Phunware, Inc.

Previous wording

Generative AI Tools for Internal Systems. We actively utilize generative AI tools to streamline internal processes and workflows for mobile app creation and development. We also plan to use predictive AI tools in the future to further enhance these processes. By applying these technologies, we expect to improve the quality and personalization of our mobile apps for customers and drastically reduce the time required to adapt our mobile app development framework to meet specific customer needs. We anticipate that these efficiencies will enable the Company to reduce mobile app development costs significantly and make high-quality customized mobile apps more accessible and affordable for small to medium sized businesses ("SMBs") and enterprises.

Current wording

The AI technology we initially used in the context of our platform is generative AI. We actively utilize generative AI tools to streamline internal processes and workflows for mobile app creation and development. We also plan to use predictive and agentic AI tools in the future to further enhance these processes. By applying these technologies, we expect to improve the quality and personalization of our mobile apps for customers and drastically reduce the time required to adapt our mobile app development framework to meet specific customer needs. We anticipate that these efficiencies will enable the Company to reduce mobile app development costs significantly and make high-quality customized mobile apps more accessible and affordable for small to medium sized businesses and enterprises.

Previous wording

AI Features and Functionalities for Engagement and Monetization. We are also developing AI Personal Concierge features and functionalities to serve as a human-like interface in our mobile apps for customers and users thereof to enhance engagement and provide our customers with innovative opportunities to further monetize their products and services with users.

Current wording

We recently developed an AI Personal Concierge generative AI product feature with functionalities to serve as a human-like interface in our mobile apps for our customers to enhance customer engagement with users and provide customers with innovative opportunities to further monetize their products and services with users. We are currently engaging with existing customers to run pilot testing programs with our AI Personal Concierge feature in their existing mobile applications.

Previous wording

We intend to continue investing for long-term growth. We have invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We also expect to continue investing in the development and improvement of new and existing products and services to address customers’ needs. We currently do not expect to be profitable in the near future.

Current wording

We intend to continue investing for long-term growth. We have also invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We also expect to continue investing in the development and improvement of new and existing products and services to address customers’ needs. We currently do not expect to be profitable in the near future.

Previous wording

Backlog represents future amounts to be invoiced under our active contracts. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue, accounts receivable or elsewhere in our condensed consolidated financial statements and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals. We reasonably expect approximately 52% of our backlog as of March 31, 2025 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.

Current wording

Backlog represents future amounts to be invoiced under our active contracts. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue, accounts receivable or elsewhere in our condensed consolidated financial statements and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals. We reasonably expect approximately 44% of our backlog as of June 30, 2025 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure. We believe adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define adjusted EBITDA as net loss plus (i) interest expense, net of interest income (ii) income tax expense, (iii) depreciation, and further adjusted for (iv) non-cash impairment, (v) valuation adjustments and (vi) stock-based compensation expense.

Current wording

Adjusted EBITDA is a non-GAAP financial measure. We believe adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define adjusted EBITDA as net loss plus or (minus) (i) depreciation, (ii) interest expense, (iii) (interest income), (iv) income tax expense, and further adjusted for (v) stock-based compensation expense, (vi) non-cash impairment and valuation adjustments.

Previous wording

Software subscriptions and services gross profit is equal to software subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to platform subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of our software platform are expensed in research and development. As a result, platform subscriptions and services gross profit may fluctuate from period to period.

Current wording

Software subscriptions and services gross profit is equal to software subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to platform subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of our software platform are expensed in research and development. As a result, software subscriptions and services gross profit may fluctuate from period to period.

Previous wording

Net revenues decreased $0.2 million, or (25.3%), for the three months ended March 31, 2025 compared to the corresponding period in 2024, as a result of a decrease in advertising campaigns, which was partially offset by an increase in software development revenue as a result of delivered customer projects.

Current wording

Net revenue decreased $0.8 million, or (40.8%), for the six months ended June 30, 2025 compared to the corresponding period in 2024, as a result of a decrease in advertising campaigns mainly due to softening demand from advertising agency partners, which was partially offset by an increase in software development revenue as a result of delivered customer projects.

Previous wording

Sales and marketing expense increased $0.5 million, or 102.3% for the three months ended March 31, 2025, compared to the corresponding periods of 2024, primarily due to an increase in corporate marketing and sales consultants.

Current wording

Sales and marketing expense increased $0.1 million, or 13.3% for the three months ended June 30, 2025, compared to the corresponding period of 2024, due to an increase in sales consultants.

Previous wording

General and administrative expense increased $1.0 million, or 40.2%, for the three months ended March 31, 2025 compared to the corresponding period of 2024, due to a $1.5 million increase in professional fees, mainly related to legal fees for the Company's Wild Basin litigation. This increase was partially offset by a $0.5 million decrease in stock-based compensation expense.

Current wording

General and administrative expense increased $1.5 million, or 31.1%, for the six months ended June 30, 2025 compared to the corresponding period of 2024, due to a $2.1 million increase in professional fees, mainly related to legal fees for the Company's Wild Basin litigation and consultants, as well as a $0.3 million increase in other operating expenses as described above. This increase was partially offset by a $1.0 million decrease in stock-based compensation expense.

Previous wording

Research and development expense increased $0.3 million, or 68.0%, for the three months ended March 31, 2025, compared to the corresponding periods of 2024, primarily as a result of an increase in payroll and related expenses as a result of higher headcount and an increase in consulting fees for engineering consultants.

Current wording

Research and development expense increased $0.5 million, or 95.6%, and $0.8 million, or 81.9%, for the three and six months ended June 30, 2025, respectively, compared to the corresponding periods of 2024, primarily as a result of an increase in payroll and related expenses as a result of higher headcount and an increase in consulting fees for engineering consultants related to our AI initiatives.

Previous wording

During the three months ended March 31, 2025, we recorded other income of $1.1 million, primarily as a result of interest income from cash and cash equivalents. During the three months ended March 31, 2024, we recorded other income of approximately $0.6 million, primarily as a result of gain on extinguishment of debt on our 2022 Promissory Note, as amended.

Current wording

During the six months ended June 30, 2025 and 2024, we recorded other income of approximately $2.2 million and $0.9 million, primarily as a result of interest income earned from cash and cash equivalents, and in 2024 a gain on extinguishment of debt on our 2022 Promissory Note, as amended.

Previous wording

As of March 31, 2025, we held total cash of $109.7 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

Current wording

As of June 30, 2025, we held total cash of $106.3 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.

Previous wording

On June 4, 2024, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”), as representative of certain agents, pursuant to which we could offer and sell, from time to time, shares of our common stock for aggregate gross proceeds of up to $120 million, through the agents. On November 1, 2024, we entered into an Amended and Restated Equity Distribution Agreement (amending the June 4, 2024 Equity Distribution Agreement) with Canaccord, and filed a registration statement on Form S-3MEF relating to the Company's existing registration statement on Form S-3 originally filed in 2022, pursuant to which we increased the aggregate amount of shares of our common stock that we were entitled to sell under our at-the-market facility to an aggregate offering price of approximately $171.5 million. During the three months ended March 31, 2025, we sold an aggregate of 14,210 shares of our common stock under our At Market Issuance Sales Agreement with Wainwright and Equity Distribution Agreement with Canaccord for aggregate gross cash proceeds of approximately $0.1 million. On February 9, 2025, the aforementioned registration statement on Form S-3 expired (including the subsequent registration statement on Form S-3MEF), and as a result, the Amended and Restated Equity Distribution Agreement with Canaccord terminated.

Current wording

On June 4, 2024, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”), as representative of certain agents, pursuant to which we could offer and sell, from time to time, shares of our common stock for aggregate gross proceeds of up to $120 million, through the agents. On November 1, 2024, we entered into an Amended and Restated Equity Distribution Agreement (amending the June 4, 2024 Equity Distribution Agreement) with Canaccord, and filed a registration statement on Form S-3MEF relating to the Company's existing registration statement on Form S-3 originally filed in 2022, pursuant to which we increased the aggregate amount of shares of our common stock that we were entitled to sell under our at-the-market facility to an aggregate offering price of approximately $171.5 million. During the six months ended June 30, 2025, we sold an aggregate of 14,210 shares of our common stock under our Equity Distribution Agreement with Canaccord for aggregate gross cash proceeds of approximately $0.1 million. On February 9, 2025, the aforementioned registration statement on Form S-3 expired (including the subsequent registration statement on Form S-3MEF), and as a result, the Amended and Restated Equity Distribution Agreement with Canaccord terminated.

Previous wording

We utilized $3.3 million of cash from operating activities during the three months ended March 31, 2025, resulting in a net loss of $3.7 million. The net loss included non-cash charges of $0.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash increase of $0.2 million, primarily relating to an increase in accounts payable and accrued expenses partially offset by an increase in accounts receivable.

Current wording

We utilized $6.8 million of cash from operating activities during the six months ended June 30, 2025, resulting in a net loss of $6.9 million. The net loss included non-cash charges of $0.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash increase of $0.1 million.

Previous wording

We utilized $5.5 million of cash from operating activities during the three months ended March 31, 2024, resulting in a net loss of $2.3 million. The net loss included non-cash charges of $0.4 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $3.5 million, primarily relating to a decrease in accounts payable and accrued expenses.

Current wording

We utilized $8.2 million of cash from operating activities during the six months ended June 30, 2024, resulting in a net loss of $4.9 million. The net loss included non-cash charges of $1.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $4.5 million, primarily relating to a decrease in accounts payable and accrued expenses.

Previous wording

We did not have any investing activities during the three months ended March 31, 2025 and 2024.

Current wording

We did not have any investing activities during the six months ended June 30, 2025 and 2024.

Previous wording

Our financing activities during the three months ended March 31, 2025 and 2024 consisted of various sales of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Company's financing activities.

Current wording

Our financing activities during the six months ended June 30, 2025 and 2024 consisted of various sales of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Company's financing activities.