Phunware, Inc.

Item 1A. Risk Factors

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K filed with the SEC on March 1531, 20245 for the year ended December 31, 20234 or contained elsewhere in this Report. The risks and uncertainties described within our Form 10-K for the year ended December 31, 20234 are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

The disclosure below supplements the risk factors previously disclosed under Part I Item 1A Risk Factors of our Annual Report on Form 10-K filed with the SEC on March 15, 2024 for the year ended December 31, 2023. For the quarter ended September 30, 2024, we identified the following additional risk factor:

Artificial 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.

We have made, and expect to continue making, investments in the integration of AI into our platforms, products and services. However, AI presents various risks, challenges, and potential unintended consequences that could disrupt our ability to effectively integrate and leverage these technologies. The process of refining and expanding our AI-driven offerings may involve significant costs, and there can be no assurance that our efforts will ultimately succeed.

The complexity of AI systems, coupled with rapidly evolving competition in the AI space, introduces significant uncertainty about our ability to successfully integrate and commercialize these technologies. Competitors may develop more effective or efficient AI solutions, potentially undermining our competitive position. Additionally, the regulatory environment surrounding AI is still in development, and new laws or regulations could emerge that require substantial adjustments to our business practices. These changes could impose unexpected costs or operational disruptions, and the full scope and impact of such regulatory developments remains uncertain.

Furthermore, we may rely on third-party vendors that incorporate AI in certain products and services they provide to us. As a result, we may not have full visibility or control over the quality, security, performance, or compliance of AI-powered solutions sources externally. There is also a risk that the underlying algorithms used by us or third-party vendors may be flawed, or trained on incomplete or biased datasets, leading to inaccuracies, inefficiencies or other negative consequences. Any of these factors, whether related to internal AI development, third-party dependencies, or regulatory changes, could have a material adverse effect on our business, financial condition and/or operating results.

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