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What changed in Cyngn Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Cyngn Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−263 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-17)

Top changes in Cyngn Inc.'s 2023 10-K

259 paragraphs added · 263 removed · 189 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

79 edited+20 added−25 removed46 unchanged
Biggest changeMapping & localization Our proprietary system design abstracts mapping and localization data so that DriveMod can use a variety of high-accuracy solutions to create the optimal mapping and localization system for the given environment. Our mapping and localization system distills sensor data into contextually rich representations of the physical world and extracts common insights like required stops and navigation boundaries.
Biggest changeWith Cyngn Insight, EAS integrates analytics, visual dashboards, connectivity, cloud services, and other traditional software systems that allow customers to interact with and extract insights out of our advanced AV technology. 10 Mapping & localization Our proprietary system design abstracts mapping and localization data so that DriveMod can use a variety of high-accuracy solutions to create the optimal mapping and localization system for the given environment.
Go-to-market Our go-to-market strategy hinges on strategic collaboration and is based on a set of three basic principles: ● Collaborate with industrial vehicle OEMs ● Land & expand with end customers ● Partner instead of compete on adjacent enabling technology Collaborate — industrial vehicle OEMs Our focus is on acquiring new customers who are either (a) looking to embed our technology into their vehicle products or (b) upsell their existing clients with our vehicle retrofits.
Go-to-Market Strategy Our go-to-market strategy hinges on strategic collaboration and is based on a set of three basic principles: ● Collaborate with industrial vehicle OEMs ● Land & expand with end customers ● Partner instead of compete on adjacent enabling technology Collaborate — industrial vehicle OEMs Our focus is on acquiring new customers who are either (a) looking to embed our technology into their vehicle products or (b) upsell their existing clients with our vehicle retrofits.
We have already deployed DriveMod software on more than ten different vehicle form factors that range from stockchasers and stand-on floor scrubbers to 14-seat shuttles and electric forklifts as part of prototypes and proof of concept projects, demonstrating the extensibility of our AV building blocks. 1 Our recent progress contributes to the validation of EAS with OEM partners and end customers.
We have already deployed DriveMod software on more than ten different vehicle form factors that range from stockchasers and stand-on floor scrubbers to 14-seat shuttles and electric forklifts as part of prototypes and proof of concept projects, demonstrating the extensibility of our AV building blocks. Our recent progress contributes to the validation of EAS with OEM partners and end customers.
This allows for customer data sets to be leveraged and augmented to achieve testing and validation prior to releasing new AV features. 9 As AV technology expertise matures globally, there may be opportunities to monetize the sophisticated AV-centric tools of Cyngn Evolve. Currently, we believe that AV development is confined to small groups of experts.
This allows for customer data sets to be leveraged and augmented to achieve testing and validation prior to releasing new AV features. As AV technology expertise matures globally, there may be opportunities to monetize the sophisticated AV-centric tools of Cyngn Evolve. Currently, we believe that AV development is confined to small groups of experts.
Rather than trying to compete with other technology suppliers, we intend to rely on our strategic collaborations that give both partners access to new markets and capabilities. For example, partners like Arilou, Symboticware, and Airbiquity respectively provide complementary solutions in technologies like cyber security, digital asset management, and connectivity.
Rather than trying to compete with other technology suppliers, we intend to rely on our strategic collaborations that give both partners access to new markets and capabilities. For example, partners like Symboticware and Airbiquity respectively provide complementary solutions in technologies like cyber security, digital asset management, and connectivity.
These competitors are also working to advance technology, reliability, and innovation in their development of new and improved solutions. We will continue to face competition from existing competitors and new companies entering the industrial autonomy landscape.
These competitors are also working to advance technology, reliability, and innovation in their development of new and improved solutions. 11 We will continue to face competition from existing competitors and new companies entering the industrial autonomy landscape.
Our EAS plugs into business operations by creating and collecting real-time data and aggregating it into configurable analytics dashboards that inform customer operations as well as future DriveMod releases, creating a data set specific to each customer from high-resolution data collected during their operations. 6 Our Approach Augments and Upskills Workforces Industrial vehicle autonomy represents an opportunity to minimize the adverse impact that labor shortages, employee health, and safety have on a company’s core operations.
Our EAS plugs into business operations by creating and collecting real-time data and aggregating it into configurable analytics dashboards that inform customer operations as well as future DriveMod releases, creating a data set specific to each customer from high-resolution data collected during their operations. 5 Our Approach Augments and Upskills Workforces Industrial vehicle autonomy represents an opportunity to minimize the adverse impact that labor shortages, employee health, and safety have on a company’s core operations.
We believe our market positioning as a technology partner to vehicle manufacturers creates a synergy with incumbent suppliers that already have established sales, distribution, and service/maintenance channels. By focusing on industrial use cases and partnering with the incumbent OEMs in these spaces, we believe we can source and execute revenue-generating opportunities more quickly.
We believe our market positioning as a technology partner to vehicle manufacturers creates a synergy with incumbent suppliers that already have established sales, distribution, and service/maintenance channels. By focusing on industrial use cases and partnering with the incumbent OEMs in these markets, we believe we can source and execute revenue-generating opportunities more quickly.
By lessening both the commercial and technical burdens of traditional vehicle automation and industrial robotics investments, industrial AVs can become universally available to the market, even reaching small and medium-sized businesses that may otherwise struggle to adopt Industry 4.0 technology. 8 Cyngn Insight: Intelligent Control Center Cyngn Insight is the customer-facing tool suite for managing AV fleets and aggregating data to extract business insights.
By lessening both the commercial and technical burdens of traditional vehicle automation and industrial robotics investments, industrial AVs can become universally available to the market, even reaching small and medium-sized businesses that may otherwise struggle to adopt Industry 4.0 and 5.0 technology. 7 Cyngn Insight: Intelligent Control Center Cyngn Insight is the customer-facing tool suite for managing AV fleets and aggregating data to extract business insights.
These competitors include traditional industrial vehicle manufacturers (such as Crown Equipment’s automated forklifts) robotics providers (such Locus Robotics for stock picking AMRs or SeeGrid for pallet and tow AMRs), and software companies (such as Brain Corp for floor scrubbers or Oxbotica for people and goods transport), as well as large corporate competitors that provide a broad range of software, service, and logistics solutions across many markets.
These competitors include traditional industrial vehicle manufacturers (such as Crown Equipment’s automated forklifts or Toyota Materials Handling) robotics providers (such Locus Robotics for stock picking AMRs or SeeGrid for pallet and tow AMRs), and software companies (such as Brain Corp for floor scrubbers or Oxbotica for people and goods transport), as well as large corporate competitors that provide a broad range of software, service, and logistics solutions across many markets.
In fact, Deloitte’s 2020 and 2021 Material Handling Industry Report showed that over 50% of the 1,000 supply chain and manufacturing leaders surveyed rated hiring and employee retention as their biggest challenge (source: MHI Deloitte Industry Report).
In fact, Deloitte’s 2020 and 2022 Material Handling Industry Report showed that over 50% of the 1,000 supply chain and manufacturing leaders surveyed rated hiring and employee retention as their biggest challenge (source: MHI Deloitte Industry Report).
This makes the data collected during vehicle operation a new type of asset that adopters of AV technology can take advantage of. Data can be stored in cloud or on-premises servers, according to customer requirements.
This makes the data collected during vehicle operation a new type of asset that adopters of AV technology can take advantage of. Data can be stored in cloud or on-premise servers, according to customer requirements.
Therefore, Cyngn Evolve is currently an internal EAS tool that we use to advance DriveMod and Cyngn Insight, our customer-facing EAS products. Our Strategy 360° Sales and Marketing We are building a go-to-market ecosystem that we believe will be highly leveraged by using our partners as the foundation of our growth strategy.
Therefore, Cyngn Evolve is currently an internal EAS tool that we use to advance DriveMod and Cyngn Insight, our customer-facing EAS products. 8 Corporate Strategy 360° Sales and Marketing We are building a go-to-market ecosystem that we believe to be highly leveraged by using our partners as the foundation of our growth strategy.
The regulatory environment for autonomous industrial vehicles is still being developed. In 2016, the United States Department of Transportation (“USDoT”) issued regulations that require the submission of documentation covering specific topics related to autonomy and government regulators, but these regulations are targeted towards road vehicles.
The regulatory environment for autonomous industrial vehicles is still being developed. In 2016, the United States Department of Transportation (“US DoT”) issued regulations that require the submission of documentation covering specific topics related to autonomy and government regulators, but these regulations are targeted towards road vehicles.
We will utilize these relationships to generate and cultivate customer demand, acquire new customers, and deliver additional services to our customers.
We plan to utilize these relationships to generate and cultivate customer demand, acquire new customers, and deliver additional services to our customers.
Creates consistent autonomous vehicle operation and interfaces for diverse fleets. 4. Complements the core competencies of existing industry players by introducing leading-edge technologies like Artificial Intelligence (“AI”) & Machine Learning (“ML”), cloud/connectivity, sensor fusion, high-definition mapping, and real-time dynamic path planning & decision making.
Develop consistent autonomous vehicle operation and user interfaces for diverse vehicle fleets. 4. Complement the core competencies of existing industry players by introducing the leading-edge technologies of Artificial Intelligence (“AI”) & Machine Learning (“ML”), cloud/connectivity, sensor fusion, high- definition mapping, and real-time dynamic path planning & decision-making.
Figure 4: Illustration of DriveMod’s ability to utilize key subsystems across multiple environments and vehicle platforms (left: off-road utility vehicle; right: indoor material handling vehicle). 7 Our Products EAS is a suite of technology and tools that is made up by three complementary categories: DriveMod, Cyngn Insight, and Cyngn Evolve.
Figure 4: Illustration of DriveMod’s ability to utilize key subsystems across multiple environments and vehicle platforms (left: off-road utility vehicle; right: indoor material handling vehicle). 6 Our Products EAS is a suite of technology and tools that consists of three complementary categories: DriveMod, Cyngn Insight, and Cyngn Evolve.
In short, almost every industrial vehicle, regardless of use case, can move autonomously using our technology. Our approach accomplishes several primary value propositions: 1. Brings autonomous capabilities to vehicles built by proven manufacturers that are already trusted by customers. 2. Generates continual customer value by leveraging the synergistic relationship of autonomous vehicles and data. 3.
In short, nearly every industrial vehicle, regardless of use case, can move autonomously using our technology. Our approach accomplishes several primary value propositions: 1. Provide autonomous capabilities to industrial vehicles built by established manufacturers that are already trusted by customers. 2. Generate continual customer value by leveraging the synergistic relationship of autonomous vehicles and data. 3.
Our approach drives value at every stage of a company’s autonomy journey EAS provides extensible industrial autonomy solutions that can include data-driven actionable insights, partial autonomy to augment existing workflows and support human drivers, and fully autonomous vehicle mobility.
Figure 2: The core components that make up our EAS product offering. 4 Our approach drives value at every stage of a company’s autonomy journey EAS provides extensible industrial autonomy solutions that can include data-driven actionable insights, partial autonomy to augment existing workflows and support human drivers, and fully autonomous vehicle mobility.
Installing DriveMod onto any vehicle unlocks a collection of valuable product offerings that customers can activate over the air, creating lower barriers to entry and enabling customers to benefit from novel data insights while adopting industrial AVs at their own pace.
Installing DriveMod onto any vehicle unlocks a collection of valuable product offerings that customers can activate over the air, creating lower barriers to entry and enabling customers to benefit from novel data insights while adopting industrial AVs at their own pace. Our solutions also do not require infrastructure investments to enable autonomous vehicle operation.
Our Autonomous Vehicle (“AV”) technology is uniquely positioned to capitalize upon these changes by offering a universal autonomy solution that can deliver self-driving capabilities and data insights to nearly every industrial vehicle on the market.
Our AV technology is uniquely positioned to capitalize upon these changes by offering a universal autonomy solution that can deliver self-driving capabilities and data insights to nearly every industrial vehicle on the market. Automation has long played a role in industrial sectors.
Automation Solutions for Industrial Equipment The Industrial Equipment market covers a broad range of use cases and product categories, with automation solutions targeting Material Transport Equipment (“MTE”) heavily utilized by the majority of industry market sectors.
Figure 1: Illustration of the progression from Industry 1.0 to Industry 5.0. 2 Automation Solutions for Industrial Equipment The Industrial Equipment market covers a broad range of use cases and product categories, with automation solutions targeting Material Transport Equipment (“MTE”) heavily utilized by the majority of industry market sectors.
The Enterprise Autonomy Suite for Industrial Vehicles Our unique value proposition stems from the concept that the growth of industrial autonomy requires an approach that deploys applied AV solutions within a system of supportive resources rather than a technology feature that is tuned to a specific industrial vehicle.
Our unique value proposition stems from the concept that the growth of industrial autonomy requires an approach that deploys applied AV solutions within a system of supportive resources rather than a technology feature that is tuned to a specific industrial vehicle. Some companies manufacture standard industrial vehicles then integrate industrial automation software for rigid tasks.
Our solutions also do not require infrastructure investments to enable autonomous vehicle operation. 5 EAS galvanizes the relationship between AVs and data Our EAS combines core autonomous vehicle technology with a suite of tools and products that strengthen the ties between industrial business operations and the positive network effects that underpin the relationship between data and AVs.
EAS galvanizes the relationship between AVs and data Our EAS combines core autonomous vehicle technology with a suite of tools and products that strengthen the ties between industrial business operations and the positive network effects that underpin the relationship between data and AVs.
DriveMod’s flexibility is intertwined with the wide-ranging applicability of our EAS and creates the unique leveraged opportunity of expanding across vehicles and sites with these major customers.
Our archetypal customers are corporations that deploy fleets of heterogeneous industrial vehicles across many sites. DriveMod’s flexibility is intertwined with the wide-ranging applicability of our EAS and creates the unique leveraged opportunity of expanding across vehicles and sites with these major customers.
Item 1. Business General We are an autonomous vehicle (“AV”) technology company that is focused on addressing industrial uses for autonomous vehicles. We believe that technological innovation is needed to enable adoption of autonomous industrial vehicles that will address the substantial industry challenges that exist today.
Item 1. Business Company Overview Cyngn Inc. is an autonomous vehicle (“AV”) technology company that is focused on addressing industrial uses for autonomous vehicles. We believe that technological innovation is needed to enable adoption of autonomous industrial vehicles that will address the substantial industry challenges that exist today. These challenges include labor shortages, high labor costs and work safety.
Like the autonomous vehicle regulatory environment, the regulatory framework for data privacy, protection, and security worldwide is continuously evolving and developing. As a result, interpretation and implementation standards and enforcement practices are likely to remain fluid for the foreseeable future.
U.S. and international regulations related to data privacy are also of great importance to our company’s products, operations, and culture. Like the autonomous vehicle regulatory environment, the regulatory framework for data privacy, protection, and security worldwide is continuously evolving and developing. As a result, interpretation and implementation standards and enforcement practices are likely to remain fluid for the foreseeable future.
Our AV development and testing have included road vehicles that navigate complex dynamic environments. DriveMod is capable of perceiving more than 100 dynamic objects per second and then using that perception information to navigate autonomously. This capability has been proven via road testing in difficult driving settings like urban streets.
DriveMod is capable of perceiving more than 100 dynamic objects per second and then using that perception information to navigate autonomously. This capability has been proven via road testing in difficult driving settings like urban streets. In contrast, the industrial settings of our target market rarely encounter 100 dynamic actors per minute, let alone per second.
These components are essential to the operations and growth of global markets such as manufacturing, distribution, transportation, construction, and mining.
These components are essential to the operations and growth of global markets such as manufacturing, distribution, transportation, construction, and mining. However, Industry 4.0 has its limitations in industrial autonomy.
Sustained revenue growth will come largely from ongoing subscription revenues that enable companies to tap into an ever-expanding suite of AV and AI capabilities as organizations transition into full industrial autonomy. Industrial operations are extremely rich with data. However, we believe this data is still being put to limited use, especially as it pertains to equipment transport and autonomy performance.
Sustained revenue growth is expected to come largely from recurring subscription revenues that enable companies to tap into an ever-expanding suite of AV and AI capabilities as organizations transition into full industrial autonomy. Industrial operations are extremely rich with data.
We have now integrated DriveMod into more than ten different vehicle platforms, utilizing various combinations of Light Detecting and Ranging (“LiDAR”), camera, radar, ultrasonic, and positioning sensors.
Our approach addresses common industry challenges like integrating different sensor modalities and accounting for different sensor mounting positions. We have now integrated DriveMod into more than ten different vehicle platforms, utilizing various combinations of Light Detecting and Ranging (“LiDAR”), camera, radar, ultrasonic, and positioning sensors.
Between 2013 and 2015, Cyanogen released multiple versions of its mobile operating system, and collaborated with an ecosystem of companies including mobile phone OEMs, content providers and leading technology partners.
CyanogenMod was an open-source operating system for mobile devices, based on the Android mobile platform. Cyanogen released multiple versions of its mobile operating system and collaborated with an ecosystem of companies including mobile phone OEMs, content providers and leading technology partners from 2013 to 2015.
For our purposes, we can think of MTE to include all material handling equipment directly related to material transit (this includes conveying equipment, monorail, hoists, storage & retrieval, and industrial vehicles).
For our purposes, we can think of MTE to include all material handling equipment directly related to material transit (this includes conveying equipment, monorail, hoists, storage & retrieval, and industrial vehicles). According to a Grand View Research report, the material handling equipment market was valued at $213.4 billion in 2021.
We follow a named account coverage approach. After establishing a customer relationship with an OEM, we seek to embed our technology into their product roadmap and expand our services to their many clients. We believe this category represents a substantial opportunity to generate revenue as a single relationship with an OEM can lead to revenue opportunities across the entire marketplace.
We follow a named account coverage approach. After establishing a customer relationship with an OEM, we seek to embed our technology into their product roadmap and expand our services to their many clients.
Thus, we expect and prepare to comply with various standards, including Occupational Safety and Health Administration (“OSHA”), International Organization for Standardization (“ISO”), International Electrotechnical Commission (“IEC”), or American National Standards Institute (“ANSI”) on a case-by-case basis. 13 U.S. and international regulations related to data privacy are also of great importance to our company’s products, operations, and culture.
In certain cases, these standards may be contractually applicable to our systems, products, and operations. Thus, we expect and prepare to comply with various standards, including Occupational Safety and Health Administration (“OSHA”), International Organization for Standardization (“ISO”), International Electrotechnical Commission (“IEC”), or American National Standards Institute (“ANSI”) on a case-by-case basis.
We pursue this strategy by being hyper-focused on building a robust pipeline of prospective customers (“land”) and utilizing strategic sales channels that will result in coordinated opportunities to accelerate growth (“expand”). Our archetypal customers are corporations that deploy fleets of heterogeneous industrial vehicles across many sites.
Land & expand — end customers Our go-to-market strategy is to acquire new customers that use industrial vehicles in their mission-critical operations. We pursue this strategy by being hyper-focused on building a robust pipeline of prospective customers (“land”) and utilizing strategic sales channels that will result in coordinated opportunities to accelerate growth (“expand”).
DriveMod’s vehicle-agnostic capability to deploy AV technology on diverse vehicle fleets has been proven through its deployment on more than ten different vehicle form factors that we have operated autonomously. DriveMod has been commercially released for the Columbia Stockchaser, and a commercial agreement with a customer is subsidizing the development of DriveMod for electric forklifts towards commercial availability.
DriveMod’s vehicle-agnostic capability to deploy AV technology on diverse vehicle fleets has been proven through its deployment on more than ten different vehicle form factors that we have operated autonomously. DriveMod has been commercially released for the Columbia Stockchaser. Other autonomous vehicles were deployed as prototypes or as a part of proof-of-concept project.
When vehicles have DbW ECUs already installed, the CbW software layer is configured and applied without the need for replacing the hardware.
When vehicles have DbW ECUs already installed, the CbW software layer is configured and applied without the need for replacing the hardware. Thus, CbW enables AV actuation across vehicle fleets with varying levels of vehicle age and sophistication.
EAS creates a foundation for extracting new and valuable enterprise data insights by the nature of the advanced sensors, electronic control units, and connectivity that supports DriveMod’s functionality. We can monetize the data insights in a variety of ways by offering configurable cloud dashboards for fleet/asset management, operational performance data, and predictive analytics to customers.
We can monetize the data insights in a variety of ways by offering configurable cloud dashboards for fleet/asset management, operational performance data, and predictive analytics to customers.
Industrial automation customers are forced to coordinate operational components from a variety of different vendors and lack a unifying architecture that allows the technology to scale effectively within and across sites.
Difficulty in scaling — The traditional approaches to vehicle automation make scaling vehicle automation solutions difficult due to strains caused by service lifecycle management and issues with dynamic deployability. Industrial automation customers are forced to coordinate operational components from a variety of different vendors and lack a unifying architecture that allows the technology to scale effectively within and across sites.
Depending on fleet size, traditional automation solutions such as “robot-in-a-box” may command ROI horizons of up to 4 years. Factoring in ancillary costs like installation, maintenance, on-site testing, integration, and deployment, can also represent a significant annual cost burden, according to findings by Richoh & ABI Research Report.
Factoring in ancillary costs like installation, maintenance, on-site testing, integration, and deployment, can also represent a significant annual cost burden, according to findings by Ricoh & ABI Research Report.
Working directly with our OEM partners as well as with third party experts ensures that we can deploy our technology globally and at scale. 10 EAS Subscription According to ABI Research, the cloud robotics opportunity will grow from $3.3 billion in 2019 to $157.8 billion in 2030, accounting for 30% of the robotic industry’s total worth (source: Cloud Robotics Market Predicted to Grow to $157.8 billion by 2030, article by Robotics & Automation News).
EAS Subscription According to ABI Research, the cloud robotics opportunity is expected to grow from $3.3 billion in 2019 to $157.8 billion by 2030, accounting for 30% of the robotic industry’s total worth (source: Cloud Robotics Market Predicted to Grow to $157.8 billion by 2030, article by Robotics & Automation News).
DriveMod Customization and Non-Recurring Engineering (“NRE”) DriveMod’s capability as an AV software stack will continue to expand in several dimensions—most notably, in the number of vehicles that DriveMod can operate autonomously and the maneuvers that a DriveMod-powered vehicle can execute.
In parallel, exposing this fleet and vehicle data could be a boon for our OEM partners as they evolve to optimize their product roadmaps and better integrate our technology to serve the future needs of industrial autonomy. 9 DriveMod Customization and Non-Recurring Engineering (“NRE”) DriveMod’s capability as an AV software stack will continue to expand in several dimensions—most notably, in the number of vehicles that DriveMod can operate autonomously and the maneuvers that a DriveMod-powered vehicle can execute.
Considering the incumbents’ gaps in leading-edge AV and AI technologies and the pressure existing suppliers face to ship manually-operated vehicles that address the multi-billion dollar demand that already exists, we believe it is unlikely that existing stakeholders will be able to invest in the technological advancements that will solve the industry’s fundamental challenges.
Considering the incumbents’ gaps in leading-edge AV and AI technologies and the pressure existing suppliers face to ship manually-operated vehicles that address the multi-billion dollar demand that already exists, we believe it is unlikely that existing stakeholders will be able to invest in the technological advancements that will solve the industry’s fundamental challenges. 3 High barriers to adoption — Many solutions for automated material transport require an all-or-nothing commitment from customers: either make a major upfront investment to overhaul operations for automation or postpone automation at the risk of falling behind competition.
Other autonomous vehicles were deployed as prototypes or as a part of proof-of-concept project. More than five past deployments have been at customer or beta customer sites. For one deployment we were paid $166,000. Other past deployments were part of our normal R&D activities and product validation that was performed with beta customers.
More than five past deployments have been at customer or beta customer sites. Other past deployments were part of our normal R&D activities and product validation that was performed with beta customers. Our AV development and testing have included road vehicles that navigate complex dynamic environments.
Revenue Sources We anticipate that our technology will generate revenue through three main methods: deployment, EAS subscriptions, and DriveMod customization. Deployment Deploying our EAS requires us and our integration partners to work with a new client to map the job site, gather data, and install our AV technology within their fleet and site.
Deployment Deploying our EAS requires us and our integration partners to work with a new client to map the job site, gather data, and install our AV technology within their fleet and site. New deployments yield project-based revenues that are assessed based on the scope of the deployment.
According to a PwC 2016 Digital Operations survey, “cost advantage” was the most prevalent prompt cited (86% of responses) for adopting advanced industrial mobility technologies, but in conjunction, “costs are prohibitive” was the most prevalent barrier (58% of responses) to adoption of semi-autonomous/autonomous vehicles. 4 To combat these challenges, we have built an Enterprise Autonomy Suite for industrial vehicles that leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, fleet management, cloud, and connectivity.
To combat these challenges, we have built an Enterprise Autonomy Suite for industrial vehicles that leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, fleet management, cloud, and connectivity.
Because our core autonomous technology is universal, the Company has an opportunity to generate revenue across a variety of industries. We believe that developing the sales and marketing infrastructure to access these markets is an essential aspect of driving growth in these areas.
We believe that developing the sales and marketing infrastructure to access these markets is an essential aspect of driving growth in these areas. Revenue Sources We anticipate that our technology will generate revenue through three main methods: deployment, EAS subscriptions, and DriveMod customization.
Thus, CbW enables AV actuation across vehicle fleets with varying levels of vehicle age and sophistication. 12 Competitive Environment There is an increasing demand for autonomous vehicle solutions in an effort to increase safety, improve efficiency, and enhance productivity to meet the goals set out by Industry 4.0.
Competitive Environment There is an increasing demand for autonomous vehicle solutions in an effort to increase safety, improve efficiency, and enhance productivity to meet the goals set out by Industry 4.0 and 5.0. Autonomous vehicles are an enabling technology that gives us the opportunity to add more value to customers.
Thus, proliferating our solutions with customers will be achieved by iteratively adding onto an existing EAS, which minimizes the marginal cost associated with expanding AV operations. Additionally, the deployment of EAS allows for all of the on-going administration, services, and vendors associated with managing the lifecycle of the system to be integrated.
Additionally, the deployment of EAS allows for all of the on-going administration, services, and vendors associated with managing the lifecycle of the system to be integrated.
DriveMod has been architected to be vehicle agnostic and allow for efficient expansion to industries such as mining, construction, yard operations, and agriculture. Expand: develop autonomous vehicle technologies across other sectors According to a CB Insights report, “33 Industries Other Than Auto That Driverless Cars Could Turn Upside Down,” autonomous vehicle technology brings value to at least 33 industries.
Expand: develop autonomous vehicle technologies across other sectors According to a CB Insights report, “33 Industries Other Than Auto That Driverless Cars Could Turn Upside Down,” autonomous vehicle technology brings value to at least 33 industries. Because our core autonomous technology is universal, the Company has an opportunity to generate revenue across a variety of industries.
Some companies manufacture standard industrial vehicles then integrate industrial automation software for rigid tasks. Others develop new vehicle platforms to enable more advanced automation capabilities, limiting the AV technology to a narrow use case. We develop an advanced autonomous vehicle software, DriveMod, for industrial vehicles.
Others develop new vehicle platforms to enable more advanced automation capabilities, limiting the AV technology to a narrow use case. We developed advanced autonomous vehicle software, DriveMod, for industrial vehicles. DriveMod is a component of EAS that is operationally expansive, vehicle agnostic, and compatible with indoor and outdoor environments.
Our belief is that these strong growth indicators will drive increased need for more advanced technology that will address gaps in the current capabilities of automated MTE solutions. Historically, MTE automation has been heavily weighted in solutions related to storage/retrieval systems and conveyors because more rigid and repetitive environments are better suited for the limited capability of existing automation solutions.
Historically, MTE automation has been heavily weighted in solutions related to storage/retrieval systems and conveyors because more rigid and repetitive environments are better suited for the limited capability of existing automation solutions. By contrast, industrial vehicles in the MTE category are largely still driven manually.
Our culture is also built on diversity, inclusion, camaraderie, and celebration. We organize regular team building activities and public recognition forums to celebrate our diversity and invest in strong relationships. In addition to a positive culture and career development, we offer a robust benefits package.
We believe these values encourage innovation and a team-oriented culture. Our employees have access to a wide range of training, different career paths, and, most importantly, challenging and purposeful work. Our culture is also built on diversity, inclusion, camaraderie, and celebration. We organize regular team building activities and public recognition forums to celebrate our diversity and invest in strong relationships.
Manufacturing is expected to account for 52% of new material handling machinery demand by 2023, according to findings by Freedonia Focus Reports. We have already deployed DriveMod -powered industrial vehicles at multiple manufacturing and distribution facilities. These vehicles were previously deployed as prototypes or as a part of proof-of-concept project. Of these past deployments, one was paid.
We have already deployed DriveMod-powered industrial vehicles at multiple manufacturing and distribution facilities. These vehicles were previously deployed as prototypes or as a part of a proof-of-concept project. Of these past deployments, one was paid. Future deployments will primarily be commercial deployments with limited prototype or proof-of-concept deployments that may be engaged opportunistically for strategic value.
We have built a modular sensor fusion pipeline that runs on a low compute footprint and creates the flexibility to customize our perception stack according to application requirements. Our perception architecture streamlines DriveMod deployments on new vehicles. Our approach addresses common industry challenges like integrating different sensor modalities and accounting for different sensor mounting positions.
Perception is one of the most complex subsystems, requiring specialized data infrastructure and engineering expertise in AI/ML and high-performance computing. We have built a modular sensor fusion pipeline that runs on a low compute footprint and creates the flexibility to customize our perception stack according to application requirements. Our perception architecture streamlines DriveMod deployments on new vehicles.
However, fewer than 1% of material handling vehicles shipped every year are automated, presenting a significant opportunity to automate industrial vehicles. The cost to operate a non-autonomous material transport vehicle is reported to be $32.42 per hour, according to the U.S. Bureau of Labor Statistics compensation data for transportation and material moving full-time employees.
However, fewer than 1% of material handling vehicles shipped every year are automated, presenting a significant opportunity to automate industrial vehicles. The cost to operate a non-autonomous material transport vehicle is reported to have an annual salary of $47,244 for warehouse drivers in the U.S. based on Indeed.com, a career and jobsite provider.
Through a unifying cloud-based data infrastructure, our proprietary data tools strengthen the positive network effects derived from the valuable new data created by AVs. Cyngn Evolve and its data pipelines facilitate AI/ML training and deployment, manage data sets, and support driving simulation and grading to test and validate new DriveMod releases, using both real-world and simulated data.
Cyngn Evolve and its data pipelines facilitate AI/ML training and deployment, manage data sets, and support driving simulation and grading to test and validate new DriveMod releases, using both real-world and simulated data. Figure 6: The Cyngn “AnyDrive” simulation is part of the Cyngn Evolve toolchain. The simulation environment creates a digital version of the physical world.
New deployments yield project-based revenues that are assessed based on the scope of the deployment. Our major collaborators in this area are our OEM partners, and we can reinforce our deployment capability with integration and services from third party partners.
Our major collaborators in this area are our OEM partners, and we can reinforce our deployment capability with integration and services from third party partners. Working directly with our OEM partners as well as with third party experts ensures that we can deploy our technology globally and at-scale.
The Company started as a venture funded company with offices in Seattle and Palo Alto, aimed at commercializing CyanogenMod, direct to consumer and through collaborations with mobile phone manufacturers. CyanogenMod was an open-source operating system for mobile devices, based on the Android mobile platform.
Corporate History The Company was incorporated in the State of Delaware on February 1, 2013, under the original name Cyanogen, Inc. or Cyanogen. The Company started as a venture funded company with offices in Seattle and Palo Alto, aimed at commercializing CyanogenMod, direct to consumers and through collaborations with mobile phone manufacturers.
We may from time to time provide important disclosures to investors by posting them in the Investor Relations section of our website.
We may from time to time provide important disclosures to investors by posting them in the Investor Relations section of our website. Our common stock is quoted on the Nasdaq under the symbol “CYN”. We file annual, quarterly, and current reports, proxy statements and other information with the U.S.
Figure 6: An operator uses the Cyngn Insight control center to operate vehicles remotely Cyngn Insight’s tool suite includes configurable cloud dashboards that aggregate diverse data streams at several levels of granularity (i.e., site, fleet, vehicle, module, and component).
Cyngn Insight’s tool suite includes configurable cloud dashboards that aggregate diverse data streams at several levels of granularity (i.e., site, fleet, vehicle, module, and component). We can collect data during “open loop” vehicle operation, meaning that the vehicles can be operated manually while still collecting the rich data enabled by the advanced on-vehicle sensors and computers.
Autonomous vehicles can be relied upon to fill the voids that commonly create human resource issues like executing repetitive tasks, working during undesirable hours, and operating in uncomfortable or hazardous environments. One Deloitte case study inspected a parts manufacturing and fulfillment facility that utilized Autonomous Mobile Robots (“AMRs”) to pick products from the back of their expansive distribution center.
Autonomous vehicles can be relied upon to fill the voids that commonly create human resource issues like executing repetitive tasks, working during undesirable hours, and operating in uncomfortable or hazardous environments. Furthermore, existing employees can be exposed to cutting-edge technology and develop new valuable career development opportunities.
This package includes a flexible vacation policy, access to a 401(k) plan, premier health plan options and numerous voluntary benefits for employees and their dependents. 14 Corporate Information The Company was originally incorporated in the State of Delaware on February 1, 2013, under the name Cyanogen, Inc. or Cyanogen.
In addition to a positive culture and career development, we offer a robust benefits package. This package includes a flexible vacation policy, access to a 401(k) plan, premier health plan options and numerous voluntary benefits for employees and their dependents.
These common insights help to create consistent AV operation across diverse sites, enabling our AVs to navigate both indoor and outdoor. Perception Granular, efficient perception forms the basis of advanced AVs. Perception is one of the most complex sub-systems, requiring specialized data infrastructure and engineering expertise in AI/ML and high-performance computing.
Our mapping and localization system distills sensor data into contextually rich representations of the physical world and extracts common insights like required stops and navigation boundaries. These common insights help to create consistent AV operation across diverse sites, enabling our AVs to navigate both indoor and outdoor. Perception Granular, efficient perception forms the basis of advanced AVs.
These collaborative partnerships are established through mutually beneficial, non-binding memorandums of understanding or partnering agreements for the purpose of joint go-to-market efforts. 11 Our Technology Autonomous vehicles must integrate a suite of technologies to generate operational value.
These collaborative partnerships are established through mutually beneficial, non-binding memorandums of understanding or partnering agreements for the purpose of joint go-to-market efforts. Thereby we leverage our limited R&D resources with our technology partners through out-sourcing versus in-house development resulting in a more efficient asset-light approach in product development.
Our core competencies are in DriveMod, the on-vehicle AV technology stack that is underpinned by AI and robotics expertise and paramount to enabling autonomous mobility. With Cyngn Insight, EAS integrates analytics, visual dashboards, connectivity, cloud services, and other traditional software systems that allow customers to interact with and extract insights out of our advanced AV technology.
Our Technology Autonomous vehicles must integrate a suite of technologies to generate operational value. Our core competencies are in DriveMod, the on-vehicle AV technology stack that is underpinned by AI and robotics expertise and paramount to enabling autonomous mobility.
In 2016 the Company’s management and board of directors, determined to pivot its product focus and commercial direction from the mobile device and telecom space to industrial and commercial autonomous driving. In May 2017, the Company changed its name to Cyngn Inc. Available Information Our common stock is quoted on the Nasdaq under the symbol “CYN”.
In 2016 the Company’s management and board of directors, determined to pivot its product focus and commercial direction from the mobile device and telecom space to industrial and commercial autonomous driving with the hiring of Lior Tal in June 2016 to serve as the company’s chief operating officer. Mr.
DriveMod is a component of EAS that is operationally expansive, vehicle agnostic, and compatible with indoor and outdoor environments. EAS centers around DriveMod’s on-vehicle AV software and is supported by our Cyngn Insight and Cyngn Evolve technology and tools. Figure 2: The core components that make up our EAS product offering.
EAS centers around DriveMod’s on-vehicle AV software and is supported by our Cyngn Insight and Cyngn Evolve technology and tools.
For example, our partner, Columbia Vehicle Group with whom we have partnered through a non-binding memorandum of understanding, provides over 70 years of vehicle manufacturing experience and customer insight. Land & expand — end customers Our go-to-market strategy is to acquire new customers that use industrial vehicles in their mission-critical operations.
We believe this category represents a substantial opportunity to generate revenue as a single relationship with an OEM that can lead to revenue opportunities across the entire marketplace. For example, our partner, Columbia Vehicle Group with whom we have partnered through a non-binding memorandum of understanding, provides over 70 years of vehicle manufacturing experience and customer insight.
The majority of our employees are based in Silicon Valley, California. Our core values include focus on impact, display curiosity, communicate proactively, apply good judgment, and demonstrate selflessness. We believe these values encourage innovation and a team-oriented culture. Our employees have access to a wide range of training, different career paths, and, most importantly, challenging and purposeful work.
Together with a highly talented and skilled support team, we solve real-world industrial applications in autonomy. As of February 29, 2024, we had 81 full-time employees. The majority of our employees are based in Silicon Valley, California. Our core values include focus on impact, display curiosity, communicate proactively, apply good judgment, and demonstrate selflessness.
Our software stack has over 30 subsystems, including those designed for perception, mapping & localization, decision making, planning, and control. As of the date of this Annual Report, we have 3 granted patents and 19 pending patent applications, and expect to continue to file additional patent applications with respect to our technology in the future.
Our software stack has over 30 subsystems, including those designed for perception, mapping & localization, decision making, planning, and control.
Human Capital Resources Our team is composed of energetic, motivated and highly experienced visionaries. They include machine vision, AI, and autonomous software engineers from the greatest universities in the world. Together with a highly talented and skilled support team, we solve real-world industrial applications in autonomy. As of the date of this Annual Report, we had 66 full-time employees.
We seek to make the movement of goods in warehouse settings safer, faster, cheaper while reducing greenhouse gas emissions through greater operating efficiencies. Human Capital Resources Our team is composed of energetic, motivated and highly experienced visionaries. They include machine vision, AI, and autonomous software engineers from the greatest universities in the world.
Autonomous vehicles represent fundamental technology that will enable the fourth industrial revolution. Figure 1: Illustration of the progression from Industry 1.0 to Industry 4.0. Industrial automation is broadly understood to consist of a wide range of technology solutions that provide varying levels of automation for critical software control systems and industrial equipment.
The larger industrial automation market has grown significantly by riding the wave of new technology and innovation experienced during Industry 4.0. This consists of a wide range of technology solutions that provide varying levels of automation for critical software control systems and industrial equipment.
These challenges include: Labor shortages — The hiring and retention of qualified workers is a critical concern for the markets that material transport vehicles operate within.
With a fully loaded, global weighted average annual labor cost of $47,674 with an assumed, on average, 1.5 work shift operations, our current market potential opportunity exceeds $268 billion. Automating industrial vehicles will address the following challenges: Labor shortages — The hiring and retention of qualified workers is a critical concern for the markets that material transport vehicles operate within.
High barriers to adoption — Many solutions for automated material transport require an all-or-nothing commitment from customers: either make a major upfront investment to overhaul operations for automation, or postpone automation at the risk of falling behind competition. This all-or-nothing approach to unlocking future return on investment (“ROI”) can be problematic for risk-averse companies that seek to adopt automation solutions.
This all-or-nothing approach to unlocking future return on investment (“ROI”) can be problematic for risk-averse companies that seek to adopt automation solutions. Depending on fleet size, traditional automation solutions such as “robot-in-a-box” may command ROI horizons of up to 4 years.
Future deployments will primarily be commercial deployments with limited prototype or proof-of-concept deployments that may be engaged opportunistically for strategic value. Broaden: address other industrial vehicle use cases The industries that utilize material transport vehicles share trends, challenges, and opportunities.
Broaden: address other industrial vehicle use cases The industries that utilize material transport vehicles share trends, challenges, and opportunities. DriveMod has been architected to be vehicle agnostic and allow for efficient expansion to industries such as mining, construction, yard operations, and agriculture.
We file annual, quarterly, and current reports, proxy statements and other information with the U.S. Securities Exchange Commission (the “SEC”). These filings are available to the public on the Internet at the SEC’s website at http://www.sec.gov. Our principal business address is 1015 O’Brien Dr., Menlo Park, CA 94025.
Securities Exchange Commission (the “SEC”) and are subject to the requirements of the Securities and Exchange Act of 1934, as amended (the Exchange Act). These filings are available to the public on the Internet at the SEC’s website at http://www.sec.gov. 13
In contrast, the industrial settings of our target market rarely encounter 100 dynamic actors per minute, let alone per second. Scalability is further strengthened by EAS creating common interfaces and experiences that unify customer data and AV operations within and across sites.
Scalability is further strengthened by EAS creating common interfaces and experiences that unify customer data and AV operations within and across sites. Thus, proliferating our solutions with customers will be achieved by iteratively adding onto an existing EAS, which minimizes the marginal cost associated with expanding AV operations.
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These challenges include labor shortages, lagging technological advancements from incumbent vehicle manufacturers, and high upfront investment commitment. According to the “Trends in Supporting and Scaling Modern Automation” report by Ricoh & ABI Research Report, historically, less than 1% of industrial vehicle equipment shipped by top manufacturers has been automated.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong other things, the charter documents will provide: ● certain amendments to our bylaws that will require the approval of two-thirds of the combined vote of our then-outstanding shares of our common stock; and ● our board of directors has the authority, without further action by our stockholders, to issue preferred stock in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional, or special rights, and the qualifications, limitations, or restrictions, including dividend rights, conversion rights, voting rights, terms. 34 Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Biggest changeAmong other things, the charter documents will provide: ● certain amendments to our bylaws that will require the approval of two-thirds of the combined vote of our then-outstanding shares of our common stock; and ● our board of directors has the authority, without further action by our stockholders, to issue preferred stock in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional, or special rights, and the qualifications, limitations, or restrictions, including dividend rights, conversion rights, voting rights, terms.
Our continued enhancement of our autonomous driving technology is and will be subject to risks, including with respect to: ● our ability to continue to enhance our data analytics and software technology; ● designing, developing, and securing necessary components on acceptable terms and in a timely manner; ● our ability to attract and retain customers; ● our ability to pay for research and development costs; ● our ability to attract, recruit, hire, and train skilled employees; ● our ability to fund the development and commercialization of our technology; and ● our ability to enter into strategic relationships with key members in the industrial vehicles and industrial automation industries and component suppliers.
Continued enhancement of our autonomous driving technology is and will be subject to risks, including with respect to: ● our ability to continue to enhance our data analytics and software technology; ● designing, developing, and securing necessary components on acceptable terms and in a timely manner; ● our ability to attract and retain customers; ● our ability to pay for research and development costs; ● our ability to attract, recruit, hire, and train skilled employees; ● our ability to fund the development and commercialization of our technology; and ● our ability to enter into strategic relationships with key members in the industrial vehicles and industrial automation industries and component suppliers.
You should consider our business and prospects in light of the risks and challenges we face as a new entrant into a novel industry, including, among other things, with respect to our ability to: ● design, integrate, and deploy safe, reliable, and quality autonomous vehicle software products and tools for industrial vehicles with our partners on an ongoing basis; ● navigate an evolving and complex regulatory environment; ● successfully produce with OEM partners a line of purpose-built autonomous industrial vehicles on the timeline we estimate; ● improve and enhance our software and autonomous technology; ● establish and expand our customer base; ● successfully market our autonomous driving solutions and our other products and services; ● properly price our products and services; ● improve and maintain our operational efficiency; ● maintain a reliable, secure, high-performance, and scalable technology infrastructure; ● attract, retain, and motivate talented employees; ● anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and ● build a well-recognized and respected brand.
You should consider our business and prospects in light of the risks and challenges we face as a new entrant into a novel industry, including, among other things, with respect to our ability to: ● design, integrate, and deploy safe, reliable, and quality autonomous vehicle software products and tools for industrial vehicles with our partners on an ongoing basis; ● navigate an evolving and complex regulatory environment; ● successfully produce with OEM partners a line of purpose-built autonomous industrial vehicles on the timeline we estimate; ● improve and enhance our software and autonomous technology; 14 ● establish and expand our customer base; ● successfully market our autonomous driving solutions and our other products and services; ● properly price our products and services; ● improve and maintain our operational efficiency; ● maintain a reliable, secure, high-performance, and scalable technology infrastructure; ● attract, retain, and motivate talented employees; ● anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and ● build a well-recognized and respected brand.
In addition, the market leaders in our target industries, such as Industrial Material Handling (“IMH”) may start, or have already started, pursuing large scale deployment of autonomous industrial vehicle technology on their own. These companies may have more operational and financial resources than we do. We cannot guarantee that we will be able to effectively compete with them.
In addition, the market leaders in our target industries, such as Industrial Material Handling, may start, or have already started, pursuing large scale deployment of autonomous industrial vehicle technology on their own. These companies may have more operational and financial resources than we do. We cannot guarantee that we will be able to effectively compete with them.
If existing competitors or new entrants commercialize earlier than expected, our competitive advantage could be adversely affected. 17 Business collaboration with third parties is subject to risks and these relationships may not lead to significant revenue. Strategic business relationships are and will continue to be an important factor in the growth and success of our business.
If existing competitors or new entrants commercialize earlier than expected, our competitive advantage could be adversely affected. Business collaboration with third parties is subject to risks and these relationships may not lead to significant revenue. Strategic business relationships are and will continue to be an important factor in the growth and success of our business.
In addition, the number of high-profile data breaches at major companies continues to accelerate, which will likely lead to even greater regulatory scrutiny. The scope and interpretation of the laws and regulations that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. For example, the E.U.
In addition, the number of high-profile data breaches at major companies continues to accelerate, which will likely lead to even greater regulatory scrutiny. 28 The scope and interpretation of the laws and regulations that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. For example, the E.U.
If we are not able to scale our IT infrastructure in a cost-effective and secure manner, our ability to offer competitive solutions will be harmed and our business, financial condition, and operating results may suffer. We must also continue to manage our employees, operations, finances, research and development, and capital investments efficiently.
If we are not able to scale our IT infrastructure in a cost-effective and secure manner, our ability to offer competitive solutions will be harmed and our business, financial condition, and operating results may suffer. 20 We must also continue to manage our employees, operations, finances, research and development, and capital investments efficiently.
As such, we do not know the degree of future protection that we will have on our technologies, products, and services. While we will endeavor to try to protect our technologies, products, and services with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and sometimes unpredictable. 25 Additionally, the U.S.
As such, we do not know the degree of future protection that we will have on our technologies, products, and services. While we will endeavor to try to protect our technologies, products, and services with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and sometimes unpredictable. Additionally, the U.S.
Our R&D program may not produce successful results, and our new products may not achieve market acceptance, create additional revenue, or become profitable. 18 We have a limited operating history, which makes it difficult to forecast our future results of operations. We were founded in 2013.
Our R&D program may not produce successful results, and our new products may not achieve market acceptance, create additional revenue, or become profitable. We have a limited operating history, which makes it difficult to forecast our future results of operations. We were founded in 2013.
To date, we have financed our operations primarily through the issuance of equity securities in private placements. We may need to raise additional capital to continue to fund our commercialization activities, sales and marketing efforts, enhancement of our technology and to improve our liquidity position.
To date, we have financed our operations primarily through the issuance of equity securities in private and public placements. We may need to raise additional capital to continue to fund our commercialization activities, sales and marketing efforts, enhancement of our technology and to improve our liquidity position.
The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business. 20 To execute our growth plan, we must attract and retain highly qualified personnel.
The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business. To execute our growth plan, we must attract and retain highly qualified personnel.
We expect that in the future we may receive notices that claim we or our collaborators have misappropriated or misused other parties’ intellectual property rights, particularly as the number of competitors in our market grows. 23 To defend ourselves against any intellectual property claims brought by third parties, whether with or without merits, can be time-consuming and could result in substantial costs and a diversion of our resources.
We expect that in the future we may receive notices that claim we or our collaborators have misappropriated or misused other parties’ intellectual property rights, particularly as the number of competitors in our market grows. 22 To defend ourselves against any intellectual property claims brought by third parties, whether with or without merits, can be time-consuming and could result in substantial costs and a diversion of our resources.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license, which could adversely affect our business, financial condition, results of operations, and prospects. 26 In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes, and know-how.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license, which could adversely affect our business, financial condition, results of operations, and prospects. 25 In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes, and know-how.
However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective and there can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar or superior to ours and that compete with our business. 24 Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets.
However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective and there can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar or superior to ours and that compete with our business. 23 Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets.
This re-engineering process could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful. 27 Additionally, the use of certain open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of software.
This re-engineering process could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful. 26 Additionally, the use of certain open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of software.
Because we will incur the costs and expenses from these efforts before we receive any incremental revenue, our losses in future periods will be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenue, which would further increase our losses.
Because we will incur the costs and expenses from these efforts before we receive any substantial revenue, our losses in future periods will be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenue, which would further increase our losses.
Any concerns about our data privacy and security practices (even if unfounded), or any failure, real or perceived, by us to comply with our posted privacy policies, contractual obligations, or any legal or regulatory requirements, standards, certifications, or orders, or other privacy or consumer protection-related laws and regulations applicable to us, could cause our clients to reduce their use of our autonomous industrial vehicles and could affect our financial condition, operating results, and our reputation, and may result in governmental or regulatory investigations, enforcement actions, regulatory fines, criminal compliance orders, litigations, breach of contract claims, or public statements against us by government regulatory authorities, our partners and/or clients, data subjects, consumer advocacy groups, or others, all of which could be costly and have an adverse effect on our business.
Any concerns about our data privacy and security practices (even if unfounded), or any failure, real or perceived, by us to comply with our posted privacy policies, contractual obligations, or any legal or regulatory requirements, standards, certifications, or orders, or other privacy or consumer protection-related laws and regulations applicable to us, could cause our clients to reduce their use of our autonomous industrial vehicles and could affect our financial condition, operating results, and our reputation, and may result in governmental or regulatory investigations, enforcement actions, regulatory fines, criminal compliance orders, litigations, breach of contract claims, or public statements against us by government regulatory authorities, our partners and/or clients, data subjects, consumer advocacy groups, or others, all of which could be costly and have an adverse effect on our business. 29 Furthermore, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our financial condition or results of operations; ● variance in our financial performance from expectations of securities analysts; ● changes in the pricing of the solutions on our platforms; ● changes in our projected operating and financial results; ● changes in laws or regulations applicable to our technology; ● announcements by us or our competitors of significant business developments, acquisitions or new offerings; ● sales of shares of our common stock by us or our shareholders; ● significant data breaches, disruptions to or other incidents involving our technology; ● our involvement in litigation; ● future sales of our common stock by us or our stockholders, as well as the anticipation of lock-up releases; ● changes in senior management or key personnel; 32 ● the trading volume of our common stock; ● changes in the anticipated future size and growth rate of our market; ● general economic and market conditions; and ● other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our financial condition or results of operations; ● variance in our financial performance from expectations of securities analysts; ● changes in the pricing of the solutions on our platforms; ● changes in our projected operating and financial results; ● changes in laws or regulations applicable to our technology; ● announcements by us or our competitors of significant business developments, acquisitions or new offerings; ● sales of shares of our common stock by us or our shareholders; ● significant data breaches, disruptions to or other incidents involving our technology; ● our involvement in litigation; ● future sales of our common stock by us or our stockholders; ● changes in senior management or key personnel; ● the trading volume of our common stock; ● changes in the anticipated future size and growth rate of our market; ● general economic and market conditions; and ● other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events.
In addition to the other risks described herein, factors that may affect our results of operations include the following: ● changes in our revenue mix and related changes in revenue recognition; ● changes in actual and anticipated growth rates of our revenue, customers, and key operating metrics; ● fluctuations in demand for or pricing of our offering; ● our ability to attract new customers; ● our ability to retain our existing customers, particularly large customers; ● customers and potential customers opting for alternative products, including developing their own in-house solutions; ● investments in new offerings, features, and functionality; ● fluctuations or delays in development, release, or adoption of new features and functionality for our offering; ● delays in closing sales which may result in revenue being pushed into the next quarter; ● changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; ● our ability to control costs; ● the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses; ● timing of hiring personnel for our research and development and sales and marketing organizations; ● the amount and timing of costs associated with recruiting, educating, and integrating new employees and retaining and motivating existing employees; ● the effects of acquisitions and their integration; ● general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; ● the impact of new accounting pronouncements; 19 ● changes in revenue recognition policies that impact our technology license revenue; ● changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance; ● the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period; ● health epidemics or pandemics, such as the COVID-19 pandemic; ● changes in the competitive dynamics of our market, including consolidation among competitors or customers; and ● significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our offering.
In addition to the other risks described herein, factors that may affect our results of operations include the following: ● changes in our revenue mix and related changes in revenue recognition; ● changes in actual and anticipated growth rates of our revenue, customers, and key operating metrics; ● fluctuations in demand for or pricing of our product offerings; ● our ability to attract new customers; ● our ability to retain our existing customers, particularly large customers; ● customers and potential customers opting for alternative products, including developing their own in-house solutions; ● investments in new offerings, features, and functionality; ● fluctuations or delays in development, release, or adoption of new features and functionality for our offering; ● delays in closing sales which may result in revenue being pushed into the next quarter; ● changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; ● our ability to control costs; ● the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses; ● timing of hiring personnel for our research and development and sales and marketing organizations; ● the amount and timing of costs associated with recruiting, educating, and integrating new employees and retaining and motivating existing employees; ● the effects of acquisitions and their integration; ● general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; ● the impact of new accounting pronouncements; ● changes in revenue recognition policies that impact our technology license revenue; ● changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance; ● the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period; ● the impact of global events, including the outbreak of war or conflicts ● health epidemics or pandemics, such as the COVID-19 pandemic; ● changes in the competitive dynamics of our market, including consolidation among competitors or customers; and ● significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our offering. 18 Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly.
While our R&D costs were $9.5 million and $5.0 million during the years ended December 31, 2022 and 2021, respectively, and are likely to grow in the future, we have minimal recurring revenues. Further, because we account for R&D as an operating expense, these expenditures will adversely affect our results of operations in the future.
While our R&D costs were $12.7 million and $9.5 million during the years ended December 31, 2023 and 2022, respectively, and are likely to grow in the future, we have minimal recurring revenues. Further, because we account for R&D as an operating expense, these expenditures will adversely affect our results of operations in the future.
If our common stock were to be delisted from The Nasdaq Capital Market, trading of our common stock most likely will be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the OTC Markets or in the “pink sheets.” Such a downgrading in our listing market may limit our ability to make a market in our common stock and which may impact purchases or sales of our securities.
If our common stock were to be delisted from The Nasdaq Capital Market, trading of our common stock most likely will be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the OTC Markets or in the “pink sheets.” Such a downgrading in our listing market may limit our ability to make a market in our common stock and which may impact purchases or sales of our securities. 30 Future sales of our common stock in the public market could cause the market price of our common stock to decline.
Risks Related to Our Financial Position and Need for Additional Capital Losses for the foreseeable future. We incurred net losses of $19.2 million and $7.8 million for the years ended December 31, 2022, and 2021, respectively.
Risks Related to Our Financial Position and Need for Additional Capital Losses for the foreseeable future. We incurred net losses of $22.8 million and $19.2 million for the years ended December 31, 2023, and 2022, respectively.
On December 15, 2022, we received a notification letter from The Nasdaq Stock Market advising that, for 30 consecutive business days preceding the notification letter, the Company did not meet the minimum $1.00 per share bid price requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2).
On August 24, 2023, we received a notification letter from The Nasdaq Stock Market advising that, for 30 consecutive business days preceding the notification letter, the Company did not meet the minimum $1.00 per share bid price requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2).
Any insurance that we carry may not be sufficient or it may not apply to all situations. If we experience such an event or multiple events, our insurance premiums could increase significantly or insurance may not be available to us at all. Further, if insurance is not available on commercially reasonable terms, or at all, we might need to self-insure.
If we experience such an event or multiple events, our insurance premiums could increase significantly or insurance may not be available to us at all. Further, if insurance is not available on commercially reasonable terms, or at all, we might need to self-insure.
We have not recognized a material amount of revenue to date, and we had accumulated deficit of $135.7 million and $116.5 million as of December 31, 2022 and December 31, 2021, respectively. We have developed and tested our autonomous driving technology but there can be no assurance that it will be commercially successful at scale.
We have not recognized a substantial amount of revenue to date, and we had an accumulated deficit of $160.0 million and $135.7 million as of December 31, 2023 and December 31, 2022, respectively. We have developed and tested our autonomous driving technology but there can be no assurance that it will be commercially successful at scale.
When our autonomy enabled industrial vehicles are in operation, the camera, LiDAR, and other sensing components of the vehicles will collect site and route view, mapping data, landscape images, and other LiDAR information, which may include personal information such as license plate numbers of other vehicles, facial features of pedestrians, appearance of individuals, GPS data, geolocation data, in order train the data analytics and artificial intelligence technology equipped in our industrial vehicles for the purpose of identifying different objects, and predicting potential issues that may arise during the operation of our integrated industrial vehicles. 28 We plan to utilize systems and applications that are spread over the globe, requiring us to regularly move data across national borders.
When our autonomy enabled industrial vehicles are in operation, the camera, LiDAR, and other sensing components of the vehicles will collect site and route view, mapping data, landscape images, and other LiDAR information, which may include personal information such as license plate numbers of other vehicles, facial features of pedestrians, appearance of individuals, GPS data, geolocation data, in order train the data analytics and artificial intelligence technology equipped in our industrial vehicles for the purpose of identifying different objects, and predicting potential issues that may arise during the operation of our integrated industrial vehicles.
Our results of operations may fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.
We expect fluctuations in our financial results making it difficult to project future results. Our results of operations may fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.
We will remain an emerging-growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.
In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards. 32 We will remain an emerging-growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of our initial public offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.
Unauthorized access or disclosure of personal or other sensitive or confidential data of Company (including data about third parties which the Company possesses), whether through systems failure, employee negligence, fraud, or misappropriation, by the Company, our service providers or other parties with whom we do business (if they fail to meet the standards we impose, or if their systems on which our data is stored experience any data breaches or security incidents) could also subject us to significant litigation, monetary damages, regulatory enforcement actions, fines, and criminal prosecution in one or more jurisdictions. 30 Risks Related to our Common Stock There is no established trading market for our shares; further, our shares will be subject to potential delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.
Unauthorized access or disclosure of personal or other sensitive or confidential data of Company (including data about third parties which the Company possesses), whether through systems failure, employee negligence, fraud, or misappropriation, by the Company, our service providers or other parties with whom we do business (if they fail to meet the standards we impose, or if their systems on which our data is stored experience any data breaches or security incidents) could also subject us to significant litigation, monetary damages, regulatory enforcement actions, fines, and criminal prosecution in one or more jurisdictions.
We have alliances and partnerships, through mutually beneficial non-binding memoranda of understanding or partnering arrangements with other companies in the industrial equipment, automation and automotive industries to help us in our efforts to continue to enhance our technology, commercialize our solutions, and drive market acceptance.
We have alliances and partnerships, through mutually beneficial non-binding memoranda of understanding or partnering arrangements with other companies in the industrial equipment, automation and automotive industries to help us in our efforts to continue to enhance our technology, commercialize our solutions, and drive market acceptance. 16 Collaboration with these third parties is subject to risks, some of which are outside our control.
We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.
None of the employment agreements and offer letters with our executive officers or other key personnel require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.
Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
Failure to manage our future growth effectively could cause our business to suffer, which, in turn, could have an adverse impact on our business, financial condition, and operating results. Our management team has limited experience managing a public company.
Failure to manage our future growth effectively could cause our business to suffer, which, in turn, could have an adverse impact on our business, financial condition, and operating results.
While we intend to regain compliance with the minimum bid price rule, there can be no assurance that we will be able to maintain continued compliance with this rule or the other listing requirements of The Nasdaq Capital Market.
The Company was given until August 19, 2024 to regain compliance with Nasdaq’s $1 minimum bid price per share requirement. While we intend to regain compliance with the minimum bid price rule, there can be no assurance that we will be able to maintain continued compliance with this rule or the other listing requirements of The Nasdaq Capital Market.
We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our common stock. Our stock price may be volatile, and the value of our common stock may decline. Prior to our initial public offering in October 2021, there was no public market for our common stock.
We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our common stock. Our stock price may be volatile, and the value of our common stock may decline.
If any of our collaborations with third parties are terminated, it may delay or prevent our efforts to deploy our software products and tools on purpose-built autonomous industrial vehicles at scale.
For example, certain agreements with our partners grant our partner or us the right to terminate such agreements for cause or without cause. If any of our collaborations with third parties are terminated, it may delay or prevent our efforts to deploy our software products and tools on purpose-built autonomous industrial vehicles at scale.
Other considerations related to the current conflict between Russia and Ukraine that may affect the Company include possible cyberattacks and potential disruptions in the banking systems and capital market, as well as supply chain and increased costs and expenditures on domestic and internationally-sourced materials and services. As an example, we engage third-party software development engineers who reside in Russia.
Other considerations related to the ongoing conflicts between Russia and Ukraine, and Israel and Palestine that may affect the Company include possible cyberattacks and potential disruptions in the banking systems and capital market, as well as supply chain and increased costs and expenditures on domestic and internationally-sourced materials and services.
Our dependence on these relationships exposes us to the risk that components manufactured by OEMs or other suppliers could contain defects that would cause our autonomous driving technology not to operate as intended. 15 Our autonomous driving technology is currently available as a private beta release, during which phase, we will prepare for scaled commercialization in 2024.
Our dependence on these relationships exposes us to the risk that components manufactured by OEMs or other suppliers could contain defects that would cause our autonomous driving technology not to operate as intended. Our autonomous driving technology is available for production release and is currently being licensed to customers. We plan to continue our scaled commercialization throughout 2024 and beyond.
As a result, we are subject to a variety of laws and regulations in the United States, and other foreign jurisdictions as well as contractual obligations, regarding data privacy, protection, and security.
We plan to utilize systems and applications that are spread over the globe, requiring us to regularly move data across national borders. As a result, we are subject to a variety of laws and regulations in the United States, and other foreign jurisdictions as well as contractual obligations, regarding data privacy, protection, and security.
Due to the current conflict, we may experience an interruption in the services provided by these parties. We are also vulnerable to natural disasters and other calamities.
As an example, we engage third-party software development engineers who reside in Russia. Due to the ongoing conflict, we may experience an interruption in the services provided by these parties. We are also vulnerable to natural disasters and other calamities.
If we fail to do so, our business, results of operations, and financial condition will be adversely affected. 16 Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business.
Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and employees.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. 33 These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and employees.
Our future business depends in large part on our ability to continue to develop and successfully commercialize our suite of software products and tools. Our ability to develop, deliver, and commercialize at scale our technology to support or perform autonomous operation of industrial vehicles is still unproven.
Our future business depends in large part on our ability to continue to develop and successfully commercialize our suite of software products and tools.
To demonstrate compliance with this requirement, the closing bid price of our common stock needs to be at least $1.00 per share for a minimum of 10 consecutive business days before June 13, 2023.
To demonstrate compliance with this requirement, the closing bid price of our common stock needs to be at least $1.00 per share for a minimum of 10 consecutive business days before February 20, 2024. On February 21, 2024, Nasdaq granted the Company an additional 180-day extension to continue its listing on the Nasdaq Capital Market.
Further, if we do raise additional capital, it may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline. 33 We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We do not intend to pay cash dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and operating results. 21 We may be subject to product liability or warranty claims that could result in significant direct or indirect costs, including reputational harm, increased insurance premiums or the need to self-insure, which could adversely affect our business and operating results.
We may be subject to product liability or warranty claims that could result in significant direct or indirect costs, including reputational harm, increased insurance premiums or the need to self-insure, which could adversely affect our business and operating results. Our technology is used for autonomous driving, which presents the risk of significant injury, including fatalities.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history at scale, user unfamiliarity with our solutions, any delays in scaling manufacturing, delivery, and service operations to meet demand, competition and uncertainty regarding the future of autonomous vehicles, and our performance compared with market expectations .
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history at scale, user unfamiliarity with our solutions, any delays in scaling manufacturing, delivery, and service operations to meet demand, competition and uncertainty regarding the future of autonomous vehicles, and our performance compared with market expectations . 21 Catastrophic events, such as pandemics and epidemics, or outbreak of an infectious disease, such as COVID-19 and subsequent variants, natural disasters, terrorist activities, political unrest, and other manmade problems such as war could have a material adverse impact on our business, results of operations, financial condition and cash flows or liquidity.
We cannot assure you that we will be able to adjust to changing market or regulatory conditions quickly or cost-effectively.
We cannot assure you that we will be able to adjust to changing market or regulatory conditions quickly or cost-effectively. If we fail to do so, our business, results of operations, and financial condition will be adversely affected.
Although we have no current acquisition plans, if appropriate opportunities arise, we may acquire additional assets, products, technology or businesses that are complementary to our existing business.
Our failure to achieve or maintain profitability could negatively impact the value of our common stock. 19 We may be subject to risks associated with potential future acquisitions. Although we have no current acquisition plans, if appropriate opportunities arise, we may acquire additional assets, products, technology or businesses that are complementary to our existing business.
Further, while the United Kingdom enacted the Data Protection Act 2018 in May 2018 that supplements the GDPR, and has publicly announced that it will continue to regulate the protection of personal data in the same way post-Brexit, Brexit has created uncertainty with regard to the future of regulation of data protection in the United Kingdom. 29 The U.S. federal government and various states and governmental agencies also have adopted or are considering adopting various laws, regulations, and standards regarding the collection, use, retention, security, disclosure, transfer, and other processing of sensitive and personal information.
Further, while the United Kingdom enacted the Data Protection Act 2018 in May 2018 that supplements the GDPR, and has publicly announced that it will continue to regulate the protection of personal data in the same way post-Brexit, Brexit has created uncertainty with regard to the future of regulation of data protection in the United Kingdom.
Our technology is used for autonomous driving, which presents the risk of significant injury, including fatalities. We may be subject to claims if one of our or a customer’s industrial vehicles is involved in an accident and persons are injured or purport to be injured or if property is damaged.
We may be subject to claims if one of our or a customer’s industrial vehicles is involved in an accident and persons are injured or purport to be injured or if property is damaged. Any insurance that we carry may not be sufficient or it may not apply to all situations.
Our business is vulnerable to damage or interruption from pandemics and epidemics, or outbreak of an infectious disease, such as COVID-19 and subsequent variants, natural disasters, terrorist attacks, political unrest, acts of war, including the current conflict between Russia and Ukraine, and similar events. 22 The COVID-19 pandemic as well as the recent inflation in the United States, and foreign and domestic government sanctions imposed on Russia as a result of its recent invasion of Ukraine, has caused or may continue to result in extreme volatility and disruptions in the capital and credit markets, which may adversely affect investor’s confidence and, in turn may affect our ability to raise additional capital.
The recent inflation in the United States, foreign and domestic government sanctions imposed on Russia as a result of its invasion of Ukraine, and the conflicts in Israel and Palestine has caused or may continue to result in extreme volatility and disruptions in the capital and credit markets, which may adversely affect investor’s confidence and, in turn may affect our ability to raise additional capital.
If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer. We expect fluctuations in our financial results making it difficult to project future results.
We anticipate that we will encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described in this Annual Report. 17 If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. 24 Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
Our executive officers, directors and principal stockholders, if they choose to act together, have the ability and will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval. Our executive officers, directors and principal stockholders (including entities affiliated with Benchmark), beneficially own approximately 52 % of our common stock.
We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention. 31 Our executive officers, directors and principal stockholders, if they choose to act together, have the ability and will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.
If we cannot raise additional funds when we need them, our financial condition, results of operations, business, and prospects could be materially adversely affected. We may be subject to risks associated with potential future acquisitions.
If we cannot raise additional funds when we need them, our financial condition, results of operations, business, and prospects could be materially adversely affected. We have incurred significant losses, have limited cash on hand and there is substantial doubt as to our ability to continue as a going concern .
In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information.
The U.S. federal government and various states and governmental agencies also have adopted or are considering adopting various laws, regulations, and standards regarding the collection, use, retention, security, disclosure, transfer, and other processing of sensitive and personal information. In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information.
Pandemics and epidemics, or outbreak of an infectious disease, such as COVID-19 and subsequent variants, natural disasters, terrorist activities, political unrest, and other manmade problems such as war could have a material adverse impact on our business, results of operations, financial condition and cash flows or liquidity.
Our business is vulnerable to damage or interruption from pandemics and epidemics, or outbreak of an infectious disease, such as COVID-19 and subsequent variants, natural disasters, terrorist attacks, political unrest, acts of war (such as the ongoing conflicts between Russia and Ukraine, and Israel and Palestine).
Our technology suite is currently available as a private beta release which will need to be continually developed and enhanced for scaled commercialization.
Our ability to develop, deliver, and commercialize at scale our technology to support or perform autonomous operation of industrial vehicles is still unproven. 15 Our technology suite is currently available on stockchasers and tuggers for production release. However, this technology will need to be continually developed and enhanced for further scaled commercialization .
Prior to our initial public offering in October 2021, there was no public market for our shares of common stock. Although our common stock began trading on the Nasdaq Capital Market on October 20, 2021, there can be no assurance that an active trading market for these securities will develop or be sustained.
Prior to our initial public offering in October 2021, there was no public market for our common stock and our common stock is not actively traded.
Removed
Collaboration with these third parties is subject to risks, some of which are outside our control. For example, certain agreements with our partners grant our partner or us the right to terminate such agreements for cause or without cause.
Added
The Company incurred net losses of approximately $22.8 million and $19.2 million for the year ended December 31, 2023 and 2022, respectively.
Removed
We anticipate that we will encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described in this Annual Report.
Added
In addition, the Company had accumulated deficits of approximately $160.0 million and $135.7 million as of December 31, 2023 and December 31, 2022, respectively, and net cash used in operating activities was approximately $19.5 million and $16.3 million for the year ended December 31, 2023 and 2022, respectively.
Removed
Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly.
Added
As of December 31, 2023, the Company’s unrestricted cash balance was $3.6 million, and its short-term investments balance was $4.6 million. As of December 31, 2022, the Company’s cash balance was approximately $10.5 million, and the short-term investments balance was $12.1 million.
Removed
Our management team has limited experience managing a publicly-traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies.
Added
Based on cash flow projections from operating and financing activities and the existing balance of cash and short-term investments, management is of the opinion that the Company has insufficient funds for sustainable operations, and it may not be able to meet its payment obligations from operations and related commitments, if the Company is not able to complete the required funding transactions to allow the Company to continue as a going concern.
Removed
Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
Added
Based on these factors, the Company has substantial doubt that it will continue as a going concern for the 12 months following the issuance date of the financial statements included elsewhere in this report.
Removed
The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health and safety measures.
Added
The Company’s plan to alleviate the going concern issue is to increase revenue while controlling operating costs and expenses and obtaining funds from outside sources of financing to generate positive financing cash flows.
Removed
The effects of this outbreak on our business practices have included and could continue to include temporary modifications to employee travel plans and cancellation of physical participation in meetings, events, and conferences, and we may take further actions as required by governmental authorities or that we determine are in the best interests of our employees, users, and business partners.
Added
While management is optimistic about its ability to raise substantial funds to continue as a going concern for one year following the financial statement issuance date, there can be no assurance that any such measures will be successful. We currently do not generate substantial revenue from product sales.
Removed
In addition, the business and operations of our manufacturers, suppliers, and other business partners have also been adversely impacted by the COVID-19 pandemic and may be further adversely impacted in the future, which could result in delays in our ability to commercialize our suite of autonomous vehicle software products and tools.
Added
Accordingly, we expect to rely primarily on equity and/or debt financings to fund our continued operations.
Removed
The extent to which COVID-19 will impact our, and those of our partners and potential users, business, results of operations, and financial condition will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the occurrence of a “second wave,” duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.
Added
The Company’s ability to raise additional funds will depend, in part, on the success of our product development activities, and other events or conditions that may affect the share value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control.
Removed
Even if the COVID-19 outbreak subsides, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
Added
There can be no assurances that sufficient funds will be available to us when required or on acceptable terms, if at all. Accordingly, management has concluded that these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Description of Property Our corporate headquarters is located in Menlo Park, California and acts as the main operational facility for our vehicle engineering, software engineering and business units. We lease our corporate headquarters which contains approximately 16,400 square feet.
Biggest changeItem 2. Properties Our corporate headquarters is located in Menlo Park, California and acts as the main operational facility for our vehicle engineering, software engineering and business units. We lease our corporate headquarters which contains approximately 16,400 square feet.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNone of our directors, officers or affiliates are involved in a proceeding adverse to our business or have a material interest adverse to our business.
Biggest changeNone of our directors, officers or affiliates are involved in a proceeding adverse to our business or have a material interest adverse to our business. Item 4. Mine Safety Disclosures Not Applicable. 34 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−0 removed1 unchanged
Biggest changeDividend Policy We have not declared or paid cash dividends on our capital stock and have no present intention of paying any dividends on our capital stock.
Biggest changeHolders of Record As of December 31, 2023, we had 58 shareholders of record. Dividend Policy We have not declared or paid cash dividends on our common stock and have no present intention of paying any cash dividends on our common stock.
Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Recent Sales of Unregistered Securities None.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Information with Respect to our Common Stock Our common stock is traded on the Nasdaq Capital Market, or Nasdaq, and began trading under the symbol “CYN” on October 20, 2021. Holders of Record As of December 31, 2022, we had 89 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Information with Respect to our Common Stock Our common stock is traded on The Nasdaq Capital Market, LLC, or Nasdaq, and began trading under the symbol “CYN” on October 20, 2021.
Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities The Company did not repurchase any of its equity securities during the fourth quarter ended December 31, 2022. Item 6. [Reserved]
Issuer Purchases of Equity Securities The Company did not repurchase any of its equity securities during its fiscal year ended December 31, 2023. Item 6. [Reserved]
Added
On September 29, 2023, our board of directors declared a one-time special stock dividend of 10% on our issued and outstanding shares of our common stock to holders of record on October 23, 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data F-1 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 42 Item 9A. Controls and Procedures 42
Biggest changeItem 6. [Reserved] 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data F-1 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 42 Item 9A. Controls and Procedures 42 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

43 edited+21 added−10 removed29 unchanged
Biggest changeThe increase was attributed to the following factors: i) an increase in personnel related costs, including provisions for non-cash stock-based compensation expense, as the Company increased staff to support being a public company; ii) the increase in occupancy costs following the renewal of the lease that expanded the square footage of the leased area; iii) directors and officers insurance coverage taken by the Company and; iv) professional fees related to required compliance and regulatory filings following the Company becoming a public company in October 2021 Interest income, net Interest (expense) income increased by $53.7 thousand to $44.1 thousand for the year ended December 31, 2022 from ($9.6 thousand) for the year ended December 31, 2021.
Biggest changeThe increase was attributed to an increase in personnel related costs, including provisions for non-cash stock-based compensation expense, as the Company increased staff to support public company responsibilities, an increase in marketing and advertising expenses, an increase in legal and professional fees associated with public filings and increases in other general and administrative expenses. 39 Interest income, net Interest income increased by $93.8 thousand to $137.9 thousand for the year ended December 31, 2023 from $44.1 thousand for the year ended December 31, 2022.
Warrants The Company issued to its lead underwriter in the Company’s initial public offering consummated in October 2021, (the “IPO”), warrants to purchase up to 140,000 shares of its common stock, exercisable at a price per share of $9.373 and expiring on October 19, 2026.
Common Stock Warrants The Company issued to its lead underwriter in the Company’s initial public offering consummated in October 2021, (the “IPO”), warrants to purchase up to 140,000 shares of its common stock, exercisable at a price per share of $9.373 and expiring on October 19, 2026.
The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating costs and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows.
The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating costs and expenses and obtaining funds from outside sources of financing to generate positive financing cash flows.
Revenue on these multi-phase contracts is generally recognized at the point in time when the performance obligations of each independent phase has been completed and customer acceptance has been acknowledged. Contracts often allow mutual termination without penalty. To the extent our actual costs vary from the fixed fee, we will generate more or less profit or could incur a loss.
Revenue on these multi-phase contracts is generally recognized at the point in time when the performance obligations of each independent phase have been completed and customer acceptance has been acknowledged. Contracts often allow mutual termination without penalty. To the extent our actual costs vary from the fixed fee, we will generate more or less profit or could incur a loss.
We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures.
We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our consolidated financial statements and related disclosures.
The Company plans to continue to expand its level of engineering and other R&D personnel to support its research and development efforts and expects research and development costs to increase over time. 39 General and Administrative General, and administrative expense consist primarily of personnel costs, facilities expenses, depreciation and amortization, travel, and advertising costs.
The Company plans to continue to expand its level of engineering and other R&D personnel to support its research and development efforts and expects research and development costs to increase over time. General and Administrative General, and administrative expense consist primarily of personnel costs, facilities expenses, depreciation and amortization, travel, and advertising costs.
Overview We are an autonomous vehicle (“AV”) technology company that is focused on addressing industrial uses for autonomous vehicles. We believe that technological innovation is needed to enable adoption of autonomous industrial vehicles that will address the substantial industry challenges that exist today.
Overview We are an autonomous vehicle technology company that is focused on addressing industrial uses for autonomous vehicles. We believe that technological innovation is needed to enable adoption of autonomous industrial vehicles that will address the substantial industry challenges that exist today.
With these challenges in mind, we are developing an Enterprise Autonomy Suite that leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, asset tracking, fleet management, cloud, and connectivity.
With these challenges in mind, we are developing an Enterprise Autonomy Suite (“EAS”) that leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, asset tracking, fleet management, cloud, and connectivity.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments.
Additionally, on April 29, 2022, the Company received net proceeds of approximately $18.1 million from the sale of common stock and exercise of pre-funded warrants in a private placement offering.
On April 29, 2022, the Company received net proceeds of approximately $18.1 million from the sale of common stock and exercise of pre-funded warrants in a private placement offering.
Cyngn Evolve , our internal tool suite and infrastructure that facilitates artificial intelligence (“AI”) and machine learning (“ML”) training to continuously enhance our algorithms and models and provides a simulation framework (both record/rerun and synthetic scenario creation) to ensure that data collected in the field can be applied to validating new releases.
Cyngn Evolve , our internal tool suite and infrastructure that facilitates artificial intelligence AI and machine learning (“ML”) training to continuously enhance our algorithms and models and provides a simulation framework (both record/rerun and synthetic scenario creation) to ensure that data collected in the field can be applied to validating new releases.
These challenges include labor shortages, lagging technological advancements from incumbent vehicle manufacturers, and high upfront investment commitment. 36 Industrial sites are typically rigid environments with consistent standards as opposed to city streets that have more variable environmental and situational conditions and diverse regulations.
These challenges include labor shortages, lagging technological advancements from incumbent vehicle manufacturers, and high upfront investment commitment. 35 Industrial sites are typically rigid environments with consistent standards as opposed to city streets that have more variable environmental and situational conditions and diverse regulations.
The Company determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the fair value of common stock, expected price volatility of common stock, expected term, risk-free interest rates, and expected dividend yield. Results of Operations Revenue We currently derive revenue from two sources.
The Company determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the fair value of the Company’s common stock, expected price volatility of the common stock, expected term, risk-free interest rates, and expected dividend yield. 38 Results of Operations Revenue We currently derive revenue from two sources.
The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition as of and during the years ended December 31, 2022 and 2021 and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report.
The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition as of and during the years ended December 31, 2023 and 2022 and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report.
We expect our technology to generate revenue through two main methods: deployment and EAS subscriptions. Deploying our EAS requires us and our integration partners to work with a new client to map the job site, gather data, and install our AV technology within their fleet and site.
We expect our technology to generate revenue through two main methods: deployment and EAS subscriptions. Deploying our EAS requires us and our integration partners to work with a new client to map the facility, gather data, and install our AV technology within their fleet and site.
Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The Company recognizes stock-based compensation cost and reverses previously recognized costs for unvested awards in the period forfeitures occur.
Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The Company recognizes stock-based compensation cost and reverses previously recognized costs for unvested awards in the period forfeitures occur, if any.
DriveMod , our modular industrial vehicle autonomous driving software; 2. Cyngn Insight , our customer-facing tool suite for monitoring and managing AV fleets (including remotely operating vehicles) and generating/aggregating/analyzing data (including the Infinitracker asset tracker and IoT gateway device); and 3.
DriveMod , our modular industrial vehicle autonomous driving software; 2. Cyngn Insight , our customer-facing tool suite for monitoring and managing AV fleets (including remotely operating vehicles) and generating/aggregating/analyzing data (including the IoT gateway device); and 3.
Financing activities Cash provided by financing activities for the year ended December 31, 2022 was $18.2 million, of which $18.1 million relate to the proceeds from the April 2022 private placement offering and $114.2 thousand relate to stock option exercises.
Cash provided by financing activities for the year ended December 31, 2022 was $18.2 million, which consisted of proceeds from the April 2022 private placement offering of $18.1 million and $114.2 thousand related to stock option exercises.
Our go-to-market strategy is to acquire new customers that use industrial vehicles in their mission-critical and daily operations by (a) leveraging the relationships and existing customers of our network of strategic partners, (b) bringing AV capabilities to industrial vehicles as a software service provider, and (c) executing a robust in-house sales and marketing effort to nurture a pipeline of industrial organizations.
We target scaled deployments to begin in 2024. 36 Our go-to-market strategy is to acquire new customers that use industrial vehicles in their mission-critical and daily operations by (a) leveraging the relationships and existing customers of our network of strategic partners, (b) bringing AV capabilities to industrial vehicles as a software service provider, and (c) executing a robust in-house sales and marketing effort to nurture a pipeline of industrial organizations.
Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical. The Company consider warrants and share-based compensation to be critical accounting estimates and believe the associated assumptions and estimates to have the greatest potential impact on our consolidated financial statements.
Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical. The Company considers costs to develop software, warrants and share-based compensation to be critical accounting estimates and believes the associated assumptions and estimates to have the greatest potential impact on our consolidated financial statements.
In turn, our customers are any organizations that could utilize our EAS solution, including original equipment manufacturers (“OEMs”) that supply industrial vehicles, end customers that operate their own industrial vehicles, or service providers that operate industrial vehicles for end customers.
In turn, our customers are any organizations that could utilize our EAS solution, including OEMs that supply industrial vehicles, end customers that operate their own industrial vehicles, or service providers that operate industrial vehicles for end customers.
During 2022, the Company recognized $262.0 thousand of revenue, of which $250.0 thousand was associated with NRE contracts and the remaining $12.0 thousand related to sales of Infinitracker devices. Cost of Revenue Cost of revenues consists primarily of direct labor and related fringe benefits for internal engineering resources costs incurred for the completion of the contracts and hardware costs.
During 2022, the Company recognized $0.26 million of revenue, of which $0.25 million was associated with NRE contracts and the remaining $0.01 million related to sales of Infinitracker devices. Cost of Revenue Cost of revenues consists primarily of direct labor and related fringe benefits for internal engineering resources costs incurred for the completion of the contracts and hardware costs.
During 2022, the company reported cost of revenue of $186.8 thousand consisting primarily of fully burdened internal engineering development resources and hardware costs incurred for the completion of the initial phases of NRE contracts.
During 2022, the Company reported cost of revenue of $0.2 million consisting primarily of fully burdened internal engineering development resources and hardware costs incurred for the completion of the initial phases of NRE contracts.
We have not yet derived any significant recurring revenues from EAS but began marketing EAS to customers in 2022. We expect EAS to continually be developed and enhanced according to evolving customer needs, which will take place concurrently while other completed features of EAS are commercialized.
We have not yet derived any significant recurring revenues from EAS but began marketing EAS to customers in 2022 with our first, paid commercial deployment commencing in the first quarter of 2023. We expect EAS to continually be developed and enhanced according to evolving customer needs, which will take place concurrently while other completed features of EAS are commercialized.
Interest income consists primarily of interest earned of $49.5 thousand from the Company’s interest-bearing bank accounts, offset by interest expense of $5.4 thousand representing the present value interest on the adoption of lease accounting guidelines under ASC 842 on right-of-use assets and operating liabilities.
Interest income consists primarily of interest earned of $149.9 thousand from the Company’s interest-bearing bank accounts, offset by interest expense of $12.0 thousand representing amortization of the present value interest on the adoption of lease accounting guidelines under ASC 842, Leases , on right-of-use assets and operating liabilities.
General and administrative expenses increased by approximately $5.6 million or 126.7% to $10.0 million for the year ended December 31, 2022 from $4.4 million for the year ended December 31, 2021.
General and administrative expenses increased by approximately $0.9 million or 9% to $10.9 million for the year ended December 31, 2023 from $10.0 million for the year ended December 31, 2022.
We expect annual R&D expenditures in the foreseeable future to equal or exceed that of 2020 and 2021. We also expect that limited paid pilot deployments in 2023 will offset some of the ongoing R&D costs of continually developing EAS. We target scaled deployments to begin in 2024.
We expect annual R&D expenditures in the foreseeable future to exceed that of 2023. We also had limited paid deployments in 2023 that offset some of the ongoing R&D costs of continually developing EAS.
We have already deployed DriveMod software on more than 10 different vehicle form factors that range from stockchasers and stand-on floor scrubbers to 14-seat shuttles and 5-meter-long cargo vehicles demonstrating the extensibility of our AV building blocks. These deployments were prototypes or part of proof-of-concept projects. Of these deployments, two were at customer sites.
We have already deployed DriveMod software on more than 10 different vehicle form factors that range from stockchasers and forklifts to 14-seat shuttles and 5-meter-long cargo vehicles demonstrating the extensibility of our AV building blocks.
This “land and expand” strategy can repeat iteratively across new vehicles and sites and is at the heart of why we believe industrial AVs that operate in geo-fenced, constrained environments are poised to create value.
This “land and expand” strategy can repeat iteratively across new vehicles and sites and is at the heart of why we believe industrial AVs that operate in geo-fenced, constrained environments are poised to create value. Critical Accounting Policies and Estimates and Judgements Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Research and development costs are expensed as incurred. Research and development expense for the year ended December 31, 2022 increased by $4.5 million or 90.0% to $9.5 million from $5.0 million for the year ended December 31, 2021.
All other research and development costs are expensed as incurred. Research and development expense for the year ended December 31, 2023 increased by $3.2 million or 34% to $12.7 million from $9.5 million for the year ended December 31, 2022.
The increase consists of purchases of short-term investments of $27.0 million and approximately $1.4 million in purchases of R&D-related hardware equipment and acquisition of intangible asset, which were partially offset by investment maturities of $15.0 million.
The increase consists of additional investment maturities of $29.5 million, which were offset by purchases of short-term investments of approximately $21.5 million and approximately $1.6 million in purchases of R&D-related hardware equipment, acquisition of intangible asset, capitalization of software and disposal of assets.
The Company determined the fair value of the warrants using the Black-Scholes pricing model and treated the valuation as equity instruments in consideration of the cashless settlement provisions in the warrant agreement. 38 The Company also applied the guidance in ASC 340-10-S99-1, Other Assets and Deferred Costs , that states specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering.
The Company also applied the guidance in ASC 340-10-S99-1, Other Assets and Deferred Costs , that states specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering.
Cash Flows Operating activities Net cash used in operating activities for the year ended December 31, 2022 was $16.3 million, an increase of approximately $7.7 million or 88.6% compared to $8.6 million for the year ended December 31, 2021.
Investing activities Net cash provided by investing activities for the year ended December 31, 2023 was approximately $6.4 million, an increase of approximately $19.7 million compared to net cash used in investing activities of approximately $13.3 million for the year ended December 31, 2022.
The increase is attributable to the increase in personnel engaged in the research and development of our AV technology in 2022 compared to headcount levels in 2021, external R&D contractors, allocated occupancy costs, R&D related travel costs.
The increase is attributable to the increase in personnel engaged in the research and development of our AV technology in 2023 compared to headcount levels in 2022, including provisions for non-cash stock-based compensation expense, and external R&D contractors.
Based on cash flow projections from operating and financing activities and existing balance of cash and short-term investments, management is of the opinion that the Company has sufficient funds for sustainable operations and it will be able to meet its payment obligations from operations and debt-related obligations for at least one year from the issuance date of this report.
Based on cash flow projections from operating and financing activities and the existing balance of cash and short-term investments, management is of the opinion that the Company has insufficient funds for sustainable operations, and it may not be able to meet its payment obligations from operations and related commitments, if the Company is not able to complete the required funding transactions to allow the Company to continue as a going concern, for the next year.
For one deployment we were paid $166,000 and the other was part of our normal R&D activities. Our strategy upon establishing a customer relationship with an OEM, is to seek to embed our technology into their vehicle roadmap and expand our services to their many clients.
Our strategy upon establishing a customer relationship with an OEM, is to seek to embed our technology into their vehicle roadmap and expand our services to their many clients.
Other Income Other income increased by $112.9 thousand to $120.1 thousand for the year ended December 31, 2022 from $7.2 thousand for the year ended December 31, 2021. Other income consists primarily of realized gains earned on the Company’s short-term investments of approximately $90.2 thousand and other miscellaneous income items.
Other Income Other income increased by $276.7 thousand to $396.8 thousand for the year ended December 31, 2023 from $120.1 thousand for the year ended December 31, 2022. Other income consists primarily of realized gains earned on the Company’s short-term investments. Liquidity and Capital Resources The Company’s principal source of liquidity is its cash and current maturities of short-term investments.
The increase is primarily attributed to the level of increases in personnel costs and professional services related to the Company’s research and development activities, as well as increases in general and administrative personnel-related costs and professional services as the Company increased staff to support being a public company, both of which led to the increase in the Company’s net loss for the period. 40 Investing activities Net cash used in investing activities for the year ended December 31, 2022 was approximately $13.3 million, an increase of approximately $13.3 million compared to net cash used in investing activities of approximately $20 thousand for the year ended December 31, 2021.
The increase is primarily attributed to the level of increases in personnel and professional services related to the Company’s research and development activities, as well as increases in general and administrative personnel-related costs and professional services as the Company continues to grow, both of which led to the increase in the Company’s net loss for the period.
The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity , depending on the specific terms of the warrant agreement.
The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity , depending on the specific terms of the warrant agreement. The Company determined the fair value of the warrants using the Black-Scholes pricing model and treated the valuation as equity instruments in consideration of the cashless settlement provisions in the warrant agreements.
We will seek to achieve sustained revenue growth largely from ongoing SaaS-style EAS subscriptions that enable companies to tap into our ever-expanding suite of AV and AI capabilities as organizations transition into full industrial autonomy. 37 Although both the components and the combined solutions of EAS are still under development, components of EAS have already been used for a paid customer trial and pilot deployments.
RaaS is a subscription model that allows customers to use robots/vehicles without purchasing the hardware assets upfront. We will seek to achieve sustained revenue growth largely from ongoing SaaS-style EAS subscriptions that enable companies to tap into our ever-expanding suite of AV and AI capabilities as organizations transition into full industrial autonomy.
However, as the project progressed, it was determined that total projected direct labor costs and related fringe benefits exceeded the arrangement fee. Research and Development Research and development expense consist primarily of outsourced engineering services, internal engineering and development expenses, materials, labor and stock-based compensation related to development of the Company’s products and services.
Research and Development Research and development expense consists primarily of outsourced engineering services, internal engineering and development expenses, materials, labor and stock-based compensation related to development of the Company’s products and services. Research and development costs incurred during NRE projects are capitalized and expensed when the associated NRE revenue is recognized.
Small Business Administration (“SBA”) that occurred during the year ended December 31, 2021. Liquidity and Capital Resources The Company’s principal source of liquidity is its cash and current maturities of short-term investments. Short-term investments consist of placements in U.S. government securities with original maturities between three to nine months.
Short-term investments consist of placements in U.S. government securities with original maturities between three to nine months. As of December 31, 2023, the Company had unrestricted cash of approximately $3.6 million and short-term investments of $4.6 million. As of December 31, 2022, the Company had unrestricted cash of $10.5 million and short-term investments of approximately $12.1 million .
Cash provided by financing activities for the year ended December 31, 2021 was $24.2 million, which consisted of proceeds from the IPO of $23.3 million, the February 2021 PPP Note proceeds of $0.9 million from the SBA, and stock option exercises of approximately $14.2 thousand.
Financing activities Cash provided by financing activities for the year ended December 31, 2023 was $6.1 million, of which $6.1 million relate to the proceeds from the sale of common stock.
Removed
RaaS is a subscription model that allows customers to use robots/vehicles without purchasing the hardware assets upfront.
Added
Although both the components and the combined solutions of EAS are still under development, we have EAS licenses with paying customers and have piloted EAS for paid customer trial and pilot deployments.
Removed
Meanwhile, according to the “Money Pit: Self-Driving Cars’ $16 Billion Cash Burn” article by The Information, more than $16 billion has been invested into passenger AV development during the last several years with negligible revenues generated and frequent delays.
Added
Costs to Develop Software The Company incurs costs related to internally developed software. Based on the nature of the software the Company capitalizes software costs under the following guidance. 37 Internal-Use Software The Company capitalizes certain costs related to internal-use software, primarily consisting of direct labor and third-party vendor costs associated with creating the software.
Removed
The $200 billion annual industrial equipment market (projected by 2027) is substantial, but it does not justify billions of dollars of annual research and development spend. These leading passenger AV companies will need to take the approach of first capturing the trillion-dollar markets of passenger AV to achieve their desired returns.
Added
Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred).
Removed
Critical Accounting Policies and Estimates and Judgements Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Added
Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces.
Removed
We also sell Infinitracker, an off-the-shelf asset tracking devise. Revenue on product sales is recognized at the point in time when ownership of the goods is transferred, generally at the time of shipment to the customer. Prior to 2022, the Company had not generated any revenue.
Added
Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which the Company expects to benefit from the use of that software.
Removed
Included in cost of revenue for 2022 is an onerous contract provision of $114.7 thousand for an anticipated loss for the first phase of an NRE contract expected to be completed in the first quarter of 2023.
Added
Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software, which is generally three to five years. There is judgment involved in the determination of the useful life. Internal-use software is classified as property and equipment in accordance with ASC 350, Intangibles – Goodwill and Other .
Removed
This onerous contract provision is based on total anticipated costs for the initial phase of the arrangement in excess of the revenue to be recognized upon completion and acceptance of the initial phase. Upon execution of the agreement, management’s expectation was that costs would approximate the arrangement fee per the contract.
Added
Costs to Develop Software to be Sold, Leased or Otherwise Marketed The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers.
Removed
For the year ended December 31, 2022, other income (expense), net, decreased by approximately $1.6 million from the year ended December 31, 2021. The decrease is attributed to the absence of comparable gains during the year ended December 31, 2022 compared to the forgiveness of Payroll Protection Program (“PPP”) Notes by the U.S.
Added
Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached shortly after a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements.
Removed
As of December 31, 2022, the Company had unrestricted cash of approximately $10.5 million and short-term investments of $12.1 million. As of December 31, 2021, the Company had unrestricted cash of $21.9 million. On October 22, 2021, the Company closed its IPO which resulted in net proceeds of approximately $23.3 million after deducting underwriting discounts, commissions and offering expenses.
Added
After technological feasibility is established, judgment is required to determine the amount of payroll and stock-based compensation costs to be capitalized on the remaining development efforts. These costs will continue to be capitalized until such time as when the product or enhancement is available for general release to customers.
Removed
Based on the above considerations, the Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.
Added
Computer software to be sold, leased or otherwise marketed is classified as an intangible asset in accordance with ASC 985, Software .
Added
Second, we derive revenue from EAS subscriptions. Revenue from these subscriptions is recognized monthly over the service contract life, beginning at the time that a customer acknowledges acceptance of the service. During 2023, the Company recognized $1.49 million of revenue, of which $1.42 million was associated with NRE contracts and the remaining $0.07 million related to revenue from EAS subscriptions.
Added
During 2023, the company reported cost of revenue of $1.2 million consisting primarily of fully burdened internal engineering development resources and hardware costs incurred for the completion of the final phases of NRE contracts.
Added
On May 31, 2023, the Company entered into an ATM Sales Agreement with Virtu Americas LLC (the “ATM Sales Agreement”), under which the Company may, from time to time, sell shares of the Company’s common stock at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.
Added
The ATM Sales Agreement and related prospectus are limited to sales of up to $8.8 million of shares of the Company’s common stock. The ATM Sales Agreement expires at the earliest of 5 years after the date of the agreement or exhaustion of the aggregate limit available under the ATM Sales Agreement.
Added
The Company pays Virtu Americas LLC up to 3.0% of the gross proceeds as a commission.
Added
For the year ended as of December 31, 2023, a total of 3,731,524 shares of common stock were sold through Virtu Americas LLC under the ATM Sales Agreement for net proceeds of $1,747,468 after payment of commission fees of $36,897 and other related expenses of $60,465.
Added
As of December 31, 2023, the Company had $6.9 million of common stock remaining available for sale under the ATM Sales Agreement. On December 8, 2023, the Company entered into a Placement Agent Agreement with Aegis Capital Corp.
Added
(“Aegis”), pursuant to which Aegis acted as the Company’s placement agent, on a reasonable best efforts basis, in connection with the sale by the Company of an aggregate of 33,333,333 shares of common stock in a public offering, which included: (i) 11,466,733 shares of Common Stock, and (ii) pre-funded warrants to purchase 21,866,600 shares of Common Stock.
Added
The public offering closed on December 12, 2023. The Company received gross proceeds of approximately $5 million before deducting transaction related expenses payable by the Company. All commissions, qualified legal, accounting, registration and other direct costs of $0.5 million related to the public offering were offset against the gross proceeds.
Added
Based on these factors, the Company has substantial doubt that it will be able to continue as a going concern for the 12 months following the date that these interim financial statements were issued.
Added
These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern. 40 Cash Flows Operating activities Net cash used in operating activities for the year ended December 31, 2023 was $19.5 million, an increase of approximately $3.2 million or 20% compared to $16.3 million for the year ended December 31, 2022.

Other CYN 10-K year-over-year comparisons