Cyngn Inc. (NASDAQ:CYN) is an autonomous vehicle (AV) technology company that is focused on addressing industrial uses for autonomous vehicles. The company has developed 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.

Cyngn's EAS provides a differentiated solution that the company believes drives pervasive proliferation of industrial autonomy and creates value for customers at every stage of their journey towards full automation and the adoption of Industry 4.0. EAS is a suite of technologies and tools that Cyngn divides into three complementary categories: DriveMod, Cyngn Insight, and Cyngn Evolve.

Business Overview

Cyngn's focus on industrial AVs simplifies the challenges faced by AVs on public roadways, as industrial facilities (especially those belonging to a single end customer that operates similarly at different sites) share much more in common than different cities do. Furthermore, Cyngn's end customers own their infrastructure and can make changes more easily than governments can on public roadways.

The company's 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 its 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.

Cyngn's long-term vision is for EAS to become a universal autonomous driving solution with minimal marginal cost for companies to adopt new vehicles and expand their autonomous fleets across new deployments. The company has 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 its AV building blocks.

Financials

For the fiscal year ended December 31, 2023, Cyngn reported annual revenue of $1,489,317, a decrease from the prior year's revenue of $2,072,800. The company's annual net income was a loss of $22,811,230, compared to a loss of $19,477,605 in the prior year. Annual operating cash flow was a negative $19,477,605, and annual free cash flow was a negative $21,242,138.

In the first quarter of 2024, Cyngn generated revenue of $5,513, substantially all related to EAS subscriptions and hardware revenue. Cost of revenue for the quarter was $113,776, consisting primarily of deployment costs, related to personnel costs, travel expenses and associated hardware costs to specific customers.

Research and development expenses for the first quarter of 2024 increased by approximately $0.1 million or 3% to $3.1 million from approximately $3.0 million in the prior year period. The increase is primarily attributable to the increase in personnel engaged in the research and development of Cyngn's AV technology in 2024 compared to headcount levels in 2023, including provisions for non-cash stock-based compensation expense.

General and administrative expenses decreased by approximately $0.4 million or 12.9% to approximately $2.7 million for the first quarter of 2024 from approximately $3.1 million in the prior year period. The decrease was attributed to a decrease in personnel related costs, including provisions for non-cash stock-based compensation expense, as well as decreases in insurance, legal and professional fees and other general and administrative expenses.

Liquidity

As of March 31, 2024, Cyngn had unrestricted cash of approximately $2.2 million and short-term investments of approximately $2.6 million. The company's principal source of liquidity is its cash and current maturities of short-term investments, which consist of placements in U.S. government securities with original maturities between three to nine months.

On May 31, 2023, Cyngn entered into an ATM Sales Agreement with Virtu Americas LLC, under which the company may, from time to time, sell shares of its common stock at market prices. As of March 31, 2024, a total of 17,034,205 shares of common stock were sold through Virtu Americas LLC under the ATM Sales Agreement for net proceeds of $4,460,639.

Additionally, on December 8, 2023, Cyngn entered into a Placement Agent Agreement with Aegis Capital Corp., pursuant to which Aegis acted as the company's placement agent in connection with the sale of an aggregate of 33,333,333 shares of common stock, including pre-funded warrants. The public offering closed on December 12, 2023, and the company received gross proceeds of approximately $5 million before deducting transaction-related expenses.

Cyngn's liquidity is based on its ability to enhance its operating cash flow position, obtain capital financing from equity interest investors and borrow funds to fund its general operations, research and development activities and capital expenditures. 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.

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 it to continue as a going concern for the next year. As a result, the company has substantial doubt it will continue as a going concern for the 12 months following the date that the interim financial statements were issued.

Risks and Challenges

Cyngn's business operations, operating results, and financial condition are vulnerable to certain risks and uncertainties, including inflation and its related impact on costs and expenditures, rising interest rates and its impact on the equity markets and investment valuations, effects of the Russia-Ukraine and Israeli-Palestine conflicts, and other factors beyond its control such as natural disasters, terrorism, civil unrest, and infectious diseases and pandemics.

Outlook

Despite these challenges, Cyngn faces significant obstacles in advancing its mission of developing cutting-edge autonomous driving technology for industrial and commercial applications. The company's ability to continue operations and focus on its strategic objectives is in doubt due to its financial situation.

Cyngn's long-term vision for EAS to become a universal autonomous driving solution, coupled with its strong patent portfolio and growing dealer network, could potentially position the company well for future growth in the industrial autonomy market. However, Cyngn's ability to execute on its strategy and capitalize on opportunities is severely limited by its current financial constraints. Investors will be closely watching the company's ability to secure the necessary funding to sustain its operations and overcome the substantial doubt about its ability to continue as a going concern.