Cyngn Inc. Commitments Disclosure

12. Commitments and Contingencies

 

Legal Proceedings

 

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves significant judgment about future events, and the outcome of litigation, which is inherently uncertain.

 

In May 2025, a former contractor of the Company filed a complaint alleging breach of contract and related claims arising from certain professional services agreements entered into between 2021 and 2024. The complaint seeks approximately $59,760 in damages, plus interest, attorneys’ fees, and costs. The matter is in its early stages, and the Company is evaluating the claims and intends to respond accordingly. The Company has recorded an accrual of approximately $33,000 in connection with the foregoing matters .

 

In August 2025, a former employee filed a complaint with the U.S. Department of Labor, Occupational Safety and Health Administration (“OSHA”), alleging retaliation in connection with the employee’s internal reporting. To avoid litigation and minimize costs, the Company has agreed in principle, subject to final documentation, to a one-time payment of $80,000 to settle a contract dispute, which payment is included in accrued expenses as of December 31, 2025.

 

Under the terms of a settlement agreement with a former placement agent, the Company may be obligated to pay a maximum of $2.3 million cash fee and issue 370,114 warrants to purchase shares of the Company’s common stock in connection with the June 27 Offering and the June 26 Offering. However, the Company has informed the former placement agent that it does not believe there is a basis for these obligations. The Company has not received a response from the former placement agent and a resolution has not been reached as of the date of this filing. Since the Company is contesting the matter and it has not accrued any liability related to it. While an unfavorable outcome is reasonably possible, the Company is unable to estimate the possible loss at this time.

  

The Company is subject to legal and regulatory actions that arise from time to time. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves significant judgment about future events, and the outcome of litigation is inherently uncertain. To avoid litigation and minimize costs, the Company agreed in principle, subject to final documentation, to a one-time payment of $500,000 to settle a contract dispute, of which payment was included in accrued expenses as of December 31, 2024 and paid out in March 2025.

 

There was no other material pending or threatened litigation against the Company that remains outstanding as of December 31, 2025.