Overview of the Company

Shift to Focus on AI Software

Cogniac was originally focused on developing hardware and software for industrial robots. However, in November 2023, Cogniac announced it would shift its focus to developing AI software for industrial robots made by other companies. This software uses artificial intelligence and machine learning to help robots learn on their own, without needing extensive reprogramming or retraining.

Cogniac believes this software will allow robots to be more flexible and productive in dynamic environments where conditions are constantly changing. The software is designed to work with many different kinds of industrial robots.

Cogniac expects to complete development of the software by June 2024. It then plans to conduct customer trials in late 2024, with the goal of beginning commercial sales in 2025.

Cost Reduction Efforts

To conserve cash while developing the AI software, Cogniac has laid off employees and closed most of its Pittsburgh office.

Cogniac believes it has enough cash to fund continued operations for at least 12 months without needing to raise additional capital. However, further delays in commercializing the AI software could require Cogniac to raise more money sooner than expected.

Financial Results

First Quarter 2024 vs. First Quarter 2023

In the first quarter of 2024, Cogniac had:

• Revenue of $3.4 million, up 50% from $2.3 million in the first quarter of 2023
  • $0.9 million from development contracts, down 62%
  • $2.6 million from product sales (none in first quarter 2023)
• Operating expenses of $10.8 million, down 58% from $25.5 million
• Net loss of $7.2 million, compared to net loss of $21.5 million

The reduced net loss reflects Cogniac’s cost cutting efforts, including layoffs. Lower research and development costs accounted for most of the drop in operating expenses.

At March 31, 2024, Cogniac had $31.8 million of cash, cash equivalents and marketable securities. This is projected to fund continued operations for at least 12 months without needing to raise additional capital.

Outlook and Risk Factors

Demand for AI Software Unproven

While interest in AI software is growing, demand for Cogniac’s specific offering is still unproven. Cogniac is dependent on customers choosing to purchase and implement the new software. Failure to accurately forecast demand could negatively impact financial results.

History of Losses

Cogniac has incurred significant losses in the past and expects to continue losing money for the foreseeable future. If the AI software platform fails to attract customers at scale or costs more to develop than anticipated, losses could persist longer than expected.

Limited Resources

With limited capital and human resources, Cogniac faces challenges commercializing the AI software and may have to make difficult tradeoffs in product development. Past resource allocation decisions have not always panned out.

Tables

Revenue	Q1 2024	Q1 2023	Change
Product Development	$0.9 million	$2.3 million	-62%
Product Sales	$2.6 million	$0	n/a
Total	$3.4 million	$2.3 million	+50%

Operating Expenses	Q1 2024	Q1 2023	Change
Cost of Revenue	$1.9 million	$1.8 million	+6%
R&D	$2.9 million	$9.4 million	-69%
G&A	$5.1 million	$9.7 million	-47%
Sales & Marketing	$0.8 million	$3.7 million	-78%
Total	$10.8 million	$25.5 million	-58%

In summary, the report covers Cogniac’s strategic shift to focus on AI software, recent financial performance, outlook for the future, and key risk factors investors should consider. While making progress on the AI platform, Cogniac continues to operate at a loss and faces risks related to uncertain product demand, history of losses, and limited resources.

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