Phunware (PHUN) risk factors, FY2024 10-K

Risks Related to Our Business, Operations and Industry

1. 01We have a history of losses, we expect to continue to incur losses and we may not achieve or sustain profitability in the future
2. 02Our future performance will depend on the successful transition of our Chief Executive Officer (CEO)
3. 03If 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
4. 04Current and future litigation and arbitration proceedings could adversely affect us
5. 05Our 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
6. 06The 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
7. 07Substantial competition could reduce our market share and significantly harm our financial performance
8. 08Our future results will depend on our ability to continue to focus our resources and manage costs effectively
9. 09Our 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
10. 10maintaining effective customer relationships
11. 11of 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
12. 12Artificial Intelligence is an emerging area of technology that has and may further impact various aspects of our business operations and customer interactions. We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, financial condition and/or operating results
13. 13We 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 of Odyssey, Simplikate, Digby, Tapit!, GoTV and Lyte Technology, Inc
14. 14managing the varying intellectual property protection strategies and other activities of an acquired company
15. 15We may not be able to recognize revenue in the period in which our services are performed, which may cause our margins to fluctuate
16. 16Our financial results may be adversely affected by changes in accounting principles applicable to us
17. 17We 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
18. 18We may not be able to accurately forecast the amount and mix of future technology, products and services, size or duration of contracts, revenue and expenses and, as a result, our operating results may fall below our estimates
19. 19We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data
20. 20If 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
21. 21Our 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
22. 22If we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties, our business could be adversely affected
23. 23If 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
24. 24Increased costs of labor and employee health and welfare benefits may adversely impact our results of operations
25. 25If platform subscription renewal rates decrease, or we do not accurately predict subscription renewal rates, our future revenue and operating results may be harmed
26. 26If we are unable to attract new customers or sell additional products or services to our existing customers, our revenue growth will be adversely affected
27. 27Because 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
28. 28If 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
29. 29The 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
30. 30If we fail to detect advertising fraud or other actions that impact our advertising campaign performance, our reputation with advertisers or agencies could be impacted, which could cause our revenue and business to suffer
31. 31If we do not maintain and grow a critical mass of advertisers and distribution partners, the value of our services could be adversely affected
32. 32Any 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
33. 33Access to quality inventory at sufficient volumes to meet the needs of advertisers’ campaigns
34. 34We 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
35. 35Activities of our advertising customers with which we do business could damage our reputation or give rise to legal claims against us
36. 36Our 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
37. 37Our 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
38. 38Our agreements with partners, employees and others may not adequately prevent disclosure of trade secrets and other proprietary technology and information
39. 39We could be subject to additional income tax liabilities
40. 40Taxing 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
41. 41Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income
42. 42Our 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
43. 43If 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
44. 44The requirements of being a public company may strain our systems and resources, divert management’s attention and be costly
45. 45We 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
46. 46Our 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

1. 47The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations
2. 48The price of our common stock has been, and may continue to be, volatile, and you could lose all or part of your investment
3. 49major catastrophic events in our domestic and foreign markets, such as, but not limited to, natural disasters, terrorist attacks, cyber-attacks or disease outbreak, epidemic or pandemic
4. 50Our 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
5. 51with listing requirements would allow our common stock to be listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq listing requirements
6. 52If 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
7. 53We 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
8. 54Delaware 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
9. 55These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our board of directors or management

Risks Related to our Digital Asset Holdings

1. 56We currently hold and may acquire additional digital assets in the future, which may expose us to various risks associated with bitcoin and other digital assets
2. 57The prices of digital assets we may acquire, including bitcoin and ethereum, may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the prices of digital assets are likely to influence our financial results and the market price of our common stock
3. 58national and international economic and political conditions
4. 59digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings
5. 60If 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
6. 61significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure
7. 62A determination that a digital asset we hold 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

1. 63Because 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
2. 64The development and operation of the Token Ecosystem will likely require additional technology and intellectual property rights
3. 65The 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
4. 66The Token Ecosystem is susceptible to mining attacks
5. 67There is no trading market for PhunCoin
6. 68The delay, or perceived delay, in the full development of our Token Ecosystem may result in declines in PhunToken revenue
7. 69The laws and regulations applicable to digital assets, blockchain technologies, digital asset exchanges and offerings of and transactions in digital assets is complex and evolving, and new regulations or policies may materially adversely affect the development and the value of our tokens
8. 70The sale of PhunToken or the offerings of PhunCoin may subject us to additional regulatory requirements. We will be adversely affected if we are, or any of our subsidiaries is, determined to have been subject to registration as an investment company under the Investment Company Act
9. 71The prices of digital assets are volatile. Fluctuations in the prices of digital assets and/or waning interest of investors in the digital asset markets could materially and adversely affect the Token Ecosystem
10. 72expectations among the Token Ecosystem or other digital asset market participants that the value and/or utility of certain digital assets will soon change
11. 73Additionally, if our conclusions as to the characterization of PhunCoin and/or PhunToken change, the manner in which we have accounted for proceeds received related to each may change, which could also result in the need to restate prior financial information