What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-03-16 · 211 added, 333 removed, 598 unchanged (48% of the section changed)

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Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity

Notes to Consolidated Financial Statements

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sarcos Technology and Robotics Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Sarcos Technology and Robotics Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023 in conformity with U.S.

generally accepted accounting principles.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as a result of the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842), using the modified retrospective transition method effective January 1, 2022.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

Salt Lake City, Utah

March 16, 2023

February 28, 2024

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

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Unbilled receivables

Inventories, net

Prepaid expenses and other current assets

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Other non-current assets

Liabilities and stockholders’

Liabilities and stockholders’ equity

Current liabilities:

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Commitments and contingencies (Note 12)

Stockholders’

Stockholders’ equity:

Common stock, $ 0.0001 par value, 165,000,000 shares authorized as of December 31, 2023, and December 31, 2022;

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Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to the consolidated financial statements.

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Year Ended December 31,

Operating expenses:

Cost of revenue (exclusive of items shown separately below)

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Intangible amortization expense

Asset write-down and restructuring

Goodwill impairment

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Loss from operations

Interest income (expense), net

Gain (loss) on warrant liability

Gain on forgiveness of notes payable

Interest income, net

Gain on warrant liability

Other income, net

Loss before income tax benefit (expense)

Income tax benefit (expense)

Loss before income tax (expense) benefit

Income tax (expense) benefit

Net loss per share

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Year Ended December 31,

Other comprehensive loss:

Change in unrealized loss on available-for-sale investments

Total other comprehensive loss

Other comprehensive income (loss):

Change in unrealized gain (loss) on available-for-sale investments

Total other comprehensive income (loss)

Comprehensive loss

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Change in fair value of warrant liability

Gain on forgiveness of notes payable

Amortization of investment discount

Asset write-down

Goodwill impairment

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Maturities of marketable securities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from notes payable

Proceeds from exercise of stock options

Shares repurchased for payment of tax withholdings

Purchase of non-controlling interest

Payment of obligations under capital leases

Proceeds from PIPE

Proceeds from Merger

Payments for transaction costs

Net cash (used in) provided by financing activities

Net (decrease) increase in cash, cash equivalents

Cash, cash equivalents at beginning of period

Cash, cash equivalents at end of period

Net cash used in financing activities

Net decrease in cash, cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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Purchases of property and equipment included in accounts payable at period-end

Leasehold improvements paid by lessor

Unpaid transaction costs

Assumption of warrant liabilities

See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONSOLIDATED S TATEMENTS OF STOCKHOLDERS’

CONSOLIDATED S TATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Convertible Preferred Stock

Accumulated Other

Comprehensive

Noncontrolling

Stockholders’

Balance at December 31, 2020

Retroactive application of reverse recapitalization

Balance, December 31, 2020, as adjusted

Purchase of non-controlling interest

Cashless exercise of common stock and warrants

Issuance of common stock upon Merger, net of transaction costs

Issuance of PIPE shares

Shares withheld on vesting of restricted stock

Stockholders’

Balance, December 31, 2021

Stock-based compensation

Common stock issued upon vesting of restricted stock awards and restricted stock units

Shares repurchased for payment of tax withholdings and other

Exercise of stock options

Common stock and assumed equity awards in connection with a business acquisition

Other comprehensive loss

Balance at December 31, 2022

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Shares repurchased for payment of tax withholdings and other

Exercise of stock options

Common stock and assumed equity awards in connection with a business acquisition

Other comprehensive loss

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Description of the Business

Sarcos Technology and Robotics Corporation (the “Company”

or “Sarcos”), designs and produces highly-dexterous mobile robotic systems and solutions for use in dynamic environments.

Sarcos Technology and Robotics Corporation (the “Company” or “Sarcos”), is a pioneer in the robotic systems industry.

The Company’s mission is to deliver software to its customers that enhances the utility and functionality of third-party stationary and mobile robotic systems by enabling these systems to quickly observe, learn, reason and act in structured and unstructured environments.

The Company’s full-stack, closed-loop autonomy software platform (“AI/ML Software Platform”) is being designed with artificial intelligence (“AI”) and machine learning (“ML”) techniques to enable robotic systems to perceive their environment and quickly adapt to changing circumstances by generalizing (i.e., learning) from their past experience using dynamic real-time operations "on the edge" (i.e., on the robotic system) without extensive programming and with minimal robot training.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

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Certain prior year amounts have been reclassified to conform to current year presentation.

The Company’s fiscal year begins on January 1 and ends on December 31.

Business Combination

On September 24, 2021 (the “Closing Date”), the Company consummated the business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of April 5, 2021, by and among Rotor Acquisition Corp.

(“Rotor”), Rotor Merger Sub Corp., a Delaware corporation, and a direct, wholly-owned subsidiary of Rotor (“Merger Sub”), and Sarcos Corp., a Utah corporation (“Old Sarcos”) and Amendment No.

1 to the Agreement and Plan of Merger, dated as of August 28, 2021 (the “Amendment”

and the Original Merger Agreement, as amended, the “Merger Agreement”), by and among Rotor, Merger Sub and Old Sarcos.

Pursuant to the terms of the Merger Agreement, the Business Combination between Rotor and Old Sarcos was effected through the merger of Merger Sub with and into Old Sarcos, with Old Sarcos continuing as the surviving corporation (the “Merger”) and a wholly-owned subsidiary of Rotor.

On the Closing Date, the Rotor changed its name from Rotor Acquisition Corp.

to Sarcos Technology and Robotics Corporation.

Immediately prior to the effective time of the Merger (the “Effective Time”), all issued and outstanding warrants to purchase shares of Class A common stock of Old Sarcos were net exercised and all issued and outstanding shares of preferred stock of Old Sarcos were converted into common stock of Old Sarcos (collectively, the “Old Sarcos Common Stock”).

Pursuant to the terms of the Merger Agreement, at the Effective Time:

each outstanding share of Old Sarcos Common Stock, after giving effect to the conversion described above, was cancelled and converted into and became (i) the right to receive approximately 5.129222424 shares (the “Exchange Ratio”) of Common Stock of the Company, par value $ 0.0001 per share (the “Common Stock”), rounded down to the nearest whole share plus (ii) the contingent right to receive a portion of additional shares of Common Stock upon achievement of certain milestones (the “Contingent Merger Consideration”), as described below;

the outstanding options, restricted stock units (“RSUs”) and restricted stock award (“RSA”) of Old Sarcos, whether vested or unvested, were assumed by the Company and converted into options, RSUs and RSA of the Company;

In addition, each holder of Old Sarcos capital stock (including the Old Sarcos RSA) was entitled to a right to Contingent Merger Consideration at the Closing Date in the form of earn-outs, up to an aggregate of 28,125,000 shares of Common Stock.

On the Closing Date, certain investors (the “PIPE Investors”) purchased from the Company an aggregate of 22,000,000 shares (the “PIPE Shares”) of Common Stock at a price of $ 10.00 per share, for an aggregate purchase price of $ 220.0 million (the “PIPE Financing”), in a private placement pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of April 5, 2021.

On September 27, 2021, the Common Stock and warrants of Sarcos Technology and Robotics Corporation (formerly those of Rotor Acquisition Corp.), ceased trading on the New York Stock Exchange and began trading on The Nasdaq Global Market (“Nasdaq”) as “STRC”

and “STRCW”, respectively.

On April 25, 2022, the Company acquired RE2, Inc., (“RE2”) a Pittsburgh, PA based developer of autonomous and teleoperated mobile robotic systems.

On September 24, 2021 (the “Closing Date”), Rotor Acquisition Corp.

(“Rotor”), a Delaware corporation, consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of April 5, 2021 (the “Original Merger Agreement”), by and among Rotor, Rotor Merger Sub Corp., a Delaware corporation and a direct, wholly-owned subsidiary of Rotor (“Merger Sub”), and Sarcos Corp., a Utah corporation (“Old Sarcos”), and Amendment No.

1 to the Agreement and Plan of Merger, dated as of August 28, 2021 (the “Amendment” and the Original Merger Agreement, as amended, the “Merger Agreement”), by and among Rotor, Merger Sub and Old Sarcos.

On the Closing Date, Rotor changed its name to Sarcos Technology and Robotics Corporation.

On April 25, 2022, the Company acquired RE2, Inc., (“RE2”) a Pittsburgh, PA based developer of autonomous and teleoperated mobile robotic systems.

The results presented herein include the activity of RE2 from the acquisition date through December 31, 2023 .

The Company's results do not include RE2’s financial information prior to the acquisition.

For further detail see Note 5.

Reverse Stock Split

On July 5, 2023, the Company effected a 1-for- 6 reverse stock split (“Reverse Stock Split”) of the Company's outstanding shares of common stock, as approved by the Company's stockholders at the Company’s Annual Meeting of Stockholders held on June 14, 2023.

All share and per share amounts of common stock, options , warrants, restricted stock and restricted stock units in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to reflect the reverse stock split.

Asset Write-Down and Restructuring

On July 12, 2023, the Company announced that it had refined its sales strategy to focus on products that have the most potential for near-term revenue growth and strategic opportunities.

At the time, these products included our Guardian Sea Class system, certain aviation (baggage handling and exterior aircraft maintenance), solar (solar field panel installation) solutions, and our commercial AI/ML Software Platform.

In connection with the restructuring effort announced in July, during the twelve months ended December 31, 2023, the Company incurred total charges of $ 10.6 million , w hich includes a write-down of inventory of $ 4.4 million, a $ 0.7 million write-down for certain assets as a result our product development reprioritization, $ 1.1 million in severance and benefit payments, and $ 4.4 million due to the acceleration of stock-based compensation expense resulting from the early termination of the Company's redemption right over certain shares held by the Company's former Chief Operating Officer in connection with the termination of his employment.

On November 14, 2023, the Company announced its decision to suspend for the foreseeable future commercialization efforts on its hardware programs and focus on the development of its commercial AI/ML Software Platform.

The Company will continue some de minimis hardware system research and development efforts on a substantially reduced scale, in part to support its software platform development efforts.

As a result of the Company's refined strategy it is optimizing its organization in pursuit of this product opportunity and will reduce costs, including reducing headcount and shifting all operations to its Salt Lake City, Utah location and will shut down its facilities in Pittsburgh, Pennsylvania.

In connection with the restructuring efforts announced in November 2023, the Company incurred charges of $ 27.3 million during the t welve months ended December 31, 2023 , which includes a write-down of inventory of $ 6.9 million, a $ 16.9 million charge for the accelerated amortization of intangible assets and write-off of certain other assets as a result our product development reprioritization, $ 1.2 million of accelerated depreciation related to the shutting down our facilities in Pittsburgh, Pennsylvania, $ 0.5 million for contract restructuring accruals, and $ 1.8 million in severance and benefit payments.

Use of Estimates

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These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period.

The Company’s most significant estimates and judgments involve contract revenue recognized based on estimates of total contract costs and cost to complete uncompleted contracts, estimates of potential losses on uncompleted contracts, impairment evaluation of contract assets, goodwill and other long lived assets, assumptions used for leases, valuation allowance for net deferred income taxes and valuation of the Company’

s stock-based compensation and warrants.

The Company’s most significant estimates and judgments involve contract revenue recognized based on estimates of total contract costs and cost to complete uncompleted contracts, estimates of potential losses on uncompleted contracts, impairment evaluation of contract assets, long lived assets, assumptions used for leases, valuation allowance for net deferred income taxes and valuation of the Company’ s stock-based compensation and warrants.

Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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These financial statements have been prepared in accordance with GAAP and this basis assumes the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company’s main sources of liquidity have been cash generated by equity offerings.

The Company’s primary use of cash is for operations and administrative activities including employee-related expenses, and general, operating and overhead expenses.

Future capital requirements will depend on many factors, including the Company’s timing and extent of development efforts, the expansion of sales and marketing activities, customer growth rate, customer retention, the introduction of new and enhanced product offerings and market acceptance of the Company’s products.

The Company’s main sources of liquidity have been cash generated by equity offerings.

The Company’s primary use of cash is for operations and administrative activities including employee-related expenses, and general, operating and overhead expenses.

The Company believes it has sufficient financial resources for at least the next 12 months from the date of this Report.

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Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, marketable securities, accounts receivable and unbilled receivables.

The Company’s cash is placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits.

The Company’s cash is placed with high-credit-quality financial institutions and issuers, and generally exceeds federally insured limits.

The Company's cash equivalents and marketable securities are money market funds or U.S.

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Accounts receivable

As of December 31, 2022 , three of our customers accounted for more than 10% of the Company’s accounts receivable, which in total represented 81 % of the accounts receivable as of December 31, 2022.

As of December 31, 2021 , one customer accounted for more than 10% of the Company’s accounts receivable, which in total represented 81 % of the accounts receivable as of December 31, 2021.

Three a nd five customers accounted for more than 10% of the Company’s revenue for each of the years ended December 31, 2022 and 2021 , respectively.

As of December 31, 2023 , three of our customers accounted for more than 10% of the Company’s accounts receivable, which in total represented 90 % of the accounts receivable as of December 31, 2023.

Five and three cust omers accounted for more than 10% of the Company’s revenue for each of the years ended December 31, 2023 and 2022 , respectively.

These concentrations accounted for 85 % and 74 % of revenue for the years ended December 31, 2023 and 2022 , respectively.

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(In thousands)

*NM - Not meaningful as the customer’s related revenue was less than 10% of the Company’

s revenue for the respective year.

* The customer’s related revenue was less than 10% of the Company’ s revenue for the respective year.

Cash and Cash Equivalents

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All highly liquid investments with an original maturity of three months or less at the time of purchase are considered to be cash equivalents.

The Company’s cash equivalents may be comprised of money market funds, certificates of deposit of major financial institutions and U.S.

Treasury bills.

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Receivables are recorded at the amount the Company expects to collect.

Management determines the need for an allowance for doubtful receivables using a specific identification method after taking into account all of its remedies for collection.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Recoveries of receivables previously written off are recorded when payment is received as other income.

Management determined no allowance for doubtful receivables was necessary as of December 31, 2022 and 2021.

Management determines the need for an allowance for credit losses using a specific identification method after taking into account all of its remedies for collection.

Management determined no allowance for credit losses was necessary as of December 31, 2023 and 2022 .

Receivables are comprised of amounts invoiced for completed contracts and contracts in progress.

As of December 31, 2022 and 2021 , no amounts have been written off or provided for recoverability.

Inventories primarily consist of raw materials, work-in-process and finished goods.

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Expenditures for maintenance and repairs are expensed when incurred and betterments that extend the useful lives of property and equipment are capitalized.

When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated, and any gain or loss is reflected in the statement of operations.

Effective January 1, 2022, the Company adopted Accounting Standard Update 2016-02 (ASU 2016-02), Lease (Topic 842), which superseded previous guidance related to accounting for leases.

When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated, and any gain or loss is reflected in the statement of operations.

In accordance with ASC 842, the Company, at the inception of the contract, determines whether a contract is or contains a lease.

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The Company is generally not able to readily determine the implicit rate in the lease and therefore uses the determined incremental borrowing rate at lease commencement to determine the present value of lease payments.

The incremental borrowing rate represents an estimate of the market interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease.

the term of a lease.

Renewal options are not included in the measurement of the right of use assets and lease liabilities unless the Company is reasonably certain to exercise the optional renewal periods.

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The Company recognizes expense for operating leases on a straight-line basis over the lease term.

The Company’s lease agreements contain variable lease payments for common area maintenance, utility, insurance, and tax.

The Company has elected the practical expedient to combine lease and non-lease components for all asset categories.

Therefore, the lease payments used to measure the lease liability for these leases

include fixed minimum rentals along with fixed non-lease component charges.

Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed non-lease component charges.

The Company does not have significant residual value guarantees or restrictive covenants in the lease portfolio.

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Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets.

No impairment loss was recognized related to these assets during the years ended December 31, 2022 and 2021 .

Goodwill is initially recorded when the purchase price paid for a business acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.

All of the Company's goodwill was recognized as part of the RE2 acquisition during 2022.

The Company evaluates goodwill at the reporting unit level for impairment annually, or when an indicator of potential impairment exists.

The Company has one reporting unit.

When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the Company elects to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that its carrying value exceeds its fair value, the Company performs a quantitative goodwill impairment test.

Under the quantitative goodwill impairment test, if the reporting unit’s carrying amount exceeds its fair value, the Company will record an impairment charge based on that difference.

To determine reporting unit fair value as part of the quantitative test, the Company uses the income approach.

Under the income approach, the Company projects the future cash flows and discounts these cash flows to reflect their relative risk.

The cash flows used are consistent with those the Company uses in its internal planning, which reflects the Company's long-term business strategy.

In order to further validate the reasonableness of fair value as determined by the income approach described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors.

Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of fair value.

Based on the Company's quantitative goodwill impairment test, that it performed during the fourth quarter of 2022, it concluded that the carrying value of its reporting unit exceeded its fair value and that goodwill was fully impaired as of December 31, 2022.

The Company recorded a $ 70.2 million non-cash goodwill impairment charge for the twelve months ended December 31, 2022 .

For details associated with the Company's goodwill impairment testing, see Note 6.

Revenue Recognition

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(1) Identify the contract with a customer:

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights and obligations regarding the products and services to be transferred and identifies the payment terms related to these products and services, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for products and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Contract modifications may include changes in scope of work, and/or the period of completion of the project.

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(3) Determine the transaction price:

The transaction price is determined based on the consideration to which the Company will be entitled to in exchange for transferring goods or services to the customer.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer.

Such amounts are typically stated in the customer contract.

However, to the extent that the Company identifies variable consideration, the Company will estimate the variable consideration at the onset of the arrangement as long as it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company’s current contracts do not include any significant financing components because the timing of the transfer of the underlying products and services under contract are at the customer's discretion.

Additionally, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

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(4) Allocate the transaction price to performance obligations in the contract:

Once the Company has determined the transaction price, the total transaction price is allocated to each performance obligation in a manner depicting the amount of consideration to which the Company expects to be entitled in exchange for transferring the good(s) or service(s) to the customer.

Once the Company has determined the transaction price, the total transaction price is allocated to each performance obligation in a manner depicting the

amount of consideration to which the Company expects to be entitled in exchange for transferring the good(s) or service(s) to the customer.

If applicable, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.

The standalone selling price represents the amount we would sell the good(s) or service(s) to a customer on a standalone basis.

The standalone selling price represents the amount the Company would sell the good(s) or service(s) to a customer on a standalone basis.

For government contracts, the Company uses expected cost plus a margin as the standalone selling price.

Because our contract pricing with government customers is generally based on expected cost plus margin, the standalone selling price of the good(s) or service(s) in our contracts with government customers are typically equal to the selling price stated in the contract.

Because the Company's contract pricing with government customers is generally based on expected cost plus a margin, the standalone selling price of the good(s) or service(s) in the Company's contracts with government customers are typically equal to the selling price stated in the contract.

When we sell standard good(s) or service(s) with observable standalone sale transactions, the observable standalone sales transactions are used to determine the standalone selling price.

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The Company derives its revenue from two sources.

First, the Company enters into research and development agreements primarily relating to the commercialization of the Company’s products.

Second, the Company sells its products and related parts and repair services.

Product development contract revenue includes revenue arising from different types of contractual arrangements, including cost-type contracts and fixed-price contracts.

Product revenue primarily includes sales of the Company's products.

Product revenue primarily consists of sales of the Company’s products.

Product Development Contract Revenue

Cost-type contracts –

Research, development and/or testing service contracts, including cost-plus-fixed-fee and time and material contracts, relate primarily to the development of our robotics systems and related technology.

Cost-type contracts – Research, development and/or testing service contracts, including cost-plus-fixed-fee and time and material contracts, relate primarily to the development of the Company's products and related technology.

Cost-type contracts are generally entered into with the U.S.

These contracts are billed at cost plus a margin as defined by the contract and Federal Acquisition Regulation (“FAR”).

These contracts are billed at cost plus a margin as defined by the contract and the Federal Acquisition Regulation (“FAR”).

The FAR establishes regulations around procurement by the government and provides guidance on the types of costs that are allowable in establishing prices for goods and services delivered under government contracts.

Revenue on cost-type contracts is recognized over time as goods and services are provided.

Fixed-price contracts –

Fixed-price development contracts relate primarily to the development of technology in the area of robotic platforms.

Fixed-price contracts – Fixed-price development contracts relate primarily to the development of technology in the area of robotic platforms.

Fixed-price development contracts generally require a significant service of integrating a complex set of tasks and components into a single deliverable.

Revenue on fixed-price contracts is generally recognized over time as goods and services are provided.

To the extent the Company’s actual costs vary from the fixed fee, we will generate more or less

profit or could incur a loss.

To the extent the Company’s actual costs vary from the fixed fee, we will generate more or less profit or could incur a loss.

The Company will recognize losses at the contract level in earnings in the period in which they are incurred.

Product Revenue

Product revenue relate to sales of the Company’s commercially available products, and certain miscellaneous parts, accessories and repair services.

Product revenue relates to sales of the Company’s commercially available products, and certain miscellaneous parts, accessories and repair services.

The Company provides a limited one-year warranty on product sales.

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Contract Balances

The timing of revenue recognition, billing, and cash collection results in the recognition of accounts receivable, unbilled receivables, contract assets, and deferred revenue in the Company’s consolidated balance sheets.

Cash funds received in excess of revenue recognized that is contingent upon the satisfaction of performance obligations is accounted for as deferred revenue.

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The Company recorded its current contract assets, long-term contract assets and current deferred revenue within prepaid expenses and other current assets, other non-current assets, and accrued liabilities, respectively.

During the years ended December 31, 2022 and 2021, the Company recognized all of the deferred revenue which existed at December 31, 2021 and 2020, respectively.

During the year ended December 31, 2023 , the Company did no t recognize any revenue related to deferred revenue which existed at December 31, 2022.

During the year ended December 31, 2022, the Company recognized all of the deferred revenue which existed at December 31, 2021.

Remaining performance obligations

As of December 31, 2022, the Company had backlog, or revenue related to remaining performance obligations, of $ 3.5 million.

The Company expects most of this backlog to be recognized over the next 12 months .

As of December 31, 2023, the C ompany had backlog, or revenue related to remaining performance obligations, of $ 8.1 million.

The Company expects most of this backlog to be recognized over the next 12 mo nths .

The Company’s backlog represents the expected value of exercised contracts, both funded and unfunded, less revenue recognized to date.

Research and Development Costs

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The Company calculates the fair value of all stock-based awards, including stock options, restricted stock units and restricted stock awards on the date of grant.

The Company values stock options using the Black-Scholes option-pricing model, which requires the use of a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

The stock-based compensation expense is recognized on a straight-line basis over the requisite service periods of the awards, which is generally four years.

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Recently Adopted Accounting Pronouncements

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies.

The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.

The adoption dates discussed below reflect this election.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the previous guidance, and improving the consistent application of and simplification of other areas of the guidance.

The Company adopted this ASU on January 1, 2022 , using a prospective approach.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The new standard requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.

The Company adopted ASU 2016-13 on January 1, 2023 .

The adoption of ASU 2016-13 did no t have a material impact on the Company's condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842), which requires companies to recognize on the consolidated balance sheet assets and liabilities for the rights and obligations created by leases.

The FASB has subsequently issued supplemental and clarifying ASUs inclusive of ASU 2020-05, which updated the effective date for “all other”

entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company adopted ASC 842 effective January 1, 2022, using the modified retrospective transition method as allowed under ASU 2018-11 which includes the ability to recognize the cumulative effect of the adoption being recorded as an adjustment to retained earnings on January 1, 2022.

Prior period results will continue to be presented under ASC 840 as it was the accounting standards in effect for such periods.

The Company elected to apply the package of practical expedients that allows entities to forgo reassessing at the transition date:

(1) whether any expired or existing contracts are or contain leases;

(2) lease classification for any expired or existing leases;

and (3) whether unamortized initial direct costs for existing leases meet the definition of initial direct costs under the new guidance.

The Company did not elect the hindsight practical expedient.

The Company elected the practical expedient to account for lease and non-lease components as a single component and elected the short-term lease exemption for all contracts with lease terms of 12 months of less.

Due to the adoption of this guidance, the Company recognized operating right-of-use assets and operating lease liabilities of $ 10.1 million and $ 12.2 million, respectively, as of the date of adoption.

The difference between the right-of-use assets and lease liabilities on the accompanying consolidated balance sheet is primarily due to the accrual for lease payments as a result of straight-line lease expense.

The adoption of this new guidance did not have a material impact on the Company’s results of operations and comprehensive loss or cash flows.

Recently Issued Accounting Standard Pronouncements

In June 2016, the FASB Issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.

The standard will be effective for the Company beginning January 1, 2023, with early application permitted.

The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition and financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid.

ASU 2023-09 will be effective for annual periods beginning January 1, 2026 and will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company does not expect a material impact on its consolidated financial statements related to ASU 2023-09.

Fair Value Measurements

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The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1—Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2—Fair value is determined using quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable.

Level 3—Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as an option pricing model, discounted cash flow or similar technique.

Level 1—Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

On a recurring basis, the Company measures certain of its financial assets and liabilities at fair value.

The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs:

As of December 31, 2023

(In thousands)

Cash equivalents:

Treasury securities

Marketable securities:

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(In thousands)

Marketable securities:

treasury securities

Warrant liability

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Balance at December 31, 2021

Initial recognition of warrants

Increase in fair value of warrants

Balance at December 31, 2021

Warrant liability transferred out of Level 3

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Balance Sheet Components

Inventories, net

Inventories, net consist of the following:

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Finished goods, net

Total inventories, net

The Company had inventory reserves of $ 0.4 million a nd $ 0.3 million for t he years ended December 31, 2022 and 2021, respectively.

Total inventories

Prepaid expenses and other current assets

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Prepaid insurance

Other prepaid expense

Other prepaid expenses and assets

Total prepaid expenses and other current assets

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Furniture and fixtures, and other fixed assets

Construction in progress

Property and equipment, gross

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Property and equipment, net

Depreciation expenses were $ 1.4 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively.

Depreciation expenses were $ 2.8 million for the year ended December 31, 2023 , $ 1.2 million of which was accelerated depreciation related to shutting down our facilities in Pittsburgh, Pennsylvania, which is included in asset write-down and restructuring on the consolidated statements of operations.

Depreciation expenses were $ 1.4 million for the year ended December 31, 2022.

Amortization of assets under finance leases is included as part of depreciation expense.

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Payroll and related costs

Consulting and professional services

Contract restructuring accrual

Legal accrual

Other current liabilities

Other accrued expenses and current liabilities

Total accrued liabilities

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Finance leases

Deferred rent

Warrant liabilities

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Certain of the operating leases include renewal options ranging from three to five years , which are not recognized as part of the right-of-use assets as the Company is not reasonably certain that the options will be exercised.

Lease expense recorded during the year ended December 31, 2022 were $ 2.4 million .

Lease costs for operating leases are as follows:

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Total lease cost

The following table summarizes the Company’s lease term and discount rate assumptions:

Operating leases

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Present value of lease liabilities

Rent expense related to noncancelable operating leases totaled $ 1.4 million for the year ended December 31, 2021.

On April 25, 2022, the Company acquired RE2, Inc.

a Pittsburgh, PA based developer of autonomous and teleoperated mobile robotic systems.

This acquisition significantly increased our engineering team and added additional products and target markets to the Company’s total addressable market.

a Pittsburgh, PA based developer of manipulator arms with human-like performance, intuitive robot interfaces and advanced autonomy capabilities.

The aggregate consideration transferred was $ 90.1 million, of which $ 30.7 million was paid in cash, $ 44.0 million was comprised of 1,562,112 shares of common stock and $ 15.4 million was comprised of assumed options to purchase 646,173 shares of common stock.

Additionally, 1,400,000 shares of common stock were issued with a fair value of $ 6.6 million at the time of grant.

These shares are subject to risk of forfeiture which lapses in full four years after the acquisition date.

These shares were excluded from the consideration transferred and are recorded as stock-based compensation expense.

Additionally, 233,333 shares of common stock were issued with a fair value of $ 6.6 million that were subject to risk of forfeiture.

These shares were excluded from the consideration transferred and have been recorded as stock-based compensation expense.

The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded as goodwill.

The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the issuance date of these consolidated financial statements and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available.

Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

As of December 31, 2022, the primary areas that remain preliminary relate to the valuation of certain intangible items and various tax implications resulting from the acquisition.

The following table presents the preliminary purchase consideration allocation recorded in the Company’s consolidated balance sheet as of the acquisition date:

The Company recorded the assets acquired and liabilities assumed at their fair values as of the acquisition date.

The following table presents the final purchase consideration allocation recorded in the Company’s consolidated balance sheet as of the acquisition date:

(in thousands)

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Goodwill is not deductible for tax purposes.

The results of operations of RE2 from the date of acquisition have been included in the Company’s consolidated financial statements.

Pro forma revenue and results of operations have not been presented because the historical results of RE2 are not material to the Company’s consolidated financial statements in any period presented.

The results of operations of RE2 from the date of acquisition have been included in the Company’s consolidated financial statements.

Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the twelve months ended December 31, 2022 was as follows:

(In thousands)

Balance at December 31, 2021

Balance at December 31, 2022

As a result of sustained decreases in the Company’s publicly quoted share price the Company conducted an analysis of its goodwill as of December 31, 2022.

The Company identified indicators of goodwill impairment for its single reporting unit and concluded that a triggering event had occurred which required a quantitative goodwill impairment assessment.

The primary indicators of impairment were the sustained decreases in the Company’s publicly quoted share price and market capitalization.

As a result of sustained decreases in the Company’s publicly quoted share price during the fourth quarter of 2022, the Company conducted an analysis of its goodwill as of December 31, 2022, and performed a quantitative goodwill impairment assessment.

The Company estimated the reporting unit's fair value under an income approach using a discounted cash flow model.

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The financial projections reflect management's best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation and amortization.

The Company recorded a $ 70.2 million non-cash goodwill impairment charge for the twelve months ended December 31, 2022.

Based on the Company’s quantitative goodwill impairment assessment, it concluded that the carrying value of its reporting unit exceeded its fair value and that all of its goodwill was fully impaired as of December 31, 2022.

Acquired Intangible Assets

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Customer relationships

The Company recorded $ 2.2 million of amortization expense during the twelve months ended December 31, 2022 , which was recorded as intangible amortization expense in the consolidated statement of operations.

There was no amortization expense

during the twelve months ended December 31, 2021 .

Due to the impairment of goodwill discussed above the Company performed an impairment analysis of its intangible assets and other long-lived assets.

As a result of this analysis, the Company concluded there was no impairment of intangible assets or other long-lived assets for the twelve months ended December 31, 2022.

As of December 31, 2022 future amortization expense related to acquired intangible assets was as follows:

December 31, 2022

(In thousands)

Amortization Expense

2028 and thereafter

Notes Payable

Old Sarcos received two unsecured loans under the Paycheck Protection Program (“PPP”) administered by the Small Business Administration, pursuant to the Coronavirus Aid, Relief, and Economic Security Act.

The first loan, with a principal amount of $ 2.4 million, was received in April 2020, and the second loan, with a principal amount of $ 2.0 million, was received in March 2021.

These PPP loans had an interest rate of 1.00 % per year.

The first PPP loan of $ 2.4 million was forgiven during June 2021, and the second PPP loan of $ 2.0 million was forgiven during November 2021.

As of December 31, 2022, the Company did no t have any outstanding debt.

Reverse Recapitalization

Pursuant to ASC 805, Business Combinations , the Business Combination was accounted for as a reverse recapitalization, rather than a business combination, for financial accounting and reporting purposes.

Accordingly, Old Sarcos was deemed the accounting acquirer (and legal acquiree) and Rotor was treated as the accounting acquiree (and legal acquirer).

Under this method of accounting, the reverse recapitalization was treated as the equivalent of Old Sarcos issuing stock for the net assets of Rotor, accompanied by a recapitalization.

The net assets of Rotor are stated at historical cost, with no goodwill or other intangible assets recorded.

The consolidated assets, liabilities, and results of operations prior to the Merger are those of Old Sarcos.

The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Merger, have been retroactively restated as shares reflecting the Exchange Ratio.

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Weighted Average Remaining Useful Life

Trade name and trademarks

Developed technology

Customer relationships

The Company recorded $ 2.8 million and $ 2.2 million of amortization expense during the years ended December 31, 2023 and 2022, respectively, which was recorded as intangible amortization expense in the consolidated statement of operations.

As a result of the Company’s product development reprioritization announced in November 2023, the Company reassessed the remaining useful-lives of its intangible assets.

The Company recorded $ 16.3 million of accelerated amortization expense during the year ended December 31, 2023, which is included in asset write-down and restructuring in the consolidated statements of operations.

Earn-Out Shares

Each holder of Old Sarcos capital stock (including the Old Sarcos RSA) is entitled to a right to Contingent Merger Consideration following the closing of the Business Combination in the form of earn-outs, up to an aggregate of 28,125,000 shares of Common Stock (the “Earn-Out Shares”).

As a result of the Business Combination each holder of Old Sarcos capital stock is entitled to Contingent Merger Consideration following the closing of the Business Combination in the form of earn-outs, up to an aggregate of 4,687,500 shares of Common Stock (the “Earn-Out Shares”).

The Earn-Out Shares will become payable as follows:

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• 2,343,750 shares of Common Stock of the Company if the closing share price of a share of Common Stock of the Company is equal to or exceeds $ 120.00 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the Closing Date and ending on the fifth anniversary of the Closing Date.

The Earn-Out Shares issuable to holders of Old Sarcos capital stock are accounted for as equity-linked instruments and recorded in additional paid-in capital, and the Earn-Out Shares issuable to holders of Old Sarcos capital stock subject to restricted stock awards are accounted for as share-based compensation.

The Earn-Out Shares are treated as equity-linked instruments as opposed to shares outstanding, and as such are not included in shares outstanding on the Company’s condensed consolidated balance sheets.

As of December 31, 2022 , there were 28,125,000 Earn-Out Shares outstanding .

Immediately following the Business Combination, the Company had 137,589,275 shares issued and outstanding of Common Stock.

The following table presents the number of shares of the Company’s Common Stock outstanding immediately following the Business Combination:

Number of Shares

Rotor Class A Common Stock, outstanding prior to the Business Combination

Rotor Class B Common Stock, outstanding prior to the Business Combination

Class A common stock issued to PIPE Investors

redemption of Rotor Common Stock

Total shares from the Business Combination and PIPE financing

Recapitalization of Old Sarcos common stock into Class A common stock (1)

Total shares of Common Stock immediately after the Business Combination

(1) The number of Old Sarcos shares was determined from the 21,483,286 shares of Old Sarcos Common Stock warrants, Common Stock and Preferred Stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the Common and Preferred Stock redeemed, converted at the Exchange Ratio of 5.129222424 .

This excludes a restricted stock award for 5,129,222 shares that was unvested as of the date of the Business Combination.

All remaining fractional shares, after cumulating shares by stockholder, were rounded down.

In connection with the Merger, the Company incurred direct and incremental costs of approximately $ 32.9 million r elated to legal, accounting and other professional fees, which were deducted from the Company’s additional paid-in capital as a reduction of cash proceeds rather than expensed as incurred and $ 1.1 million of transaction costs that were recorded to operating expenses within the consolidated statements of operations and comprehensive loss.

On January 31, 2020, Old Sarcos issued 250,000 Class A Common Stock warrants to one of the Series C Preferred Stock investors, at an exercise price of $ 11.3243 per share with an expiration date of January 31, 2030 .

Immediately prior to the Effective Time, all of the issued and outstanding warrants to purchase 250,000 shares of Class A Stock of Old Sarcos warrants were net exercised and then upon the Closing were exchanged for shares of the Company’s Common Stock in an amount determined by application of the Exchange Ratio, as discussed in Note 1.

On January 20, 2021, Rotor consummated the initial public offering (“IPO”) of 27,600,000 units (the “Units”), including the full exercise by the underwriters of their over-allotment option.

Each Unit included one share of Class A Common Stock and one half of one warrant (the “Public Warrants”).

Simultaneously with the closing of the IPO, Rotor consummated the sale of 7,270,000 warrants (the “Private Placement Warrants”) in a private placement to Rotor Sponsor LLC (the “Sponsor”), an affiliate of Rotor’s officers and directors, and certain funds and accounts managed by two qualified institutional buyers.

At the Closing Date, Old Sarcos acquired the net liabilities from Rotor, including the Public Warrants, that were recorded as equity instruments, and the Private Placement Warrants, that were recorded as warrant liabilities (together the “Warrants”).

Each whole Warrant entitles the registered holder to purchase one share of the Company's Common Stock at a price of $ 11.50 per share, subject to adjustment as discussed below, at any time commencing on January 20, 2022, provided that the Company has an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) covering the shares of the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on a cashless basis under the circumstances specified in the warrant agreement (the “Warrant Agreement”) entered into between Continental Stock Transfer & Trust Company and Rotor and such shares are registered, qualified or exempt from registration under the securities laws of the state of residence of the holder.

As of December 31, 2023 , there remained 4,687,500 Earn-Out Shares potentially issuable .

On January 20, 2021, Rotor consummated the initial public offering (“IPO”) of 27,600,000 units (the “Units”), including the full exercise by the underwriters of their over-allotment option.

Each Unit included one sixth of a share of Class A Common Stock and one half of one warrant (the “Public Warrants”).

Each whole Warrant entitles the registered holder to purchase one sixth of a share of the Company’s Common Stock at a price of $ 11.50 per warrant, subject to adjustment as discussed below, at any time commencing on Janu ary 20, 2022, provided that the Company has an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) covering the shares of the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on a cashless basis under the circumstances specified in the warrant agreement (the “Warrant Agreement”) entered into between Continental Stock Transfer & Trust Company and Rotor and such shares are registered, qualified or exempt from registration under the securities laws of the state of residence of the holder.

Pursuant to the Warrant Agreement, a Warrant holder may exercise its Warrants only for a whole number of shares of the Company’s Common Stock.

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The Company will not be obligated to deliver any Common Stock pursuant to the exercise of a Warrant and will have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration, or a valid exemption from registration is available.

No Warrant will be exercisable, and the Company will not be obligated to issue a share of Common Stock upon exercise of a Warrant unless the share of the Company's Common Stock issuable upon such Warrant exercise has been registered, qualified

or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants.

No Warrant will be exercisable, and the Company will not be obligated to issue a share of Common Stock upon exercise of a Warrant unless the share of the Company’s Common Stock issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants.

If the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant will not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless.

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Except as described herein, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants.

If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.

If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees,

the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.

The Private Placement Warrants will not be redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees, subject to certain exceptions.

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• in whole and not in part;

at a price of $ 0.01 per Warrant;

upon not less than 30 days ’

prior written notice of redemption (the “30-day redemption period”) to each Warrant holder;

if, and only if, the last reported sale price of the shares of the Company's Common Stock for any 20 trading days within a 30 -trading day period commencing after the Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the Warrant holders (which is referred to as the “Reference Value”) equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).

• at a price of $ 0.01 per Warrant;

• upon not less than 30 days ’ prior written notice of redemption (the “30-day redemption period”) to each Warrant holder;

• if, and only if, the last reported sale price of the shares of the Company’s Common Stock for any 20 trading days within a 30 -trading day period commencing after the Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the Warrant holders (which is referred to as the “Reference Value”) equals or exceeds $ 108.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).

If and when the Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

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• in whole and not in part;

at $ 0.10 per Warrant upon a minimum of 30 days ’

prior written notice of redemption;

provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value”

of the Company's Common Stock;

• at $ 0.10 per Warrant upon a minimum of 30 days ’ prior written notice of redemption;

• if, and only if, the Reference Value (as defined above) equals or exceeds $6 0.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like);

if the Reference Value is less than $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently called for redemption on the same terms (except as described above with respect to a holder’s ability to cashless exercise its Warrants) as the outstanding Public Warrants, as described above.

• if the Reference Value is less than $ 108.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently called for redemption on the same terms (except as described above with respect to a holder’s ability to cashless exercise its Warrants) as the outstanding Public Warrants, as described above.

Stock-based Compensation

2021 Stock Plan

Sarcos Technology and Robotics Corporation 2021 Equity Incentive Plan (the “2021 Plan”) provides stock options, RSUs, RSAs, stock appreciation rights (“SARS”) and performance awards for issuance to Company employees, officers, directors, non-employee agents and consultants.

Sarcos Technology and Robotics Corporation 2021 Equity Incentive Plan (the “2021 Plan”) provides stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), stock appreciation rights (“SARS”) and performance awards for issuance to Company employees, officers, directors, non-employee agents and consultants.

In general, outstanding awards granted under the 2021 Plan vest over one to four years and, in the case of options, are exercisable up to 10 years from the date of grant.

The maximum number of shares of Common Stock that may be issued pursuant to the 2021 Plan is (i) 30.0 million shares of Common Stock of the Company plus (ii) any shares of Common Stock subject to stock options and other awards that were assumed in the Business Combination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (ii) equal to 12.8 million shares of Common Stock.

As of December 31, 2022, 24.9 million shares were available for grant under the 2021 Plan.

The maximum number of shares of Common Stock that may be issued pursuant to the 2021 Plan is (i) 5.0 million shares of Common Stock of the Company plus (ii) any shares of Common Stock subject to stock options and other awards that were assumed in the Business Combination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to

or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (ii) equal to 2.1 million shares of Common Stock.

As of December 31, 2023 , 2.7 million sh ares were available for grant under the 2021 Plan.

2015 Stock Plan

The Old Sarcos 2015 Equity Incentive Plan (the “2015 Plan”) provided stock options, RSUs, RSAs, SARS and performance awards for issuance to Company employees, officers, directors, non-employee agents and consultants.

Outstanding awards under the 2015 Plan generally vest over three to five years and are exercisable up to 10 years from the date of grant.

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Stock Option Activity

The following summarizes the Company’s stock option activity for the years ended December 31, 2022 and 2021:

The following summarizes the Company’s stock option activity for the years ended December 31, 2023 and 2022:

Options Outstanding

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(in thousands)

Outstanding –

December 31, 2020

Outstanding –

December 31, 2021

Outstanding –

December 31, 2022

Exercisable –

December 31, 2021

Exercisable –

December 31, 2022

Outstanding – December 31, 2021

Outstanding – December 31, 2022

Outstanding – December 31, 2023

Exercisable – December 31, 2022

Exercisable – December 31, 2023

(a) In connection with the acquisition of RE2, the Company assumed certain outstanding options to acquire RE2 common stock which, following such assumption, were converted to options to acquire 0.6 million shares of the Company’s Common Stock at a we ighted-average exercise price of $ 6.30 per share.

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The Company calculates the fair value of each option grant on the grant date using the following assumptions:

Expected Term—

Options granted generally vest over a period of 48 months and expire 10 years from date of grant.

Expected Term— Options granted generally vest over a period of 48 months and expire 10 years from date of grant.

The Company uses the simplified method when calculating expected term due to insufficient historical information.

Expected Volatility—Due to insufficient historical information the Company uses a blended approach when calculating expected volatility.

The Company uses its historic data for the periods it has been publicly-traded and a benchmark of other comparable public companies’

volatility rates.

Expected Dividend Yield—The dividend yield used is zero as the Company does not have a history of paying dividends on its Common Stock and does not anticipate doing so in the foreseeable future.

Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S.

Expected Volatility—Due to insufficient historical information the Company uses a blended approach when calculating expected volatility.

The Company uses its historic data for the periods it has been publicly-traded and a benchmark of other comparable public companies’ volatility rates.

Expected Dividend Yield—The dividend yield used is zero as the Company does not have a history of paying dividends on its Common Stock and does not anticipate doing so in the foreseeable future.

Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S.

Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

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Expected volatility

The following summarizes the Company’s employee RSU activity for the years ended December 31, 2022 and 2021:

The following summarizes the Company’s employee RSU activity for the years ended December 31, 2023 and 2022:

Restricted Stock Units Outstanding

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Weighted-Average Grant-Date Fair Value

Outstanding –

December 31, 2020

Outstanding –

December 31, 2021

Outstanding –

December 31, 2022

(1) W eighted average grant-date fair values have been u pdated to reflect the impact of the modification to the RSUs discussed below.

Outstanding – December 31, 2021

Outstanding – December 31, 2022

Outstanding – December 31, 2023

RSUs granted generally include service vesting periods of one to four years .

Certain awards granted under the 2015 Plan included vesting conditions related to the completion of a qualifying liquidity event and/or requirements related to the forfeiture of cash compensation .

In April 2021, the Board of Directors of the Company appro ved a modification that updated the terms of certain awards such that the Business Combination would satisfy the liquidity event vesting condition for eight award recipients.

T otal incremental compensation costs resulting from the modification of these RSUs was $ 9.7 million, of which $ 8.4 million was recognized during the year ended December 31, 2021.

The following summarizes the Company’s employee RSA activity for the years ended December 31, 2022 and 2021:

The following summarizes the Company’s employee RSA activity for the year ended December 31, 2022:

Restricted Stock Awards Outstanding

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Weighted-Average Grant-Date Fair Value

Outstanding –

December 31, 2020

Outstanding –

December 31, 2021

Outstanding –

December 31, 2022

Outstanding – December 31, 2021

Outstanding – December 31, 2022

The Company did not have any RSA activity for the year ended December 31, 2023.

The Company recognized stock-based compensation expense in the consolidated statement of operations and comprehensive loss as follows:

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General and administrative

Asset write-down and restructuring

Total stock-based compensation expense

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Net loss per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the twelve months ended December 31, 2022 and 2021:

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the twelve months ended December 31, 2023 and 2022, respectively:

For the twelve months ended December 31,

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Anti-dilutive securities, excluded

The basic and diluted net loss per share for the twelve months ended December 31, 2021 has been computed to give effect to the conversion of the Old Sarcos Class B common stock and all convertible preferred shares into Old Sarcos Class A common stock as though the conversion had occurred as of the beginning of the period or the original date of issuance, if later.

Basic and diluted net loss per share attributable to common stockholders is the same for the twelve months ended December 31, 2022 and 2021 , as the inclusion of potential shares of Common Stock would have been anti‑dilutive for the periods presented.

Basic and diluted net loss per share attributable to common stockholders is the same for the twelve months ended December 31, 2023 and 2022 , as the inclusion of potential shares of Common Stock would have been anti‑dilutive for the periods presented.

Loss before provision for income taxes was $ 115.6 million and $ 161.0 million for the years ended December 31, 2023 and 2022 , respectively, all of which was generated in the United States.

The Company’s provision for income taxes consists of the following:

Years Ended December 31,

For the twelve months ended December 31,

(In thousands)

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The Company’s provision for income tax differs from the amount computed by applying the statutory federal income tax rate to income before taxes as follows:

Years Ended December 31,

For the twelve months ended December 31,

(In thousands)

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Stock compensation

Unrecognized tax benefits

Total provision for income taxes

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FASB guidance indicates that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years.

The Company had cumulative losses from continuing operations in the United States for the three-year period ended December 31, 2022.

The Company considered this negative evidence along with all other available positive and negative evidence and concluded that, at December 31, 2022, it is more likely than not that the Company’s U.S.

The Company had cumulative losses from continuing operations for the three-year period ended December 31, 2023, all of which were in the United States.

The Company considered this negative evidence along with all other available positive and negative evidence and concluded that, at December 31, 2023, it is more likely than not that the Company’s U.S.

deferred tax assets will not be realized.

As of December 31, 2022, a valuation allowance has been recorded on the Company’s deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be recognized.

The Company’s total valuation allowance was $ 44.5 million at December 31, 2022 and $ 35.5 million at December 31, 2021.

The Company’s valuation allowance increased $ 9.1 million and $ 20.3 million during the fiscal years ended December 31, 2022 and 2021 , respectively.

As of December 31, 2023, a valuation allowance has been recorded on the Company’s deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be recognized.

The Company’s total valuation allowance was $ 78.6 million at December 31, 2023 and $ 44.5 million at December 31, 2022.

The Company’s valuation allowance increased $ 34.1 million and $ 9.1 million during the fiscal years ended December 31, 2023 and 2022 , respectively.

A reconciliation of the beginning and ending amount of the valuation allowance is as follows:

14 unchanged sentences

Utah law allows unused net operating losses arising in tax years beginning after December 31, 2017 to be carried forward indefinitely.

Of the total $ 96.8 million of Utah net operating losses, $ 90.5 million are carried forward indefinitely, and the remaining net operating losses will expire between 2035 through 2037.

Of the total $ 116.2 million of Utah net operating losses, $ 109.9 million are carried forward indefinitely, and the remaining net operating losses will expire beginning in 2035 through 2037.

Of the total state net operating losses, approximately $ 27.0 million is attributable to Pennsylvania.

2 unchanged sentences

As of December 31, 2022, the Company had cumulative state net operating losses of approximately $ 107.8 million.

Of the total state net operating losses as of December 31, 2021, approximately $ 88.8 million is attributable to Utah.

Of the total state net operation losses as of December 31, 2022, approximately $ 96.8 million is attributable to Utah.

As of December 31, 2023 , the Company had a $ 3.1 million deferred tax asset related to state research and development credits carryforward.

1 unchanged sentence

This credit has been offset by a liability for unrecognized tax benefits of $ 0.3 million.

If not utilized, the credits will expire beginning in 2029 through 2036.

If not utilized, the credits will expire between 2029 through 2037.

Of the total state research and development credits, approximately $ 1.3 million is attributable to Pennsylvania.

This credit has been offset by a liability for unrecognized tax benefits of $ 0.3 million.

If not utilized, the credits will expire between 2033 through 2036.

6 unchanged sentences

Interest and penalties associated with uncertain tax positions are recorded as a component of income tax expense.

There would be no impact to the Company’s effective rate if the unrecognized tax benefits were recognized.

A reconciliation of the beginning and ending amounts of unrecognized benefits is as follows :

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Unrecognized tax benefits at the beginning of year

Gross increases –

current year tax positions

Gross increases – current year tax positions

Gross decreases – prior year tax positions

Unrecognized tax benefits at end of year

Interest and penalties in year-end balance

The Company files U.S.

4 unchanged sentences

As of December 31, 2023, there are no income tax returns currently under audit.

On April 25, 2022, the Company acquired RE2 in a tax-free stock purchase.

The acquired deferred tax liabilities of RE2 were available to offset the reversal of the Company’s preexisting deferred tax assets.

As a result of the acquisition, the Company determined a portion of its preexisting tax assets were more likely than not to be realized by the combined entity, and the valuation allowance was reduced.

The Company recorded a deferred tax benefit of $ 3.9 million related to the reduction of its valuation allowance.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law by President Biden.

The IRA includes a corporate minimum tax of 15 % on certain large corporations with greater than $ 1 billion in average adjusted financial statement income and an excise tax on certain stock repurchases executed after December 31, 2022.

There are no impacts to the Company in 2022, and the Company does not expect a material impact on its consolidated financial statements in the foreseeable future as a result of the IRA.

There are no impacts to the Company in 2023, and the Company does not expect a material impact on its consolidated financial statements in the future for the IRA.

Commitments and Contingencies

Legal Proceedings

The Company may be involved in various claims, lawsuits, investigations and other proceedings in the normal course of business.

The Company accrues a liability when management believes information available prior to the issuance of the consolidated financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.

The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

The Company has been and may in the future be involved in various claims, lawsuits, investigations and other proceedings in the normal course of business.

The Company accrues a liability when management believes information available prior to the issuance of its financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.

The Company adjusts its accruals to reflect the impact of negotiation, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

Legal costs are expensed as incurred.

The Company has not recorded any material loss contingency related to legal proceedings in the balance sheet as of December 31, 2022 and 2021.

The Company has not recorded any material loss contingency related to legal proceedings in the balance sheets as of December 31, 2023 and 2022.

Indemnifications

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to investors, directors, officers, employees, customers or vendors with respect to certain matters, including losses arising out of the Company’s breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties.

In the ordinary course of business, the Company provides or may provide indemnifications of varying scope and terms to investors, directors, officers, employees, customers or vendors with respect to certain matters, including losses arising out of the Company’s breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties.

These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses.

1 unchanged sentence

As of December 31, 2023 and 2022, the Company has not accrued a liability for these indemnification obligations as the likelihood of incurring a material payment obligation in connection with these indemnification obligations is either not probable or not reasonably estimable due to the unique facts and circumstances involved.

Unconditional purchase commitments

On April 4, 2021, the Company entered into an agreement with Palantir Technologies (“Palantir”).

Pursuant to that agreement, the Company committed to purchase licenses to access software products and utilize services from Palantir over a six year period for a total cost to the Company of $ 42.0 million.

As of December 31, 2022, the Company has an unconditional purchase commitment with Palantir as detailed in the table below:

(In thousands)

Annual Service

Segment information

The Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker (“CODM”).

The CODM allocates resources and makes operating decisions based on financial information presented on a consolidated basis.

1 unchanged sentence

Accordingly, the Company has determined that it has a single reportable segment and operating segment structure.

The Company’s revenue is derived primarily from U.S.

During the year ended December 31, 2023, the Company ha d $ 1.9 million of revenue earned from customers located outside the United States.

During the year ended December 31, 2021 , the Company had no material revenue earned from customers located outside the United States.

During the year ended December 31, 2022 , the Company had $ 2.8 million of revenue earned from customers located outside the United States.

All long-lived assets are maintained in the United States.

All losses are attributable to operations within the United States.

Related Party Transactions

On May 16, 2021, the Company entered into an agreement with Sparks Marketing Corp.

to begin the construction of an experiential marketing mobile display to be used for demonstrations of Company products at prospective customer locations as well as other marketing and demonstration events.

Negotiations of this agreement involved an account executive at Sparks Marketing Corp.

who is the brother-in-law of Mr.

Wolff, our former CEO and current Director.

As of December 31, 2022 , the Company has capitalized $ 0.8 million to property plant and equipment for the experiential mobile display.

Employee Benefits

2 unchanged sentences

In April 2022 the Company began providing employees with 401(k) matching contributions.

The Company recognized $ 0.9 million of expense for 401(k) matching contributions during the twelve months ended December 31, 2022.

The Company recognized $ 1.5 million and $ 0.9 million of expense for 401(k) matching contributions during the twelve months ended December 31, 2023 and 2022, respectively.

Changes in and Disagreements w ith Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data