Phunware (PHUN) Financial Report Summaries

Risks

• Risks Related to Our Business, Operations and Industry
• We have a history of losses, we expect to continue to incur losses and we may not achieve or sustain profitability in the future.
• Our future performance will depend on the successful transition of our Chief Executive Officer (CEO).
• We are currently operating in a period of significant macro-economic uncertainty, including supply-chain disruptions and inflationary pressures. Weakened economic conditions may have an adverse impact on our business and results of operations.
• 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.
• We have incurred a goodwill impairment charge.
• Current and future litigation could adversely affect us.
• Our results of operations and ability to grow could be negatively affected if we cannot adapt and expand our technology and product and service offerings in response to ongoing market changes.
• Demand for our technology, product and service offerings could be adversely affected by volatile, negative, or uncertain economic conditions and the effects of these conditions on our customers’ businesses.
• Global political conditions may adversely affect demand for our products.
• The actual market for our products and services could be significantly smaller than estimates of total potential market opportunity and if customer demand for our products and services does not meet expectations, our ability to generate revenue and meet our financial targets could be adversely affected.
• Substantial competition could reduce our market share and significantly harm our financial performance.
• Our future results will depend on our ability to continue to focus our resources and manage costs effectively.
• Our 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 business strategy is evolving. Investments in new services and technologies may not be successful and may involve pursuing new lines of business or strategic transactions and investments, or dispositions of assets or businesses that may no longer help us meet our objectives. Such efforts may not be successful.
• Future acquisitions could disrupt our business and may divert management’s attention and, if unsuccessful, harm our business.
• We may not be able to recognize revenue in the period in which our services are performed, which may cause our margins to fluctuate.
• Our financial results may be adversely affected by changes in accounting principles applicable to us.
• We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations.
• We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data.
• If we cause disruptions in our customers’ businesses or provide inadequate service, our customers may have claims for substantial damages against us, which could cause us to lose customers, have a negative effect on our corporate reputation and adversely affect our results of operations.
• Our technology offerings and services could infringe upon the intellectual property rights of others or we might lose our ability to use intellectual property of others.
• If we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties, our business could be adversely affected.
• If we are unable to collect our receivables from, or bill our unbilled services to, our customers, our business, results of operations or financial condition could be adversely affected.
• Increased costs of labor and employee health and welfare benefits may adversely impact our results of operations.
• Our global operations are subject to complex risks, some of which might be beyond our control.
• Economic uncertainties or downturns in the global economy or the industries in which our customers operate could disproportionately affect the demand for our products and services solutions and negatively impact our operating results.
• If platform subscription renewal rates decrease, or we do not accurately predict subscription renewal rates, our future revenue and operating results may be harmed.
• If we are unable to attract new customers or sell additional products or services to our existing customers, our revenue growth will be adversely affected.
• Because we recognize revenue from application development services as deliverables are transferred to customers and platform subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our operating results.
• If we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.
• The length and unpredictability of the sales cycle for our technology, products and services could delay new sales and cause our revenue and cash flows for any given quarter to fail to meet our projections or market expectations.
• If we fail to detect advertising fraud or other actions that impact our advertising campaign performance, we could harm our reputation with advertisers or agencies, which could cause our revenue and business to suffer.
• If we do not maintain and grow a critical mass of advertisers and distribution partners, the value of our services could be adversely affected.
• Any inability to deliver successful mobile advertising campaigns due to technological challenges or an inability to persuasively demonstrate success will prevent us from growing or retaining our current advertiser base.
• We may be unable to deliver advertising in a context that is appropriate for mobile advertising campaigns, which could harm our reputation and cause our business to suffer.
• Activities of our application transaction customers with which we do business could damage our reputation or give rise to legal claims against us.
• Our business depends on our ability to collect and use data to deliver ads and to disclose data relating to the performance of our ads; any limitation on these practices could significantly diminish the value of our solutions and cause us to lose customers and revenue.
• Our business practices with respect to data could give rise to liabilities, restrictions on our business or reputational harm as a result of evolving governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.
• Our agreements with partners, employees and others may not adequately prevent disclosure of trade secrets and other proprietary technology and information.
• We could be subject to additional income tax liabilities.
• Taxing authorities may successfully assert that we should have collected or in the 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.
• Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
• Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business.
• If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results.
• If we are unable to obtain and maintain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors may also be adversely affected if we experience difficulty in maintaining adequate directors’ and officers’ liability insurance.
• The requirements of being a public company may strain our systems and resources, divert management’s attention and be costly.
• We are a "smaller reporting company" and, because we have opted to use the reduced reporting requirements available to us, our common stock may be less attractive to investors.
• Our business is subject to the risks of natural disasters, public health crises, political crises and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.
• Risks Related to Capitalization Matters, Corporate Governance and Market Volatility
• We have and may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business. Future sales or issuances of our common stock, or the perception that such sales could occur, could depress the trading price of our common stock.
• The price of our common stock and warrants has been, and may continue to be, volatile, and you could lose all or part of your investment.
• Our failure to meet the continued listing requirements of the Nasdaq Capital Market could adversely affect our business and our ability to maintain the listing of our common stock on the Nasdaq Capital Market.
• If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
• We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
• Delaware law and our certificate of incorporation and bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
• Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and also provides that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or Exchange Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
• We may acquire additional digital assets in the future, which may expose us to various risks associated with bitcoin and other digital assets.
• The prices of digital currencies, including bitcoin and ethereum, may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of bitcoin are likely to influence our financial results and the market price of our common stock.
• If we or third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital asset holdings, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.
• The loss or destruction of a private key required to access our digital asset wallets may be irreversible. If we are unable to access our private keys or if we experience a cyberattack or other data loss relating to our digital asset holdings, our financial condition and results of operations could be materially adversely affected.
• A determination that bitcoin or any other digital asset is a "security" could lead to our classification as an “investment company” under the Investment Company Act of 1940 and could adversely affect the market price of our digital asset holdings and the market price of our common stock.
• Risks Related to our Token Ecosystem and Tokens
• We have raised capital to fund a Token Generation Event of rights to receive future PhunCoin, and beginning in 2021 we created and sold PhunToken. There can be no assurance that PhunCoin will ever be issued, and any significant difficulties we may experience with the offerings of PhunCoin or sales of PhunToken could result in claims against us. Additionally, the Token Generation Event and the offerings of PhunCoin and sales of PhunToken could subject us to various other business and regulatory uncertainties.
• The further development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets could have a material adverse effect on our business plans, which may have a material adverse effect on the Company and our stockholders.
• Because our tokens will be digital assets built and transacted initially on top of existing third-party blockchain technology, Phunware is reliant on another blockchain network, and users could be subject to the risk of wallet incompatibility and blockchain protocol risks.
• The development and operation of the Token Ecosystem will likely require additional technology and intellectual property rights.
• The Token Ecosystem is designed to distribute PhunCoin or PhunToken to consumers who provide certain personal information to us. Providing this data exposes us to risks of privacy data breach and cybersecurity attacks.
• The Token Ecosystem may be the target of malicious cyberattacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of PhunCoin or PhunToken. If Token Ecosystem’s security is compromised or if the Token Ecosystem is subjected to attacks that frustrate or thwart our users’ ability to access the Token Ecosystem, their PhunCoin, PhunToken or the Token Ecosystem products and services, users may cease using the Token Ecosystem altogether.
• The Token Ecosystem is susceptible to mining attacks.
• The delay, or perceived delay, in the full development of our Token Ecosystem may result in declines in PhunToken revenue.
• The regulatory regime governing blockchain technologies, digital assets, digital asset exchanges and offerings of and transactions in digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of our tokens.
• The prices of digital assets are extremely volatile. Fluctuations in the prices of digital assets and/or waning interest of investors in the digital asset markets could materially and adversely affect our business.