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Item 1. Business

2023-03-16 compared with 2022-03-29 · 430 added, 277 removed, 131 unchanged (84% of the section changed)

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You should read Part I Item 1A Risk Factors and the section titled “Special Note Regarding Forward-Looking Statements”

for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion.

We are a technology leader in industrial highly- dexterous mobile robotic systems for use in dynamic environments.

Our mission is to save lives and prevent injury while helping humans accomplish more than ever before.

To achieve this mission, we design our robotic systems to augment human performance by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines to enhance human safety and productivity.

We expect our products to benefit markets in which people perform physically demanding or hazardous tasks, such as aerospace, automotive, aviation, construction, defense, distribution and warehousing for ecommerce and other industries, industrial manufacturing, maritime, military and oil and gas.

Our technologically-advanced line of products augments, rather than replaces, humans.

We believe we are in the midst of a fourth industrial revolution, or Industry 4.0, with the application of modern smart technology to traditional manufacturing and industrial practices.

Robotically augmenting the workforce is expected to increase productivity, reduce costly occupational injuries, minimize production downtime by facilitating fast implementation and changeovers, enhance agile manufacturing, broaden the pool of available employees by equalizing workers’

physical capabilities and potentially increase the longevity of an aging workforce.

For example, we expect that our Guardian XO and Guardian XT will each allow users to safely lift a load of up to 200 lbs.

(compared to the 35 to 40 lbs.

limits typically recommended by OSHA guidelines) with small effort in a wide range of tasks.

Based on use cases that we have explored with potential customers, we estimate that individuals using our Guardian XO unit can improve productivity by three or more times.

Our products are designed to serve as a key element of an Industry 4.0-ready workforce.

Our engineering and design efforts are led by a highly experienced robotics team, with some members of our core engineering team working together for over 20 years.

We are a technology leader in the design, development and manufacture of advanced robotic systems and solutions that redefine human possibilities.

Our mission is to increase worker productivity and longevity and prevent injuries through robotics.

Our robotic systems are designed to augment and increase human productivity by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines.

We aim to bring the benefits of robotics to dynamic and unstructured environments (i.e., environments that change or that require our robotic systems to perform different tasks at different times in different places, especially outdoor environments).

To do this, we design our robotic systems to be mobile, dexterous and adaptable through the use of flexible hardware designs and intelligent software.

Our core systems consist of the Guardian XM (formerly known as the Sapien 6M), Guardian XT and Guardian Sea Class teleoperated/semi-autonomous systems and the Guardian XO exoskeleton.

Our teleoperated/semi-autonomous systems are comprised of mobile robotic arms, sensing, wireless communications, control stations with intuitive human-robot interfaces and application-specific end-of-arm attachments (end-effectors), such as grippers, drills or spray nozzles.

We create our solutions by combining our systems with use-case specific features and components, which may include third-party hardware, such as lifts, bucket trucks and underwater remotely operated vehicles, or ROVs, as well as use-case specific hardware designs, software and end-effectors.

In general, the use-cases we are targeting are currently being done by humans, at times with the aid of generic industrial equipment like a crane or forklift, and involve dangerous or injury-prone activities in areas experiencing, and expected to continue to experience, labor shortages.

As a result, we believe our systems and solutions will increase safety and reduce injuries, prolong careers, broaden the pool of available workers by equalizing physical capabilities and increase productivity.

While taking advantage of our proprietary intelligent software, humans continue to be an essential part of our systems’

operation, whether through teleoperation, supervised autonomy or directly operating the robot (e.g., by wearing an exoskeleton).

In this way, human jobs and health are preserved while increasing productivity and helping to address labor shortages in our target markets.

While we ultimately expect our systems and solutions to benefit a wide variety of markets, we are currently focusing our systems and solutions on use-cases in the aviation, construction, defense, maritime, power and utility and solar energy industries.

We adapt our teleoperated/semi-autonomous core systems for specific use-cases based on the capabilities and characteristics of each system to create solutions.

We may also combine aspects of multiple systems or create a specific system for a particular solution.

For example, we currently expect that the next version of our solar field construction solution will be a hybrid of our Guardian XM and Guardian XT systems, and the baggage-handling solution we are developing uses a specific system designed for that solution.

Our product development efforts are led by a highly experienced robotics team, with some members of our engineering team having worked together for over 20 years.

We also benefit from more than $375 million in research and development investment in our proprietary technologies and an extensive patent portfolio.

We have received several awards and recognitions, including recognition as the 2020 Dexterous Robots & Exoskeletons Company of the Year by Frost & Sullivan and the following recognitions for the Guardian XO:

2021 IEEE Robotics and Automation Society Award for Product Innovation, selection as one of the Best Inventions of 2020, Productivity by Time Magazine, 2020 Finalist for the Innovation by Design Awards by Fast Company and 2020 Winner of the Commercial Technologies for Maintenance Activities (CTMA) Technology Competition by the National Center for Manufacturing Sciences.

The Guardian XO also received many top honors at CES in 2020, including being named “Top Emerging Technology”

by Digital Trends, “Best Robot”

by PCMag.com and “The Best Ideas and Products of CES”

by VentureBeat, and was recognized by WIRED Magazine as being one of the smartest technologies on the show floor.

We plan to offer our Guardian XO and Guardian XT robotic systems primarily through a Robot-as-a-Service, or RaaS, subscription-based service model that will give customers the convenience of included on-going maintenance, support, remote monitoring and software upgrades in addition to use of our products.

We believe the RaaS subscription model will be attractive to our customers and accelerate market adoption of our robotic systems because it will lower the upfront costs of deployment, shift capital expenditures to operating expenditures, allow customers to more nimbly scale deployments up or down in response to market conditions, and make our products more accessible to customers of all sizes.

Much of our technology we leverage across our systems and solutions.

For example, various technologies and inventions developed for the Guardian XO have been incorporated into the Guardian XT.

Combined with our advanced, success-based learning artificial intelligence, or AI approach, our supervised autonomy software framework uses multi-modal sensor data to optimally perceive, interact, and conceptualize dynamic, unstructured environments to harness the power of real-time and learned-behavior data inputs that allow our robotic systems and solutions to successfully execute task-specific autonomy in unstructured environments.

Our advanced, success-based AI enables human workers’

flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments.

Based on interest shown by our development customers and potential commercial customers in purchasing our systems and solutions, we have decided to offer our products primarily through a sales business model where the customer purchases a system or solution for a one-time, upfront amount.

As a result, we do not expect the Robot-as-a-Service (RaaS) model that we had previously planned to apply to our Guardian XO and Guardian XT systems to be a focus of our business model going

We also plan to offer software upgrades and additional capabilities and to offer for sale add-on hardware components (such as additional interchangeable end-effectors).

History and Corporate Information

Sarcos is the result of a decades-long effort in research and development of highly-dexterous robotic systems.

Sarcos is the result of a decades-long effort in research and development of robotic systems and solutions.

Our original predecessor was spun-out of the University of Utah in 1983.

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In December 2014, the assets of Raytheon Sarcos were acquired by a consortium led by the former Raytheon Sarcos President and our current Chief Innovation Officer Dr.

Fraser Smith and technology and telecom entrepreneur Benjamin Wolff, our former CEO and current Executive Chairman of the Board.

This acquisition was the basis for the establishment of Old Sarcos, which was incorporated in Utah in February 2015.

On September 24, 2021, we completed the Business Combination whereby Old Sarcos became a wholly-owned subsidiary of Rotor and Rotor changed its name to Sarcos Technology and Robotics Corporation.

Fraser Smith and technology and telecom entrepreneur Benjamin Wolff, our former Chief Executive Officer and current member of the Board of Directors.

This acquisition was the basis for the establishment of Old Sarcos, which was incorporated in Utah in February 2015 as Sarcos Corp.

On September 24, 2021, we completed the Business Combination whereby Old Sarcos became a wholly-owned subsidiary of Rotor Acquisition Corp.

and Rotor Acquisition Corp.

changed its name to Sarcos Technology and Robotics Corporation.

In April 2022, we acquired RE2, Inc., a Pittsburgh, Pennsylvania based robotics company.

The acquisition added engineering talent, technology, products and customers and expanded the potential use-cases and target markets we can address.

Our principal executive offices are located at 650 South 500 West, Suite 150, Salt Lake City, Utah, 84101.

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Evolution of Robotics

Industrial robots have been commercially available and used in industrial and manufacturing environments since the 1970s.

They are typically large, stationary machines designed to automate repetitive tasks that require speed and strength greater than what a human can accomplish.

Industrial robots have been commercially available and used in industrial and manufacturing environments for many decades.

They are typically large, stationary machines designed to automate repetitive tasks in a controlled environment (e.g., a factory assembly line) that require speed and strength greater than what a human can accomplish.

For manufacturing tasks, industrial robots generally execute plans by rote programming (functions that are programmed in advance by a human engineer).

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These advances have offered increased safety and operational flexibility, allowing robots to be deployed safely alongside humans, disrupting the historical industrial robotics industry and labor markets while offering more advanced capabilities than earlier models.

However, neither cobots nor AMRs are designed to perform tasks in dynamic or unstructured environments.

However, neither cobots nor AMRs are designed to perform tasks in dynamic or unstructured environments, especially outdoors.

As with their predecessors, they are tools of automation, designed and programmed to perform routinized tasks.

They also generally lack human-like dexterity and the ability to lift and manipulate heavy objects.

Evolution of Wearable Robotics

Robotic exoskeletons are not a new concept.

Robotic exoskeletons are also not a new concept.

They have been a staple of science fiction for decades.

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Partial-body, non-powered devices (called passive exoskeletons) have been adopted for passive support functions such as assisting parts-assembly workers when performing repetitive, overhead manual labor.

Unlike these commercial predecessors, powered, full-body industrial robotic exoskeletons will combine human intelligence and mobility with the strength, endurance and precision of traditional industrial robots.

These powered exoskeletons will allow humans and robots to operate as a single unit, substantially augmenting a typical workers’

capabilities while reducing the risk of occupational injuries.

Traditional Labor Market

Historically, many industries have been dependent on manual human labor and heavy equipment (such as forklifts or cranes) for numerous physically demanding tasks.

Human limitations and equipment inflexibility, such as size constraints and power needs, create costly inefficiencies.

Relying on human labor sources also has considerable financial and safety costs, which impact the business and the labor pool alike.

Workplace accidents and fatigue caused by heavy lifting and working from heights have significant detrimental effects on a workforce’s productivity and can cause extensive bodily harm to human workers.

Unlike these commercial predecessors, powered, full-body industrial robotic exoskeletons seek to combine human intelligence and mobility with the strength, endurance and precision of traditional industrial robots by allowing humans and robots to operate as a single unit, substantially augmenting a typical worker's capabilities while reducing the risk of occupational injuries.

Manual Labor Market

Historically, many industries have been dependent on manual human labor and heavy equipment (such as forklifts or cranes) for physically demanding tasks.

Human limitations, such as strength, potential for injury and limited reach, and equipment inflexibility, such as size constraints, power needs and limited or narrow functionality, create costly inefficiencies.

Relying on human labor sources also has considerable financial and safety costs, which impact both businesses and workers.

Workplace accidents and fatigue caused by heavy lifting and working at-height have significant detrimental effects on a workforce’s productivity and can cause extensive bodily harm to human workers.

Challenges to the labor market include:

Rising average age of the labor force in developed nations.

According to European Commission data:

According to data collected by the Organization for Economic Co-operation and Development (OECD) (see OECD (2023), Old-age dependency ratio (indicator);

as shown on March 14, 2023):

as of 2022, 24.6% of the United States labor force was over the age of 65;

by 2050, that percentage is expected to rise to 40.4%;

worldwide, as of 2015, 13% of the labor force was over the age of 65;

worldwide (representing the average of all country data tracked by the OECD), as of 2022, 32.4% of the labor force was over the age of 65;

and, by 2050, that number is expected to rise to 52.7%.

Shrinking pool of manual laborers .

Long-term trends suggest workers may avoid manual labor due to occupational hazards, resulting in labor shortages.

Moreover, although the long-term effects of COVID-19 are largely unknown, there is a chance they will further negatively affect the availability of the labor force.

According to an industry study, there will be a shortage of approximately 2.4 million workers in U.S.

Long-term trends suggest workers may avoid manual labor due to, among other factors, occupational hazards, resulting in labor shortages.

According to a 2018 industry study, there will be a shortage of approximately 2.4 million workers in U.S.

manufacturing by 2028 resulting in a $2.5 trillion negative impact on the U.S.

Moreover, although the long-term effects of COVID-19 are largely unknown, COVID-19 has resulted in many people leaving the workforce and may continue to negatively affect the availability of the labor force.

Costs associated with physically taxing occupations .

In the United States alone, (a) the Spine Research Institute and OSHA report that healthcare costs, lost wages and decreased productivity associated with back injuries cost approximately $100 billion annually, and (b) according to a 2018 U.S.

Bone and Joint Initiative study, back pain accounts for an estimated more than 264 million lost workdays a year, the equivalent of approximately two workdays for every full-time worker in the country.

Falls from heights are the fourth most disabling and costly injury after overexertion and falling from the same level according to the 2019 Liberty Mutual Workplace Safety Index.

OSHA reports that approximately $136 billion is lost annually due to worker fatigue.

In the United States alone, (a) in 2006 The Journal of Bone & Joint Surgery reported that healthcare costs, lost wages and decreased productivity associated with back injuries cost approximately $100 billion annually, and (b) according to a 2018 U.S.

Bone and Joint Initiative study, back pain

accounts for an estimated more than 264 million lost workdays a year, the equivalent of approximately two workdays for every full-time worker in the country.

Falls from heights are the fourth most disabling and costly injury, coming after such injuries as overexertion and falling from the same level, according to the 2019 Liberty Mutual Workplace Safety Index.

According to a 2007 publication, OSHA reported that approximately $136 billion is lost annually due to worker fatigue.

Many manual labor jobs are conducted in dangerous environments.

In the markets we are targeting, many manual labor jobs involve dangerous environments, such as working at height, underwater or near or using explosives or dangerous equipment.

According to the CDC, 18% of the non-fatal work injuries resulting in days away from work in 2020 were related to slips, trips and falls.

Another study reported that injuries related to falls accounted for approximately $4.8 billion per year in lost productivity and wages in the United States.

Equipment that is not ideal for complex environments or the task at hand .

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Larger equipment sizes and inflexibility in the range of tasks they can perform often do little to address some of the common issues faced by the labor force.

The Sarcos Solution

We design our robotic systems to augment human performance by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines to enhance human safety and productivity while addressing many of the labor market’s challenges mentioned above.

The technological advancements provided by our industrial highly-dexterous mobile robotic systems can have broad-ranging implications and benefits to workers and employers alike.

Based on our testing and initial trials, we expect each unit to increase productivity across a variety of use cases, while significantly reducing the risk, and associated costs, of employee injuries.

Our technological innovations, coupled with significant improvements in the size, weight, power, performance and cost of components, have enabled us to advance the development of our robotic systems.

We believe that our products sufficiently address the limitations historically faced by the robotics industry as discussed above to be commercially viable and expect to commence initial production of commercial units of the Guardian XO and Guardian XT by the end of 2022 for delivery to customers in early 2023.

The Sarcos Approach

We design our robotic systems and solutions to augment human performance by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines to enhance human safety and productivity while addressing many of the labor market’s challenges mentioned above.

We aim to bring the benefits of robotics to dynamic, unstructured work environments involving dangerous or physically demanding tasks by moving humans from doing the task themselves to being an operator or supervisor of a robotic system or, in the case of exoskeletons, enhancing human capabilities to reduce the risk of physical injury by having the human and the robotic system operate as one unit.

Our robotic systems and solutions combine technologically-advanced robotic hardware with advanced intelligent software, along with human operation or supervision, to increase capability, precision and productivity beyond unassisted human capabilities.

As a result, we believe our robotic systems and solutions will provide the following benefits (in some cases, depending on the system):

Fewer Injuries.

Fewer employee injuries from physically demanding work, which should reduce costs associated with such injuries, such as medical costs and replacement or temporary labor costs and related delays (including hiring and training time and costs).

Safer Work Conditions.

Less hazardous job conditions, which should also reduce injury-related costs and certain other costs, such as employee insurance costs and hazard pay.

Increased Productivity.

Increased productivity through increased throughput and/or decreased time to completion, fewer errors or accidents that may compromise materials or work surfaces that then require repair or replacement and/or addressing labor shortages by enabling more work to be done with the same number of human workers (e.g., decreasing crew sizes to increase the number of available crews while increasing the productivity of any particular crew).

Career Longevity.

Increase the health and career longevity of human workers by transferring the physical demands associated with our target use-cases from humans to our robotic systems and solutions thereby enabling experienced, more productive workers to remain on the job with fewer injuries and reduced wear-and-tear on their bodies, which should reduce labor costs and shortages.

Expanded Potential Workforce.

Increased opportunities to fill jobs with workers with physical limitations that would otherwise make such jobs difficult or impossible for them by employing them to operate a robotic system, which should increase the potential labor pool.

Mobility, which allows our systems and solutions to be deployed at a job site and to move around the job site rather than require that the job be brought to the robotic system in a factory or other controlled environment, thereby allowing robotic systems and solutions to tackle use-cases that previously could not be addressed easily or at all through robotics.

Adaptable Systems.

The ability to teach our robotic systems and solutions through software using AI and machine learning, or ML, so that our robotic systems and solutions can learn to do multiple and changing repetitive tasks with human supervision but without the need for human operation.

For example, the software we are creating will

allow some of our systems and solutions to enable operators to train the system to set autonomous tasks such as painting or sandblasting over a particular area and then operate on its own with human supervision.

Ultimately, this should further increase productivity as one human worker supervises multiple robotic systems.

Aligned Interests of Employers and Workers.

Compatibility of objectives between employers and employees because our robotic systems and solutions are intended to empower, not replace, the labor force and enhance employee safety while reducing employer costs.

We expect that our systems and solutions can benefit a wide variety of markets, including the aerospace and aviation, construction, defense, distribution and warehousing, industrial manufacturing, maritime, mining, power and utilities and solar energy industries, among others.

Based on product testing and trials and customer feedback, we expect our robotic systems and solutions to increase productivity across a variety of use-cases, while significantly reducing the risk, and associated costs, of employee injuries.

We believe that our core strength is in the design and development of highly complex and technologically advanced robotic systems and solutions, including associated software.

As a result, we may integrate our systems with readily available third-party products, such as lifts, bucket trucks, ROVs and other components as part of creating solutions for specific markets or use-cases.

Our technological innovations include or will include:

Kinematic Equivalency .

Our robotic systems are modeled after human movement and designed for a robot-to-human-body ratio with intuitive controls and integrated feedback.

Teleoperated .

Our teleoperated units, the Guardian XT and Guardian GT, are expected to provide high fidelity force feedback to enable precision work through a platform-agnostic design for diverse environments.

Human-like Dexterity with Augmented Strength .

We are designing our robotic systems to provide human-like ability to operate in dynamic, unstructured environments and augment humans with the strength, stamina, precision and speed of robotics.

Human-like Dexterity with Augmented Strength and Extended Reachability .

We are designing our robotic systems to provide human-like ability to operate in dynamic, unstructured environments and augment humans with the strength, stamina, precision, reach and speed of robotics.

Energetic Autonomy (untethered, battery-powered) .

We expect that our products will offer reduced power consumption via optimized power utilization.

Our robotic systems are being developed to include advanced controls and comprehensive system recovery to increase their safety.

We believe the primary drivers towards the adoption of our products include:

Increased productivity gained through increased strength and endurance, and reduced errors caused by worker fatigue.

Reduced costly occupational injuries, days missed and medical or legal expenses.

Ability to hire employees who would otherwise have been physically unable to perform the required tasks.

Potential to extend the number of years that aging workers can continue to perform physically demanding work.

Compatibility of objectives between employers and employees because our products are intended to empower, not replace, the labor force and enhance employee safety while reducing employer costs.

Limited production downtime as a result of fast implementation and changeovers.

Our Product Platforms

We expect to offer a range of robotic systems that draw on our intellectual property, years of expertise, and innovative core technologies.

We are designing our systems and solutions to offer reduced power consumption via optimized power utilization.

Our robotic systems and solutions are being developed to include advanced controls and comprehensive system recovery to increase their safety.

Intelligent AI-Based Software .

Our supervised autonomy framework uses multi-modal sensor data to optimally perceive, interact and conceptualize unstructured, outdoor environments.

Combined with our advanced, success-based learning AI approach, our supervised autonomy software framework uses the power of real-time and learned-behavior data inputs that enable our robotic systems and solutions to successfully execute task-specific autonomy in unstructured environments.

Our advanced, success-based AI enables human workers’

flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments.

In addition, we intend to offer our software solutions separately for sale or license.

Simulations / Mixed Reality.

Our robotic systems use augmented reality (AR), virtual reality (VR), digital twin and AI-enabled simulation techniques to create a simulations environment in which we can train and optimize the robot and the human operator.

Simulations allow analysis of system performance in conditions otherwise too expensive, risky or time-consuming to investigate in the physical world.

By virtually inserting a physics-based representation of our robot (a.k.a.

a digital twin) into a simulated work environment, we can analyze how the robot is performing as well as predict how it may perform under varying conditions.

The simulation also collects training data and helps to expand the behavior tree library for the robotic system so that it continues to get smarter in how it addresses real-time impediments or fault-situations when executing a work task.

Natural Extended Reality (XR) Interactions between Human and Robots.

We are advancing the state-of-the-art in fully immersive teleoperation technology for natural XR interactions between humans and robots, which combines VR/AR, new robot affordable motion capture technology based on magnetic motion tracking, haptic feedback from the teleoperated robot to the human and advanced intelligent controls software to provide a greater sense of realism and increased performance, as well as safety and control.

This technology is robot agnostic.

Our Systems, Solutions and Software

Our core robotic systems consist of:

the Guardian XM, the Guardian XT, the Guardian Sea Class and the Guardian XO.

Based on product development progress, combined with our views of market readiness and demand, we are currently focused on the commercialization of three of our core robotic systems:

the Guardian XM, Guardian XT and Guardian Sea Class.

We have begun production of initial commercial versions of the Guardian XM and Guardian XT robotic systems and offer both for sale.

We believe that we will also begin production of the initial commercial version of the Guardian Sea Class during 2023, and therefore we also offer that system for sale.

During 2022, as a result of supply chain constraints, product readiness and perceived market demand, we decided to focus on the development and commercialization of the Guardian XM and Guardian XT rather than the Guardian XO.

We used that time as an opportunity to do a full product evaluation of the Guardian XO and determined that it required additional development before commercialization, in particular with regards to weight and additional safety enhancements.

Although this will result in further delays in the commercialization of the Guardian XO, we continue to develop the system for commercialization and reap the benefits of our product development work on the Guardian XO as we apply its technology to our other systems and solutions.

We have also seen meaningful market demand for our Guardian Sea Class system and, as that system is nearing commercial readiness, have decided to also focus on the commercialization of that system.

In addition, we offer for sale our Guardian S remote-controlled visual inspection and surveillance robotic system and our Guardian HLS heavy-lift pneumatic rescue and recovery system designed in collaboration with the Air Force Research Laboratory (AFRL) to lift armored tactical vehicles and other substantial payloads when the speed, timing and accuracy of operations are crucial.

Our Guardian GT system is a custom product in the early stages of development and is being designed to be similar to the Guardian XT, but much larger in size.

We expect future development and production of the Guardian GT to be on a bespoke basis in collaboration with each customer desiring the product.

These systems are not currently a focus of our commercial efforts, and we do not expect the Guardian S, Guardian HLS or Guardian GT systems to comprise a meaningful part of our future revenue.

Core Robotic Systems

The Guardian XM system is an intelligent robotic manipulator that offers speed, dexterity, precision and strength in a compact, lightweight package.

With six degrees of freedom, an optimized strength-to-weight ratio, embedded intelligence and a hardware design that can withstand extreme temperatures and environmental conditions, the Guardian XM system can be used for a variety of complex outdoor and indoor applications.

It is compatible with our autonomy software, enabling semi-autonomous mobile manipulation in structured environments, such as in a factory with controlled lighting, and in unstructured environments like outdoor construction sites.

When human-in-the-loop control is required, the Guardian XM system can be teleoperated.

Key features of the Guardian XM system include:

Enhanced Mobility.

The Guardian XM is designed for enhanced mobile manipulation through:

o an optimized strength-to-weight ratio;

o not requiring an external control box due to being powered with low-voltage DC embedded computing and intelligence to minimize its footprint;

o a hardened mechanical design that is resilient to shock and vibration and can operate both indoors and outdoors.

Standard Interfaces.

Standard power and communication interfaces allow for fast and easy integration with third-party tools and sensors.

Capable of Many Tasks.

A standard end-effector interface allows for the integration of a wide variety of interchangeable end-of-arm tools.

Durable for Use in Harsh Conditions.

The Guardian XM’s rugged hardware is tolerant to extreme temperatures and harsh environmental conditions, such as rain, sleet, snow and the corrosive effects of salt spray.

Six degrees of freedom, including continuous wrist and elbow roll joints, allow for the precise placement of end-effectors.

Semi-autonomous Capability.

The Guardian XM has the capability to perform semi-autonomous manipulation using our proprietary Detect multi-modal computer vision software and our proprietary Intellect multi-algorithm AI software.

The Guardian XT is a highly-dexterous, mobile robotic system designed to combine robotic strength and precision with human judgment and ingenuity via teleoperation and increase productivity and worker safety in dangerous, complex and unstructured industrial environments.

Its versatile design enables mounting to various third-party mobile and lift platforms and allows operators to control their trade tools remotely while working at height, overhead or at ground level.

The Guardian XT is based on the upper body of the Guardian XO exoskeleton and is designed to be a one- or two-armed system that is platform-agnostic and attachable to various mobile bases.

The two-armed Guardian XT system can lift and manipulate up to 200 lbs.

and accomplish precision tasks under various conditions.

Key features of the Guardian XT system include:

Remote, Safe and Intuitive Operation.

The Guardian XT offers remote, safe operation to perform precise, dexterous tasks using intuitive, easy-to-use custom and off-the-shelf trade tools that provide situational awareness to the operator.

The system comes with an intuitive Operator Control Station (OCS) that includes a controller to operate the system with an HD touch screen display for monitoring, programming and controlling the robotic system.

The robotic system can be teleoperated intuitively, without any prior experience, by the human operator.

Anthropomorphic.

Operated in part by mimicking the natural movement of the operator.

A robot head, equipped with cameras located consistent with where a human would see provides situational awareness with which the human operator is already familiar, including the spatial relationship between the sensory input and the robotic arm.

The Guardian XT is capable of indoor and outdoor use, and is battery-operated for mobile use in unstructured environments (but can also accommodate installed power sources).

Further, a combination of robotic arms, torso and actuated end-effectors enables a wide range of motion and dexterity (e.g., reach, grab, raise/lower, turn).

The tasks carried out by the system can be complex, and occur in unstructured environments where automation is currently not a practical alternative.

Each arm can lift and manipulate up to 100 lbs.

We are also developing a variant of the Guardian XT for the U.S.

military, the Guardian DX, for defense logistics and maintenance applications.

Guardian Sea Class

The Guardian Sea Class robotic system is designed to provide human-like manipulation capability in complex underwater environments.

Whether used for commercial applications or military operations, the system can reduce the need to put divers in the water and can explore depths that are unsafe for humans.

An electromechanical system that can stay submerged for up to two hours at a time, it remains fully operational in depths up to 1 kilometer.

The system is a one- or two-armed system that is integrated into third-party ROVs from major manufacturers and that can be teleoperated or operated through optional semi-autonomous control.

The electromechanical system’s low-power stand-by state enables the use of mobile power sources and helps extend run time for enhanced productivity.

Key features of the Guardian Sea Class system include:

Optimized for Size and Power Usage.

Electronically driven, energy-saving system that provides reduced weight, size and expense as compared with hydraulic power unit systems.

Lightweight, compact design allows for a smaller “footprint,”

or volume, in constricted or precarious environments.

Water Resistant.

Fewer sealed surfaces than comparable hydraulic systems to significantly lower maintenance costs and risk of system downtime due to failure.

Closed, sealed design protects the electrical system from water ingress.

One- or Two- Armed System.

Can be equipped with two mirrored six-degree-of-freedom arms to improve modularity and reduce training requirements for service and repair.

Neutral buoyancy improves ROV/system balance and control.

The Guardian XO is a full-body, powered exoskeleton designed to augment user strength, endurance and precision without materially restricting freedom of movement.

We expect that the Guardian XO will enable the user to safely lift a load of up to 200 lbs.

with small effort in a wide range of use cases and industrial processes, significantly increasing a user's lift capability beyond the 35-40 lbs.

typically recommended by OSHA.

The unit’s advanced sensing and control system is designed to provide both responsiveness and fluidity of movement, making it user-friendly and intuitive to operate.

We expect that the Guardian XO will enable the operator to safely lift significantly

more than the 35-40 lbs.

typically recommended by OSHA with small effort in a wide range of use-cases and industrial processes.

The Guardian XO’s advanced sensing and control system is designed to provide both responsiveness and fluidity of movement, making it user-friendly and intuitive to operate.

The Guardian XO is intended to enhance productivity, mitigate worker fatigue, reduce the risk of workplace injuries and democratize the labor force by augmenting the capabilities of individuals otherwise physically unable to perform the required tasks.

We believe the Guardian XO has the potential to revolutionize the way work gets done in industry sectors such as aerospace, automotive, aviation, construction, defense, distribution and warehousing for ecommerce and other industries, industrial manufacturing, maritime, military and oil and gas.

According to initial customer testing feedback, the Guardian XO can increase a worker’s productivity by three or more times.

We believe the following capabilities will be required for initial market acceptance of the Guardian XO, and we intend to include them in our initial commercial units:

We believe the Guardian XO has the potential to revolutionize the way work gets done in a variety of industries, such as aerospace/aviation, automotive, construction, defense, distribution and warehousing for ecommerce and other industries, industrial manufacturing, maritime and power and utilities.

Key features of the Guardian XO will include:

Added Strength and Endurance .

The exoskeleton is expected to carry a maximum load of up to 200 lbs., while offloading the unit’s weight and the weight of the load being carried.

It is also designed to enable a smooth lifting motion by dynamically compensating for gravity and inertia for up to 100 lbs.

per arm (or 50 lbs.

per arm when lifting at full extension).

The exoskeleton is expected to enable the operator to carry significantly more than the 35-40 lbs.

typically recommended by OSHA.

It is also designed to enable a smooth lifting motion by dynamically compensating for gravity and inertia.

Battery-powered for Mobile Performance and Near-continuous Use .

The Guardian XO will be powered by onboard hot-swappable batteries intended to provide near-continuous operation.

Additionally, the XO Pod docking station is expected to facilitate battery charging, donning and doffing of the unit and data management.

Additionally, the XO Pod docking station is expected to facilitate battery charging, donning and doffing of the system and data management.

Sensors and Advanced Control Systems for Enhanced Maneuverability and Mobility .

Integrated sensors in the Guardian XO are expected to enable the unit’s advanced controls system to detect movement (position, force, angular rate, orientation, torque and speed) in milliseconds to eliminate perceived latency.

Maneuverability and mobility are intended to be provided through gravity compensation, which will cause the robot to feel almost weightless to the user, and 24 motorized joints, or degrees of freedom, which will allow the user to move freely and naturally in unstructured environments.

Integrated sensors in the Guardian XO are expected to enable the system’s advanced controls system to detect movement (position, force, angular rate, orientation, torque and speed) in milliseconds to eliminate perceived latency.

Maneuverability and mobility are intended to be provided through gravity compensation, which will cause the robot to feel almost weightless to the user, and many motorized joints, or degrees of freedom, which will allow the user to move freely and naturally in unstructured environments.

The Guardian XO is also expected to include a “hands-free”

mode in which the user can lock the suit’s arms while carrying a heavy load and simultaneously complete dexterous tasks requiring human hands.

Each unit will be equipped with a user-friendly control interface for user controls and diagnostics notification display.

Each system will be equipped with a user-friendly control interface for user controls and diagnostics notification display.

Ergonomic, Safety-first Features for User Comfort and Injury Prevention .

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In the event of a sudden power loss, redundant hardware and software are expected to enable “passive braking”

to prevent user injury.

In addition, the units are expected to include a highly responsive control system to enable the user to execute fall-prevention motions such as stumble-recovery.

We anticipate that users will be able to don and doff units without assistance in less than 30 seconds, with additional provisions for sudden egress.

We expect the Guardian XO to have a six-year service life (which we expect will involve shorter periods at different customers over that six-year period as initial customers upgrade to newer versions), with refurbishment after three years in service.

We expect to commence initial production of commercial units of the Guardian XO by the end of 2022 for delivery to customers in early 2023.

The Guardian XT is designed to be a highly-dexterous teleoperated, mobile robotic system that performs intricate, and sometimes dangerous, tasks that require human-like dexterity.

Based on the upper body of the Guardian XO, the Guardian XT is designed to be a one- or two-armed system that is platform-agnostic and attachable to various mobile bases.

We expect that the two-armed Guardian XT system will be able to lift and manipulate up to 200 lbs.

and accomplish precision tasks under various conditions, including at height.

The Guardian XT will be controlled via a wearable input device and a head-mounted display worn by the user to guide the robotic system’s arm movements in its workspace.

Users will be able to control the unit by utilizing their natural movement, reflexes, instincts and judgment to perform complex and precise tasks in unstructured, often hazardous environments both indoors and outdoors, all while keeping the user at a safe distance.

The Guardian XT is designed to provide several efficiency benefits through its remote lifting and dexterous manipulation capabilities.

For an at-height powerline maintenance task, for example, one of our potential customers concluded, based on their initial use of one of our early prototypes, that the Guardian XT has the ability to reduce the size of a crew by 50% and complete tasks 20% faster.

In addition, the Guardian XT is able to mitigate hazardous work condition risks including falling from height and worker fatigue due to repetitive motion tasks at-height.

We believe the Guardian XT will be capable of reducing both direct and indirect costs associated with at-height and other hazardous work, including insurance premiums, safety crew costs, hazard-pay and more.

We believe the following capabilities will be required for initial market acceptance of the Guardian XT and we intend to include them in our initial commercial units:

Tremendous Dexterity from a Distance .

The Guardian XT’s teleoperation system is designed to provide force feedback and allow for the tremendous precision and control necessary to perform dexterous tasks and manipulate off-the-shelf and user-specified trade tools.

Base and Platform Agnostic .

We expect the Guardian XT to be platform-agnostic and attach to various mobile or fixed bases, including wheeled or tracked vehicles such as boom lifts, scissor lifts and bucket trucks, to address construction, maintenance, installation, assembly and logistics needs.

Mixed Reality .

The Guardian XT can move users out of harms' way by allowing the remote operation of the robotic system leveraging mixed reality technologies.

The user can be safe inside or beside the Guardian XT by utilizing mixed reality systems integrated with the Guardian XT.

In the future, this will also allow partners to have experts in remote locations provide training and teleoperations.

Task Specific Autonomy .

Leveraging artificial intelligence, the Guardian XT will provide users with the ability to set autonomous tasks in undefined areas.

This includes the ability to set an area where a task, such as painting, sandblasting or assembly, can be performed after being trained by the remote user.

The Guardian XT is expected to have a six-year service life (which we expect will involve shorter periods at different customers over that six-year period as initial customers upgrade to newer versions), with refurbishment after three years in service.

We are also developing a variant of the Guardian XT for the U.S.

military, the Guardian DX, for defense logistics and maintenance applications.

We expect to commence initial production of commercial units of the Guardian XT by the end of 2022 for delivery to customers in early 2023.

The Guardian GT is a custom product designed to be similar to the Guardian XT, but much larger in size.

We expect it to be a teleoperated, force-multiplying robotic system that amplifies human strength and replicates human dexterity, while keeping the user at a safe distance.

The robot’s highly-dexterous 7-foot long arms will have the ability to lift up to 500 lbs.

each and mount on a variety of mobile bases, allowing the user to complete hazardous tasks such as decommissioning, public safety, disaster recovery, construction, ship building and maintenance and repair activities.

We expect future development and production of the Guardian GT to be on a bespoke basis in collaboration with each customer desiring the product.

We have established our Cybernetic Training for Autonomous Robots, or CYTAR, program, with initial funding from the U.S.

Airforce, to build on our existing Guardian XO and Guardian XT technology roadmap to develop trainable and semi-autonomous industrial highly-dexterous mobile robotic systems.

Fueled by the belief that a “human-in-the-loop”

approach delivers the optimal flexibility needed for complex tasks and dynamic environments in which robotic systems will need to interact, through our CYTAR program we intend to build upon our Guardian XO and Guardian XT technology using advances in artificial intelligence and machine learning as appropriate to allow users to effectively and rapidly teach robotic systems to perform complex tasks.

We expect the CYTAR platform to use inputs gathered from a human user wearing a kinematically equivalent controller to teach robotic systems to perform tasks in unstructured, dynamic and uncertain environments.

These inputs will be used to generate machine learning control policies that can be replicated and repeated with variations in the complexity and duration of tasks.

Additionally, the CYTAR program is expected to offer a fleet-accessible database of successful task completion strategies to scale teaching across numerous robotic systems saving time and resources.

While we have begun efforts to develop the CYTAR solution, it is in its early stages and we do not expect to produce commercial CYTAR products for the foreseeable future .

The Guardian S is a remote-controlled visual inspection and surveillance robotic system that can traverse challenging terrain and facilitate two-way, real-time video, voice and data communication.

The man-portable robot is controlled via an easy-to-use, ruggedized tablet, helping keep the user at a safe distance.

The system’s two-way communication facilitates video, sensor and still-image data capture by the Guardian S, allowing users to gain vital first-look and situational awareness data of the inspection target before a human-based inspection is required.

The Guardian S is small, lightweight and deployable in less than 2 minutes.

The robotic system’s ability to traverse difficult terrain and climb ferromagnetic surfaces makes it ideally suited for commercial, industrial, public safety and defense applications.

We believe the following to be the key capabilities of the Guardian S:

Multi-Purpose Mobile IoT Platform .

The Guardian S includes a built-in sensor module that gathers real-time information and has the flexibility to add task-specific sensors via its payload bracket.

Additionally, the Guardian S is capable of transporting a 10-pound sensor payload while traversing a horizontal surface.

Two-Way, Real-Time Video, Voice and Data Communication .

The Guardian S includes enhanced Wi-Fi and two-way radio connection between the user control unit and the robotic system.

It also comes with built-in LTE capability (at 700 MHz operation) for cloud-based services.

Audio and video are encrypted using 256-bit AES encryption.

All-Terrain, State-of-the-Art Visual Surveillance .

The Guardian S is capable of traversing challenging terrain, including stairs, pipes, tanks, culverts, and vertical ferromagnetic surfaces, and is IP65-rated to be dustproof and water protected.

The unit’s slim form factor enables access to confined spaces, beginning with seven inch diameter openings.

The Guardian S provides high-resolution visual inspection enabled by six 4k cameras with digital zoom and autofocus, providing 360-degree video coverage with both daytime and nighttime vision.

Surveillance capabilities last up to 12 hours of stationary surveillance time or a three-mile mobile inspection travel range.

The Guardian S robot was rolled out commercially in 2018 and is available today as a one-time upfront equipment purchase.

It was the first robotic system to be commercialized by Sarcos and has been purchased by both industrial and defense customers.

We do not expect the Guardian S to comprise a material part of our revenues after we release our commercial Guardian XO and Guardian XT products.

to prevent or reduce user injury.

In addition, the systems are expected to include a highly responsive control system to enable the user to execute fall-prevention motions such as stumble-recovery.

We anticipate that users will be able to don and doff a system without assistance in less than 30 seconds, with additional provisions for sudden egress.

To address the needs of our near-term target markets, we are developing use-case specific solutions:

We are developing solutions to address aircraft servicing (such as de-icing) and baggage-handling (loading and unloading airplane baggage compartments) use-cases.

We expect these solutions to reduce delays on the tarmac by enabling work to be done when humans are not able to perform the tasks (such as during lightning or other severe weather events) and to otherwise increase productivity by reducing the number of human workers needed to complete the tasks.

Construction / Surface Preparation.

We are developing a solution based on the Guardian XM to address surface preparation that we believe will be adaptable to a variety of contexts, such as buildings, ships and airplanes, to enable blasting and paint removal, painting, washing and similar activities.

We expect this solution to address human safety and health concerns frequently associated with these activities, increase precision and productivity and reducing scaffolding work and costs.

Some of our solutions have defense applications.

For example, our surface preparation solutions can work on Navy ships and our maritime solutions can assist with mine clearing.

We are developing maritime solutions based on the Guardian Sea Class system to address a variety of underwater use-cases, such as ship inspection (damage or security), rudder and prop shaft clearing, contraband recovery, mine clearing, salvage and infrastructure (locks, dams, power plants) inspection and debris removal and obstruction clearing.

We believe the Guardian Sea Class solutions will reduce the need for divers to be in dangerous, underwater conditions and increase the depths and duration at which work can be done.

Power and utilities .

We are developing a solution to address vegetation management for the power and utilities market.

This solution is based on the Guardian XT system and is being designed to remove vegetation at a height of up to 45 feet and be able to cover over a kilometer of distance per day.

Based on customer feedback, we expect this solution to extend daily work hours (multiple-shifts), reduce the impact of weather conditions (heat, wind, rain) on productivity and reduce the dependence on human workers.

Solar Field Construction .

We are developing a solar field construction solution to automate the installation of photovoltaic, or PV, panels at utility scale solar sites.

Early prototypes have been based on the Guardian XM, but we expect the commercial version of this solution to be based on a new system comprising aspects of both the Guardian XM and Guardian XT systems.

We believe that our solar field construction solution will increase productivity through increasing the number of panels that can be installed in a given day, reducing damage to PV panels arising from human accidents or mishandling and reducing the size of installation crews to help address the labor shortages facing the industry.

Our robotic systems and solutions are the combination of advanced robot technology and software.

As a result, our software is a critical part of our systems and solutions and our ability to create robotic solutions for dynamic, unstructured environments.

In part with initial funding from the U.S.

Airforce, we have developed and are developing software leveraging artificial intelligence and machine learning technologies that is designed to optimize the significant capabilities of our robots.

Among other things, we are developing our software to enable:

Intelligent teleoperation

Supervised and multi-algorithm autonomy

Multi-modal computer vision and fused perception

Success-based reinforcement learning

Motion planning and optimization

Predictive fault compensation

Fused perception

Cybersecurity

Physics-based simulation

Each of our robotic systems and solutions comes with a baseline software package that enables basic operation and useability of the system, teleoperation and semi-autonomous capabilities, cybersecurity, controls and communications.

For our market and use-case specific solutions, we will also include additional software designed to meet the base requirements of the particular use-case.

In either case, for customers who want additional features, we will sell or license upgrades to the baseline package.

For example, we intend to offer supervised autonomy as an incremental service.

Combined with our advanced, success-based learning AI approach, our supervised autonomy software framework uses multi-modal sensor data to optimally perceive, interact, and conceptualize unstructured environments to harness the power of real-time and learned-behavior data inputs that allow the applicable robotic systems to successfully execute task-specific autonomy in unstructured environments.

Our advanced, success-based AI enables human workers’

flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments.

Other enhancements that we intend to develop and offer include advanced teleoperation capabilities, task libraries (predefined data

sets, tools, inferencing models and scripts for controlling specific workflow execution) and fleet management and remote monitoring to allow a human operator to remotely control or supervise several robots from a central control location.

Further, we are exploring opportunities to sell and license our software separate from our own robots for use in third-party systems.

We anticipate that this will largely be done through a software-as-a-service license model.

Robot Service Platform

We refer to the combination of our software and the web-based portal we are developing to enable customers to monitor and configure the robotic systems and solutions they purchase as our “robot service platform.”

We are designing our robot service platform to enable us to provide customers with additional data analytics, operational tools, systems diagnostics, bug fixes and software upgrade deployment and other features, as well as a web-based portal where the customer can access information and request upgrades.

Market Opportunity

We expect to offer the Guardian XO and Guardian XT primarily through the RaaS subscription model, which we believe will promote customer adoption.

We believe that our products will be well received by our potential customers, as well as the labor force and labor unions.

We believe the total addressable market, or TAM, for our robotic systems is large and mostly unpenetrated.

We estimate that the TAM for our products was approximately $147 billion in 2020 and will grow to approximately $165 billion in 2026.

Our TAM is driven by the total number of workers in the occupations we expect to be candidates for adoption of the Guardian XO and Guardian XT and assumes that one in ten workers would adopt a unit.

Our assumptions regarding the number of workers in each occupation is based on data from the Bureau of Labor Statistics, or BLS, and our forecast assumes that the TAM would grow at the same rate as GDP, estimated to be 2% per year.

In addition, we believe that our serviceable obtainable market, or SOM, calculated to be initially 10% of our TAM, was $14.7 billion as of 2020 and will grow to $24.8 billion as of 2026, with the SOM as a percentage of TAM gradually increasing year by year to a 15% adoption rate as of 2026.

Our SOM is estimated based on the expected technology adoption life cycle of our products.

In the long run, we believe that we will be able to offer robotic systems and solutions that will benefit many markets and industries.

As a result, we believe that the global total addressable market, or TAM, for our robotic systems and solutions is large and will reach approximately $600 billion in 2029, which we estimated based on independent third-party research regarding the TAM for the solar power, construction, aerospace/aviation and maritime markets.

Of the global TAM, we estimate our global serviceable addressable market, or SAM, will be approximately $9.3 billion in 2029.

Finally, we believe that our global serviceable obtainable market, or SOM, will be approximately $1.2 billion by 2029, which is calculated as 13.5% of 2029 global SAM and assumes that our products will penetrate the Early Adopters phase of the Rogers' Innovation-Adoption Lifecycle by 2029.

We assume that our initial customer base will be comprised of innovators and early adopters in the industries we are targeting.

Following successful deployment with these early adopters, we believe that there will be many potential customers that are fast-followers.

We believe our estimated SOM is based on reasonable assumptions given our technology’s leadership position in the category of industrial highly-dexterous mobile robotic systems, the lack of competitive products in this new category and our interactions with leading industrial companies across a number of verticals.

However, it is possible that these assumptions will prove incorrect, and, as a result, our SOM could be significantly less than our estimates or take longer to be realized.

See Part I Item 1A Risk Factors - “

Our operating and financial projections rely on management assumptions and analyses.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results .”

The 2029 TAM and SAM estimates for our principal target industries were:

(1) solar power - $373.8 billion and $334 million, respectively;

(2) construction - $156.2 billion and $2.4 billion, respectively;

(3) aerospace/aviation - $68.6 billion and $1.9 billion, respectively;

and (4) maritime - $8.0 billion and $4.5 billion, respectively.

Other than construction, each 2029 industry TAM estimate is from independent third-party research.

To calculate the construction TAM, we projected from 2023 TAM using a 2023-2030 compound annual growth rate, or CAGR, where the 2023 TAM and 2023-2030 CAGR are from independent third-party research.

To calculate each 2029 industry SAM, we projected from 2023 or 2024 industry SAM, which are from commissioned third-party research, using the industry CAGRs from the independent third-party TAM research, and assume the following:

(a) average selling price (ASP) of $127,000 for each industry except maritime, where we assume $590,000 ASP, and (b) no material change in SAM from 2023 to 2024.

Furthermore, global SAM assumes target markets in (a) 13 countries (Australia, Brazil, China, France, Germany, Italy, Japan, South Korea, Mexico, New Zealand, Spain, the United Kingdom and the United States) for solar power;

(b) the same 13 countries plus Canada and Norway for maritime;

and (d) the United States only for construction.

We believe our estimates are based on reasonable assumptions given our technology's leadership position in the category of industrial, highly-dexterous mobile robotic systems, the general lack of directly competitive products in this new category, our plans to further differentiate our products via AI-enabled performance enhancing software and our interactions with leading industrial companies across a number of verticals.

However it is possible that these assumptions will proved incorrect, and, as a result, actual results and market sizes may deviate materially from our estimates.

See Part I Item 1A Risk Factors - “Our operating and financial projections rely on management assumptions and analyses.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

In the near-term, due to a combination of size, growth opportunities and our current product portfolio, we have decided to focus our commercialization efforts on six primary markets and related use-cases:

aviation, construction, defense, maritime, power and utility and solar energy.

Further, we believe that many of the potential customers within these markets for the solutions we are currently commercializing have additional use-cases beyond what we are currently targeting that we could choose to address in the future as we continue to develop our systems and solutions to expand their capabilities and applications.

We are initially focused on providing a baggage-handling solution and certain other solutions (such as de-icing and aircraft servicing) for the aviation ground services market.

Construction.

According to an August 2022 report by Associated Builders and Contractors, as of July 2022 there were more than 375,000 unfilled construction jobs in the United States and construction workers were quitting

their jobs at a faster rate than they were laid off or discharged for the 17 th consecutive month.

Further, based on 2022 U.S.

Bureau of Labor Statistics, the construction industry has the highest level of workplace injuries resulting from falls, slips and trips.

As a result, we believe the construction market is a significant opportunity for our solutions, primarily for surface preparation and other at-height work use-cases, to increase productivity and address the labor shortage while increasing worker safety.

We believe the defense industry will be an important market for us.

We have worked with the U.S.

Department of Defense for many years on product development to address its needs.

Further, some of our commercial solutions have defense applications.

For example, our surface preparation solutions can work on Navy ships and our maritime solutions can assist with mine clearing and ship inspection and repair.

With the capability to work underwater for up to 2 hours, at depths of up to 1000 meters and to perform dexterous tasks semi-autonomously or by teleoperation, such as inspection, repair or object removal, we believe our Guardian Sea Class system and solutions have a large market opportunity while increasing safety by reducing the need for human divers to work in dangerous underwater conditions.

Power and Utility .

We are developing solutions for vegetation management and utility pole top repair, as well as underwater dam and other infrastructure inspection or repair use-cases, for use by power utilities.

We believe these use-cases are significant opportunities for our solutions because they are designed to decrease the need for humans to work at height and in dangerous weather conditions or underwater and to increase productivity.

Solar Field Construction .

President Biden has announced that the United States is targeting a carbon pollution-free electrical grid by 2035.

According to the Solar Energy Industries Association, achieving the PV installation target to meet this goal will require roughly 900,000 solar panel installers.

SEIA has estimated that as of 2020, there were approximately 230,000 such installers in the United States and that this number has declined since 2016.

As a result, we believe there is a significant opportunity for our solution in the solar field construction market.

Growth Strategy

The key elements of our growth strategy include:

Continue to Develop our Robotic Systems

We will continue to develop our robotic systems, in particular in preparation for the commercial launch of the Guardian XO and Guardian XT.

As mentioned above, we currently expect to commence initial production of commercial units of these products by the end of 2022 for delivery to customers in early 2023.

However, such timeline may be delayed, including due to challenges in recruiting skilled employees, difficulties in securing components and materials, development delays, difficulties relating to manufacturing of the units and other factors.

See Part I Item 1A Risk Factors - " Initial production of commercial units of our core products, the Guardian XO and Guardian XT, may be delayed beyond the end of 2022 and therefore initial delivery to customers could be beyond early 2023 .

Focused Effort on Commercialization

We will continue to focus on the commercialization of select systems and solutions to increase speed to market and accelerate market penetration by targeting specific use-cases, while demonstrating our ability to sell, manufacture and service our products.

We believe this will prove the benefits of our systems and solutions in everyday working conditions while confirming market demand and achieving and growing product revenue.

Continue to Develop our Robotic Systems and Solutions

We plan to pursue continuous improvement of our current systems and solutions and to develop additional systems and solutions over time.

We believe that as we show the commercial viability and benefits of our products in our initial target markets and use-cases, customers and potential customers will want to use robotics, and specifically our products, to address other use-cases that previously have not been conducive to automation.

As our products are highly complex, we want to ensure that we continue to develop new systems and solutions to address new markets and use-cases, and thereby grow our business.

Continued Investment in Innovation

We will continue to invest significant resources in developing proprietary technologies across hardware, firmware, software and controls to commercialize our robotic systems.

We expect our research and development activities to focus on areas such as kinematic equivalency, teleoperation, human-like dexterity with augmented strength, energetic autonomy and safety of robotic systems.

We expect these efforts to continue to build our intellectual property portfolio and our design and engineering expertise as we work to achieve the product capabilities needed for effective commercialization.

Establish a RaaS Subscription Model to Accelerate Adoption of our Robotic Systems

We expect to offer our Guardian XO and Guardian XT primarily through a RaaS subscription model where customers pay a monthly subscription fee for the use of our robotic systems, as well as maintenance, servicing and software upgrades.

We believe the RaaS subscription model will be attractive to our customers and accelerate market adoption of our robotic systems because it will lower the upfront costs of deployment for customers, shift customer capital expenditures to operating expenditures, allow customers to more nimbly scale deployments up or down in response to market conditions and make our products more accessible to customers of all sizes.

Our RaaS subscription model will also allow us to generate recurring revenue which would improve our visibility into future results.

We will continue to invest significant resources in developing proprietary technologies across hardware, firmware, software and controls to commercialize our robotic systems and solutions.

We expect our research and development activities to focus on areas such as human-like dexterity with augmented strength and reach, energetic autonomy, safety, intelligent AI-based software, simulations/mixed reality and natural extended reality interactions between humans and robots.

We believe that these investments will be critical to our future growth as we seek to expand the capabilities of our systems and to create new solutions to address new markets and use-cases, as well as to sell upgrades and additional functionality to previous customers.

Capital Efficient Manufacturing

We intend to explore different options for manufacturing our products and select the most capital efficient manufacturing process, with a focus also on speed to market, quality and scalability.

One available option is outsourced manufacturing by established third-party contract manufacturers.

This approach would reduce our up-front capital investment and eliminate the recurring fixed costs and overhead that would be required for us to own and operate a manufacturing facility.

Outsourced manufacturing would also allow us to focus on our core competencies while significantly reducing overall risk and give us the flexibility to quickly scale volumes up or down to match demand levels since we can leverage an established manufacturing operation and supply chain.

Another available option is in-house manufacturing of our products.

Although this approach would require a more significant capital investment at the start, it would provide us with increased flexibility, such as the ability to react to changing conditions without regard to minimum order quantity requirements frequently imposed by contract manufacturers.

In-house manufacturing may also allow for more flexibility in customizing our products when requested by customers and provide more direct control over quality, product costs and product supply and timing.

We may also elect to pursue a blend of contract and in-house manufacturing.

We estimate that our new facility has the capacity to produce between 300 to 500 u nits per year.

Although we currently expect to favor an outsourced manufacturing model, we have not yet entered into an agreement with a third-party contract manufacturer and may ultimately determine that in-house manufacturing is the better alternative for our products.

Expand Target Markets

We are currently engaging with development partners in various industries in the United States, including aerospace, automotive, aviation, construction, defense, utilities, distribution and warehousing, industrial manufacturing, maritime, military and oil and gas.

We believe working with these partners will allow us to accelerate our brand awareness within these and adjacent industries and provide complementary capabilities and differentiation that will attract new customers while helping us expand our customer base.

We have decided to focus on a standard product sales model for our robotic systems and solutions instead of the robot-as-a-service, or RaaS, model we previously expected to pursue particularly for the Guardian XO and Guardian XT.

The standard sales model has the benefit of reducing our capital requirements since we do not need to wait to recover our production costs over many months or years of RaaS subscription payments.

As a result, we expect that our capital requirements will be reduced and that we can manufacture our systems and solutions in a more capital efficient manner.

We plan to engage one or more contract manufacturing partners and that, over time, our manufacturing partner(s) will be responsible for most of our manufacturing.

We believe that leveraging the core strengths of a contract manufacturing partner will have the long-term benefits of increased speed to market, high-quality volume production and the ability to scale more quickly to meet demand, as well as potentially decreasing supply chain costs, reducing delays and expanding our supplier-base.

Further, we would not need to build large-scale manufacturing facilities and incur the up-front capital investment and the recurring fixed costs and overhead that would be required for us to own and operate such manufacturing facilities.

We expect outsourced manufacturing to allow us to focus on our core competencies while significantly reducing overall risk and give us the flexibility to quickly scale volumes up or down to match demand levels since we can leverage an established manufacturing operation and supply chain.

See “—Manufacturing and Suppliers ”

Collaborate with Development Customers to Expand Target Markets

We have engaged, are engaging and intend to engage in the future with development customers in various industries, including aerospace/aviation, construction, defense, utilities, solar, distribution and warehousing, industrial manufacturing, maritime and power and utilities.

In many cases, these development customers pay us to develop our products, and this constitutes the bulk of our services revenue.

This allows us to reduce our net loss and use of cash while continuing product development efforts to improve and commercialize our products, develop new products and establish relationships with potential commercial and government customers that have helped us create products designed to meet their needs.

We believe working with these development customers will allow us to accelerate our brand awareness within these and adjacent industries and develop products that will meet the needs of a variety of potential customers.

These relationships have already played an important role in helping us select the markets, use-cases and product capabilities we are currently pursuing.

Additionally, while our focus has been primarily on the U.S.

domestic market, we aim to expand our presence in select non-U.S.

markets, most likely focusing on areas such as South Korea, Japan and Western Europe, in the future through relationships with a network of distributors.

We believe this diversified industry and geographic approach will allow us to identify new applications for our robotic platforms and provide us with customer feedback to assist our product development efforts while ensuring that we are addressing a broad range of markets.

domestic market, we intend to explore opportunities in select non-U.S.

markets as and when we deem appropriate.

Pursue Selective Strategic Acquisitions and Partnerships

We plan to pursue strategic acquisitions from time to time that we believe will be complementary to our existing business or otherwise increase the value proposition we deliver to our customers.

For example, we may pursue acquisitions that we believe will help us add new or enhanced capabilities or technology, expand our product offering, accelerate customer growth, enter new markets or add talent and expertise to our organization.

We may pursue strategic acquisitions from time to time that we believe will be complementary to our existing business or otherwise increase the value proposition we deliver to our customers.

We may pursue acquisitions that we believe will help us add new or enhanced capabilities or technology, expand our product offering, accelerate customer growth, enter new markets or add talent and expertise to our organization.

For example, our acquisition of RE2, Inc.

in April 2022 provided many of these benefits, including bringing much needed and hard to hire engineering talent into our company.

In addition, the RE2 acquisition has brought us additional technology, products and customers that are key elements of many of our currently targeted markets, use-cases and solutions, such as solar field construction, baggage-handling and maritime.

We may also enter into strategic partnerships from time to time, including to combine our product offerings with those of our partners.

For example, we may partner with companies whose products may serve as a mobile base for the Guardian XT and offer the combined unit as a standalone product.

For example, we may partner with companies whose products may serve as a mobile base for the Guardian XT or an integrated ROV for the Guardian Sea Class and offer the combined unit as a standalone product or solution.

Among other benefits, these partnerships could reduce barriers to customer adoption and use of our products, allow us to leverage the partner’s existing sales and distribution channels or provide lead generation and conversion of additional potential customers for our other product offerings.

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We are a pioneer in the robotic systems industry and benefit from lessons learned over more than 30 years and $375 million in research and development investment in our proprietary technologies, as well as our extensive patent portfolio.

We believe that our innovations, including advances in energetic autonomy, kinematic equivalency and human like dexterity, together with advances in electronics, materials, motors and other components of our products, will enable us to produce machines that do not suffer from historical limitations and are intuitive to use and relatively quick and easy for setup and changeover.

Worldwide, as of March 2022, we had approximately 172 patents and approximately 108 filed patent applications.

We believe that our innovations, including advances in energetic outdoor mobile manipulation, human like dexterity, intelligent AI-based software for controls and outdoor autonomy and immersive teleoperation technology for natural

extended reality interactions between humans and robots, together with advances in electronics, materials, motors and other components of our products, will enable us to produce machines that do not suffer from historical limitations and are intuitive to use and relatively quick and easy for setup and workflow changeover.

We often have opportunities to use technology developed for one system or solution in other systems or solutions.

For example, many of the technologies we developed for the Guardian XO have been incorporated into the Guardian XT and our intelligent software for controls and simulations developed for the Guardian XO has been extended to our other core products.

-Intellectual Property ”

Early Mover Across Wide Range of Industries

We believe we are creating an entirely new category of industrial highly-dexterous mobile robotic systems that augment, rather than replace, humans.

While developing our products in recent years we have engaged in frequent dialogue with leaders in the industries we expect to target, including through our Technical Advisory Group, which includes executive-level participants from various Fortune 500 companies.

We believe our efforts and position as a pioneer in industrial highly-dexterous mobile robotic systems and our head-start in developing relationships with potential customers situate us well to further develop and expand our product portfolio to address a significant market opportunity and additional use cases.

We believe we are creating a new category of industrial robotics –

intelligent systems and solutions designed to be mobile, highly-dexterous, used in changing, unstructured environments and capable of different tasks as directed by human operators.

We have spent many years working with and listening to people with experience in the industries we expect to target, including advisors and development customers.

These early engagements have helped us form relationships with potential customers, helped fund our development efforts and provided critical customer insight and feedback into our development plans and product designs.

We believe our early efforts to get this feedback and build these relationships with potential customers situate us well to create robotic systems and solutions that meet customer needs.

Visionary and Experienced Management

We have a proven and experienced team with deep operational expertise in bringing emerging technologies to market.

Our team is led by Ben Wolff, our Executive Chairman, and Kiva Allgood, our Chief Executive Officer.

Wolff has led two publicly-traded companies and was co-founder and chief executive officer of Clearwire, a leading mobile communications company.

Allgood has many years of executive-level, operational experience within global telecommunications and technology companies, including Ericsson and Qualcomm.

Our engineering and design efforts are led by a highly experienced robotics team with hundreds of years of cumulative robotics experience, with many members of our engineering team working together for over 20 years.

Our team is led by Kiva Allgood, our Chief Executive Officer, who has many years of executive-level, operational experience within global telecommunications and technology companies, including Ericsson and Qualcomm.

Our engineering and design efforts are led by a highly experienced robotics team with hundreds of years of cumulative robotics experience, with some members of our engineering team working together for over 20 years.

Members of our board of directors have extensive experience across a wide array of disciplines, including experience in many of the industries that we intend to serve and in the production and delivery of complex hardware and software solutions.

Strategic Collaborators

We collaborate with various companies, such as companies represented on our Technical Advisory Group, which is comprised of executives from more than a dozen Fortune 500 companies, including Delta Air Lines, GE, Microsoft, Schlumberger and The Boeing Company.

Some of the companies represented are also investors in Sarcos.

Our strategic engagement with high profile industry leaders provides valuable feedback that we believe will enhance our early mover advantage and product development efforts.

We also expect that these relationships will provide enhanced credibility and customer conversion.

We believe we are developing a new category of industrial robotic systems that augment, rather than replace, humans.

We collaborate or have collaborated with various companies, including development customers, in the development of our systems and solutions, such as Delta Air Lines, Changi Airport Group, Mortensen and Microsoft.

Some of the companies with which we have collaborated have also invested in Sarcos.

We have also worked closely with the U.S.

Department of Defense and the U.S.

Department of Energy on the development of some of our products or technologies.

We believe these collaborations provide valuable feedback that will enhance our early mover advantage and product development efforts.

We believe we are developing a new category of industrial robotic systems and solutions that augment, rather than replace, humans.

In many cases, our primary competition will be traditional modes of human labor, sometimes assisted with material handling products such as overhead cranes, forklifts and pallet jacks.

To overcome potential resistance to innovation and the adoption of new products and ways of working, we must demonstrate to customers the value proposition of our products, including increased productivity, reduced costly occupational injuries and a broadened pool of available employees by equalizing workers’

physical capabilities including older and less physically strong workers.

Additionally, our product offerings compete in a broad competitive landscape that includes robotics and automation companies that have both directly competing as well as alternative solutions ranging from exoskeletons, collaborative robots, industrial

robots, traditional lift-assist equipment and unmanned robotic vehicles.

We also view our competitive landscape to include companies who have different but unique product lines in the automation space, such as ABB Robotics, Siasun Robot & Automation, Teradyne and Berkshire Grey.

To overcome potential resistance to innovation and the adoption of new products and ways of working, we must demonstrate to customers the value proposition of our products, including increasing productivity, reducing costly occupational injuries and broadening the pool of available employees by equalizing workers’

physical capabilities to include older and less physically strong workers.

We also view our competitive landscape to include companies who have different product lines in the automation space, such as ABB Robotics, Siasun Robot & Automation, Teradyne and Berkshire Grey.

Also included in our broader competitive landscape are robotic solution suppliers, like Rockwell Automation, Honeywell, Keyence Corporation, COGNEX Corporation and Hexagon AB, which may not have a directly competing product today, but which could become competitors through diversification;

these companies have existing customer relationships and channels, as well as significant financial and other resources, that could enable them to emerge as formidable competitors in the future.

The following is a breakdown of the competitive landscape by product area:

The Guardian XO competes with robotics and automation solutions that help workers with heavy materials handling, heavy lift-and-transport-assist and overhead assembly type jobs.

Principal competitors include Hyundai and Daewoo, who have previously shown powered exoskeleton prototype units, and companies like Cyberdyne, Samsung, Panasonic, Ekso Bionics, Ottobock, Lockheed Martin, SuitX and Levitate who currently sell powered, partial-body exoskeletons or passively-powered, partial-body variants.

The Guardian XT faces a varied competitive landscape that includes collaborative robotics companies, as well as automation companies like Teradyne, ABB Robotics, Siasun Robot & Automation, Berkshire Grey, Ready Robotics and OMRON.

The Guardian S mobile IoT platform competes with other ground-based unmanned vehicles offered by companies such as Eddyfi Technologies and Waygate Technologies;

it also competes with aerial unmanned vehicle companies, like Flyability.

Other notable adjacent market and other competitors include Gecko Robotics, Teledyne FLIR, ICM, RedZone Robotics, Clearpath Robotics and Easysight Technology.

These companies have products that are commercially available and/or in development.

The following is a breakdown of the competitive landscape for our core systems and solutions:

Our Guardian XM and Guardian XT systems face a varied competitive landscape that includes collaborative robotics companies, such as Kuka, Fanuc, Doosan Robotics and Universal Robotics, as well as automation

companies like Teradyne, ABB Robotics, Siasun Robot & Automation, Berkshire Grey, Ready Robotics and OMRON.

Our Guardian Sea Class competes with robotic arm manipulator companies like Deep Trekker, Nauticus Robotics, Reach Robotics and QYSEA that provide manipulators and grippers for light and working-class ROVs.

Our Guardian XO competes with robotics and automation solutions that help workers with heavy materials handling, heavy lift-and-transport-assist and overhead assembly type jobs.

Principal competitors include Hyundai and Daewoo, who have previously shown powered exoskeleton prototype units, and companies like Cyberdyne, Samsung, Ekso Bionics, Ottobock, Lockheed Martin, SuitX and Levitate who currently sell powered, partial-body exoskeletons or passively-powered, partial-body variants.

Our vegetation management solution competes indirectly with general purpose mechanical brush clearing solutions like the Mini-Jaraff by Jarraff Industries and the Kershaw SkyTrim product by Progress Rail and modified lift trucks, such as the BIK Boom Truck and Sennebogen, that are marketed for vegetation management.

We believe our PV panel installation solution will compete with products under development by AES and Bailey Crane.

AES, a large utility company, announced in 2021 it was developing an autonomous solar module installation point-solution.

Bailey Crane has announced that it is developing a solar panel installation robot that could compete with our solution.

Our baggage-handling solution competes with AMR and automated guided vehicle (AGV) products designed for baggage-handling by companies such as Vanderlande, Addverb Technologies, Alstef Group, Siemens and Lloyd W.

Aubry Company and baggage-loader/unloader systems such as those provided by Beumer Group and BBHS.

Many of our competitors and potential competitors have products that are commercially available and/or in development.

We expect some products currently in development to become commercially available in the next few years.

In addition, we compete with companies that develop artificial intelligence and industrial automation solutions, such as those offered by Hyundai-Boston Dynamics, Canvas Technology, DroneSense, Intuitive, iRobot, Hahn Robotics, Kuka, Neurala, Ready Robotics, Rethink Robotics and Yaskawa.

Our competitor base may change or expand as we continue to develop and commercialize our robotic systems in the future.

In addition, we compete or may compete with companies that develop artificial intelligence and industrial automation solutions, such as those offered by Hyundai-Boston Dynamics, Grey Matter, Canvas Technology, DroneSense, Intuitive, iRobot, Hahn Robotics, Kuka, Fanuc, Neurala, Ready Robotics, Rethink Robotics and Yaskawa.

Our competitor base may change or expand as we continue to develop and commercialize our robotic systems and solutions in the future.

These or other competitors may develop new technologies or products that provide superior results to customers or are less expensive than our products.

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product quality, reliability and safety;

product features and performance;

product features and performance, including from our intelligent software;

product pricing;

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however, our potential competitors may have greater financial, technical, manufacturing and other resources than we have.

Our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their industrial robotics programs.

Our competitors may be able to deploy greater resources

to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their cobot and industrial robotics programs than we can.

Additionally, our competitors may have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other tangible and intangible resources than we have.

Furthermore, our competitors may decide to operate solely with a traditional sales model for robotic systems that may be viewed more favorably

by potential customers.

These competitors also compete with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products.

Additional mergers and acquisitions in the industrial robotics market may result in even more resources being concentrated in our competitors.

Additional mergers and acquisitions in the cobot and industrial robotics market may result in even more resources being concentrated in our competitors.

Customers and Partners

Our customers and development partners include some of the largest enterprises in our target markets (aerospace, automotive, aviation, construction, defense, distribution and warehousing, industrial manufacturing, maritime, military, and oil and gas), including Delta Air Lines, General Electric, Schlumberger, The Boeing Company and other Fortune 500 companies, as well as the U.S.

We engage with a wide-variety of potential customers in many different industries, including some of the largest companies in our target markets, small and medium-sized businesses and government agencies such as the U.S.

Department of Defense and the U.S.

Department of Energy.

Our development customers include some of the largest enterprises in our target markets, including Delta Air Lines, Changi Airport Group, Mortenson and the U.S.

Department of Defense.

We also have significant engagement with small and medium-sized potential customers across the aerospace, automotive, construction, defense, manufacturing, oil and gas, power and utilities and warehouse and logistics markets.

With our core products, the Guardian XO and Guardian XT, still under development, we have no binding customer commitments for the commercial production version of these products.

We have numerous ongoing discussions with prospective customers who have collectively expressed interest in thousands of units.

However, these discussions may not result in binding orders or sales.

Similarly, while we have current development contracts with the Department of Defense and other government entities covering both the Guardian XO and Guardian DX, these development contracts may not result in commercial orders or sales from these or other government entities.

We have also partnered with such companies as Microsoft and Array.

Through the end of 2022 our customers have primarily been development customers –

customers paying us to fund our product research and development efforts.

While we expect our revenue to continue to include product development contract revenue, we also expect to begin to see meaningful product sales revenue in 2023 as we begin to sell and deliver commercial versions of our Guardian XM, Guardian XT and Guardian Sea Class systems and solutions.

However, we have only recently begun to offer these systems for sale and, while we are having discussions with many potential customers that have expressed strong interest in purchasing our systems and solutions, at this time we do not yet have binding customer sales contracts for the commercial versions of these products.

Research and Development

Our research and development team is comprised of technology experts from fields including mechanical and electrical engineering, systems engineering, software/firmware/controls engineering, artificial intelligence and machine learning, finite element analysis, human factors and design and applications engineering.

Our primary areas of focus in research and development include, for the Guardian XO, kinematic equivalency to provide human-like dexterity and enable intuitive use and energetic autonomy;

and, for the Guardian XT, teleoperation and force feedback.

Our research and development team is comprised of technology experts from fields including controls, perception and simulations engineering, artificial intelligence and machine learning, software/firmware engineering, mechanical and electrical engineering, systems engineering, finite element analysis, human factors and design and applications engineering.

Our primary areas of focus in research and development are centered around supervised autonomy solutions, including multi-modal sensor data to optimally perceive, interact and conceptualize unstructured environments.

More specifically, among other things, we are focusing research and development efforts on:

for the Guardian XM, supervised autonomy for outdoor environments that enable dexterous manipulation for aviation, solar panel construction, surface preparation and other use-cases;

for the Guardian XT, immersive teleoperation technology for natural extended reality interactions between humans and robots and using the motions and task solutions of the human operator to train the system for increasing levels of autonomy;

for the Guardian Sea Class, an autonomy solution for multi-modal sensor perception and dexterous manipulation of robotic arms and guidance, navigation and control of an ROV to increase autonomy for underwater applications;

and for the Guardian XO, optimized bipedal walking controllers and supervised learning techniques to develop a novel, stable motion control framework to enable a hybrid use of the Guardian XO (either with or without a human operator).

Our research and development efforts also include our DfX (design for excellence) work, including comprehensive design for manufacturing, design for cost and procurement, design for testing and design for assembly.

These efforts are aimed at ensuring the manufacturability, serviceability and robustness of our products.

Our research and development expenses were $17.5 million and $14.1 million during 2021 and 2020, respectively, and are likely to grow in the future.

Our research and development expenses were $34.1 million and $17.5 million in 2022 and 2021, respectively, (which does not include the research and development expenses of RE2 prior to the acquisition on April 25, 2022).

Our customer first, collaborative approach is a cornerstone of our research and development processes.

Intellectual Property

Our research and development efforts over many years has resulted in significant intellectual property.

Our ability to create, obtain and maintain intellectual property is important to our business.

We rely upon a combination of protections afforded to owners of patents, copyrights, trade secrets and trademarks, along with employee and third-party non-disclosure agreements and other contractual restrictions to establish and protect our intellectual property rights.

We pursue patent protection at times when we believe we have developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings.

Our patents and patent applications are focused primarily on robots and robotic systems, including wearable exoskeletons to enhance human operations, humanoid robots, teleoperated robots, mobile platform-based robotic arms, teleoperated robots, unmanned ground robots and end-effectors, including patents in the areas of safety, robot vision, sensors, power efficiency, control strategies and cybersecurity.

We also have patents and patent applications covering technology in the fields of counter-attack unmanned aerial vehicles (drones) for enemy drone neutralization, various micro-camera and other medical devices, augmented reality, sensors, valves, motors, actuators and others.

As of February 2023, we had approximately 90 issued and unexpired U.S.

patents and approximately 100 issued and unexpired international patents, as well as approximately 135 patent applications filed in the United States or internationally.

Many of our previously issued patents have expired, with others set to expire on dates ranging from 2023 to 2040, exclusive of any patent term adjustment or patent term extension.

We do not know whether all of our pending patent applications will result in issued patents, or whether the examination process will require a narrowing of claimed subject matter.

Furthermore, in light of the highly active fields of technology in which we are involved, particularly the field of robotics, our patents and pending patent applications may not provide us with broad-level protection.

In an effort to protect our brand, we also pursue the registration of our domain names and various trademarks in the United States and in select international locations.

Sales and Marketing

We currently sell our Guardian S through a hybrid model of direct sales and distribution channels.

We expect to offer the Guardian XO and Guardian XT through a similar model.

Currently, we focus our resources on companies represented on our Technical Advisory Group and other leading companies in key vertical markets.

Due to their size and their potential opportunity and willingness to be early adopters, we believe these companies have the potential and ability to serve as referenceable customers and drive additional sales.

We intend to continue to invest in our sales and marketing efforts as we approach commercial launch of the Guardian XO and Guardian XT.

We intend to pursue strategic relationships with systems integrators, companies with complementary technologies, software application providers, distributors and consulting firms to expand the channels in which our solutions are marketed.

We currently offer for sale our Guardian XM, Guardian XT and Guardian Sea Class systems through a direct sales model.

We focus our sales and marketing efforts on industries that we believe show a strong potential for growth and a significant need based on worker shortage, limited innovations for their tasks (such as for outdoor tasks in unstructured environments) and risk of injury.

Due to their size and their potential opportunity and willingness to be early adopters, we generally direct our sales efforts toward leading companies in the industries and markets we target as we believe these companies have the potential and ability to serve as referenceable customers and drive additional sales.

Notwithstanding the foregoing, we also target small and medium-sized businesses and government agencies such as the U.S.

Department of Defense and the U.S.

Department of Energy.

We intend to continue to invest in our sales and marketing efforts in support of the commercialization of our robotic systems and solutions.

We believe working with these partners will accelerate our brand awareness within various industries and provide complementary capabilities and differentiation that will attract new customers while helping us expand our customer base.

We expect to operate a RaaS subscription model for the Guardian XO and the Guardian XT, which we believe will drive accelerated adoption following commercial launch.

We believe the RaaS subscription model will be attractive to our customers and accelerate market adoption of our robotic systems because it will lower the upfront costs of deployment, shift capital expenditures to operating expenditures, allow customers to more nimbly scale deployments up or down in response to market conditions and make our products more accessible to customers of all sizes.

We expect that initial sales of our robotic systems and solutions will be a standard sales model where the customer pays an upfront amount to purchase the system or solution, rather than the RaaS leasing model that we previously expected to pursue particularly with our Guardian XO and Guardian XT systems.

We had expected the RaaS model to be enticing to customers for a variety of reasons, though we had expected to follow a sales model for the Guardian XM, Guardian Sea Class and other products that were part of the Sapien product line acquired from RE2.

However, based on interest shown by our development customers and potential commercial customers in purchasing our systems, we have decided to pursue a standard sales model and we expect that our product revenue will primarily result from standard product sales.

As a result, while we could consider a RaaS or other model for a particular customer, we do not expect the RaaS model to be a focus of our business model going forward.

We expect that the standard sales model will enable us to reduce our capital requirements as we will not need to bear the upfront manufacturing costs associated with building our systems and solutions and then wait to recover those costs over many months or years of RaaS subscription payments.

With respect to our software, to the extent we are successful in commercializing it separately from our robotic systems and solutions, we expect to favor a software-as-a-service (SaaS) model that would result in a recurring revenue stream, though we will also consider one-time sales.

Similarly, we would also favor a SaaS model but consider one-time sales for software upgrades.

We expect to continue discussions with potential customers to ultimately determine the appropriate model for us in light of market conditions.

Manufacturing and Suppliers

We intend to explore different options for manufacturing our products and select the most capital efficient manufacturing process, with a focus also on speed to market and scalability.

We believe we can manufacture 300-500 systems per year in our current facilities, depending on the mix.

However, we do not expect to use all of that capacity in 2023, especially after engaging a contract manufacturing partner to provide additional capacity and expertise.

While we currently do not anticipate high-volume production by a contract manufacturing partner to be in place until at least the end of 2023, we have signed an agreement and begun initial engagement activities with a contract manufacturing partner.

We expect that this contract manufacturing partner will initially focus on helping us produce sub-systems for the Guardian XT.

We believe that leveraging the core strengths of a contract manufacturing partner will have the long-term benefits of increased speed to market, high quality volume production and the ability to scale more quickly to meet demand, as well as potentially decreasing supply chain costs, reducing delays and expanding our supplier-base.

See above discussion under “Growth Strategy - Capital Efficient Manufacturing.”

We maintain a diverse set of suppliers.

However, as we scale production, we expect the identity and magnitude of our suppliers to change materially.

Most of our suppliers are based in the United States and we often target suppliers that are local to our facilities, though we also pursue consolidation of suppliers between facilities when we deem it more cost-effective or to otherwise be beneficial.

Most of our supplier relationships are purchase order based and we do not have many long-term supply contracts.

In some cases, we have sole source (where the component is only available from a single vendor, often as a result of customization for our use) or single source (where we purchase from a single vendor but there are alternative sources of the component) suppliers.

We seek to minimize our dependence on sole or single source suppliers in order to reduce risk in our supply chain, including the risk of losing a sole or single source supplier due to bankruptcy, discontinuing production of the particular component or some other reason.

Government Regulation

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We are also subject to U.S.

laws and regulations that limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other persons.

In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.

We must also comply with export restrictions and laws imposed by other countries affecting trade and investments.

We maintain an export compliance program but there are risks that the compliance controls might not be effective, exposing us to legal liabilities.

Compliance with these laws has not significantly limited our sales but could significantly limit them in the future.

laws and regulations that may limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, suppliers, business partners and other persons.

These laws and regulations may include outright prohibitions or export license requirements.

We must also comply with export restrictions and laws imposed by other countries affecting trade and investments to the extent applicable.

We maintain export compliance controls and procedures but there are risks that these compliance controls might not be effective, in which case we could be exposed to legal liabilities.

Compliance with these laws has not significantly limited our sales or other transactions with third parties but could significantly limit them in the future.

Changes in, and responses to, U.S.

trade policy could reduce the competitiveness of our products and cause our sales to drop or make it difficult or impossible to enter affected markets, which could have a material adverse effect on our business, financial condition or results of operations.

Our robotic platforms must comply with the rules of the Federal Communications Commission (FCC) with respect to:

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The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products.

Intellectual Property

Our ability to create, obtain and maintain intellectual property is important to our business.

As of March 2022, we had approximately 79 issued U.S.

patents and approximately 93 issued international patents, as well as approximately 108 patent applications filed in the United States or internationally.

Many of our issued patents have expired, with others set to expire on dates ranging from 2022 to 2039, exclusive of any patent term adjustment or patent term extension.

We do not know whether all of our pending patent applications will result in issued patents, or whether the examination process will require a narrowing of claimed subject matter.

In an effort to protect our brand, we also pursue the registration of our domain names and various trademarks and service marks in the United States and in select international locations.

Legal Proceedings

From time to time, we may be subject to legal proceedings.

We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results

of operations.

Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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Our employees are critical to our success.

As of December 31, 2021, we had approximately 160 full-time and part-time employees with the majority of our employees based in the Salt Lake City, Utah area.

As of December 31, 2023, we had approximately 280 full-time and part-time employees with the majority of our employees based in the Salt Lake City, Utah and Pittsburgh, Pennsylvania areas.

We also engage consultants and contractors to supplement our permanent workforce on an as-needed basis.

A majority of our employees are involved in engineering, research and development and related functions.

Approximately 45% of our employees are involved in engineering functions, including research and development.

To date, we have not experienced any organized work stoppages and consider our relationship with our employees to be good.

None of our employees are subject to a collective bargaining agreement or represented by a labor union.

We operate in a corporate and manufacturing facility in Salt Lake City, Utah consisting of approximately 60,000 square feet.

The lease expires May of 2033 and has two options to extend the lease for a three-year period each.

We believe that this facility, which includes office, development, testing and light manufacturing space, will adequately serve our current needs.

Should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.

We currently operate in a corporate and manufacturing facility in Salt Lake City, Utah consisting of approximately 61,000 square feet, and in three facilities in Pittsburgh, Pennsylvania.

The lease of our Salt Lake City facility expires in May 2033 and has two options to extend the lease for a three-year period each.

The leases for our facilities (or portions thereof) in Pittsburgh, including outdoor test space and indoor office, test, manufacturing, production and warehouse space, expire in August 2023, March 2025 and June 2025, with various renewal or extension options.

We believe that should we need additional or different space we will be able to obtain such space on commercially reasonable terms.

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What changed 10-K

Item 1. Business