Phunware, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. The Company and Basis of Presentation

The Company

Phunware, Inc. and its subsidiaries (the “Company,” "Phunware," "we," "us" or "our") offers a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios and audiences. Our technology is available in a cloud-based prepackaged vertical solution application, Software Development Kit ("SDK") form for organizations developing their own application and through customized development services. We also provide advertising services that drive mobile audience building, user acquisition, application discovery, audience engagement and audience monetization. Founded in 2009, we are a Delaware corporation headquartered in Austin, Texas.

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and rules and regulations of the Securities and Exchange Commission (“SEC”) and include the Company’s accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The balance sheet as of December 31, 2025 was derived from our audited consolidated financial statements, but these interim condensed consolidated financial statements do not include all the annual disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, which are referenced herein. The accompanying interim condensed consolidated financial statements as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited financial statements, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP and the SEC have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly state our financial position as of June 30, 2026, the results of operations for the three and six months ended June 30, 2026 and 2025, and cash flows for the six months ended June 30, 2026 and 2025. The results for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any future interim period.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

2. Summary of Significant Accounting Policies

There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2025, except as set forth below.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). The amendments in the update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the disclosure requirements related to this new standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) - Narrow-Scope Improvements. The amendments in this ASU clarify interim disclosure requirements and the applicability of Topic 270. It does not fundamentally change the nature of interim reporting or expand/reduce disclosure requirements but makes the guidance easier to navigate and apply. This ASU compiles a list of required interim disclosures from across the GAAP Codification into ASC 270, making it easier for preparers to identify what disclosures are required for interim periods. The amendments in this ASU are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is still evaluating the impact of the adoption of this ASU.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material.

3. Supplemental Information

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable and our digital asset holdings.

Although we limit our exposure to credit loss by depositing our cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, our deposits, at times, may exceed Federal Deposit Insurance Corporation ("FDIC") insured limits. Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of three months or less. As of June 30, 2026, the Company exceeded FDIC insurance limits in its insured bank accounts by approximately$0.2 million and held approximately$91.7 million in non-FDIC insured cash equivalent accounts. Included in cash equivalents are money market investments with original maturity dates when purchased of less than ninety days and are carried at fair value. Unrealized gains are included in interest income in the condensed consolidated statements of operations. As of December 31, 2025, we exceeded FDIC insurance limits by approximately$0.3 million in our insured bank accounts and held approximately$100.0 million non-FDIC insured cash equivalent accounts. The Company hadno restricted cash as of June 30, 2026 and December 31, 2025.

There is currently no clearing house for our digital assets, including our bitcoin holdings, nor is there a central or major depository for the custody of our digital assets. There is a risk that some or all of our digital asset holdings could be lost or stolen. There can be no assurance that the exchanges or custodians will maintain adequate insurance or that such coverage will cover losses with respect to our digital asset holdings. Further, transactions denominated in digital assets are irrevocable. Stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed transactions could adversely affect our financial condition.

Collateral is not required for accounts receivable, and we believe the carrying value approximates fair value. The following table sets forth our concentration of accounts receivable, net of specific allowances for credit losses.

Additional Disclosures

Prepaid expenses and other current assets consisted of the following:

Accrued expenses consisted of the following:

Refer to Note 7, "Commitments and Contingencies" in our Annual Report on Form 10-K filed with the SEC on March 27, 2026 for further discussion on our litigation settlement.

Loss per Common Share

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.

The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been anti-dilutive:

4. Revenue

Software subscriptions and services revenue consist of software license subscriptions and application development and support services. Advertising revenue is comprised of in-app advertising. Refer to our revenue recognition policy under the subheading, Revenue Recognition, in Note 2, “Summary of Significant Accounting Policies,”in our Annual Report on Form 10-K filed with the SEC on March 27, 2026.

Disaggregation of Revenue

The following table sets forth our net revenue by category:

The following table sets forth our concentration of revenue sources as a percentage of total net revenue:

We generate revenue in domestic and foreign regions and attribute net revenue to individual countries based on the location of the contracting entity. We derived 99% and 98% of our net revenue from within the United States for the three and six months ended June 30, 2026, respectively, and 98% of our net revenue from within the United States for both the three and six months ended June 30, 2025.

Deferred Revenue

Deferred revenue consists of customer billings or payments received in advance of the recognition of revenue under the arrangements with customers. We recognize deferred revenue as revenue only when revenue recognition criteria are met. During the six months ended June 30, 2026, we recognized revenue of$1.0 million that was included in our deferred revenue balance as of December 31, 2025.

Remaining Performance Obligations

Remaining performance obligations were$3.2 million as of June 30, 2026, of which we expect to recognize approximately 59% as revenue over the next 12 months and the remainder thereafter.

5. Leases

Further information regarding our office leases and accounting thereof are located in Note 2, “Summary of Significant Accounting Policies,” and Note 6, “Leases,”in our Annual Report on Form 10-K filed with the SEC on March 27, 2026.

We recognize lease expense on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in general and administrative expense in our condensed consolidated statements of operations. Lease expense for the three months ended June 30, 2026 and 2025 was$0.1 million and$0.1 million, respectively. Lease expense for the six months ended June 30, 2026 and 2025 was$0.2 million and$0.2 million, respectively. The weighted-average remaining lease term for operating leases as of June 30, 2026 was 1.25 years.

Future minimum lease obligations are set forth below:

6. Commitments and Contingencies

Litigation

There have been no material changes to the disclosures related to our litigation matters since the filing of our Annual Report on Form 10-K for the year ended December 31, 2025. See Note 7, "Commitments and Contingencies" and Note 13, "Related Party Transactions," in our Annual Report on Form 10-K filed with the SEC on March 27, 2026.

7. Stockholders’ Equity

Common Stock

Total common stock authorized to be issued as of June 30, 2026, was 1,000,000,000 shares, with a par value of $0.0001 per share. As of June 30, 2026 and December 31, 2025, there were 20,449,022 and 20,188,160 shares of our common stock outstanding, respectively.

On May 21, 2026, we entered into an Equity Distribution Agreement with The Benchmark Company ("Benchmark") and StoneX Financial, Inc. ("StoneX"), pursuant to which we can offer and sell, from time to time, shares of our common stock, par value $0.0001 per share, for aggregate gross proceeds of up to $15.3 million through Benchmark and StoneX as agents.

During the six months ended June 30, 2026, we did not sell any shares of our common stock under the Equity Distribution Agreement with Benchmark and StoneX.

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, par value $0.0001 per share, for aggregate gross proceeds of up to $120 million, through the agents. Additionally, on November 1, 2024, we entered into an Amended and Restated Equity Distribution Agreement with Canaccord, as representative of certain agents, pursuant to which we increased the aggregate amount of shares of our common stock that we could sell under our at-the-market facility to an aggregate offering price of approximately $171.5 million. On February 9, 2025, the registration statement which registered the shares issuable under the Amended and Restated Equity Distribution Agreement expired and the agreement with Canaccord terminated officially via a Notice of Termination effective May 13, 2026.

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$0.1 million.

8. Stock-Based Compensation

Except as set forth below, there have been no material changes to the terms of our various equity incentive plans since the filing of our Annual Report on Form 10-K for the year ended December 31, 2025. Refer to Note 10, “Stock-Based Compensation,” in our Annual Report on Form 10-K filed with the SEC on March 27, 2026 for more information.

2026 Inducement Plan

In June 2026, our board of directors adopted the Phunware, Inc. 2026 Inducement Plan (the " 2026 Inducement Plan"). As permitted by Nasdaq Listing Rules, our stockholders were not required to approve the 2026 Inducement Plan. The 2026 Inducement Plan provides for the issuance of up to 1,500,000 shares of our common stock under awards granted to newly hired employees. An "award" is any right to receive common stock of the Company consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards or restricted stock units. Shares will be delivered electronically to the holder shortly after exercise or vest date pursuant to an effective registration statement, including, without limitation, the registration statement on Form S-8 (File No. 333-297031) dated effective June 25, 2026.

Stock-Based Compensation

Compensation costs that have been included in our condensed consolidated statements of operations for all stock-based compensation arrangements are set forth below:

Restricted Stock Units

A summary of our restricted stock unit activity related to our various equity incentive plans for thesix months ended June 30, 2026 is set forth below:

In April 2026, we granted equity awards of 253,953 restricted stock units to certain non-employee board members and a former board member pursuant to the Company's Outside Director Compensation Policy with a grant date fair value of $1.85. The awards vested immediately.

In June 2026, we granted an equity award of 105,820 time-based restricted stock units to a newly hired executive with a grant date fair value of $1.89. The grant is subject to a three-year vesting schedule with one-third of the grant vesting on May 13, 2027, and the remaining amount vesting in quarterly installments thereafter, subject to the executive's continued employment with the Company.

We also granted the executive an equity award of 317,460 performance-based restricted stock units. The performance-based restricted stock units are subject to the executive's achievement of a volume weighted average price of the Company's common stock at or above $5.00 for 20 days and revenue of at least $4.5 million for a trailing 12-month period (excluding professional services revenue). The vesting may be prorated at the discretion of the Company's Board of Directors in the event the executive terminates from the Company without cause within one year. The term of the grant is one year and is subject to the executive's continued employment with the Company.

As of June 30, 2026, there was approximately$0.3 million of total unrecognized compensation cost related to restricted stock grants. These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 2.24 years.

Stock Options

A summary of our stock option activity related to our various equity incentive plans for thesix months ended June 30, 2026 is set forth below:

In June 2026, we granted an equity award in the form of a non-statutory stock option to purchase 105,820 shares of Company common stock to a newly hired executive with an exercise price of $5.00 per share. The grant is subject to a four-year vesting schedule with one-fourth of the grant vesting on May 13, 2027, and the remaining amount vesting in quarterly installments thereafter, subject to the executive’s continued employment with the Company.

As of June 30, 2026, there was approximately$0.2 million of total unrecognized compensation cost related to stock option grants. These unrecognized compensation costs are expected to be recognized over an estimated weighted-average period of approximately 3.87 years.

Additional Disclosures

Our equity incentive plans had 2,950,883 and 1,232,912 shares of common stock reserved for future issuances as of June 30, 2026 and December 31, 2025, respectively. In addition, the shares of common stock reserved for issuance under the 2018 Equity Incentive Plan (the "2018 Plan") will also include any shares of common stock subject to stock options granted under the 2009 Equity Incentive Plan (the "2009 Plan"), that expire or otherwise terminate without having been exercised in full and shares of common stock issued pursuant to awards granted under the 2009 Plan that are forfeited. As of June 30, 2026, the maximum number of shares of common stock that may be added to the 2018 Plan pursuant to the foregoing is 883.

Furthermore, there were 79,543 and 63,167 shares of common stock available for sale and reserved for issuance under our 2018 Employee Stock Purchase Plan as of June 30, 2026 and December 31, 2025, respectively.

9. Segment Reporting

Business segments are components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (the "CODM") to assess operating performance and allocate resources. Our CODM is our chief executive officer. Our operations are organized by management into operating segments by line of business. The CODM evaluates performance and allocates resources based on the segment operating income (loss) of the operating segments. The Company does not allocate its corporate expense function across its operating segments. We havetwo reportable segments: (i) software subscriptions and services and (ii) advertising. Certain reclassifications have been made to prior years' figures for compensation and consulting and professional services to conform to current year presentation. No segment-level asset information has been disclosed as our CODM does not review asset information by segment.

Reportable segment information is set forth below:

(1)

Other segment expenses represent marketing, information technology related expenses, travel and other general operating expenses.

10. Subsequent Events

The Company has evaluated subsequent events for the period from June 30, 2026 through the date the condensed consolidated financial statements were issued and determined that no events require recognition or disclosure.