What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-28 · 281 added, 246 removed, 563 unchanged (48% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB:

Consolidated Balance Sheets

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Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders' Equity (Deficit)

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Sarcos Technology and Robotics Corporation

To the Stockholders and the Board of Directors

Palladyne AI Corp.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Palladyne AI Corp.

and subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for the year ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company's auditor since 2024

Salt Lake City, Utah

February 20, 2025

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Palladyne AI Corp., formerly known as Sarcos Technology and Robotics Corporation:

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, 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.

We have audited the accompanying consolidated balance sheet of Palladyne AI Corp., formerly known as Sarcos Technology and Robotics Corporation (the Company) as of December 31, 2023, the related consolidated statement of operations, comprehensive loss, stockholders' equity and cash flows for the year 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 the results of its operations and its cash flows for the year ended December 31, 2023 in conformity with U.S.

generally accepted accounting principles.

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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.

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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

We served as the Company's auditor from 2020 to 2024.

Salt Lake City, Utah

February 28, 2024,

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

except for Note 13, as to which the date is

February 20, 2025

PALLADYNE AI CORP.

CONSOLIDATED BALANCE SHEETS

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Marketable securities

Accounts receivable

Accounts receivable, net of allowance for credit losses of $ 0.3 million and $ 0.0 million at December 31, 2024 and 2023, respectively

Unbilled receivables

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Property and equipment, net

Intangible assets, net

Operating lease assets

Other non-current assets

Liabilities and stockholders’ equity

Liabilities and stockholders’ equity (deficit)

Current liabilities:

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Operating lease liabilities

Other non-current liabilities

Warrant liabilities

Total liabilities

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

PALLADYNE AI CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

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Asset write-down and restructuring

Goodwill impairment

Total operating expenses

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Interest income, net

Gain on warrant liability

(Loss) gain on warrant liabilities

Other income, net

Loss before income tax (expense) benefit

Income tax (expense) benefit

Loss before income tax expense

Income tax expense

Net loss per share

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See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

PALLADYNE AI CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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Year Ended December 31,

Other comprehensive income (loss):

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

Total other comprehensive income (loss)

Other comprehensive income:

Change in unrealized gain on available-for-sale investments

Total other comprehensive income

Comprehensive loss

See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

PALLADYNE AI CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Amortization of intangible assets

Change in fair value of warrant liability

Change in fair value of warrant liabilities

Allowance for credit losses

Amortization of investment discount

Asset write-down

Goodwill impairment

Changes in operating assets and liabilities:

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Prepaid expenses and other current assets

Other non-current assets

Operating lease assets & other non-current assets

Accounts payable

Accrued liabilities

Other non-current liabilities

Accrued liabilities and current operating lease liabilities

Operating lease liabilities

Net cash used in operating activities

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Purchases of property and equipment

Acquisition of a business, net of cash acquired

Purchases of marketable securities

Maturities of marketable securities

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

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Payment of obligations under capital leases

Net cash used in financing activities

Net decrease in cash, cash equivalents

Proceeds from issuance of warrants

Proceeds from issuance of common stock

Payment of transaction costs related to issuance of common stock

Net cash provided by (used in) financing activities

Net increase (decrease) in cash, cash equivalents

Cash and cash equivalents at beginning of period

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Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of non-cash activities:

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

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

See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONSOLIDATED S TATEMENTS OF STOCKHOLDERS’ EQUITY

PALLADYNE AI CORP.

CONSOLIDATED S TATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(in thousands, except share data)

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Stockholders’

Balance, December 31, 2021

Income (Loss)

Equity (Deficit)

Balance at December 31, 2022

Stock-based compensation

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

Common stock issued under equity award plans

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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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

Common stock issued under equity award plans

Shares repurchased for payment of tax withholdings

Exercise of stock options

Issuance of common stock, net of cost

Other comprehensive loss

1 unchanged sentence

See accompanying notes to the consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORTATION

PALLADYNE AI CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Description of the Business

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.

The Company's full-stack, closed-loop autonomy software ("AI/ML Foundational Technology") has been designed with artificial intelligence ("AI") and machine learning ("ML") technologies 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.

To reflect the Company's transition from a hardware-focused company, in March 2024 the Company changed its name from Sarcos Technology and Robotics Corporation to Palladyne AI Corp.

Basis of Presentation and Consolidation

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All intercompany accounts and transactions have been eliminated in consolidation.

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”), 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.

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, 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

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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, 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 and 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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Cash, cash equivalents and marketable securities were $ 40.1 million as of December 31, 2024, compared to $ 39.1 million as of December 31, 2023.

The Company has historically incurred losses and negative cash flows from operations.

The Company has incurred losses and negative cash flows from operations since inception and is likely to continue to incur losses and negative cash flows from operations in the near term.

As of December 31, 2024, the Company also had an accumulated deficit of approximately $ 490.8 million and working capital of $ 38.3 million .

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.

These financial statements have been prepared in accordance with GAAP and on the basis that 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 source of liquidity has 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.

Future capital requirements will depend on many factors, including the Company's timing and extent of development efforts, the expansion and success 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 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 generally exceeds 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, 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.

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.

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.

As of December 31, 2024 , three customers accounted for more than 10% of the Company's accounts receivable, which in total represented 100 % of the accounts receivable as of December 31, 2024.

As of December 31, 2023 , three 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.

Two and five cust omers accounted for more than 10% of the Company's revenue for each of the years ended December 31, 2024 and 2023 , respectively.

These concentrations accounted for 98 % and 85 % of revenue for the years ended December 31, 2024 and 2023 , respectively.

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(In thousands)

* 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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Treasury bills.

Marketable Securities

The Company's marketable securities consist primarily of U.S.

Treasury bills.

The Company classifies securities that have effective maturities of greater than three months as marketable securities in its consolidated balance sheets.

The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date.

The Company's marketable debt securities are classified as available-for-sale.

The Company carries the marketable debt securities at fair value, and reports the unrealized gains and losses in accumulated other comprehensive income within the consolidated balance sheets.

If the fair value of a marketable debt security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in the consolidated statements of operations.

There were no allowances for credit losses related to marketable debt securities recorded during the twelve months ended December 31, 2024 and 2023 .

Accounts Receivable

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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 .

Management recorded $ 0.3 million allowance for credit losses during the twelve months ended December 31, 2024.

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

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

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Costs are computed on the first-in, first-out basis and include material, labor and manufacturing overhead.

Adjustments are also made to reduce the cost of inventory for estimated excess or obsolete balance by evaluating inventory against forecasted revenue and production requirements.

Adjustments are also made to reduce the value of inventory for estimated excess or obsolete balance by evaluating inventory against forecasted revenue and production requirements.

Property and Equipment

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

For leases with terms greater than 12 months, the Company records the related operating or finance right of use asset and lease liability at the present value of lease payments over the lease term.

For leases with terms greater than 12 months, the Company records the related operating or finance right of use asset and lease liability at the present value of unpaid lease payments over the lease term.

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.

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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Impairment of Long-Lived Assets

The Company evaluates its long-lived asset for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

The Company evaluates its long-lived assets, which includes property and equipment, and operating lease assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

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.

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.

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.

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.

A contract with a customer exists when (a) 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, (b) the contract

has commercial substance and (c) 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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(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.

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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 consists of sales of the Company’s products.

Product development contract revenue includes revenue arising from different types of contractual

arrangements, including cost-type contracts and fixed-price contracts.

Historically, product revenue primarily consists of sales of the Company's hardware products.

Product Development Contract Revenue

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Opening Balance as of December 31, 2022

Increase/(decrease), net

(Decrease)/increase, net

Ending Balance as of December 31, 2023

Increase/(decrease), net

(Decrease)/increase, net

Ending Balance as of December 31, 2024

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 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, 2024, the Company recognized all of the deferred revenue which existed at December 31, 2023.

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.

Remaining Performance Obligations

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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

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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Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred income taxes related primarily to differences between the tax bases and financial reporting bases of assets and liabilities.

Deferred income taxes represent future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

Deferred income taxes represent future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis, to ascertain whether it is more likely than not that deferred tax assets will be realized.

In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.

If the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

Conversely, if all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.

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.

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 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 November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires enhanced disclosure of significant segment e xpenses on an annual and interim basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

The Company adopted ASU 2023-07 during the year ended December 31, 2024 .

See Note 13, Segment Information, in the accompanying notes to the consolidated financial statements for further detail.

Recently Issued Accounting Standard Pronouncements

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

In November 2024, the FASB issued ASU No.

2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2024-03.

Fair Value Measurements

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treasury securities

Warrant liability

Warrant liabilities

Total liabilities

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(In thousands)

Cash equivalents:

Treasury securities

Marketable securities:

treasury securities

Warrant liability

Warrant liabilities

Total liabilities

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The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

The carrying amounts of accounts payable and accrued expenses approximate their fair values because of the relatively short periods until they are required to be settled.

The following table sets forth a reconciliation from the opening balances to the closing balances for Level 3 values:

(In thousands)

Balance at December 31, 2021

Warrant liability transferred out of Level 3

Balance at December 31, 2022

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period in which a change in valuation technique or methodology occurs.

During the first quarter of 2022 the trading price of our public warrants was used to value our private placement warrants, and a third-party valuation was no longer deemed necessary resulting in the estimated fair value of our private placement warrants being transferred from a Level 3 fair value measurement to a Level 2 fair value measurement.

The carrying amounts of accounts receivable, unbilled receivables, accounts payable and accrued expenses approximate their fair values because of the relatively short periods until they are required to be settled.

Balance Sheet Components

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Raw materials

Work-in-process

Finished goods, net

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Property and equipment, net

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 $ 0.8 million for the year ended December 31, 2024.

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

Accrued liabilities

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Contract restructuring accrual

Legal accrual

Legal services accrual

Deferred revenue

Other contract liabilities

Other accrued expenses and current liabilities

Total accrued liabilities

Other non-current liabilities

Other non-current liabilities consist of the following:

(In thousands)

December 31, 2023

December 31, 2022

Finance leases

Warrant liabilities

Total other non-current liabilities

The Company leases real estate for office space under operating leases with varying expiration dates through 2033 .

The Company leases real estate for office and lab space under operating leases with varying expiration dates through 2033 .

Leases are categorized at their commencement date , which is the date the Company takes possession or control of the underlying asset.

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Lease costs for operating leases are as follows:

Year Ended December 31,

(In thousands)

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

Year Ended December 31,

Operating leases

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Supplemental cash flow and other information related to leases:

Year Ended December 31,

(In thousands)

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Operating cash flows from operating leases

Right-of-use assets obtained in a noncash exchange for new lease liabilities:

Operating leases

Undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year, as of December 31, 2024 are as follows:

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Present value of lease liabilities

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

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, 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 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)

Cash and cash equivalents

Accounts receivable

Unbilled receivables

Prepaid expenses and other current assets

Property and equipment

Intangible Assets

Operating lease assets

Other non-current assets

Accounts payable

Accrued liabilities

Current operating lease liabilities

Operating lease liabilities

Deferred tax liabilities

Total acquisition consideration

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands):

(in thousands)

Weighted Average Useful Life (in years)

Trade name and trademarks

Developed technology

Customer relationships

Total intangible assets

Goodwill represents the future economic benefits arising from other assets that could not be individually identified and separately recognized, such as the acquired assembled workforce and synergies expected to be achieved from the integration of RE2.

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.

Goodwill and Intangible Assets

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.

The income approach used the reporting unit's projections of estimated operating results and cash flows that were discounted using a market participant discount rate based on the weighted-average cost of capital.

The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate.

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.

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

December 31, 2022

(In thousands)

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.

The Company had no intangible amortization expense during the year ended December 31, 2024.

The Company recorded $ 2.8 million of amortization expense during the year ended December 31, 2023, 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.

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Earn-Out Shares

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

("Rotor"), a Delaware corporation, consummated the 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.

To reflect the Company's transition from a hardware-focused company to an AI software-focused company, in March 2024 the Company changed its name from Sarcos Technology and Robotics Corporation to Palladyne AI Corp.

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").

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As of December 31, 2024 , there remained 4,687,500 Earn-Out Shares potentially issuable .

DeSPAC Warrants

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”).

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 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.

The Warrants will expire five years after the completion of the Business Combination, or September 24, 2026 , at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

As of December 31, 2023 , there were 20,549,453 Warrants outstanding.

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.

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.

In no event will the Company be required to net cash settle any Warrant.

In the event a registration statement is not effective for the exercised Warrants, the purchaser in the Rotor IPO of a Unit containing such Warrant will have paid the full purchase price for the Unit solely for the share of the Company’s Common Stock underlying such Unit.

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.

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.

The initial purchasers or their permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis.

Redemption of Warrants When the Price per Share of the Company’s Common Stock Equals or Exceeds $ 108.00 .

Once the Warrants become exercisable, the Company may call the Warrants for redemption:

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

Simultaneously with the closing of the IPO, Rotor consummated the sale of 7,270,000 warrants (the "deSPAC 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 deSPAC Public Warrants, and the deSPAC Private Placement Warrants (together the "deSPAC Warrants").

The deSPAC Public Warrants are listed and traded under the PDYNW ticker symbol on the Nasdaq Global Market.

Each whole deSPAC 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 deSPAC Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their deSPAC Warrants on a cashless basis under the circumstances specified in the warrant agreement (the "deSPAC 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 deSPAC Warrant Agreement, a deSPAC Warrant holder may exercise its deSPAC Warrants only for a whole number of shares of the Company's Common Stock.

The deSPAC Warrants will expire five years after the completion of the Business Combination, or September 24, 2026 , at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

As of December 31, 2024 , there were 20,549,453 deSPAC Warrants outstanding.

The Company will not be obligated to deliver any Common Stock pursuant to the exercise of a deSPAC Warrant and will have no obligation to settle such deSPAC Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the deSPAC 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 deSPAC Warrant will be exercisable, and the Company will not be obligated to issue a share of Common Stock upon exercise of a deSPAC Warrant unless the share of the Company's Common Stock issuable upon such deSPAC 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 deSPAC Warrants.

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

In no event will the Company be required to net cash settle any deSPAC Warrant.

In the event a registration statement is not effective for the exercised deSPAC Warrants, the purchaser in the Rotor IPO of a Unit containing such deSPAC Warrant will have paid the full purchase price for the Unit solely for the share of the Company's Common Stock underlying such Unit.

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

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

The deSPAC 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.

The initial purchasers or their permitted transferees, have the option to exercise the deSPAC Private Placement Warrants on a cashless basis.

Redemption of deSPAC Warrants When the Price per Share of the Company's Common Stock Equals or Exceeds $ 108.00 .

Once the deSPAC Warrants become exercisable, the Company may call the deSPAC Warrants for redemption:

• 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 $ 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.

However, the Company will not redeem the Warrants unless an effective registration statement under the Securities Act covering the shares of the Company’s Common Stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of the Company’s Common Stock is available throughout the 30-day redemption period.

Redemption of Warrants When the Price per Share of Our Common Stock Equals or Exceeds $ 60.00 .

Once the Warrants become exercisable, the Company may redeem the outstanding Warrants (except as described herein with respect to the Private Placement Warrants if the Company does not utilize this redemption provision):

• at a price of $ 0.01 per deSPAC Warrant;

• upon not less than 30 days ' prior written notice of redemption (the "30-day redemption period") to each deSPAC 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 deSPAC Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the deSPAC 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 deSPAC 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.

However, the Company will not redeem the deSPAC Warrants unless an effective registration statement under the Securities Act covering the shares of the Company's Common Stock issuable upon exercise of the deSPAC Warrants is effective and a current prospectus relating to those shares of the Company's Common Stock is available throughout the 30-day redemption period.

Redemption of deSPAC Warrants When the Price per Share of Our Common Stock Equals or Exceeds $ 60.00 .

Once the deSPAC Warrants become exercisable, the Company may redeem the outstanding deSPAC Warrants (except as described herein with respect to the deSPAC Private Placement Warrants if the Company does not utilize this redemption provision):

• 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 deSPAC Warrant upon a minimum of 30 days ' prior written notice of redemption;

provided that holders will be able to exercise their deSPAC 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;

• 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 $ 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.

• if the Reference Value is less than $ 108.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) the deSPAC 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 deSPAC Warrants) as the outstanding deSPAC Public Warrants, as described above.

Both the deSPAC Public Warrants and the deSPAC Private Placement Warrants are recorded as warrant liabilities on the Company's consolidated balance sheets.

The Company values both the deSPAC Public and deSPAC Private Placement Warrants using the closing price of the deSPAC Public Warrants on the Nasdaq Global Market as of the reporting date.

The fair value measurement for the deSPAC Public Warrants is considered a level 1 fair value measurement, and the fair value measurement for the deSPAC Private Placement Warrants is considered a level 2 fair value measurement, as the deSPAC Private Placement Warrants are substantially the same, but not identical to, the deSPAC Public Warrants.

The Company recognized losses of $ 15.7 million and gains of $ 0.2 million related to the change in fair value of the deSPAC Warrants during the years ended December 31, 2024 and 2023 , respectively.

2024 Warrants

On November 1, 2024, the Company closed a registered direct offering for an aggregate of 2,790,700 shares of its common stock at a purchase price of $ 2.15 per share.

In a concurrent private placement, the Company agreed to issue to the same investor warrants to purchase up to 2,790,700 shares of common stock (the "2024 Private Placement Warrants").

The 2024 Private Placement Warrants have an exercise price of $ 2.30 per share, will be exercisable commencing six months from the date of issuance, and will expire five and one-half years following the date of issue.

In a separate concurrent private placement, the Company's Chief Executive Officer and certain other members of the Board of Directors purchased 430,105 shares of common stock at a price of $ 2.20 per share, which represented the consolidated closing bid price of the Company's common stock on the Nasdaq Global Market on October 30, 2024, and warrants to purchase up to 430,105 shares of common stock, at a price of $ 0.125 per warrant (the "2024 Concurrent Private Placement Warrants").

The 2024 Concurrent Private Placement Warrants have an exercise price of $ 2.30 per share, will be exercisable commencing six months from the date of issuance, and will expire five and one-half years following the date of issue.

The Company received gross proceeds of approximately $ 7 million, before deducting placement agency fees and offering expenses, from the registered and private placement offerings.

The 2024 Private Placement Warrants and the 2024 Concurrent Private Placement Warrants (together the "2024 Warrants") are recorded as warrant liabilities on the Company's consolidated balance sheet.

The Company estimated the fair value of the 2024 Warrants using the Monte Carlo valuation model, which is considered a level 3 fair value measurement.

The Monte Carlo valuation model inputs are based on assumptions related to the probability of a fundamental transaction occurring, expected volatility, expected life, risk-free interest rate and expected dividends .

These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future.

The Company recognized losses of $ 31.2 million related to the change in fair value of the 2024 Warrants during the year ended December 31, 2024 , which are recorded as a loss on warrant liabilities within the consolidated statements of operations.

The following table provides quantitative information regarding assumptions used in the Monte Carlo model to determine the fair value of the 2024 Warrants:

December 31, 2024

November 1, 2024

Term (in years)

Expected volatility

Risk-free rate

Dividend yield

Stock-Based Compensation

2021 Stock Plan

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.

The Company's 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) 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.

The maximum number of shares of Common Stock that may be issued pursuant to the 2021 Plan is (a) 5.0 million shares of Common Stock of the Company plus (b) 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 (b) equal to 2.1 million shares of Common Stock.

As of December 31, 2024, 2.3 million shares 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.

The Old Sarcos 2015 Equity Incentive Plan (the "2015 Plan") provided stock options, RSUs, RSAs, SARS and performance awards for issuance to Old Sarcos' 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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Any forfeited awards will be added to the 2021 Plan as described above .

RE2 Stock Plans

In connection with the acquisition of RE2, the Company assumed the outstanding stock plans and certain outstanding stock options of RE2.

These stock options are governed by the plans and agreements under which they were originally issued, but are now exercisable for shares of Common Stock.

2024 Inducement Plan

The Company adopted the 2024 Inducement Equity Incentive Plan (the "Inducement Plan") with an effective date of December 15, 2024, to reserve 500,000 shares of Common Stock to be used exclusively for grants of nonstatutory stock options, RSUs, RSAs, SARS and performance awards to individuals who were not previously employees or directors of the Company (or who are returning to employment following a bona fide period of non-employment), as an inducement material to the individual's entry into employment with the Company, pursuant to Nasdaq Listing Rule 5635(c)(4).

The Inducement Plan was adopted and approved without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4).

As of December 15, 2024, 500,000 shares of Common Stock will be available to grant under the Inducement Plan.

As of December 31, 2024 , no stock-based compensation expense has been incurred with respect to the Inducement Plan.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the "ESPP") provides for the issuance of shares of Common Stock pursuant to purchase rights granted to employees over designated offering periods, by funds accumulated primarily through elective payroll deductions.

Offerings under the ESPP commenced in December 2024.

As of December 31, 2024, no shares have been issued under the ESPP.

Offering periods are generally six months long and begin on June 1 and December 1 of each year.

The purchase price for shares of Common Stock purchased under the ESPP is calculated as 85 % of the lesser of the fair market value of the Common Stock on (1) the first trading day of the applicable offering period or (2) the last trading day of the offering period.

Stock Option Activity

The following summarizes the Company's stock option activity for the years ended December 31, 2024 and 2023:

Weighted-Average

Options Outstanding

Aggregate Intrinsic

Weighted Average

Contractual Term

Number of Shares

Weighted Average Exercise Price

Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value

Exercise Price

(In thousands)

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Exercisable – December 31, 2024

(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.

For options granted during the years ended December 31, 2024 and 2023, the weighted-average grant-date fair value was $ 1.26 and $ 1.81 per option, respectively.

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

The Company calculated the fair value of options granted under the 2021 Plan on the respective dates of grant using the following weighted average assumptions:

The Company calculated th e fair value of options granted under the 2021 Plan on the respective dates of grant using the following weighted average assumptions:

Year Ended December 31,

Risk-free interest rate

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Expected volatility

Option Repricing

On April 17, 2024, the Company amended certain options to purchase 773,551 shares of the Company's Common Stock.

All of the options subject to the amendments had exercise prices that exceeded the value of the Company's Common Stock on the amendment date.

One set of amendments, which were entered into with seven senior employees of the Company, applied to options to purchase an aggregate of 225,670 shares held by those seven senior employees.

These amendments (1) re-started the vesting schedule of the amended options, including for options that had already vested and (2) reduced the per share exercise price of the options to $ 1.59 (the "New Exercise Price"), which is equal to the closing price of the Company's Common Stock on April 17, 2024, the effective date of the amendments.

No other terms of these options were modified.

The other set of amendments applied to options to purchase an aggregate of 547,881 shares held by other eligible current employees and service providers of the Company with an exercise price per share greater than the New Exercise Price.

These amendments reduced the per share exercise price of affected options to the New Exercise Price, which is equal to the closing price of the Company's Common Stock on April 17, 2024, the effective date of the amendments.

No other terms of such options were modified.

The total incremental fair value to be recognized as a result of the amendments was $ 0.2 million.

The incremental fair value attributable to the vested options of $ 0.1 million was recognized as stock-based compensation expense during the twelve months ended December 31, 2024.

The remaining incremental fair value attributable to the unvested option shares will be amortized over the remaining requisite service periods.

Restricted Stock Units

The following summarizes the Company's employee RSU activity for the years ended December 31, 2024 and 2023:

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

Restricted Stock Awards

The following summarizes the Company's employee RSA activity for the year ended December 31, 2024:

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

For the year ended December 31,

Year Ended December 31,

(In thousands)

8 unchanged sentences

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, 2024 and 2023, respectively:

For the twelve months ended December 31,

Year Ended December 31,

(In thousands, except share and per share data)

5 unchanged sentences

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

For the twelve months ended December 31,

Year Ended December 31,

(In thousands)

4 unchanged sentences

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:

For the twelve months ended December 31,

Year Ended December 31,

(In thousands)

2 unchanged sentences

Change in valuation allowance

Change in valuation allowance - acquisition

Research credits

Change in effective tax rate

Goodwill impairment

Warrant revaluation

Warrant liability revaluation

Disallowed executive compensation

21 unchanged sentences

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 for the three-year period ended December 31, 2023, all of which were in the United States.

The Company had cumulative losses from continuing operations for the three-year period ended December 31, 2024.

The Company considered this negative evidence along with all other available positive and negative evidence and concluded that, at December 31, 2024, it is more likely than not that the Company's U.S.

19 unchanged sentences

Utah law allows unused net operating losses arising in tax years beginning after December 31, 2008 to be carried forward indefinitely.

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.

All of the Utah net operating losses are for tax years beginning after December 31, 2008, and are carried forward indefinitely.

Of the total State net operating losses, approximately $ 23.9 million is attributable to Pennsylvania.

8 unchanged sentences

Of the total State research and development credits, approximately $ 0.6 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 2037.

1 unchanged sentence

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

Utilization of federal and state net operating losses and tax credit carryforwards may be subject to annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.

Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization.

ASC Topic 740-10-05 requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

5 unchanged sentences

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

Years ended December 31,

Year Ended December 31,

(In thousands)

1 unchanged sentence

Gross increases – current year tax positions

Gross increases – prior year tax positions

Gross decreases – prior year tax positions

6 unchanged sentences

As of December 31, 2024, there are no income tax returns currently under audit.

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 2023, and the Company does not expect a material impact on its consolidated financial statements in the future for the IRA.

Commitments and Contingencies

11 unchanged sentences

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.

The Company has determined that it has a single operating segment.

The Company has historically derived revenues from product development contracts focused on the development of technologies included within the Company's AI/ML Foundational Technology, which the Company expects to commercialize and sell under software license arrangements.

The accounting policies of the segment are the same as those described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies.

The Company's Chief Executive Officer is the Chief Operating Decision Maker ("CODM").

The CODM allocates resources and makes operating decisions based on consolidated net income.

The CODM does not evaluate profitability below the level of the consolidated company.

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

Net loss is used to monitor results on a budget versus actual basis.

Net loss is adjusted for various non-recurring and non-cash transactions such as stock compensation expenses and impairment expenses.

The following table presents selected financial information with respect to the Company's single operating segment:

Year Ended December 31,

(In thousands)

Segment Revenue

Other Revenue (1)

Total Revenue

Cost of revenue

Research and development

General and administrative

Sales and marketing

Interest income, net

(Loss) gain on warrant liabilities

Other income, net

Income tax expense

(1) Other revenue includes revenue from legacy product sales.

(2) Other for the year ended December 31, 2024, includes $ 1.1 million of cost of revenue from legacy product sales, $ 2.8 million of stock compensation expenses, $ 0.6 million of other non-recurring or non-cash transactions.

Other for the year ended December 31, 2023, includes $ 7.6 million of stock compensation expenses, $ 38.5 million of asset write-off and restructuring charges and employee separation related expenses, and $ 2.8 million of intangible amortization expense.

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, 2024, the Company ha d no revenue earned from customers located outside the United States.

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

4 unchanged sentences

The plans allow employees to defer up to 100 % of their employment income (subject to annual contribution limits imposed by the I.R.S.) after all taxes and applicable benefit deductions.

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

The Company provides employees with 401(k) matching contributions.

The Company recognized $ 0.6 million and $ 1.5 million of expense for 401(k) matching contributions during the twelve months ended December 31, 2024 and 2023, respectively.

Subsequent Events

From January 1, 2025 through the date of this filing, the Company sold 1,335,807 shares of Common Stock under the at-the-market equity offering program for gross proceeds of $ 14.4 million, before deducting commission and other expenses.

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