What changed in this filing

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Item 1. Business

2026-03-05 compared with 2025-02-20 · 196 added, 166 removed, 127 unchanged (74% of the section changed)

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We use the terms "Palladyne AI," "the Company," "we," "us," and "our" to refer to Palladyne AI Corp.

Our mission is to deliver artificial intelligence software products that enable robotic and unmanned platforms, or robotic systems, in the industrial and defense sectors to perform complex tasks in arbitrary (i.e., unstructured and dynamic) human environments.

Our AI/ML Foundational Technology enhances the utility and functionality of third-party stationary and mobile robotic systems by allowing these systems to quickly observe, learn, reason and act in structured and unstructured environments.

Our AI/ML Foundational Technology is 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 and not in the cloud) without extensive programming, training or the latency associated with processing in the cloud.

We believe this "human-like" ability to learn, reason and adapt will be a key differentiator in assisting our customers to enhance productivity in dynamic or unstructured environments, where human reasoning has traditionally been required to complete the task.

We designed our AI/ML Foundational Technology to be hardware agnostic, meaning that our AI/ML software products are designed so that with a minimal integration effort they will be able to function on a wide variety of industrial robots, cobots, unmanned aerial vehicles ("UAV"), unmanned ground vehicles ("UGV") and other remotely operated vehicles ("ROV").

We believe that our AI/ML Foundational Technology will enable autonomous functionality in challenging and arbitrary environments for industries that can benefit from a high degree of adaptability and efficiency, such as manufacturing and the defense sector.

These industries typically encounter limitations on the tasks a robotic system can perform, while also engaging in lengthy and costly efforts to program, manage, and modify such systems.

Our AI/ML Foundational Technology is designed to enable robotic systems to function with human-like reasoning through flexible and adaptable learning capabilities such that a robotic system can perform a variety of tasks without the need for costly reprogramming efforts.

We believe our AI/ML Foundational Technology will expedite robotic system training, expand task capabilities, enable collaboration among robotic systems and reduce human labor requirements all while significantly decreasing costly programming costs, leading to increased productivity and a higher return on investment for robotic system deployments across various use-cases.

Our AI/ML Foundational Technology is the foundational technology for our two software products.

The first, Palladyne IQ, has been developed for use with industrial robots and cobots, and the second, Palladyne Pilot, is being developed for use with unmanned platforms with our current focus being Class 1 UAVs.

We released the initial commercial version of our Palladyne IQ product in October 2024 and expect to release the initial commercial version of Palladyne Pilot by the end of the first quarter of 2025.

Our Palladyne IQ product continues to undergo reliability testing, debugging and other stabilizing improvements as we continue internal testing and learn from customer trials.

We believe that our initial customer base will be comprised of innovators and early adopters in the industrial manufacturing, defense, infrastructure maintenance, repair and surveillance, energy and aerospace and aviation industries.

We believe that if we are successful in demonstrating the value of our products with these early adopters, there will be many potential customers that follow.

Palladyne IQ is being offered through a term-based licensing model that would result in a recurring revenue stream.

We may also offer add-on functionality for an additional license fee.

We may charge an upfront fee for the hardware associated with Palladyne IQ or embed the cost into the license fee.

We anticipate offering Palladyne Pilot through a device-based licensing model.

We expect to begin generating revenues from commercial customers of Palladyne IQ and Palladyne Pilot in 2025.

The majority of our sales and marketing efforts are focused initially on U.S.

markets, but we are also exploring opportunities in select non-U.S.

markets on a more limited basis.

Industry Background

Recent efforts to use AI technologies to enable the use of robotic systems in dynamic physical environments have focused on training foundational models residing in cloud infrastructure with enormous amounts of real-world robotic data sets collected over extended periods of time.

In these cases, training occurs by connecting to these databases, doing extensive searching to try to find case-applicable data and models and then attempting to use the new data to recommend a viable solution.

This process requires persistent cloud connectivity, driving increased costs and time, significantly reducing the benefits of these AI technologies.

Industrial Robotics

Industrial robots have been used in industrial and manufacturing automation for many decades, typically in the form of large, stationary robotic arms that automate repetitive tasks in a controlled environment (e.g., a factory assembly line).

These robots are typically programmed in advance by human engineers and excel at tasks requiring consistency, speed and strength beyond human capacity.

Over time, they have become more advanced and are now widely adopted across various industries.

While industrial robots and cobots offer significant benefits, they also have limitations in that they are not capable of performing a diverse set of complex tasks, and programming and re-programming efforts are costly, time-intensive and require highly skilled programmers.

We understand from early customer engagement that reprogramming a single robotic arm can take weeks to months in some cases.

Reprogramming thousands of robotic arms on a full assembly line to build a different product or accommodate a new component is therefore costly and can put the line out of commission for a significant period of time, reducing or delaying production and sales.

A disruption to the controlled environment, such as the insertion of an obstacle or the imprecise placement of parts, can result in the system shutting down until human assistance resolves the situation, resulting in additional costs and lost production.

Unmanned Platforms

The defense sector has used unmanned platforms such as UAVs, UGVs and ROVs for many years.

UAV-based missions, particularly in tactical operations, are often personnel-intensive, requiring multiple roles and shifts to ensure continuous situational awareness.

Operators are tasked with managing the drone platforms, analyzing data streams and coordinating between team members to maintain an effective overview of the mission.

Currently, most tactical UAVs rely on manual, 1:1 platform control, where one operator controls a single drone, and one-to-many data coordination is essential for the smooth integration of different information sources.

This setup creates significant operational complexity, particularly when real-time decision-making is required in highly variable and unpredictable conditions, where constant monitoring of diverse data streams is crucial to making timely, accurate choices.

Moreover, tactical UAVs face a number of challenges in target detection, identification and tracking.

Limited or contested radio frequency ("RF") availability causes interruptions in communication that jeopardize persistent target tracking of moving targets.

Additionally, fast-moving targets often exit the field of view or are obstructed from the drone's line-of-sight, complicating continuous tracking efforts.

Distinguishing targets based on visual attributes—such as color, shape or markings—can also be difficult, especially in complex and arbitrary environments.

These challenges highlight the need for advanced technologies that can enhance situational awareness, automate target detection, identification and tracking and improve the precision of decision-making in complex, real-time scenarios.

Our Solution:

The AI/ML Foundational Technology

Our AI/ML Foundational Technology is full stack, closed-loop autonomy software designed to enable robotic systems to observe, learn, reason and act in a manner similar to that of humans to solve tasks in arbitrary environments that have been too complex for traditional automation.

We are a U.S.-based technology company developing and offering embodied artificial intelligence ("AI") software and collaborative autonomy solutions, advanced avionics, unmanned aerial vehicles ("UAVs"), advanced UAV engineering services and precision-manufactured components for defense and commercial/industrial markets.

Our core AI software offerings, Palladyne IQ, SwarmOS and Palladyne Pilot, consist of full-stack, closed-loop autonomy software that is intended to enhance the functionality and operational effectiveness of third-party robotic systems across a range of applications.

These products are designed to be hardware agnostic, enabling integration across a wide range of robotic platforms, whether third-party or our own proprietary platforms, including industrial robots, collaborative robots ("cobots"), UAVs, unmanned ground vehicles ("UGVs"), and remotely operated vehicles ("ROVs") across multiple domains.

We are positioning our defense business as a mid-tier U.S.

technology prime defense contractor aiming to combine innovative autonomy, practical engineering and American production to bring intelligent systems into active service faster, safer and more cost-effectively than legacy approaches.

We seek to harness our advanced, ethical embodied AI to provide cost-effective lethality and precision harm mitigation through rapidly delivering scalable, low-cost, intelligent and collaborative attritable weapons, including by developing proprietary, UAVs incorporating our avionics and AI technologies.

We support these efforts and those of other defense contractors and commercial customers through our vertically integrated aircraft engineering design services, enhanced avionics compute hardware and machining and fabrication services.

Palladyne SwarmOS is designed for unmanned platforms and includes advanced autonomy and coordination capabilities that enable multiple UAVs to swarm, collaborate and execute complex missions through distributed tasking and edge-native orchestration.

Our embodied AI is designed to operate in complex, contested and high-risk environments, enabling distributed tasking, human-on-the-loop oversight, degraded-communications resilience, multi-domain coordination and real-time responsiveness.

Our platform-agnostic autonomy stack combines real-time sensor fusion, adaptive AI models, and edge-native orchestration to support autonomous and collaborative systems across air, ground, maritime and industrial domains where performance, resilience, trust and mission assurance are critical to operational outcomes.

These capabilities are intended to meet the performance and reliability requirements of military and defense customers, particularly in applications where it is essential to conduct coordinated multi-vehicle operations in contested environments with degraded communications.

For commercial and industrial customers in particular, Palladyne IQ is designed to enable poly-functional robots, including industrial robots and cobots, to become capable of performing multiple tasks across dynamic real-world industrial environments.

Palladyne IQ enables industrial robots and cobots to adapt to variability in tasks, parts, and environments, thereby reducing the need for rigid automation, custom fixtures, and manual intervention.

We believe Palladyne IQ has applications across manufacturing, logistics, warehousing, and other industrial settings where unstructured or semi-structured environments have historically limited the adoption of automation.

We also offer Palladyne Pilot, a derivative version of SwarmOS tailored to meet the requirements of public safety and commercial customers by delivering core autonomy capabilities with reduced system complexity and cost.

We focus our efforts on leveraging our technologies and businesses to meet the needs of customers in two, broadly-defined markets:

(1) the Defense and Public Safety market and (2) the Commercial and Industrial market.

Defense and Public Safety (Defense)

Our vision is to become a leading innovative, nimble and pioneering supplier of next-generation enabling AI and UAV technologies, components and complete systems for the defense and public safety sectors.

We aim to combine the affordability and agility of a small enterprise with the impact of a much larger one.

We believe our products, technologies and capabilities are aligned with key U.S.

Department of War initiatives.

In particular, we focus on:

Ethical embodied AI.

We integrate our AI/ML Foundational Technology into our products to enhance mission effectiveness, reduce unintended collateral damage and be a force multiplier for the U.S.

military and U.S.

Scalable, low-cost and effective systems.

We design our systems with a view toward rapid, scalable and affordable deployment.

We believe that economic advantage is a warfighting advantage and therefore that cost-effective military systems are critical to future military success.

Building U.S.-based capabilities.

We believe it is strategically imperative for the United States to build and maintain a strong domestic supply chain for its military needs, from raw materials and manufacturing capability to cutting-edge technologies.

As a result, we seek to support that imperative and can provide U.S.-based stand-alone or vertically integrated solutions to U.S.

government customers or other U.S.

government prime contractors, including fabrication and precision-machining capabilities, advanced avionics, advanced UAV design and engineering services and leading AI robotics and unmanned systems software.

Commercial and Industrial (Commercial)

We aim to help commercial and industrial customers increase productivity by leveraging our AI/ML Foundational Technology to enable robotic systems to perform tasks in arbitrary, changing environments that have historically been too complex for traditional automation.

We have intentionally designed our AI/ML Foundational Technology to:

• Allow robotic systems to be poly-functional, learn multiple tasks and handle disruptions or obstacles efficiently and without human intervention.

• Support rapid programming and reprogramming of robotic systems with minimal inputs.

• Operate “on the edge” and without the need to connect to the cloud or incur the costs and compute time associated with the use of large-language models (LLMs).

Our AI/ML Foundational Technology

Our AI/ML Foundational Technology is full stack, closed-loop embodied autonomy software designed to enable robotic systems to observe, learn, reason and act in a manner similar to that of humans to solve tasks in arbitrary environments that have been too complex for traditional automation.

It operates on the edge by using real-time sensor inputs to adjust to a changing environment and accomplish the assigned task without the need to connect to the cloud to try to find and process an applicable LLM.

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After minimal initial training, robots using our AI/ML Foundational Technology are expected to operate in a closed-loop to continuously observe, learn, reason and act so that they can adapt and continue to complete the desired tasks in the face of a changing environment.

We believe that our products will enable autonomous functionality to address challenging and dynamic environments for industries that can benefit from a high degree of adaptability and efficiency.

We believe that our products will enable autonomous functionality to address challenging and arbitrary environments for industries that can benefit from a high degree of adaptability and efficiency.

These industries typically encounter limitations on the tasks a robotic system can perform, while also engaging in lengthy and costly efforts to program, manage and modify such systems.

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Our AI/ML Foundational Technology is the foundation for our first two software products.

The first, Palladyne IQ, has been developed for use with industrial robots and cobots, and the second, Palladyne Pilot, is being developed for use with unmanned platforms.

Palladyne IQ has been developed for use with industrial robots and cobots to empower robots with human-like reasoning, enabling them to learn multiple tasks and handle disruptions or obstacles efficiently.

Potential use cases include:

Products and Services

Palladyne IQ was our first product based on our AI/ML Foundational Technology.

It has been developed for use with industrial robots and cobots to empower robots with human-like reasoning, enabling them to learn multiple tasks and handle disruptions or obstacles efficiently thereby reducing the need for rigid automation, custom fixtures, and manual intervention.

Use cases on which we are initially focused include:

• manufacturing;

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With Palladyne IQ, robots typically learn a task in approximately one to five human-controlled demonstrations via a variety of methods including, remote manipulation, virtual reality manipulation or natural language instruction.

We believe our

dynamic reasoning model requires much less training data than traditional models.

We believe our dynamic reasoning model requires much less training data than traditional models.

Using this learning data, Palladyne IQ creates a mathematical model of the data and stores it as a task.

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Over time, each robot will create its own library of tasks (a "Task Library").

By operating "on the edge" and not accessing external large data sets, the learning process can happen faster and cheaper and without the need for a connection to the cloud.

operating "on the edge" and not accessing external large data sets, the learning process can happen faster and cheaper and without the need for a connection to the cloud.

human-like, AI-based reasoning to determine best course of action without human intervention .

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Palladyne IQ translates observations into control messages that adjust robot behavior in a safe and controlled manner in real time, ensuring tasks continue without the need for production stoppages.

For example, in our testing lab an arm robot has continued the task of sorting items by color even after an obstacle was placed in its way.

For example, robotic arms running Palladyne IQ can perceive and work around unexpected obstacles to continue performing their tasks.

Palladyne IQ enables each robot to have a unique Task Library such that each robot can perform multiple tasks in a variety of situations and switch between them quickly with no reprogramming and minimal, if any, retraining.

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Palladyne IQ is delivered to customers with compute hardware that houses the software.

We are also developing a cloud-based customer portal to facilitate software purchases, updates and online customer support.

We are also developing a cloud-based customer portal to facilitate Palladyne IQ software purchases, updates and online customer support.

This customer portal will include data analytics, operational tools and the functionality to monitor, configure and train Palladyne IQ.

Because Palladyne IQ is designed to work with most industrial robots being sold today, we expect that this product can benefit a wide variety of industries such as industrial manufacturing, defense, infrastructure maintenance and repair, energy and aerospace and aviation, among others.

Because Palladyne IQ is designed to be hardware agnostic so as to work with most industrial robots being sold today, we expect that this product can benefit a wide variety of industries such as industrial manufacturing, defense, infrastructure maintenance and repair, energy and aerospace and aviation, among others.

Based on product testing and trials, we expect Palladyne IQ to increase productivity across a variety of use-cases, while significantly reducing associated costs of programming and deploying robotic systems.

We have released the initial commercial version of Palladyne IQ.

We provided this version to a large global manufacturer for trial, which has resulted in invaluable customer feedback that is currently being incorporated into the next version of the product.

We work to continuously improve our products through debugging and other reliability, stabilizing and functional improvements to improve the customer experience, better meet customer needs and enable our products to address increasingly complex use cases.

Palladyne Pilot

Palladyne Pilot is being developed for use with unmanned platforms with our current focus being on Class 1 UAVs to enable persistent detection, identification, tracking and classification of objects of interest by sharing situational awareness information across multiple drones that is derived by fusing multi-modal sensor data.

Palladyne Pilot is being designed to integrate with third-party autopilot systems thereby enhancing a network of collaborating drones and sensors that can self-orchestrate to provide superior capabilities for applications including intelligence, surveillance and reconnaissance.

While our current focus is on developing Palladyne Pilot for Class 1 UAVs, we envision developing Palladyne Pilot for other unmanned platforms across multiple domains in the future.

Our current Palladyne Pilot development efforts are focused on enabling UAVs to do the following.

Palladyne SwarmOS and Pilot

Palladyne SwarmOS is also based on our AI/ML Foundational Technology and is designed for use with unmanned platforms to enable persistent detection, identification, tracking and classification of objects of interest and/or lethal mission objectives by sharing situational awareness information across multiple drones (including attritable systems and loitering munitions) that is derived by fusing multi-modal sensor data.

Palladyne SwarmOS is designed to integrate with third-party autopilot systems thereby enhancing a network of collaborating drones and sensors that can self-orchestrate to provide superior capabilities for applications including intelligence, surveillance and reconnaissance.

SwarmOS enables unmanned platforms to swarm – to make collective decisions in support of one or more shared missions and objectives while adapting to contested environments and attrition of participants in the swarm, all with minimal human oversight.

These capabilities are intended to meet the performance and reliability requirements of military and defense customers, particularly in applications where coordinated multi-vehicle operations in communication constrained environments are essential.

Our current Palladyne SwarmOS development efforts are focused on enabling UAVs to do the following:

advanced perception for enhanced situational awareness.

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dynamic learning improves detection and surveillance capabilities.

Leverages edge computing to enable real-time learning and decision-making for persistent target tracking and monitoring by integrating various information streams into a single, coherent view, ultimately empowering a single operator - on the loop - to simultaneously operate multiple drone platforms as a coordinated drone team.

dynamic reasoning improves data sharing and collaboration.

Dynamic reasoning facilitates detection and continued tracking of targets that exhibit dynamic, changing behavior.

Further, the quick processing of contextual sensor information from individual UAVs in the network enables persistent target tracking, the timeliness of which is critical for real-time decision making and situational awareness.

Further, the quick

processing of contextual sensor information from individual UAVs in the network enables persistent target tracking, the timeliness of which is critical for real-time decision making and situational awareness.

Act and Collaborate :

transforms UAVs into an autonomously collaborating team.

transforms UAVs into an autonomously collaborating swarm.

Intelligent coordination of information allows UAVs to autonomously share low-bandwidth data, informing a network of collaborating drones and sensors sufficiently to self-orchestrate and work together on mission objectives such that a single operator is capable of managing multiple UAVs.

We expect Palladyne Pilot will be provided to customers in the form of a software download or via the purchase of our original equipment manufacturer ("OEM") partner products that have embedded Palladyne Pilot.

We are also developing a cloud-based customer portal to facilitate software purchases, updates and online customer support.

Market Opportunity

We believe that Palladyne IQ will expand the market for industrial robotics, including cobots, by enabling industrial robotic systems to address the desire to automate tasks in arbitrary human environments.

We expect Palladyne SwarmOS to be provided to customers in the form of a software download or to come preloaded onto our proprietary drones or original equipment manufacturer ("OEM") partner products that have embedded Palladyne SwarmOS.

In addition, we have combined SwarmOS with our BRAIN avionics product to create IntelliSwarm for customers who can benefit from both products.

Palladyne Pilot is a derivative of Palladyne SwarmOS designed to address the less stringent specific requirements of public safety and commercial users rather than defense customers.

While SwarmOS is focused on defense missions and military concepts of operation, Pilot is intended to bring similar multi‑vehicle collaboration, perception and on‑the‑edge reasoning capabilities to customers in sectors such as private security, critical infrastructure monitoring and industrial inspection, with feature sets and integrations tuned for public safety and civilian operational environments with reduced system complexity, features and cost.

We also intend to develop a cloud-based customer portal to facilitate SwarmOS/Pilot software purchases, updates and online customer support.

BRAIN Avionics

Our recently-acquired GuideTech business has developed a line of advanced avionics flight computers known as BRAIN for autonomous or semi-autonomous UAV platforms, particularly for defense applications.

The BRAIN products fuse high-performance avionics, AI/ML compute and multi-sensor perception into a single compact module that can replace conventional avionics at a fraction of the cost and weight.

With BRAIN X2, our NDAA-compliant flight computer product, intelligent systems can coordinate missions autonomously enabling distributed platforms to:

overwhelm adversary air defenses through synchronized, adaptive attack patterns;

detect, track and prioritize threats in real time without external guidance;

share sensor data to expand coverage, reduce risk and accelerate decision cycles;

and allow continued navigation and targeting in communications-disrupted environments.

IntelliSwarm is our product combining our SwarmOS autonomy software and our BRAIN X2 guidance, navigation and control ("GNC") flight computer.

We have successfully test-flown our proprietary Gremlin-X (formerly Project Banshee) loitering munition platform equipped with IntelliSwarm in collaboration with Red Cat drone platforms.

The flexibility of both SwarmOS and BRAIN X2 was demonstrated by the quick three-week integration effort that resulted in IntelliSwarm.

By integrating GNC with autonomous swarming capabilities into a single, unified stack that embeds perception, decision-making, flight control and coordinated behavior at the edge, we are delivering real-time performance in GPS- and communications-denied environments.

Unlike centralized command or homogeneous fleet approaches, IntelliSwarm enables platforms from different manufacturers with varying roles, payloads, and performance characteristics, to autonomously operate as intelligent, collaborative peers within a secure mesh network.

This decentralized design supports graceful degradation, mission resilience, alignment with Department of War open-systems requirements, robust security, and operator oversight.

UAVs and Missiles

We are developing two drone munitions platforms, Gremlin-X and SwarmStrike.

Gremlin-X is an autonomous, precision UAV reusable mini bomber designed to deliver precision strike effects at a fraction of the cost per effect of current platforms.

SwarmStrike is a cruise-class autonomous platform designed to offer hundreds of miles of range and an attritable price point, featuring a 30-pound warhead.

Built to operate in GPS- and communications-denied environments, SwarmStrike embodies the convergence of artificial intelligence, affordability, and scalable lethality.

It is engineered to deliver decisive effects through mass deployment, empowering the U.S.

Department of War and its allied forces with a cost-effective, attritable system that maintains precision and ethical control in contested battle spaces.

Both Gremlin-X and SwarmStrike have been successfully test-flown.

Engineering Services

GuideTech provides design-to-field advanced engineering design services that take aerospace programs from early concept through flight‑ready prototype in compressed timelines, while engineering every stage for manufacturability and scale.

offer deep missile and UAV design experience, combining model‑based design, advanced modeling and simulation, avionics and flight software development, hardware‑in‑the‑loop testing, environmental and flight qualification, and design‑for‑manufacture to refine systems for performance, reliability and cost.

Through our advanced, proprietary design technology, we enable customers to move from digital model to integrated flight article in months rather than years, while ensuring new systems are optimized for attritable cost‑per‑effect and U.S.

Manufacturing

Through our Palladyne Manufacturing business, comprised of Warnke Precision Machining and MKR Fabricators (companies we recently acquired), we provide precision U.S.

manufacturing capabilities to both Defense and Commercial customers.

Our operations include machining, fabrication and assembly of aerospace and defense components, supporting major programs such as the F‑16, F‑35, Tomahawk, Harpoon and Bradley Fighting Vehicle.

By supplying high‑quality parts to leading U.S.

defense prime contractors and emerging defense companies, we deliver a U.S.-based, defense‑grade production backbone to customers and provide ourselves with an opportunity to leverage those capabilities in the production of our own proprietary platforms and products.

Comprehensive Solutions

By combining our manufacturing and engineering design services with our software and hardware products, we are able to offer comprehensive, vertically integrated solutions to customers.

For example, GuideTech could help a customer design a loitering munition UAV that incorporates IntelliSwarm and is produced by Palladyne Manufacturing.

Similarly, we believe we can leverage these capabilities for the design and production of our own autonomous platforms and products.

Market Opportunity and Customers

Our platform-agnostic approach allows customers to deploy our Palladyne IQ and SwarmOS/Pilot software products on existing robotic and UAV fleets or new platforms without being locked into proprietary hardware ecosystems.

We believe this flexibility supports broader adoption across industries, platforms and use cases, accelerates deployment timelines, enables integration with customers’ existing robotic ecosystems and supports scalable growth.

We expect to continue to advance and evolve our technology and products in response to the evolving demands of our customers in the various industries we expect to serve.

Our products are in various stages of development and early commercialization, and we expect to continue product development, quality and assurance testing, debugging and similar activities as we seek continuous improvement and to bring products to market successfully.

We are focused on commercializing Palladyne IQ, SwarmOS/Pilot and IntelliSwarm, as well as growing our avionics, engineering services and manufacturing businesses.

Our current customers include U.S.

defense prime contractors, commercial businesses and the U.S.

We recently launched Palladyne IQ 2.0 and have secured our first paid customer for that product.

We believe that near- to mid-term customer growth opportunities exist for both our Commercial and Defense businesses.

We expect initial customer engagement with our products to begin with lower volume trials and then move to higher volumes as customers experience our products’ benefits and capabilities.

Palladyne Defense

Palladyne Defense targets a large and rapidly evolving market for intelligent, attritable mission systems driven by shifting defense priorities, cost‑per‑effect mandates and the Department of War’s push for AI‑enabled capabilities.

We believe defense customers are seeking domestically manufactured systems that combine advanced autonomy, rapid design‑to‑field cycles and lower unit costs, creating demand for loitering munitions, cruise‑class autonomous platforms and mission‑grade avionics that can be produced at scale rather than as bespoke assets.

By uniting SwarmOS, advanced avionics, UAV munitions and missiles, engineering services and manufacturing into a vertically integrated solution, Palladyne Defense is positioned to offer U.S.

and allied governments a path to fielding collaborative swarming, multi‑domain systems that are both operationally flexible and economically replicable.

Palladyne Commercial

We believe that Palladyne IQ will expand the market for industrial robotics, including cobots, by enabling poly-functional industrial robotic systems that address the desire to automate tasks in arbitrary human environments.

The market for industrial robotic systems has been experiencing, and is expected to continue to experience, significant growth.

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We believe Palladyne IQ can augment the capabilities that these systems offer, enabling Palladyne IQ to be complementary rather than competitive to these existing product offerings.

We believe Palladyne Pilot fills a void in current UAV capabilities by facilitating collaboration between multiple UAVs, enhancing tracking through fusing multi-modal sensor data and enabling autonomous navigation functionality.

These capabilities have the potential to make intelligence, defense, surveillance and reconnaissance missions more effective and efficient.

We believe that if we are successful demonstrating the value of our products with these early adopters, there will be many potential customers that are fast followers.

In the long run, we believe that our products will benefit many markets and industries.

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

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

If these assumptions or analyses prove to be incorrect, as they often have in the past, our actual operating results may be materially different from our expected or forecasted results.

Commercialization and Growth Strategy

Continued Development of our Products

Our research and development efforts are primarily focused on the further improvement of our AI/ML Foundational Technology and improvement and enhancement of our related software products, including the minimal hardware associated with Palladyne IQ.

We pursue continuous improvement of our AI/ML Foundational Technology and related products and to develop additional functionalities and expand its use to increasingly complex tasks.

For example, we continue to improve product reliability and the user interface and product documentation and to create new Task Libraries for Palladyne IQ.

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

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

Focused Effort on Commercialization while Collaborating with Third Parties

We continue to focus on development and commercialization of our AI/ML Foundational Technology and related products targeting specific use cases.

For example, for Palladyne IQ, we are focusing on (1) sorting or kitting, (2) inspection and (3) surface preparation, while for Palladyne Pilot we are focusing on (1) surveillance, (2) security and (3) inspection.

strategy is to continue working with potential customers for these specific use cases and build on initial successes with potential customers to expand our customer base and strengthen our pipeline.

We expect to do so by deepening our presence in the applications where we experience initial success and strong demand, while also expanding our offerings to address additional unmet needs.

This will help us demonstrate the value of our products, validate market demand, and drive licensing revenue growth.

As we gain traction, we plan to broaden the application of our products to other use cases.

We also intend to pursue relationships with third parties, which could include robotic system OEMs and system integrators.

In some cases, third parties may pay us to develop our products, which would allow us to reduce our net loss and net use of cash while learning from our future customers' experience with our AI/ML Foundational Technology and related products.

We believe that working with third parties will allow us to accelerate our brand awareness within our targeted industries and develop products that will better meet the needs of potential customers.

We anticipate that these relationships will play an important role in helping us select the markets, use-cases and product capabilities we are currently pursuing.

We released the initial commercial version of Palladyne IQ in October 2024, which continues to undergo reliability testing, debugging and other stabilizing and functional improvements as we continue internal testing and learn from customer trials.

We expect to release the initial commercial version of Palladyne Pilot by the end of the first quarter of 2025.

Competitive Strengths

30+ Years of Robotics Experience

As a pioneer in the robotic systems industry, we benefit from lessons learned over 30-plus years and significant investment in research and development.

Through our hardware product development efforts over many years, including our related software development efforts, we have developed a significant amount of advanced technology and understanding of robotic systems that we are leveraging to develop and commercialize our AI/ML Foundational Technology and related products.

Our extensive robotics history gives us valuable perspective on how to use software to tackle the challenges associated with training and managing robotic systems to solve complex tasks in arbitrary human environments.

We believe that our historical innovations in the development of our legacy hardware products and our related early AI software development for our own hardware, including human like dexterity and immersive teleoperation technology for natural extended reality interactions between humans and robots, have enabled us to transition our previous software development into a hardware agnostic AI/ML Foundational Technology that has the potential for a wide range of use cases and that is compatible with a broad base of robots and unmanned platforms such as UAVs, ROVs and UGVs.

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

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

We believe our early efforts to get this feedback and build these relationships with potential customers situate us well to effectively commercialize our products.

Visionary and Experienced Management

We have an experienced and talented team with deep operational expertise.

Our team is led by Benjamin Wolff, our President and Chief Executive Officer, who has served in various capacities with the Company for more than 10 years and who has many years of executive-level, operational and corporate board experience for public and private companies.

Our engineering efforts are led by Denis Garagić, our Chief Technology Officer and a co-founder of our AI software business, with over 25 years of experience in AI and ML.

Members of our board of directors have extensive experience across a wide array of disciplines.

We believe Palladyne Pilot fills a void in current UAV capabilities by facilitating

collaboration between multiple UAVs, enhancing tracking through fusing multi-modal sensor data and enabling autonomous navigation functionality.

Further, our engineering services and manufacturing businesses also serve Commercial customers.

Our products and services have the potential to make private security, critical infrastructure monitoring and industrial inspection more effective and efficient.

Sales and Marketing

The majority of our sales and marketing efforts are focused initially on U.S.

markets, but we are also exploring opportunities in select non-U.S.

markets on a more limited basis.

Our sales and marketing efforts include engaging with potential customers with which we built relationships through our previous hardware efforts, contacting potential customers that we believe could benefit from our products, working with manufacturers of robotic systems and systems integrators to offer our products along with theirs to end users, building brand and product capability awareness through targeted activities such as attending trade shows, increasing our presence in social media channels, increasing public relations, increasing earned media, and engaging in speakerships, blogs and white papers.

We also collaborate with third-party drone companies, such as Red Cat and Draganfly.

We currently conduct sales and marketing activities primarily through our direct, internal sales and business development teams and our internal marketing team.

We have organized our sales and business development teams generally with resources focused on either Defense or Commercial customers.

We intend to continue investing in our sales and marketing efforts in support of the commercialization of our products and services.

Palladyne IQ is being offered through a term-based licensing model that we expect to result in recurring revenue streams, while Palladyne SwarmOS/Pilot is offered through a device-based licensing model.

We may also offer add-on functionality for an additional license fee.

While we plan to charge an upfront fee for the hardware associated with Palladyne IQ, we may choose to embed the cost in the license fee in the future.

Based on interaction with dozens of potential customers, we believe that the sales cycle for Palladyne IQ is likely to be between 12 and 18 months, or even longer, while the sales cycle for Palladyne SwarmOS/Pilot is unknown.

System integrators and potential customers of Palladyne IQ have indicated that recent changes in U.S.

trade policy have caused some potential customers to re-evaluate their automation priorities which we believe has and will continue to delay certain investment decisions in the near term but will overall create greater opportunities for Palladyne IQ deployments in the United States in the medium and long term.

We believe we are redefining automation to bring human-like reasoning, intelligence and autonomy to robotics through an innovative and distinctive application of AI and ML that will provide significant benefits to customers as compared to alternative approaches.

Our products will compete with companies that have developed or are developing both directly and indirectly competing solutions and capabilities.

Many of our competitors and potential competitors have products that are

commercially available and/or in development.

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

We expect some products currently in development by such competitors and potential competitors to become commercially available in the next few years.

We believe that SwarmOS/Pilot will face competition from a variety of other UAV software solutions currently available on the market, which may include software developed by manufacturers for use with their proprietary UAVs.

These include solutions offered by Anduril, Shield AI and Skydio.

While certain competitors offer individual functionalities similar to what Palladyne SwarmOS/Pilot provides, they do not deliver the full suite of features offered by our product.

Some competitors sell both UAV hardware and its corresponding software.

Other competitors that sell UAV software as a standalone product tend to focus on software functionality for larger UAVs, which may nonetheless be competitive with SwarmOS/Pilot with certain UAVs or use cases.

Large defense prime contractors with UAV, aviation or missile programs, such as Lockheed Martin, Northrop Grumman, Boeing and RTX, along with manufacturing companies, represent formidable potential competitors of ours, particularly as they accelerate investments in attritable autonomous systems, loitering munitions and AI-enabled avionics.

These incumbents leverage established program relationships, large R&D budgets and certified production lines to develop integrated solutions like other low-cost attritable weapons such as the Leidos Black Arrow, which could compete with SwarmStrike.

We believe our engineering services may compete with companies such as ModalAI, ArkElectronics, Applied Navigation, and other organizations such as Georgia Tech Research Institute and similar organizations that sell or otherwise provide similar services.

We believe that our competitors provide solutions for more broadly applicable use cases, while our engineering services provide solutions for nonstandard or specialized products or use cases where more generic competitor solutions are less suitable.

While there are many automation-centric companies who are active, especially in early-adopter segments such as warehouse and logistics and select manufacturing or assembly verticals, we believe our primary competitors for Palladyne IQ are those who are focused on addressing key challenges in robotic deployments via autonomy or automation-enhancing software capabilities.

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We believe that our competitors generally are seeking to solve the same or similar industry challenges as we are, but that most are focused on a particular aspect of the problem we are addressing with Palladyne IQ than a fully competitive solution.

While we view industrial robotics manufacturers, large system integrators and consulting companies such as Fanuc, KUKA, ABB, Yasakawa, Honeywell, Reply and Rockwell Automation, as potential target customers and/or channel partners for Palladyne IQ, we also recognize that these companies could also emerge as formidable competitors through their own internal development efforts or future technology partnerships with and acquisitions of our direct competitors.

Although we view industrial robotics manufacturers, large system integrators and consulting companies such as Fanuc, KUKA, ABB, Yasakawa, Honeywell, Reply and Rockwell Automation, as potential target customers and/or channel partners for Palladyne IQ, we also recognize that these companies could also emerge as formidable competitors through their own internal development efforts or future technology partnerships with and acquisitions of our direct competitors.

They may bring their robust customer relationships, channels and significant financial resources to help accelerate the market viability of their own products or those of one or more of our direct or indirect competitors.

Palladyne Pilot

We believe that our product will face competition from a variety of other UAV software solutions currently available on the market, which may include software developed by manufacturers for use with their proprietary UAVs.

These include solutions offered by Anduril, Shield AI and Skydio.

While certain competitors offer individual functionalities similar to what Palladyne Pilot provides, they do not deliver the full suite of features offered by our product.

Some competitors sell both UAV hardware and its corresponding software, typically at a high price point, which may appeal to customers that are also seeking a hardware solution and do not require the full functionality of Pilot.

Other competitors that sell UAV software as a standalone product tend to focus on software functionality for larger UAVs, which may nonetheless be competitive to us for certain use cases.

While we expect that we will compete favorably against potential competitors for both of our products due to our technical innovation and product features and performance, some of our potential competitors have greater financial, technical and other resources than we have.

While we expect that we will compete favorably against potential competitors due to our technical innovation and product cost, features and performance, many of our potential competitors have greater financial, technical and other resources than we have.

Our competitors may be able to deploy greater resources to the design, development, distribution, promotion, sales, marketing and support of competitive products than we can.

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

Additional mergers and acquisitions by our existing or potential competitors may result in even more resources being concentrated in our competitors.

Additional mergers and acquisitions by our existing or potential competitors may result in even more resources being concentrated with our competitors.

Our competitor base may change as other companies introduce products that provide solutions to the same problems addressed by our products or we develop new functionality or products that overlap with current or future products offered by others.

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Our products may not be competitive with other alternatives."

Customers and Partners

We are focused on securing our first paying customers for Palladyne IQ and Palladyne Pilot.

In addition to our ongoing sales efforts, we are actively pursuing opportunities to expand current relationships in an effort to convert those into revenue-generating opportunities in the future.

For example, we continue work to expand our relationship with the Air Force Research Laboratory ("AFRL"), with the most recent success being a new contract to migrate Palladyne Pilot to next-generation, U.S.-made AI computing chipsets.

Separately, we continue to collaborate with Red Cat Holdings, Inc.

to enhance the autonomous capabilities of some of Red Cat's drones by enabling integration with Palladyne Pilot.

We anticipate initial commercial customers of Palladyne IQ will be in the industrial manufacturing sector, while initial customers for Palladyne Pilot will be in the defense sector.

Sales and Marketing

We also intend on collaborating with leading consultants such that we may offer our products as solutions to their customers.

We currently conduct sales and marketing activities primarily through our direct, internal sales and business development team and our internal marketing team.

We intend to continue investing in our sales and marketing efforts in support of the commercialization of our products.

For Palladyne IQ, we intend to pursue strategic relationships with robotic systems manufacturers, systems integrators, companies with complementary technologies, software application providers, distributors and consulting firms as and when we deem appropriate to expand the channels in which Palladyne IQ is marketed.

We believe working with these partners will accelerate our brand awareness and path to market within various industries and provide complementary capabilities and differentiation that will attract new customers.

For Palladyne Pilot, we intend to continue our collaboration with Red Cat and pursue other strategic relationships, such as with companies working with the "5 Eyes" – the militaries of the United States, the United Kingdom, Canada, Australia and New Zealand.

We currently expect to offer Palladyne IQ through a term-based licensing model that would result in a recurring revenue stream.

We may also offer add-on functionality for an additional license fee.

We may charge an upfront fee for the hardware associated with Palladyne IQ or embed the cost into the license fee.

We anticipate offering Palladyne Pilot through a device-based licensing model.

Additionally, while the initial focus of our sales and marketing efforts has been primarily on the U.S.

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

markets as and when we deem appropriate.

Research and Development

Our research and development efforts are primarily focused on (1) the further improvement of our AI/ML Foundational Technology and improvement and enhancement of our related software products, Palladyne IQ and Palladyne SwarmOS/Pilot, (2) the BRAIN family of advanced avionics computers and (3) our UAV and missiles projects, Gremlin-X and SwarmStrike.

We pursue continuous improvement of our AI/ML Foundational Technology and other technologies, and related products, as well as to develop additional functionalities and performance enhancements.

For example, we continue to improve product reliability and the user interface and product documentation and to create new Task Libraries for Palladyne IQ.

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

Intellectual Property

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

We are in the process of attempting to secure patent protection for aspects of our AI/ML Foundational Technology but none of these patent applications have yet been granted.

Due to the fact that our extensive patent portfolio is expensive to maintain, we have been and continue to be in the process of culling patents and applications from our portfolio that we do not believe are essential or likely to add value to our ongoing business operations.

We have been issued U.S.

12,452,957 B2, titled “Closed Loop Tasking and Control of Heterogeneous Sensor Networks,” which protects Palladyne AI’s core architecture that allows multiple autonomous systems, including drones, robots, and sensors, to work together as an intelligent, coordinated team across domains, resulting in a heterogeneous swarm.

We are in the process of attempting to secure patent protection for other aspects of our AI/ML Foundational Technology as well.

business operations.

Many of our previously issued patents have expired, with others set to expire on dates ranging from 2026 to 2045, exclusive of any patent term adjustment or patent term extension.

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

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

We have a limited set of suppliers for the minimal hardware components that are part of our Palladyne IQ product.

To protect our brand, we also pursue the registration of various trademarks in the United States and in select international locations.

Human Capital

We have an experienced and talented team with deep operational expertise.

Our engineering efforts are led by Denis Garagić, our Chief Technology Officer and a co-founder of our AI software business, with over 25 years of experience in AI and ML.

Our recent acquisitions of GuideTech, Warnke Precision Machining and MKR Fabricators have brought experienced aerospace and manufacturing executive leadership into our organization with teams of engineers with expertise and decades of experience with defense prime contractors and defense manufacturers.

The addition of these executives and their teams enables us to provide our engineering services, manufacturing and vertically integrated solutions.

Members of our board of directors have extensive experience across a wide array of disciplines, including significant defense and national security expertise brought by Admiral Eric T.

Olsen (Ret.) and Lt.

(Ret.) Stephen Twitty.

As of February 3, 2026, we had approximately 161 full-time and part-time employees, with approximately 61 located in our Salt Lake City, Utah office 44 in our Michigan facilities.

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

Approximately 48% of our employees are involved in engineering functions, including research and development.

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

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

We have a limited set of suppliers for our products.

We expect most of our suppliers to be based in the United States and expect most of our supplier relationships to be purchase order based rather than long-term supply contracts.

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

We seek to minimize our dependence on sole or single source suppliers in order to reduce risk in our supply chain, including the risk of losing a sole or single source supplier due to

bankruptcy, discontinuing production of the particular component or some other reason.

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

For additional information related to supply chain issues, see " Risk Factors— The products related to our AI/ML Foundational Technology require certain limited hardware components, and we are dependent on our suppliers, some of which are currently single, sole or limited source suppliers.

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We maintain export compliance controls and procedures as part of our broader compliance efforts, but, as with any compliance program, there are risks that these controls might not prevent every instance of non-compliance, in which case we could be exposed to legal liability.

While the industry's regulatory landscape has changed, to date, compliance with these laws has not significantly hampered our efforts to engage and transact with third parties but could further limit them in the future.

Compliance with these laws has not significantly

hampered our efforts to engage and transact with third parties but could limit them in the future.

Further changes in, and responses to, U.S.

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government contractor, we are subject to various government procurement and other laws, regulations and contract requirements, including provisions and clauses of the Federal Acquisition Regulation ("FAR"), the Defense Federal Acquisition Regulation Supplement ("DFARS") and other agency-specific regulations.

government contracting requirements further implicate a broad variety of subjects in addition to the areas described above, including security, data management and disclosure, cybersecurity, cost and pricing activity and finance.

Legal Proceedings

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

Human Capital

As of February 3, 2025, we had approximately 71 full-time and part-time employees, with most employees located in our Salt Lake City, Utah office.

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

Approximately 61% of our employees are involved in engineering functions, including research and development.

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

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

We currently operate primarily from our facilities in Salt Lake City, Utah consisting of approximately 61,000 square feet, The lease of our Salt Lake City facility expires in May 2033 and has two options to extend the lease for a three-year period each.

We currently operate primarily from our facilities in Salt Lake City, Utah and also have offices in Lenexa, Kansas, Tucson, Arizona, a fabrication facility in Saginaw, Michigan and a machining facility in Oxford, Michigan totaling approximately 160,000 square feet.

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

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

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governmental agencies.

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

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

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

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

On November 14, 2023, we announced a pivot in business strategy to prioritize the development and commercialization of our AI/ML Foundational Technology and suspend further commercialization efforts on hardware products.

As part of the business pivot and to reflect the new focus of the company, on March 18, 2024, the Company changed its name to Palladyne AI Corp.

On November 14, 2025, we acquired GuideTech, LLC an engineering company, MKR Fabrication, LLC (also known as MKR Fabricators), a fabrication company, and Warnke Precision Machining, LLC, a precision machining company.

As a pioneer in the robotic systems industry, we benefit from lessons learned over 30-plus years and significant investment in research and development.

We believe that our historical innovations in the development of our legacy hardware products and our related early AI software development for our own hardware, including human like dexterity and immersive teleoperation technology for natural extended reality interactions between humans and robots, have enabled us to transition our previous software development into our hardware agnostic AI/ML Foundational Technology that has the potential for a wide range of use cases and that is compatible with a broad base of robots and unmanned platforms such as UAVs, ROVs and UGVs.

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

We believe our early efforts to get this feedback and build these relationships with potential customers situate us well to effectively commercialize our products.

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

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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 1. Business