Phunware(PHUN)2025-03-31 21:28Customer Concentration - For the fiscal year ended December 31, 2024, three customers collectively represented 34% of Phunware's net revenues[35]. Research and Development - Research and development expenses were 4.4 million for the fiscal years ended December 31, 2024 and 2023, respectively[45]. - The company has made significant investments in research and development to enhance existing product offerings and introduce new technologies[45]. - Phunware plans to continue extending the functionality and scale of its mobile applications, focusing on mobile products and services as one of the fastest-growing technology markets[37]. - The company is developing a new generative AI-driven software development platform aimed at enabling businesses to create custom mobile applications more quickly and at a lower cost[46]. - Phunware holds 18 issued patents, six pending patents, and one allowed patent in various areas including content management and location services[31]. - The company holds 17 issued patents in the United States, with expiration dates ranging from 2027 to 2037, and one patent in Japan expiring in 2031[60]. Financial Performance - The company experienced a consolidated net loss for the years ended December 31, 2024, and December 31, 2023, attributed to a decline in platform revenue and goodwill impairment[71]. - Future profitability will depend on the company's ability to manage costs effectively; failure to do so could lead to decreased operating margins and additional losses[85]. - The company may not be able to accurately forecast future revenue and expenses, leading to potential shortfalls in operating results[104]. - The company acknowledges that the actual market for its products may be smaller than estimated, which could adversely affect revenue generation and financial targets[81]. - The company has identified a material weakness in its internal control over financial reporting, which could impact the reliability of its financial information and investor confidence[105]. - The company may experience fluctuations in quarterly operating results due to various factors, including customer spending changes and competitive dynamics, making future performance difficult to predict[103]. - The company has incurred significant legal, accounting, and other expenses as a public entity, which may continue to affect its profitability[71]. Competition and Market Risks - The company faces significant competition in its market, with larger competitors having greater resources and established marketing relationships, which could adversely affect its market share and financial performance[82]. - The company must adapt to rapid technological changes and evolving customer preferences to maintain its competitive advantage[78][79]. - The company is focused on expanding its partnership network with third-party providers to enhance its competitive position in the market[41]. - The company may pursue strategic acquisitions to expand its business, but these acquisitions carry risks such as integration difficulties and potential negative impacts on financial performance[96]. Sales and Customer Relationships - The company aims to deepen existing customer relationships and create cross and upsell opportunities within its customer base[38]. - Future growth is dependent on the successful acquisition of new customers and the renewal of contracts with existing customers[74][76]. - The company plans to continue expanding its sales efforts, although it may face challenges in hiring and training qualified sales personnel[75]. - The company’s ability to attract new customers or sell additional products to existing customers is crucial for revenue growth, and challenges in this area could adversely affect financial performance[119]. Legal and Regulatory Risks - The company is subject to various evolving laws and regulations that could adversely affect its business operations and practices[57][58]. - The company faces risks related to ongoing litigation, which could impose substantial costs and negatively impact its financial condition[77]. - The company is subject to various U.S. and non-U.S. laws regarding the protection of sensitive customer and employee data, which could lead to substantial penalties if violated[108]. - The company must comply with various laws and regulations as a public entity, which may increase costs and divert management's attention from revenue-generating activities[149]. - The company received a notice from Nasdaq on January 10, 2025, indicating non-compliance with listing rules due to not holding an annual meeting within 12 months of year-end for the fiscal year ended December 31, 2023[169]. - The company submitted a compliance plan to Nasdaq requesting an extension to June 30, 2025, to regain compliance with listing requirements[169]. Digital Assets and Blockchain - The company holds digital assets, including bitcoin, which have experienced significant price volatility, trading below 104,000 per bitcoin during 2024[181]. - The company is examining the risks and rewards of its bitcoin acquisition strategy, which may adversely impact its financial condition if the price of bitcoin falls[179]. - The company may change the means of holding its bitcoin assets, which could materially impact its results of operations and the carrying value of bitcoin on its balance sheet[180]. - The prices of digital assets held by the company may be influenced by regulatory, commercial, and technical factors, leading to potential fluctuations in financial results[182]. - The company faces risks related to the unregulated nature of digital asset trading venues, which may experience fraud or operational problems[188]. - The digital asset market has experienced extreme price volatility due to events such as the bankruptcies of Celsius Network, Voyager Digital Ltd., and FTX, undermining confidence in the market[190]. - The company’s digital asset holdings may be affected by various factors, including public sentiment regarding environmental impacts and competition from other digital assets[186]. - The Token Generation Event, which is crucial for the launch of PhunCoin, may not be consummated, potentially affecting future sales and financial condition[202]. - The development and acceptance of blockchain networks are subject to high uncertainty, which could adversely affect business plans and stockholder interests[203]. - The reliance on third-party blockchain technology exposes the Token Ecosystem to risks of wallet incompatibility and protocol malfunctions[204]. - The Token Ecosystem's operation may depend on technology and intellectual property rights from third parties, and failure to comply could adversely affect operations[205]. - The Token Ecosystem utilizes sensitive personal information, exposing the company to privacy data breach risks[209]. - Security breaches could harm the Token Ecosystem's reputation and erode user confidence, negatively impacting user acquisition and retention[211]. - The Token Ecosystem is still in an early development stage, with no assurances of uninterrupted or fully secure creation, transfer, or storage of PhunCoin and PhunToken, potentially leading to complete loss of users' investments[214]. - The Token Ecosystem is susceptible to various mining attacks, including double-spend and majority mining power attacks, which pose risks to the security of PhunCoin and PhunToken[215]. - There is currently no established public market for PhunCoin, and the development of a secondary market is uncertain, which could adversely affect liquidity and value[217]. - Delays in the development of the Token Ecosystem may lead to declines in PhunToken revenue, as customers may seek alternative methods to use or transact their tokens[218]. - The evolving laws and regulations regarding digital assets could materially impact the development and value of PhunCoin and PhunToken, with potential fines and penalties for non-compliance[219]. - If the company is deemed an "investment company" under the Investment Company Act, it could face increased regulatory requirements that may adversely affect business operations and financial condition[220]. - Potential violations of the Investment Company Act could lead to legal actions, including injunctions and lawsuits from investors, which would materially affect the company's business[221]. Operational Risks - The company relies on fixed-price contracts for a significant portion of its work, which poses risks related to cost overruns and project management challenges[86]. - The lengthy and unpredictable sales cycle may hinder the company's ability to forecast sales accurately, impacting revenue and cash flows[122]. - The company may face significant reputational harm and financial liability due to potential security breaches or unauthorized disclosures of confidential information[107]. - Increased labor costs and employee benefits could adversely impact the company's results of operations[117]. - The company faces significant risks related to advertising fraud, which could harm its reputation and revenue[123]. - The company's success heavily relies on maintaining and growing a critical mass of advertisers and distribution partners, as any decline could adversely affect the value of its services[124]. - The ability to deliver successful mobile advertising campaigns is crucial; technological challenges or failure to demonstrate success could hinder growth and retention of the advertiser base[125]. - Revenue is dependent on the performance of internal and third-party systems used for ad placement and monitoring; system failures could significantly reduce attractiveness to advertisers and impact revenue[126]. - The company must ensure that advertisements are placed in appropriate contexts to maintain its reputation; failure to do so could lead to loss of advertisers and revenue[127]. - The company faces potential legal liabilities due to the advertising practices of its customers, which could damage its reputation and lead to costly legal claims[128]. - Limitations on data collection and processing could significantly diminish the value of the company's solutions, leading to loss of customers and revenue[130]. - The company relies on confidentiality agreements to protect proprietary information, but these may not be effective, leading to potential unauthorized disclosures and competitive disadvantages[140]. - The company is subject to income tax liabilities and uncertainties in tax assessments, which could materially affect operating results and cash flows[141]. - As of December 31, 2024, the company had federal net operating loss carryforwards of approximately 162.5 million never expiring and 236.7 million, with the majority beginning to expire in 2030 if not utilized[143]. - The company sold and issued common stock during 2024 via at-the-market offerings and public offerings under a shelf registration statement, which may result in dilution to existing stockholders[158]. - The company may need additional capital in the future to continue planned operations, potentially through equity offerings, debt financings, or other arrangements, which could adversely affect stockholder rights[158]. - The company is subject to the risks of financial institutions failing, which could impair access to cash and cash equivalents necessary for operations[160]. - The trading price of the company's common stock has been volatile, influenced by various factors including market conditions and company announcements[162]. - The company is a "smaller reporting company," which allows it to use reduced reporting requirements, potentially making its stock less attractive to some investors[155]. - The company faces risks related to large customers having substantial negotiating leverage, which may adversely affect business terms and conditions[146]. - The company has a diverse customer base, and financial distress among customers could negatively impact its financial position and results[147].