended December 31, 2016. These losses were due to both a reduction in revenue in 2017 and the substantial investments we made to build our products and services, grow and maintain our business and acquire customers. 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 build our brand. As a result, we expect our operating expenses to increase in the future due to expected increased sales and marketing expenses, operations costs, research and development costs and general and administrative costs and, therefore, our operating losses will continue or even potentially increase for the foreseeable future. In addition, as a public company we incur significant legal, accounting and other expenses that we did not incur as a private company. Furthermore, to the extent that we are successful in increasing our customer base, we will also incur increased expenses because costs associated with generating and supporting customer agreements are generally incurred up front, while revenue is generally recognized ratably over the committed term of the agreement. 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 report and unforeseen expenses, difficulties, complications and delays and other unknown events. You should not rely upon our recent bookings 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 ultimately unable to generate sufficient revenue to meet our financial targets, become profitable and have sustainable positive cash flows, investors could lose their investment.

Our results of operations and ability to grow could be negatively affected if we cannot adapt and expand our technology offerings and services in response to ongoing market changes.

The collaboration and technology solutions business and markets are characterized by rapid technological change, evolving industry standards, changing customer preferences and new product and service introductions. Our success depends on our ability to continue to develop and implement technology offerings and services 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 at sufficient speed and scale, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our technology offerings and services, our results of operations and our ability to develop and maintain a competitive advantage and to continue to grow could be negatively affected.

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 out account managers, sales technology specialists, engineers and consultants 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.

61

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 our technology offerings and services with existing customers. Our customers may not 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 service. 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 assure you that its efforts will increase sales to existing customers or additional revenue. If our efforts to upsell to our customers are not successful, our future growth may be limited.

Our ability to achieve significant growth in revenue in the future will also depend upon our ability to attract new customers. This may be particularly challenging where an organization has already invested substantial personnel and financial resources to integrate competing technology offerings and services into our business, as such organization may be reluctant or unwilling to invest in new technology offerings and services. If we fail to attract new customers and maintain and expand those customer relationships, our revenue may grow more slowly than expected and our business may be harmed.

Demand for our technology offerings and services could be adversely affected by volatile, negative, or uncertain economic conditions and the effects of these conditions on our customers’ businesses.

Our revenue and profitability depend on the demand for our technology offerings and services, which could be negatively affected by numerous factors, many of which are beyond our control. Volatile, negative, or uncertain economic conditions 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.

Substantial competition could reduce our market share and significantly harm our financial performance.

We expect the competitive landscape in which we compete to continue to change as new technologies are developed. While innovation can help our business as we create new offerings for us to sell and provide complementary services, it can also disrupt our business model and create new and stronger competitors. For instance, while cloud based solutions present an opportunity for us, cloud based solutions and technologies that deliver technology solutions as a service could increase the amount of sales directly to customers rather than through solutions providers like us, or could reduce the amount of hardware we sell, leading to a reduction in our technology offerings revenue and/or profitability. In addition, some of our hardware and software technology partners sell and could intensify their efforts to sell, their products directly to our customers. Moreover, traditional OEMs have increased their services capabilities through mergers and acquisitions with service providers, which could potentially increase competition in the market to provide comprehensive technology solutions to customers. If any of these trends becomes more prevalent, it could adversely affect our business, results of operations, or financial condition.

62

Our future results will depend on our ability to continue to focus our resources and manage costs effectively.

We are continually implementing productivity measures and focusing on measures intended to further improve cost efficiency. We may be unable to realize 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, we may incur losses, which could decrease our operating margins and significantly reduce or eliminate our profits. 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, 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 offerings 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 accurately 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.

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 IT 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 investments in new services and technologies may not be successful and our business strategy is evolving 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, and such efforts may not be successful.

We continue to invest in new services and technologies, including cloud, virtualization, security, mobility, data analytics and blockchain. The complexity of these solutions, our learning curve in developing and supporting them and significant competition in the markets for these solutions could make it difficult for us to market and implement these solutions successfully. Additionally, there is a risk that our customers may not adopt these solutions widely, which would prevent us from realizing expected returns on these investments. Even if these solutions are successful in the market, they still rely on third-party hardware and software and our ability to meet stringent service levels. If we are unable to deploy these solutions successfully or profitably, it could adversely impact our business, results of operations, or financial condition.

63

Our industry is undergoing significant change and our business strategy is continuing to evolve to meet these changes. In order to profitably grow our business, we may need to expand into new lines of business beyond our current focus of providing mobile advertising analytics products and services, which may involve pursuing strategic transactions, including potential acquisitions of, or investments in, related or unrelated businesses. In addition, we may seek divestitures of existing businesses or assets. There can be no assurance that we will be successful with our efforts to evolve our business strategy and we could suffer significant losses as a result, which could have a material adverse effect on our business, financial 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 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.

If we lose any of our key personnel, or are unable to attract and retain the talent required for our business, our business could be disrupted and our financial performance could suffer.

Our success is heavily dependent upon our ability to attract, develop, engage and retain key personnel to manage and grow our business, including our key executive, management, sales, services and technical personnel.

Our future success will depend to a significant extent on the efforts of our executive officers; Alan S. Knitowski, Chief Executive Officer; Luan Dang, Chief Technology Officer; Randall Crowder, Chief Operating Officer; Matt Aune, Chief Financial Officer; Matthew Lindenberger, Executive Vice President of Engineering and Tushar Patel, Executive Vice President of Corporate Development, as well as the continued service and support of other key employees. Our future success also will depend on our ability to attract and retain highly skilled technology specialists, engineers and consultants, for whom the market is extremely competitive.

Our inability to attract, develop and retain key personnel could have an adverse effect on our relationships with our technology partners and customers and adversely affect our ability to expand our offerings of technology offerings and services. Moreover, our inability to train our sales, services and technical personnel effectively to meet the rapidly changing technology needs of our customers could cause a decrease in the overall quality and efficiency of such personnel. Such consequences could adversely affect our business, results of operations, or financial condition.

It may be difficult for us to retain or attract qualified officers and directors, which could adversely affect our business and our ability to maintain the listing of our common stock on the NASDAQ.

We may be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of changes in the rules and regulations which govern publicly-held companies, including, but not limited to, certifications from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting these roles. Further, applicable rules and regulations of the Securities and Exchange Commission and the NASDAQ Stock Market heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, our business and our ability to maintain the listing of our shares of common stock on the NASDAQ could be adversely affected.

Our ability to attract and retain business and personnel may depend on our reputation in the marketplace.

We believe our brand name and our reputation in the marketplace are important corporate assets that help distinguish our technology offerings and services from those of competitors and contribute to our ability to recruit and retain talented personnel, in particular our engineers and consulting professionals. However, our corporate reputation is potentially susceptible to material damage by events such as disputes with customers, cybersecurity breaches, service outages, internal control deficiencies, delivery failures, or compliance violations. Similarly, our reputation could be damaged by actions or statements of current or former customers, directors, employees, competitors, vendors, partners, joint ventures or joint venture partners, adversaries in legal proceedings, legislators, or government regulators, as well as members of the investment community or the media. There is a risk that

64

negative information about us, even if based on rumor or misunderstanding, could adversely affect our business. Damage to our reputation could be difficult, expensive and time-consuming to repair, could make potential or existing customers reluctant to select us for new engagements, resulting in a loss of business and could adversely affect our recruitment and retention efforts. Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us, adversely affecting the Successor’s share price.

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 in Odyssey, Simplikate, Digby, Tapit! and GoTV. 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 offerings 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, personnel, or operations of any acquired business, or any significant delay in achieving integration, could harm our business, results of operations, or financial condition.

65

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 time and material and fixed price contract arrangements. All revenue is recognized pursuant to applicable accounting standards. Our failure to meet all the obligations, or otherwise meet a customer’s 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 obligations have been met.

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:

•          changes in spending on subscriptions, services and transactional media offerings and services by our current or prospective customers;

•          pricing our technology offerings and services effectively so that we are able to attract and retain customers without compromising our operating results;

•          attracting new customers and increasing our existing customers’ use of our technology offerings and services;

•          the mix between new contracts and renewals;

•          customer renewal rates and the amounts for which agreements are renewed;

•          seasonality and its effect on customer demand;

•          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;

•          changes to the commission plans, quotas and other compensation related metrics for our sales representatives;

•          the amount and timing of payment for operating expenses, particularly sales and marketing expense;

•          our ability to manage our existing business and future growth, domestically and internationally;

•          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; and

•          general economic and political conditions in our domestic and international markets.

•          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;

66

•          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;

•          introduction and adoption of our marketing solutions in markets outside of the United States;

•          unforeseen costs and expenses related to the expansion of our business, operations and infrastructure;

•          awareness of our thought leadership and brand on a global basis;

•          changes in the levels of our capital expenditures;

•          foreign currency exchange rate fluctuations; and

•          general economic and political conditions in our domestic and international markets.

We may not be able to accurately forecast the amount and mix of future technology offerings and services, size or duration of contracts, revenue and expenses and, as a result, our operating results may fall below our estimates.

We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data.

We are 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 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 Directive on Data Protection 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 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 financial services industry and the healthcare industry. 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.

67

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 or other service requirements of our customers, these errors or failures could disrupt our customer’s 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 verifying the integrity of employees that work with our customers by conducting background checks. 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 the 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.

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, technology offerings and services, including, for example, the software solutions of others that we offer to our customers, do not infringe on the intellectual property rights of third parties and these third parties 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 services or solutions 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 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.

68

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 its 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 right 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 offerings 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 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 technology offerings 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. 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 complete its contractual commitments 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.

Given our number of employees, labor related costs represent a significant portion of our expenses. An increase in labor costs, for example, as a result of increased competition for skilled labor, or employee benefit costs, such as health care costs or otherwise, could adversely 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.

Our customers have operations across North and South America, Europe, Australia and Asia and other locations. Although international revenue currently represents a small portion of our business, our revenue from customers outside of the United States may expand in the future as we expand our international presence. 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 anticorruption 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

69

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.

Changes in accounting rules could adversely affect our future financial results.

We prepare our financial statements in conformity with generally accepted accounting principles in the United States (“ U.S. GAAP ” or “ GAAP ”). These accounting principles have been adopted by the Financial Accounting Standards Board (“ FASB ”) and are subject to interpretation by the FASB, the SEC, and various other bodies. Technology offerings and services and the manner in which they are bundled and sold, and in which the services are provided, are technologically complex and the characterization of these technology offerings and services requires judgment regarding the application of revenue recognition and other accounting policies. Any mischaracterization of these technology offerings and services could result in misapplication of revenue recognition or other accounting policies. In addition, future periodic assessments required by current or new accounting standards may result in non-cash changes and/or changes in presentation or disclosure. In addition, future changes to accounting standards may influence our customers’ decisions to purchase from us or to finance transactions with us in the manner in which such purchases or financings were effected prior to such changes, which could adversely impact our business, results of operations, or financial condition.

Economic uncertainties or downturns in the general economy or the industries in which our customers operate could disproportionately affect the demand for our marketing solutions and negatively impact our operating results.

General worldwide economic conditions have experienced a significant downturn and fluctuations in recent years and market volatility and uncertainty remain widespread. As a result, we and our customers 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 marketing and sales budgets, which could decrease corporate spending on our marketing solutions, 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 sector may disproportionately affect us because a significant portion of our customers are technology companies. 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 general economy or markets in which we operate worsen, our business could be harmed. In addition, even if the overall economy does not worsen or improves, the market for marketing software may not experience growth or we may not experience growth.

If 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 is typically one year, but 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 services and functionality 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 functionality and services to existing customers. As our industry matures, as interactive channels develop further, or as competitors introduce lower cost and/

70

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 enterprise 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.

Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our operating results.

As a subscription-based business, we recognize revenue over the term of each of our contracts, which is typically one year, but 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 solutions and professional services or a decline in new 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 sales or renewals of our marketing 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, as revenue from new customers must be recognized over the applicable term of the contracts.

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 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 offerings 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 offerings and services varies. As a result of the variability and length 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; and

•          the length and timing of customers’ approval processes.

Privacy concerns and consumers’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our marketing solutions.

Privacy concerns may cause consumers to resist providing the personal data necessary to allow our customers to use our service effectively. We have implemented various features intended to enable our customers to better protect consumer privacy, but these measures may not alleviate all potential privacy concerns and threats. For example, the ECJ Ruling had the effect of invalidating the Safe Harbor framework. As a result, the framework no longer provides a valid legal basis for companies to transfer personal data from the European Union to the United States. Companies, including our customers, must comply with relevant aspects of European Union data protection laws using alternate mechanisms and our customers may not implement the alternate mechanisms that we offer. Additionally, our alternative measures may be challenged or deemed insufficient. Even the perception of privacy

71

concerns, whether or not valid, may inhibit market adoption of our service in certain industries. In addition to government activity privacy advocacy groups and the marketing and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. The costs of compliance with and other burdens imposed by, the foregoing laws, regulations, policies and actions may limit the use and adoption of our cloud-based marketing solutions and reduce overall demand for it, or lead to significant fines, penalties or liabilities for any noncompliance or loss of any such action.

We require significant additional capital funding and such capital may not be available to us.

We expect that our operating expenses will be higher than our net revenue for the foreseeable future, we currently lack sufficient working capital and, as a standalone entity without giving effect to the Business Combination, we do not currently have financing available to pay all liabilities as they are scheduled to come due in the next twelve months. We are working on several contingency plans within our control to conserve existing liquidity through the reduction of discretionary expenses. We are also exploring various alternatives including debt and equity financing vehicles, alternative offerings (including a potential token generation event via the launch of PhunCoin) strategic partnerships and the merger with Stellar.

Our cash requirements relate primarily to our current negative working capital balance plus working capital needed to operate and grow our business, including funding operating expenses and continued development and expansion of our services. We are currently unable to fund our operations without additional external financing and therefore cannot sustain future operations, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection. Although we have successfully raised funds from investors in the past, no assurances can be made that we will be able to obtain sufficient additional capital to satisfy the current negative working capital balances and future operations. Furthermore, if adequate additional funds are not available, we will be required to delay, reduce the scope of, or eliminate material parts of the implementation of our business strategy, including potential additional acquisitions or internally-developed businesses, which could seriously harm our business and operating results.

Additionally, even if we raise sufficient capital through additional equity or debt financings, strategic alternatives or otherwise, there can be no assurance that the revenue or capital infusion will be sufficient to enable us to develop our business to a level where it will be profitable or generate positive cash flow. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we incur additional debt, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. The debt holders would have rights senior to common stockholders to make claims on our assets and the terms of any debt securities issued could also impose significant restrictions on our operations. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance and may adversely impact our ability to raise additional funds. If we raise additional funds through collaborations and/or licensing arrangements, we might be required to relinquish significant rights to our technologies, or grant licenses on terms that are not favorable to us.

Phunware intends to raise capital via a token generation event and launch PhunCoin. There can be no assurance that the PhunCoin will ever be issued, any significant difficulties Phunware may experience with the offering could result in claims against Phunware, and the token generation event and PhunCoin will subject Phunware to various other business and regularity uncertainties.

Pursuant to the Merger Agreement, Phunware has agreed to use commercially reasonable efforts to consummate an initial block-chain technology token generation event via the launch of PhunCoin with cash gross proceeds of at least $10,000,000 and no more than $100,000,000 on or prior to June 30, 2018. Phunware will use its commercially reasonable efforts to develop and issue PhunCoin, but there is no assurance that it will do so. If the token generation event is not consummated or does not result in substantial proceeds, it could have a material adverse effect on Phunware’s cash position. If the token generation event is not consummated, Phunware would have to reduce its planned expenditures and/or would require additional funding from other sources in order to carry out its business plan. Also, any significant difficulties Phunware may experience with token generation event or the

72

development of the PhunCoin could result in claims against Phunware and could have a material adverse effect on the holders of our common stock.

The growth of the blockchain industry in general, as well as the token generation event networks on which Phuncoin will rely, is subject to a high degree of uncertainty. The cryptocurrency and cryptosecurities 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 blockchain assets may materially adversely affect Phunware’s business plans to launch and maintain PhunCoin. In addition, the tax and accounting consequences to us of the token generation event and PhunCoin are uncertain, which could lead to incorrect reporting, classification or liabilities. If the token generation event occurs and PhunCoin is developed, its structural foundation, the software applications and other interfaces or applications upon which it relies or that will be built are unproven. There can be no assurances that PhunCoin will be fully secure, which may result in impermissible transfers, a complete loss of users’ PhunCoin on that system or an unwillingness of users to access, adopt and utilize PhunCoin, whether through system faults or malicious attacks. Any such faults or attacks on PhunCoin may materially and adversely affect Phunware’s business.

The regulatory regime governing blockchain technologies, cryptocurrencies, digital assets, and offerings of digital assets such as PhunCoin is uncertain, and new regulations or policies may materially adversely affect the development and the value of PhunCoin.

Regulation of digital assets, like PhunCoin, cryptocurrencies, blockchain technologies and cryptocurrency exchanges, is currently undeveloped and likely to rapidly evolve as government agencies take greater interest in them. 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. In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with PhunCoin could subject Phunware to fines, penalties or other regulatory actions, as well as to civil actions by affected parties. Any such violations could adversely affect the ability of Phunware to maintain PhunCoin, which could have a material adverse effect on Phunware’s operations and financial condition. Failure by Phunware 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 fines.

The actual market for our solutions could be significantly smaller than estimates of total potential market opportunity and if customer demand for our services does not meet expectations, our ability to generate revenue and meet our financial targets could be adversely affected.

While we expect strong 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 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.

We are highly dependent on advertising agencies as intermediaries and this may adversely affect our ability to attract and retain business.

Nearly all of our media revenue comes from executing brand advertising campaigns for advertising agencies that purchase our solutions on behalf of their advertiser customers. Advertising agencies are instrumental in assisting brand owners to plan and purchase advertising and each advertising agency will allocate advertising spend from brands across numerous channels. We do not have exclusive relationships with advertising agencies and we depend on agencies to work with us as they embark on marketing campaigns for brands. While in some cases we are invited by advertising agencies to present directly to their advertiser customers or otherwise have developed a relationship directly with an advertiser, we nevertheless depend on advertising agencies to present to their advertiser customers the merits of our digital video advertising solutions. Inaccurate descriptions of our digital video advertising solutions by advertising agencies, over which we have no control, negative recommendations to use our service offerings or

73

failure to mention our solutions at all could hurt our business. In addition, if an advertising agency is dissatisfied with our solutions on a marketing campaign or in general, we risk losing the business of the advertiser for whom the campaign was run and of other advertisers represented by that agency. With advertising agencies acting as intermediaries for multiple brands, our customer base is more concentrated than might be reflected by the number of brand advertisers for which we conduct marketing campaigns. Since many advertising agencies are affiliated with other agencies in a larger corporate structure, if we fail to maintain good relations with one agency in such an organization, we may lose business from the affiliated agencies as well.

Our sales could be adversely impacted by industry changes relating to the use of advertising agencies. For example, if advertisers seek to bring their marketing campaigns in-house rather than using an advertising agency, we would need to develop direct relationships with the advertisers, which we might not be able to do and which could increase our sales and marketing expense. Moreover, because of dealing primarily with advertising agencies, we have a less direct relationship with advertisers than would be the case if advertisers dealt with us directly. This may drive advertisers to attribute the value we provide to the advertising agency rather than to us, further limiting our ability to develop long-term relationships directly with advertisers. Advertisers may move from one advertising agency to another, and, accordingly, even if we have a positive relationship with an advertising agency, we may lose the underlying business when an advertiser switches to a new agency. The presence of advertising agencies as intermediaries between us and the advertisers thus creates a challenge to building our own brand awareness and affinity with the advertisers that are the ultimate source of our revenue.

In addition, our advertising agency customers may offer components of our solutions, including selling advertising inventory through their own sources. As a result, these advertising agencies are, or may become, our competitors. If they further develop their capabilities they may be more likely to offer their own solutions to advertisers, which could compromise our ability to compete effectively and adversely affect our business, financial condition and operating results.

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 would cause our revenue and business to suffer.

Our business relies on our ability to deliver successful and effective video 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 video advertising campaign and could harm our reputation. It may be difficult for us to detect fraudulent or malicious activity because we do not own content and rely in part on our digital media properties to control such activity. These risks become more pronounced as the digital video industry shifts to programmatic buying. Industry self-regulatory bodies, the U.S. Federal Trade Commission (the “ FTC ”) and certain influential members of Congress have increased their scrutiny and awareness of and have taken recent actions to address, advertising fraud and other malicious activity. While we routinely review the campaign performance on our digital media properties’ inventory, such reviews may not detect or prevent fraudulent or malicious activity. If we fail to detect or prevent fraudulent 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 fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, 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. Further, if we are unable to detect fraudulent or other malicious activities and advertisers demand fraud-free inventory, our supply could fall drastically, making it impossible to sustain our current business model. If we fail to detect fraudulent or other 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 would suffer.

The mobile advertising market may develop more slowly than expected, which could harm our business.

If the market for mobile marketing and advertising develops more slowly than we expect, our business could suffer. Our future success is highly dependent on the commitment of advertisers and marketers to mobile communications as an advertising and marketing medium, the willingness of our potential advertisers to outsource

74

their mobile advertising and marketing needs and our ability to sell our mobile advertising services to reseller partners and agencies. The mobile advertising and marketing market is rapidly evolving. Businesses, including current and potential advertisers, may find mobile advertising or marketing to be less effective than traditional advertising media or marketing methods or other technologies for promoting their products and services. As a result, the future demand and market acceptance for mobile marketing and advertising is uncertain. Many of our current or potential advertisers may have little or no experience using mobile communications for advertising or marketing purposes and have allocated only a limited portion of their advertising or marketing budgets to mobile communications advertising or marketing and there is no certainty that they will allocate more funds in the future, if any. Funds to these types of campaigns may fluctuate greatly as different agencies and advertisers test and refine their overall marketing strategies to include mobile advertising and analytics tools. The adoption rate and budget commitments may vary from period to period as agencies and advertisers determine the appropriate mix of media and lead sources in short term and longer-term campaigns.

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 would 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 digital video 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.

We may experience foreign currency gains and losses and expect to continue to experience those gains and losses; fluctuations in currency exchange rates can adversely affect our profitability.

We may incur foreign currency transaction gains and losses, primarily related to foreign currency exposures that arise from British Pound Sterling and Euro denominated transactions that we expect to cash settle in the near term, which are charged against earnings in the period incurred. We have a program which utilizes foreign currency forward contracts designed to offset the risks associated with certain foreign currency transaction exposures. We may suspend the program from time to time. As a part of this program, we enter into foreign currency forward contracts so that increases or decreases in our foreign currency exposures are offset at least in part by gains or losses on the foreign currency forward contracts in an effort to mitigate the risks and volatility associated with our foreign currency transaction gains or losses. We expect that we will continue to realize gains or losses with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts. For example, we will experience foreign currency gains and losses in certain instances if it is not possible or cost effective to mitigate our foreign currency exposures, if our mitigation efforts are ineffective, or if we suspend our foreign currency forward contract program. Our ultimate realized loss or gain with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, whether we have entered into foreign currency forward contracts to offset these exposures and other factors. All of these factors could materially impact our results of operations, financial position and cash flows.

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

75

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 property 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 digital video 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 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 govern 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 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 proceedings or actions against us by governmental entities, competitors, private parties or others. Any 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 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 and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the digital advertising industry in particular. 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 would 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. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some

76

targeted advertising practices. In Europe, in October 2015 the Court of Justice of the European Union invalidated the “US-EU Safe Harbor framework,” which created a safe harbor under the European Data Protection Directive for certain European data transfers to the U.S. We had not self-certified under this regime and therefore were not directly affected by this decision. In July 2016, the European Commission approved the Privacy Shield, which is a set of principles and related rules that are intended to replace the US-EU Safe harbor framework. We are in the process of determining whether to join the Privacy Shield program. Stricter regulation of European data transfers to U.S. in future may impact our ability to serve European customers effectively, or require us to open and operate datacenters in the European Union which would result in a higher cost of doing business in these jurisdictions.

In particular, Europe’s new General Data Protection Regulation (“ GDPR ”) (which comes into force in May 2018) extends the jurisdictional scope of European data protection law. As a result, we will be 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. Complying with any new regulatory requirements 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.

The FTC has also adopted revisions to the Children’s Online Privacy Protection Act (“ COPPA ”) that expand liability for the collection of information by operators of websites and other electronic solutions that are directed to children. Questions exist as to how regulators and courts may interpret the scope and circumstances for potential liability under COPPA and the FTC continues to provide guidance and clarification as to its 2013 revisions of COPPA. FTC guidance or enforcement precedent may make it difficult or impractical for us to provide advertising on certain websites, services or applications. In addition, the FTC recently fined an ad network for certain methods of collecting and using data from mobile applications, including certain applications directed at children and failing to disclose the data collection to mobile application developers in their network.

While we have not collected data that is traditionally considered personal data, such as name, email address, physical address, phone numbers or social security numbers, we typically collect and store IP addresses, geo-location information and device or other persistent identifiers that are or may be considered personal data in some jurisdictions or otherwise may be the subject of legislation or regulation. For example, some jurisdictions in the EU regard IP addresses as personal data and certain regulators, such as the California Attorney General’s Office, have advocated for including IP addresses, GPS-level geolocation data and unique device identifiers as personal data under California law. Furthermore, when it enters into effect in May 2018, Europe’s 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 EU, the United States and elsewhere, especially relating to the classification of IP addresses, machine or device identifiers, geo-location 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 into the EU or other jurisdictions outside of the United States. Our failure to comply with evolving interpretations of applicable laws and regulations, 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.

In addition to compliance with government 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 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 properties.

77

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, 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 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 properties’ 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 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.

Our business is subject to the risks of earthquakes, fires, floods 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, mudslides, fire or flood, 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 located in California. We also have corporate offices in Texas and Florida, both of which are susceptible to floods and hurricanes. 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,

78

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. 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 indirectly disrupt our advertisers’ businesses, which could have a material adverse effect on our business, results of operations and financial condition.

Activities of our advertising 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 these 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 agreements with partners, employees and others may not adequately prevent disclosure of trade secrets and other proprietary 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 technologies, products and intellectual property 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 subject to income taxes in the United States and certain foreign jurisdictions. We use significant judgment in evaluating our worldwide income-tax provision. During 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 earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in currency exchange rates, 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.

79

Our international operations subject us to potential adverse tax consequences.

We generally conduct our international operations through wholly owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

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, 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 the Business Combination. At December 31, 2017, we had federal net operating loss carryforwards of approximately $80 million, which expire at various dates beginning in 2030. At December 31, 2017, we had state and local net operating loss carryforwards of approximately $29 million, which will begin to expire in 2030.

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 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 full valuation allowance against our net U.S. deferred tax assets should be applied as of December 31, 2017. 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.

We have a concentration of sales with key customers and any substantial reduction in sales to these customers would have a material adverse effect on our results of operations and financial condition.

During the year ended December 31, 2017, our sales were concentrated with Fox Networks Group (“ Fox ”) and Fetch Media, Ltd. (“ Fetch ”), which accounted for 44% and 11%, respectively of our net sales. During the year ended December 31, 2016, Fetch accounted for 49% of our net sales. The decline in percentage of sales to Fetch was due to a Fetch advertiser significantly dropping ad traffic, which directly caused a substantial decline in the amount of ads and media revenue through our publishing network. Fetch and Fox are currently of key importance to our business, and our results of operations would be materially adversely affected if these relationships ceased or were reduced in any material respect. We cannot guarantee that the volume of sales will remain consistent going forward. Any substantial change in traffic or purchasing decisions by these customers, whether due to actions by our competitors, industry factors or otherwise, could have a material adverse effect on our business, financial condition and results of operations.

If any of our largest customers are acquired, such acquisition may impact its advertising spending or budget with us, arising from factors such as rebranding, change in advertising agency, or change in media tactics. A

80

significant reduction in advertising spending or budgets by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from other existing customers, would have a material adverse effect on our business, financial condition and 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 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 a 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 collection of accounts receivable, result in significant reductions in services provided by us and may have a material adverse effect on our business, financial condition and results of operations.

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.

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.

We may not 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 claims by third parties. To the extent our business or property suffers any damages, losses or claims by third parties that are not covered or adequately covered by insurance, our financial condition may be materially adversely affected. We currently have directors’ and officers’ liability insurance. If we are unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage our company, which could have a material adverse effect on our business, financial condition and results of operations.

81

The report of our independent registered public accounting firm expresses substantial doubt about our ability to continue as a going concern.

Our auditor, Marcum LLP, has indicated in its report on our financial statements for the fiscal year ended December 31, 2017 that conditions exist that raise 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. 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, continued growth in services, improved operating margins and our ability to profitably meet our after-sale service commitments with existing customers. If we are unable to achieve these goals, our business would 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.

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

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of NASDAQ. The requirements of these rules and regulations will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time consuming and costly and may also place undue strain on our personnel, systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.

We are continuing the costly process of implementing and testing our systems to report our results as a public company, to continue to manage our growth and to implement internal controls. We will be required to implement and maintain various other control and business systems related to our equity, finance, treasury, information technology, other recordkeeping systems and other operations. As a result of this implementation and maintenance, management’s attention may be diverted from other business concerns, which could adversely affect our business. Furthermore, we supplement our internal team with third party software and system providers to support our reporting obligations to achieve effective internal controls.

To the extent we do not sufficiently manage these third parties, 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 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 intend to invest resources to comply with evolving 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 efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.

In addition, we expect these laws, rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain appropriate levels of coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly members to serve on our audit committee.

As a result of disclosure of information in this joint proxy statement/prospectus and in filings required of a public 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.

82