Palladyne AI Corp. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer (our "Certifying Officers"), the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended December 31, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective as of December 31, 2024. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our Certifying Officers, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on that evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2024. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm as permitted due to our status as an emerging growth company under the JOBS Act. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2024 covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. No ne of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended December 31, 2024. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 87 PART III ITEM 10. DIRECTORS, EXECTIVE OFFICERS AND CORPORATE GOVERNANCE Executive Officers and Directors The information required by this item with respect to our executive officers is set forth in Part I of this Annual Report on Form 10-K under the caption "Information about our Executive Officers," and information relating to the availability of our code of conduct for executive officers and directors is set forth below. The other information required by this item is incorporated by reference to our definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024. Code of Ethics We have adopted a Code of Business Conduct and Ethics applicable to our directors, executive officers and employees. The Code of Business Conduct and Ethics codifies the business and ethical principles that govern all aspects of our business. The full text of our code of business conduct and ethics is posted on the investor relations page on our website at https://investor.palladyneai.com/governance/documents-charters . In addition, a copy of the Code of Ethics will be provided without charge upon request to us in writing at 650 South 500 West, Salt Lake City, Utah 84101 or by telephone at 888-927-7296. Any amendments to or waivers of the Code of Conduct will be disclosed on our website. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to our definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to our definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024. 88 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to our definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to our definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024. 89 PART IV Item 15. Exhibits, Financial Statement Schedules. a) (1) Financial Statements See Index to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. (2) Financial Statement Schedule All financial statement schedules have been omitted because they are either not applicable or the required information is shown in the consolidated financial statements or notes thereto. (3) Exhibits See the Exhibit Index which precedes the signature page of this Annual Report on Form 10-K. b) Exhibits See Item 15(a)(3) above. c) Financial Statement Schedules See Item 15(a)(2) above. In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreement. The agreements may contain representations and warranties that the parties made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the applicable agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of such agreement. In addition, such representations and warranties: (1) may not be accurate or complete as of any specified date; (2) are modified and qualified in important part by the underlying disclosure schedules; (3) may be subject to a contractual standard of materiality different from those generally applicable to investors; or (4) may have been used for the purpose of allocating risk among the parties to the applicable agreement, rather than establishing matters as facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the applicable agreement, which subsequent information may or may not be fully reflected in Company's public disclosures. For the foregoing reasons, the representations and warranties should not be relied upon as statements of factual information. Exhibit Number Description 2.1† Agreement and Plan of Merger, dated as of April 5, 2021, by and among the Company, Rotor Merger Sub Corp. and Old Sarcos (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on April 6, 2021). 2.2 Amendment No. 1 to Merger Agreement, dated as of August 28, 2021, by and among the Company, Rotor Merger Sub Corp. and Old Sarcos (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on August 30, 2021). 2.3† Merger Agreement, dated March 27, 2022, by and among the Company, Spiral Merger Sub I, Inc., Spiral Merger Sub II, LLC, RE2, Inc. and Draper Triangle Ventures III, LP, solely in its capacity as the agent for and on behalf of the shareholders of RE2 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on March 29, 2022). 3.1 Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on September 30, 2021). 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 20, 2023). 90 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on March 18, 2024). 3.4 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on March 18, 2024). 4.1 Warrant Agreement between Continental Transfer & Trust Company and the Registrant (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-1/A filed with the SEC on December 30, 2020). 4.2 Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1/A filed with the SEC on December 30, 2020). 4.3 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 30, 2021). 4.4 Form of Common Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 4.5* Description of the Company's Securities. 10.1 Letter Agreement between Rotor, Rotor Sponsor LLC and Riverview LLC (incorporated by reference to Exhibit 10.4 the Company's Current Report on Form 8-K filed with the SEC on January 20, 2021). 10.2 Form of Letter Agreement between the Company, Rotor Sponsor LLC and Black Rock Funds (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on January 20, 2021). 10.3 Form of Subscription Agreement (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 6, 2021). 10.4 Form of Waiver Agreement (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on April 6, 2021). 10.5 Form of Registration Rights Agreement, by and among the Company, Rotor Sponsor LLC and certain stockholders of Sarcos (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on April 6, 2021). 10.6 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.16 to the Company's Current Report on Form 8-K filed on September 30, 2021). 10.7+ Sarcos 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K filed on September 30, 2021). 10.8+ Palladyne AI Corp. 2021 Equity Incentive Plan, forms of agreement (incorporated by reference to Exhibit 10.8 the Company's Current Report on Form 8-K filed with the SEC on September 30, 2021). 10.9+ Palladyne AI Corp. Amended and Restated 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended September 30, 2024). 10.10+ Palladyne AI Corp. 2024 Inducement Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 10.11 Form of Restricted Stock Agreement under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023) 10.12+ Amended and Restated Outside Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.13+ Employment Agreement, dated June 12, 2023, among Denis Garagic, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on June 16, 2023). 10.14+ Employment Agreement Amendment, dated March 28, 2024, among Denis Garagic, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.15+ Employment Agreement, dated January 30, 2023, among Stephen Sonne, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023). 10.16+ Employment Agreement Amendment, dated March 28, 2024, among Stephen Sonne, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 91 10.17+ Employment Agreement, dated March 5, 2024, among Trevor Thatcher, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 6, 2024). 10.18+ Employment Agreement, dated January 11, 2024, between the Company, Sarcos Corp. and Matthew Vogt (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023). 10.19+ Amended and Restated Employment Agreement, dated December 26, 2024, among Benjamin G. Wolff, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on December 27, 2024). 10.20+ Peterson Offer Letter, between the Company, Sarcos Corp. and Laura Peterson, dated January 17, 2024 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on January 19, 2024) . 10.21+ Separation Agreement and Release, dated as of March 14, 2024, among the Company, Sarcos Corp. and Andrew Hamer (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 26, 2024). 10.22+ Retention Bonus Letter Agreement, dated January 19, 2024, among Denis Garagic, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.23+ Retention Bonus Letter Agreement, dated January 19, 2024, among Andrew Hamer, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.24+ Retention Bonus Letter Agreement, dated January 19, 2024, among Stephen Sonne, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.25+ Retention Bonus Letter Agreement, dated March 19, 2024, among Matthew Vogt, Sarcos Corp. and the Company (incorporated by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.26+ Amendment to Option Agreements, dated April 16, 2024, by and between the Company and Denis Garagic (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.27+ Amendment to Option Agreements, dated April 16, 2024, by and between the Company and Stephen Sonne (incorporated by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.28+ Amendment to Option Agreements, dated April 16, 2024, by and between the Company and Trevor Thatcher (incorporated by reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.29+ Amendment to Option Agreements, dated April 16, 2024, by and between the Company and Matthew Vogt (incorporated by reference to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2024). 10.30 Open Market Sale Agreement SM , dated November 13, 2024, by and between the Company and Jefferies LLC (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-K filed with the SEC for the quarter ended September 30, 2024). 10.31 Form of Investor Purchase Agreement, dated October 31, 2024 entered into by and between the Company and the Purchasers (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 10.32 Form of Insiders Purchase Agreement, dated October 31, 2024 entered into by and between the Company and the Purchasers (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 10.33 Form of Lock-Up Agreement entered into by and between the Company and the Purchasers (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 10.34 Placement Agent Agreement, dated October 31, 2024 entered into by and between the Company and A.G.P./Alliance Global Partners (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on October 31, 2024). 92 16.1 Letter from Ernst & Young LLP to the Securities and Exchange Commission dated April 9, 2024 (incorporated by reference to Exhibit 16.1 to the Company's Current Report on Form 8-K filed with the SEC on April 9, 2024). 19*† Insider Trading Policy. 21* List of Subsidiaries . 23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm 23.2* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 24* Power of Attorney (included on the signature page) 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 Compensation Recovery Policy (incorporated by reference to Exhibit 97 to the Company's Annual Report on Form 10-K for the year ended December 31, 2023) 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith + Indicates management contract or compensatory plan. † Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. 93 Item 16. Form 10-K Summary None. 94 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . PaLLADYNE AI CORP. Date: February 20, 2025 By: /s/ Benjamin G. Wolff Benjamin G. Wolff President and Chief Executive Officer ( Principal Executive Officer ) Date: February 20, 2025 By: /s/ Trevor Thatcher Trevor Thatcher Chief Financial Officer ( Principal Financial and Accounting Officer ) 95 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Benjamin G. Wolff and Trevor Thatcher and each one of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in their name, place and stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with Exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/Benjamin G. Wolff President, Chief Executive Officer and Director February 20, 2025 Benjamin G. Wolff ( Principal Executive Officer ) /s/ Trevor Thatcher Chief Financial Officer February 20, 2025 Trevor Thatcher ( Principal Financial and Accounting Officer ) /s/ Dennis Weibling Chairman of the Board February 20, 2025 Dennis Weibling /s/ Brian D. Finn Director February 20, 2025 Brian D. Finn /s/ Matthew Shigenobu Muta Director February 20, 2025 Matthew Shigenobu Muta /s/ Eric T. Olson Director February 20, 2025 Eric T. Olson /s/ Laura J. Peterson Director February 20, 2025 Laura J. Peterson 96