Greetings, and welcome to Cyngn's third quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carolyne Sohn, Investor Relations for Cyngn. Thank you, Caroline. You may begin.
Thank you, operator, and hello, everyone. Thank you for joining us. The press release announcing Cyngn's results for the third quarter and nine months ended September 30, 2022, is available at the investor section of the company's website at investors.cyngn.com. A replay of this broadcast will also be made available on the website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will, and include, among other things, statements regarding the company's continued development of an Enterprise Autonomy Suite, or EAS, and its components, expectations regarding sales and/or revenues, growth strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment and operational focus.
Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Cyngn is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision.
The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law. On today's call, the company's Chairman and CEO, Lior Tal, will discuss recent operating highlights. Chief Financial Officer, Don Alvarez, will follow with a review of the company's financials for the third quarter and first nine months of 2022. Lior will return to make a few concluding remarks before opening the floor for questions. With that, I will turn the floor over to Lior. Please go ahead.
Thank you, Caroline. Good afternoon, everyone. Toward the end of the third quarter and in November, we announced several major developments that brought us further ahead of our go-to-market timeline since becoming a public company and closer to scale commercialization of our software offering. The first key development was the signing of a multi-phase contract with a significant new customer that has chosen Cyngn as its technology partner to apply DriveMod to electric forklifts.
The electric forklift will be the customer's first autonomous vehicle as it embarks on its electrification and automation strategy. This partnership marks Cyngn's expansion of DriveMod to its second vehicle platform that is geared towards commercialization. We're excited to have the opportunity to work with this customer, a multi-million dollar global manufacturer of a variety of building materials used in commercial and residential properties.
We work closely with the customer's team to understand their operation, which will allow us to apply our Enterprise Autonomy Suite to create differentiated value propositions for their business. The second major development was our contracting with a U.S.-based manufacturer that will allow us to scale the production of DriveMod Kits more quickly for autonomous stock chasers, putting the kits in the hands of customers at lower cost.
This represents a significant opportunity for Cyngn as we look to leverage DriveMod Kit ease of installation and scale deployment for larger base customer and vehicle fleet. The ability to retrofit vehicles and operate heterogeneous fleets continues to be a key differentiator of Cyngn versus other companies, and we look forward to additional future opportunities to prove our unique AV technology value proposition to customers.
In October, we announced a contract with HEVI, a manufacturer of electric industrial vehicles under Greenland Technologies Holding Corporation, whereby Cyngn will be the exclusive supplier for vehicle tracking systems to HEVI. Our asset tracking device, Infinitracker, will be installed on each purchased HEVI vehicle as a value-added item to their customers.
We are pleased to be recognized by this industry incumbent for the value brought by key features offered by Infinitracker, such as location tracking using cell tower triangulation and extra long battery life. This contract serves as added validation of the value of Infinitracker and location data for Cyngn's EAS offering. Through focus on efficient execution and despite the difficult macroeconomic circumstances, we surpassed all the major milestones for 2022 that we had set forth for Cyngn a year ago when we went public.
Our original goal for this year, as communicated with investors during the IPO, was to deploy EAS at a single customer site with one vehicle type. We have executed multiple beta deployments at multiple sites and have begun expanding DriveMod to our second vehicle type. In addition, we have made significant progress in recruiting and are close to having the team we need to get us to commercialization at scale.
That being said, we do expect to make a few key personnel hires in the coming months. From an operational perspective, we recently completed the expansion of our Menlo Park headquarters, which includes an autonomous vehicle development and test facility. We're excited by our achievements this year and look forward to closing out 2022 on a strong note. With that, I'll turn it over to Don to review our financial results.
Thanks, Lior. I'll quickly go over the financial highlights for the third quarter and nine months ended September 30, 2022, covering both R&D and G&A expenses, which make up our total op- Additional details can be found in our financial press release that was issued earlier today, as well as in the Form 10-Q, which we anticipate filing with the SEC this week. Total operating expenses for the third quarter ended September 30, 2022 were $5.3 million compared to $2.1 million in the same quarter of the prior year.
The increase was primarily due to a $1.6 million increase in R&D expenses related to non-cash stock-based compensation, costs incurred for additional engineering staff and contractors, allocated occupancy costs, and R&D related travel costs. We expect these costs to continue to increase as we continue to invest in building our engineering team to further our R&D efforts.
G&A expense also increased by $1.6 million, which was largely related to increased non-cash stock-based compensation, expenses incurred for additional personnel and professional services to support our statuses as a public company. We reported a net loss of $5.3 million for the third quarter of 2022, compared to a net loss of $2.1 million in the prior year quarter as a result of the increased total expenditures.
Net loss per share on a basic and diluted basis was $0.16 based on approximately 33.6 million weighted average shares outstanding for the quarter ended September 30, 2022. This compares to a net loss per share on a basic and diluted basis of $2.17 based on approximately 1 million weighted average shares outstanding in the prior year quarter.
For the nine months ended September 30, 2022, total operating expenses were $13.7 million compared to $5.8 million in the prior year period. This was due to a $3.7 million dollar increase in R&D expense and a $4.2 million increase in G&A expense. Net loss was $13.7 million for the nine months ended September 30, 2022, compared to a net loss of $5.7 million in the prior year period. Net loss per share on a basic and diluted basis was $0.45 based on approximately 30.4 million weighted average shares outstanding, compared to net loss per share on a basic and diluted basis of $5.94 based on approximately 1 million weighted average shares outstanding in the prior year period.
Turning to the balance sheet, we had $27.7 million in cash and short-term investments at September 30, 2022, which compares to $22 million at the end of 2021. Our working capital was $27.3 million compared to $22.1 million at the end of 2021, and total stockholders' equity was $28.8 million compared to $22.2 million at December 31, 2021. I'd now like to turn it back over to Lior. Lior?
Thank you, Don. It has been a very exciting year for Cyngn so far. We're in a unique position in the industrial autonomy space and are working hard to be the first company to reach scale commercialization with our AV technology. The recent developments we announced are setting the stage for an eventful 2023 and beyond. We look forward to continuing to work closely with our partners and customers, expanding and leveraging these relationships to get us recurring revenue streams via software as a service or robotics as a service model in commercialization at scale. With that, operator, let's open it up for questions and answers.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Theodore O'Neill with Litchfield Hills Research. Please proceed with your question.
Thank you very much. I was wondering, in your prepared remarks here at the beginning, you cited, you know, three important recent developments in terms of the electric forklift market and scaling production of the DriveMod and the contract with HEVI. I was wondering if you could give us any milestones that we could look forward to related to these contracts, either in the phases they're going through or what other, you know, monetary aspects of it or production aspects of it we might expect to see over the next 12 months.
Hi, Theo, this is Lior. The three are sort of separate topics. You know, with regards to EAS DriveMod, as it's applied to Columbia stock chasers, the focus so far has been the end-to-end go-to-market in taking the technology with our partners to the hands of the customers and be able to support them throughout their deployment.
We actually accelerated the timeline and took on several additions to the original one we were planning in order to explore the applicability of these stock chasers to different applications. We had the opportunity to deploy them at a 3PL facility, but also in manufacturing sites. The next steps with these are to look at slightly larger deployments and start moving some of those to commercial contracts beyond the initial pilot. That's on the stock chaser application.
The HEVI is the first distribution of Infinitracker through a partner distribution channel. HEVI's vehicles are gonna come off the factory with the Infinitracker attached. At the beginning, it's going to be a few dozen trackers that's going to expand over time as we start selling those services to their customers, and we're working on additional channels and direct B2B sales at the company. Anything else that you
What about the forklift side?
Yeah. Okay. It's a good question. The electric forklift is something that's really ahead of its time in the sense that our plan was really to move forward with the stock chasers and get them to commercial deployment before taking on a second vehicle. However, this specific company presents a very interesting opportunity for us.
This project is more an NRE project. This is a bring up of a new vehicle that's specifically needed for their purposes. Once we've completed successfully the R&D, the pilot phase, and proved the applicability of DriveMod and EAS over forklifts to the operation, we will discuss continued commercial engagement. At the moment, we're gonna keep the disclosure. Of course, it was already published.
Okay.
Once we start clearing more of these milestones, we're gonna go back and update on the status of that project.
Okay. I was under the impression on the Q2 call that there had been a large increase in R&D employees, and I sort of expected that number to go up significantly in operating expense Q2- Q3, which it didn't really change very much. Is there any expectation that this number is gonna grow significantly before the end of the year, the R&D expense?
Hi, Theo, this is Don.
Yep.
The expectation is that our R&D expenses will continue to increase, but they will not increase as dramatically as they did between Q1 and Q2.
Okay.
We definitely anticipate it going up. I think that we had a couple of specific positions that are fairly high paying that we had planned for Q3 that did not materialize and will probably slip into Q4, maybe even Q1. That might be a good thing actually, given the market.
Okay. Sounds good. Thanks very much.
Thank you. Our next question is from Rommel Dionisio with Aegis Capital. Please proceed with your question.
Good morning. I'll sort of question on labor or R&D, which, Don, you just touched on. You know, obviously we're seeing pretty big headlines about, you know, significant layoffs in the tech sector. Is that providing any sort of ease to the labor cost pressure that you've seen, you know, here in that market for the last couple of years? Or is it maybe too early to tell that just yet? Thank you.
It definitely creates a flood of candidates that are relevant to us, especially companies that have people that are experienced in developing AI and people that have worked on robotics on self-driving. However, it's going to probably take a quarter or two until there's really going to be a change in compensation and compensation structure. Immediately, what we're already seeing is a bigger flood of candidates and much easier ability to be selective and hire the right people we need.
We're already starting to see the benefits of that, but I think the real impact is going to take some time. Of course, as Don said, you know, we're aware of the environment. We're trying to be conservative as much as we can, and not be in a position like other companies that we will need to consider layoffs later. We rather slow down recruiting and really bring in the critical roles and then, you know, grow as a function of commercial traction as we start seeing customers come in and revenues grow.
Okay. Maybe just a follow-up, if I could. I think you touched on this in the comments, Lior, but you know, you've obviously had some very strong initial success signing some pretty meaningful customers right off the bat, maybe with an initial product here or there. I wonder if you could just talk a little bit more about the opportunity of, you know, bringing them into your ecosystem, you know, with one product line, you know, with this DriveMod and a forklift.
But obviously that's a $5 billion company. I mean, obviously there's significant opportunities just with that one client alone and with others. I wonder if you could just talk about, you know, the evolution of getting them with the customer, but also, you know, just building with them over time once they're in your ecosystem. Thanks.
Okay. Let me hand this over to Ben, who can answer that.
Hey, Rommel.
Thank you, Ben.
Yeah, that's a great question. It's, you know, there's only so much that I can disclose given the early stages. What you're alluding to is exactly what we have preached about the vehicle-agnostic approach that we have. We alluded to electric forklifts being the first and most prominent of vehicles that this customer wants to automate and electrify in their new rollout of an automated and electric vehicle strategy. It is representative, though, of what we have been preaching, which is that electric forklifts are not the only vehicles in their fleet. We do really see it as a first opportunity for meaningful success out of the gates with the most impactful vehicle in the electric forklift.
Part of the reason for our selection and what we see as really the long-term vision that grows this from being a customer for a vehicle is that it really does ultimately grow into this being then repeated across other vehicle form factors within their global fleet, which is a substantial vehicle fleet. Growing that footprint within the customer and bringing to fruition that defensibility that we have been touting about the way that we've built the technology, which is that automating that second vehicle, that third vehicle becomes a de facto solution with Cyngn as opposed to with a different automation supplier. It really is that first meaningful step in what we see as long as we continue to be successful, a larger rollout into multiple vehicles with a very meaningful customer.
Ben, just following up on that, to what extent then does that become, you know, to the extent that you can successfully do that, become a barrier to entry, with that customer as well as many others?
Do you mean for?
To competitors, obviously.
For our comp-
To competitors. Right. Exactly. Yeah.
Yeah. That is our expectation that once we understand the customer's operation, we've done a first vehicle for them, our marginal costs for rolling out additional vehicles beyond that reduce, whereas any new competitor that would come and try to bid to automate those types of vehicles would incur marginal costs that are higher than we already incurred and are in the process of reducing.
We're seeing firsthand that this strategy that we have been pitching about the ability to automate different types of vehicle form factors by being more software-centric, by being a more software-defined vehicle and vehicle agnostic, is really coming to fruition. It's getting us the most difficult selection of winning that first vehicle. Winning the next ones become iteratively and incrementally easier and easier for us, which means on the flip side, trying to capture those becomes more and more difficult for our competitors.
Great. That's very helpful. Thank you so much.
Yep. Thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Jason Corman] with Coleman Financial . Please proceed with your question.
Hey, guys, good evening. First of all, congratulations on a successful quarter. I'm really happy to see you following through on your plan. The question that I have is in regards to Infinitracker. So right now it seems like you're doing, like, in-house sales and you have, you know, partnerships with HEVI, et cetera. Have you thought about reaching out to, perhaps, some MVNOs or maybe primary service providers or in general, other service providers who already have their own sales teams?
I'm sort of asking, like, could you outsource all that sales and maybe accelerate that revenue generation? Then maybe just to broaden the question to, you know, the SaaS space and with what you're doing with RaaS and SaaS, maybe you know that as well. Like, in a lot of SaaS companies, the first $1 million, $2 million, $5 million is very difficult. Maybe just to jumpstart that revenue growth. You know. I think you got my question.
Yeah. The simple answer is yes. We are doing a combination of traditional B2B sales, if you will. That is in-house, but we are also looking for leveraged opportunities, whether it be through different distribution channels, value add resellers that go and allow us to lean on other sales team and other channels that go beyond our own organic efforts and spend in order to grow the reach of Infinitracker.
Infinitracker very much does target an onboarding and a familiarization with our tools, and by extension and earlier introduction of revenues than the EAS product, which is, you know, a larger ticket price, but and often a longer sales cycle. Infinitracker certainly does try to create sort of a springboard in that regard, both from a revenue and from a customer engagement and onboarding perspective.
I appreciate that. Maybe I should just, like, ask, you know, have you actually reached out to Verizon? Obviously doesn't deal with this, but there are service providers that deal in industrial and, in that space, you know, in the U.S. and internationally. What about reaching out to them directly? Because you have like, I mean, 15-year battery life. I'm not gonna go through all the specs, but, I think you fare, you know, very competitively against, your competitors. What about that?
Yeah, again, the simple answer is yes. We do see the telecoms providers as one of the most meaningful partner opportunities for Infinitracker. It's one that certainly is in our consideration.
I appreciate that. Thank you very much.
Thank you.
Thank you. There are no further questions at this time. I would like to turn the floor back over to Lior Tal for closing comments.
Thank you for your time today. We're always open to conversation with investors and welcome you to visit us in our newly renovated offices in Silicon Valley. We can witness the vehicles, the technology, and meet the team. Please feel free to reach out to us with any additional questions. Thank you all very much.
This concludes today's conference. You may disconnect your