10q10k10q10k.net

What changed in Palladyne AI Corp.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Palladyne AI Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+585 added−546 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-28)

Top changes in Palladyne AI Corp.'s 2024 10-K

585 paragraphs added · 546 removed · 415 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

79 edited+59 added−36 removed15 unchanged
Biggest changeFor additional information related to supply chain issues, see “ Risk Factors— Our AI/ML Software Platform requires certain limited hardware components, and we are dependent on our suppliers, some of which are currently single, sole or limited source suppliers, and any inability of these suppliers to deliver necessary components of our products at the prices, volumes, performance, timing and specifications acceptable to us, could have a material adverse effect on our business, prospects, financial condition and operating results. ” Government Regulation We are subject to various U.S. federal, state, and local laws and regulations governing the occupational health and safety of our employees and wage regulations, including the requirements of the U.S.
Biggest changeAny inability of these suppliers to deliver necessary components of our products at prices, volumes, performance, timing and specifications acceptable to us could have a material adverse effect on our business, prospects, financial condition and operating results.
We have spent many years working with and listening to people with experience in the industries we expect to target, including advisors and development customers. These early engagements have helped us form relationships with potential customers, helped fund our development efforts and provided critical customer insight and feedback into our development plans and software design.
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.
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.
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.
These U.S. government contracting 12 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 From time to time, we may be subject to legal proceedings.
These U.S. 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 From time to time, we may be subject to legal proceedings.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products by making it difficult or impossible to enter affected markets, which could have a material adverse effect on our business, prospects, financial condition or results of operations.
Further changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products by making it difficult or impossible to enter affected markets, which could have a material adverse effect on our business, prospects, financial condition or results of operations.
We maintain export compliance controls and procedures as part of our broader compliance program, 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.
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.
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 13 bankruptcy, discontinuing production of the particular component or some other reason.
We make available free of charge through the www.sarcos.com website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
We make available free of charge through the www.palladyneai.com website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
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 is time-consuming, significantly reducing the benefits of these AI technologies.
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.
Many of our previously issued patents have expired, with others set to expire on dates ranging from 2023 to 2040, exclusive of any patent term adjustment or patent term extension. We do not know whether our pending patent applications will result in issued patents, or whether the examination process will require a narrowing of claimed subject matter.
Many of our previously issued patents have expired, with others set to expire on dates ranging from 2024 to 2040, exclusive of any patent term adjustment or patent term extension. We do not know whether our pending patent applications will result in issued patents or whether the examination process will require a narrowing of claimed subject matter.
You should read Part I Item 1A Risk Factors and the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and throughout this Report.
You should read Part I Item 1A Risk Factors and the section titled "Special Note Regarding Forward-Looking Statements" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and throughout this Report.
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 are those who are focused on addressing key challenges in robotic deployments via autonomy or automation-enhancing software capabilities.
Palladyne IQ 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.
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 our software platform, 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.
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.
Aspects of our use of sensors in connection with our AI/ML Software Platform must comply with the rules of the Federal Communications Commission (FCC), including with respect to: the use of any radio frequency, or RF, spectrum utilized for such components as the remote control or teleoperation system; the power level and frequency of any RF energy emitted (intentionally or otherwise); and any conditions imposed by the FCC on the device certification(s) issued to us or to third parties for any modular transmitters installed in our products.
Aspects of our use of sensors in connection with our products must comply with the rules of the Federal Communications Commission ("FCC"), including with respect to: the use of any RF spectrum utilized for such components as the remote control or teleoperation system; the power level and frequency of any RF energy emitted (intentionally or otherwise); and any conditions imposed by the FCC on the device certification(s) issued to us or to third parties for any modular transmitters installed in our products.
These reports and other information are also available, free of charge, at www.sec.gov. In addition, our Code of Business Conduct and Ethics is available through the www.sarcos.com website and any amendments to or waivers of the Code of Conduct will be disclosed on that website. 14
These reports and other information are also available, free of charge, at www.sec.gov. In addition, our Code of Business Conduct and Ethics is available through the www.palladyneai.com website and any amendments to or waivers of the Code of Conduct will be disclosed on that website. 15
Due to the fact that our extensive patent portfolio is expensive to maintain, we are 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.
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 believe that as we show the commercial viability and benefits of our AI/ML Software Platform in our initial target markets and use-cases, customers and potential customers will want to use our AI/ML Software Platform to address other use-cases that previously have not been conducive to automation.
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.
We believe our early efforts to get this feedback and build these relationships with potential customers situate us well to effectively commercialize our AI/ML Software Platform. Visionary and Experienced Management We have an experienced and talented team with deep operational expertise.
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.
We believe that if we are successful demonstrating the value of our AI/ML Software Platform with these early adopters, there will be many potential customers that are fast followers. In the long run, we believe that our AI/ML Software Platform will benefit many markets and industries.
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.
We are in the process of attempting to secure patent protection for aspects of our AI/ML Software Platform but none of these patent applications have yet been granted.
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.
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.
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.
Specifically, we expect our AI/ML Software Platform to incorporate internal and external environmental inputs that allow robots to comprehend their environment, determine reasonable behavior given these inputs and to act in real time to achieve the expected task. Each newly learned task will then be incorporated and used to perform future tasks.
Specifically, our AI/ML Foundational Technology incorporates internal and external environmental inputs that allow robotic systems to comprehend their environment, determine reasonable behavior given these inputs and to act in real time to achieve the expected task. Each newly learned task will then be incorporated and used to perform future tasks.
We intend to pursue strategic relationships with 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 our AI/ML Software Platform is marketed.
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.
Because our AI/ML Software Platform is being designed to work with most industrial robots being sold today, we expect that our AI/ML Software Platform can benefit a wide variety of industries such as industrial manufacturing, warehousing and logistics, defense, infrastructure maintenance and repair, energy and aerospace and aviation, among others.
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.
Following the completion of the RIFs, as of February 1, 2024, we had approximately 70 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 65% of our employees are involved in engineering functions, including research and development.
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.
In many instances, we believe our solution will be significantly more data-efficient as compared to deep learning-based methods due to its ability to make decisions with just hundreds of parameters rather than billions.
In many instances, we believe our solution will be significantly more data-efficient as compared to deep learning-based methods, such as LLMs, due to its ability to make decisions with just hundreds of parameters obtained through training and real-time sensor inputs rather than billions obtained through the cloud as with LLMs.
We believe that our competitors are seeking to solve the same or similar industry challenges as we are, but that most are focused on a particular aspect of the functionality of our AI Software Platform rather than a fully competitive solution.
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.
We are designing our AI/ML Software Platform to enable industrial robotic systems to function with human-like reasoning through flexible and adaptable learning capabilities such that an industrial robot can perform a variety of tasks without the need for costly 5 reprogramming efforts.
Our products are 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 anticipate that our AI/ML Software Platform will enable each robot to have a 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.
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.
They may bring their robust customer relationships, channels and significant financial resources to help accelerate the market viability of one of our direct or indirect competitors. Many of our competitors and potential competitors have products that are commercially available and/or in development.
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.
Our 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.
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.
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 Development Customers Our AI/ML Software Platform is in its development phase.
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.
We expect other important future capabilities to include solving for system stability and automated end-effector orientation to match the target object, enhanced computational efficiencies achieved through the use of our domain-specific language models and the use of dynamic model inference methods to generalize with only a few demonstrations.
We expect other important future capabilities to include solving for system stability, enhanced computational efficiencies achieved through the use of our domain-specific language models and the use of dynamic model inference methods to generalize with only a few demonstrations. Palladyne IQ is delivered to customers with compute hardware that houses the software.
As a result, a change or disruption in the 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.
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.
Facilities We currently operate in a corporate and manufacturing facility 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.
None of our employees are subject to a collective bargaining agreement or represented by a labor union. 14 Facilities 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.
After minimal initial training, robots using our AI/ML Software Platform 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. 7 We are designing our AI/ML Software Platform to enable robots to: 1.
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. 7 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.
Additionally, some of our competitors have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other tangible and intangible 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. Additionally, some of our competitors have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other tangible and intangible resources than we have.
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.
Suppliers We have a limited set of suppliers for the minimal hardware components that are part of our Palladyne IQ product. 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.
Our team is led by Benjamin Wolff, our Chief Executive Officer, who has many years of executive-level, operational and corporate board experience. Our engineering efforts are led by Denis Garagić, our Chief Technology Officer, with over twenty-five years of experience in AI and ML. Members of our board of directors have extensive experience across a wide array of disciplines.
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.
The AI/ML Software Platform’s ability to operate “on the edge” is a key differentiator because, without the need to use large amounts of cloud-based computing, our AI/ML Software Platform can efficiently operate autonomously in dynamic environments while reacting to new circumstances without the need to access new data sets or be reprogrammed or retrained.
Without the need to use large amounts of cloud-based computing, our AI/ML Foundational Technology can efficiently operate autonomously in dynamic environments while reacting to new circumstances without the need to access and process new data sets, with the accompanying delays, imprecision and costs, or be reprogrammed or retrained.
Based on product testing and trials, we expect our AI/ML Software Platform to greatly increase productivity across a variety of use-cases, while significantly reducing associated costs of programming and deploying these systems.
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.
Act: Applies human-like logic and adapts its task model in real-time to translate observations into a control message that adjusts the behavior in a safe and controlled manner to complete the task. 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.
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.
Competition We believe we are redefining automation to bring human-like reasoning, intelligence and autonomy to robotics through a unique application of AI and ML that has the potential to significantly accelerate growth for our commercial and defense customers. Our AI/ML Software Platform will compete with companies that have developed or are developing both directly and indirectly competing solutions and capabilities.
Competition 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.
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.
To date, we have not experienced any organized work stoppages and consider our relationship with our employees to be good.
During this period, Raytheon Sarcos was focused primarily on developing cutting-edge technologies for use by U.S. 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 2007, our predecessor was acquired by Raytheon and was operated until 2014 as a division of Raytheon known as Raytheon Sarcos. During this period, Raytheon Sarcos was focused primarily on developing cutting-edge technologies for use by U.S. governmental agencies.
Once initial training/programming occurs, our closed-loop autonomy is expected to enable the robot to adapt to changes in its environment without human intervention or reprogramming.
Once initial training/programming is completed, our closed-loop autonomy architecture allows robots to adapt to environmental changes without human intervention or reprogramming.
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. 9 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.
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.
See Part I Item 1A Risk Factors - “ We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase. Our products may not be competitive with other alternatives.” We expect that we will compete favorably due to our technical innovation and product features and performance.
Our technologies and products could be rendered obsolete by such developments. See Part I Item 1A Risk Factors - " We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase.
Fraser Smith, and technology and telecom entrepreneur Benjamin Wolff, our Chief Executive Officer, President and member of the Board of Directors. This acquisition was the basis for the establishment of Sarcos Corp., a Utah corporation (“Old Sarcos”), which was incorporated in Utah in February 2015 as Sarcos Corp. On September 24, 2021, Old Sarcos merged with Rotor Acquisition Corp.
This acquisition was the basis for the establishment of Sarcos Corp., a Utah corporation ("Old Sarcos"), which was incorporated in Utah in February 2015. On September 24, 2021, Old Sarcos merged with Rotor Acquisition Corp. ("Rotor"), a Delaware corporation and Rotor changed its name to Sarcos Technology and Robotics Corporation ("Sarcos").
On November 14, 2023, we announced a pivot in business strategy to prioritize the development of our commercial AI/ML Software Platform and suspend further commercialization efforts on hardware products, although some de minimis hardware-related research and development efforts continue.
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.
We believe working with these development customers will allow us to accelerate our brand awareness within our targeted industries and develop products that will meet the needs of a variety of potential customers.
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.
Our principal executive offices are located at 650 South 500 West, Suite 150, Salt Lake City, Utah, 84101. Our telephone number is 888-927-7296. We maintain a company website with the address www.sarcos.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
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. Our principal executive offices are located at 650 South 500 West, Suite 150, Salt Lake City, Utah, 84101. Our telephone number is 888-927-7296. We maintain a company website with the address www.palladyneai.com.
Market Opportunity We believe the market for AI/ML software for industrial robotics has been experiencing and is expected to continue to experience significant growth, which we believe is driven by a need for more efficient and flexible manufacturing processes. 8 Companies such as ABB, Fanuc, Yaskawa, KUKA, and Universal Robots are prominent in providing both robotic hardware and AI-based software solutions to a wide range of industries to promote automation.
We believe this growth is driven by a desire for more efficient and flexible manufacturing processes. Companies such as ABB, Fanuc, Kawasaki, KUKA and Universal Robots are prominent in providing robotic systems to a wide range of industries.
In addition, our AI/ML Software Platform is being designed to fuse multi-sensor data inputs together to improve system situational awareness, increasing its flexibility and adaptability.
In addition, our AI/ML Foundational Technology is designed to fuse multi-sensor data inputs together to improve system situational awareness, increasing its flexibility and adaptability. Our AI/ML Foundational Technology empowers robots with human-like reasoning, enabling them to learn multiple tasks and handle disruptions or obstacles efficiently.
We believe that the AI/ML Software Platform will enable autonomous functionality to address challenging and dynamic environments for industries that can benefit from a high degree of adaptability and efficiency. Industry Background Robots have been commercially available and used in industrial and manufacturing automation for many decades.
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.
We use the terms “Sarcos,” “the Company,” “we,” “us,” and “our” to refer to Sarcos Technology and Robotics Corporation. Overview Our mission is to deliver software to our 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.
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.
We believe that leveraging our previous innovations in hardware and related software, including advances in energetic outdoor mobile manipulation, human like dexterity and immersive teleoperation technology for natural extended reality interactions between humans and robots will enable us to transition our previous software development into a hardware agnostic AI/ML Software Platform to bring the benefits of our software to a much broader base of robots.
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 believe working with these partners will accelerate our brand awareness and path 11 to market within various industries and provide complementary capabilities and differentiation that will attract new customers while helping us expand our customer base. We currently expect to offer our AI/ML Software Platform through a term-based licensing model that would result in a recurring revenue stream.
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.
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. Suppliers We have a limited set of suppliers for the minimal hardware components that will be offered with our AI/ML Software Platform.
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. Intellectual Property Our ability to create, obtain and maintain intellectual property is important to our business.
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. 3.
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. 3. Reason : human-like, AI-based reasoning to determine best course of action without human intervention .
These industrial robots are typically large, stationary robotic arms designed to automate repetitive tasks in a controlled environment (e.g., a factory assembly line) that require consistency, speed and strength greater than what a human can accomplish. Industrial robots generally execute plans by rote programming (functions that are programmed in advance by a human engineer).
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.
This customer portal is expected to also include the data analytics, operational tools, and the functionality to monitor, configure, and train the AI/ML Software Platform.
We are also developing a cloud-based customer portal to facilitate 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.
History, Corporate Information and Website Sarcos is the result of a decades-long effort in research and development of robotic systems and solutions. Our original predecessor was spun-out of the University of Utah in 1983. In 2007, our predecessor was acquired by Raytheon and was operated until 2014 as a division of Raytheon known as Raytheon Sarcos.
We believe that should we need additional or different space, we will be able to obtain such space on commercially reasonable terms. History, Corporate Information and Website Palladyne AI is the result of a decades-long effort in research and development of robotic systems and solutions. Our original predecessor was spun-out of the University of Utah in 1983.
We expect some products currently in development by such competitors and potential competitors to become commercially available in the next few years. Our competitor base may change or expand as we continue to develop and commercialize our AI/ML Software Platform and develop new functionality or products, or if we return to efforts to develop and commercialize hardware systems.
Many of our competitors and potential competitors have products that are 11 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.
Should this be a viable opportunity, we may consider selling our AI/ML Software Platform into the UAV, ROV and UGV markets. We believe that our initial customer base will be comprised of innovators and early adopters in the industrial manufacturing, warehousing and logistics, defense, infrastructure maintenance and repair, energy and aerospace and aviation industries.
These capabilities have the potential to make intelligence, defense, surveillance and reconnaissance missions more effective and efficient. 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.
Reason: Reason using probabilistic ML techniques, in a similar manner to human logic, when an unexpected or unknown event occurs. The robot would rely on its Task Library as a starting point and then infer to adjust to circumstances in real time. 4.
When an unexpected or unknown event occurs, robots can reason using probabilistic ML techniques in a similar manner to human logic. The software enables robots to infer how to adjust their actions to complete the task in the changed environment. 4. Act : precise robotic control and completion of tasks.
Through our development efforts, including our software development efforts, we have developed a significant amount of advanced technology that we are leveraging to develop our AI/ML Software Platform. Our extensive robotics history gives us valuable perspective on how to use software to tackle the challenges associated with training and managing industrial robots in complex and dynamic environments.
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.
Observe: Using a variety of sensors (e.g., vision, LiDAR, radar and acoustic) to perceive a dynamic and unstructured environment with situational awareness. 2. Learn: 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.
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 8 dynamic reasoning model requires much less training data than traditional models.
These or other competitors may develop new technologies or products that provide superior results to customers or are less expensive 10 than our products. Our technologies and products could be rendered obsolete by such developments.
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. Competitors may develop new technologies or products that provide superior results to customers and/or are less expensive than our products.
We believe this “human-like” ability to learn and adapt will be a key differentiator in helping our customers maintain optimal productivity in dynamic or unstructured environments, where new situations and unexpected challenges are more likely to cause delays and costly downtime.
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 believe this closed-loop autonomy approach is the key to how our software can expedite robot training, expand the tasks that a robot can perform, reduce costly workflow stoppages, mitigate downtimes and reduce human labor requirements. A variety of industries ranging from manufacturing to warehousing encounter lengthy and costly efforts to program, manage, and modify their robotic systems.
We believe this closed-loop autonomy approach is the key to how our software can apply human-like reasoning to arbitrary environments to expedite robotic system training, expand the tasks that a robotic system can perform, enable collaboration and maximize capabilities.
We believe our dynamic reasoning model will require much less training data than traditional models. Using this learning data, the AI/ML Software Platform is expected to create a mathematical model of the data and store it in the platform as a task. The model is then updated over time as more data is obtained.
Using this learning data, Palladyne IQ creates a mathematical model of the data and stores it as a task. The model is then updated over time as more data is obtained. Over time, each robot will create its own library of tasks (a "Task Library").
In the broader automation landscape, we will compete (both directly and indirectly) with companies such as Bright Machines, C3.ai, Dexterity, Gray Matter Robotics, Intrinsic, Mujin, Olis Robotics, Rapid Robotics, and Ready Robotics.
In the broader automation landscape, our direct and indirect competitors include companies such as Bright Machines, Intrinsic, Liquid AI, Mujin, Physical Intelligence, Rapid Robotics and Skild AI.
We may also offer add-on functionality for an additional license fee. We may charge an upfront fee for the teleoperation devices needed to facilitate autonomy training and deployment or embed the cost into the license fee. We expect to continue discussions with potential customers to ultimately determine the appropriate model.
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.
Over time, industrial robots have become more sophisticated and are now widely adopted in a host of applications and across many industries. While this kind of automation brings significant benefits to industrial and manufacturing efforts, it also has its limitations.
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.
Recent efforts to use AI technologies to address issues such as changing and dynamic environments typically depend on access to enormous databases with large language models (LLMs) residing in the cloud and using enormous amounts of real-world robotic data sets collected over time.
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. 5 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.
Continued Development of our AI/ML Software Platform Our research and development efforts are primarily focused on the further improvement of our AI/ML Software Platform, although some de minimis hardware-related research and development efforts continue. We plan to pursue continuous improvement of our AI/ML Software Platform and to develop additional functionalities, for example certain specific Task Libraries.
" 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.
This approach allows us to reduce our net loss and net use of cash while learning from our future customers’ experience with the AI/ML Software Platform, continuing product development efforts to improve and commercialize our product, and establish relationships with potential commercial and government customers.
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.
Some 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.
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.
Removed
Our value proposition is further enhanced relative to other competitive solutions because robotic systems using our AI/ML Software Platform are not required to be continuously connected to the cloud for our software to function, thereby reducing the performance issues associated with poor connectivity and latency typically associated with processing in the cloud.

… 94 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

259 edited+77 added−57 removed184 unchanged
Biggest changeFactors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • changes in strategy or financial condition; • speculation in the press or investment community; • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in operating performance and stock market valuations of robotics software or other technology companies, or those in our industry in particular; • changes in financial estimates and recommendations by securities analysts concerning our company or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market, sell and deliver our AI/ML Software Platform on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of the Common Stock and Public Warrants available for public sale, including as a result of the exercise of any of our Warrants or the exercise or vesting of employee equity awards; • any major change in our board of directors or management; • sales of substantial amounts of Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the realization of any of the risk factors discussed herein; • additions or departures of key personnel; • failure to comply with Nasdaq listing requirements (see “Our Common Stock may be delisted from The Nasdaq Global Market if we cannot satisfy Nasdaq’s continued listing requirements” ); • failure to comply with the Sarbanes-Oxley Act of 2002 or other laws or regulations; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Biggest changeFactors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market's expectations about our operating results; • the public's reaction to our press releases, our other public announcements and our filings with the SEC; • changes in strategy or financial condition; • speculation in the press or investment community; • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in operating performance and stock market valuations of robotics software or other technology companies, or those in our industry in particular; • changes in financial estimates and recommendations by securities analysts concerning our company or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market, sell and deliver our software products; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our publicly traded securities, including as a result of the exercise of our deSPAC Public Warrants or the exercise or vesting of employee equity awards; • any major change in our board of directors or management; • sales of substantial amounts of Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the realization of any of the risk factors discussed herein; • additions or departures of key personnel; • failure to comply with Nasdaq listing requirements (see "Our publicly traded securities are subject to potential delisting from The Nasdaq Global Market if we do not meet Nasdaq's continued listing requirements, which would likely impair the liquidity of the trading market for our Common Stock and warrants" ); • failure to comply with the Sarbanes-Oxley Act of 2002 or other laws or regulations; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. 41 Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance or any of the factors listed above.
Our management team has broad discretion in making strategic decisions to execute our growth plans, and our management’s decisions have not always led to the desired result and current and future decisions may not be successful in achieving our business objectives or may have unintended consequences that negatively impact our growth prospects.
Our management team has broad discretion in making strategic decisions to execute our growth plans, and our management's decisions have not always led to the desired result. Current and future decisions may not be successful in achieving our business objectives or may have unintended consequences that negatively impact our growth prospects.
We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, subject to certain exceptions, provided that the last reported sales price of our Common Stock equals or exceeds $60.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the Warrant holders and provided certain other conditions are met.
We have the ability to redeem outstanding deSPAC Warrants at any time after they become exercisable and prior to their expiration, subject to certain exceptions, provided that the last reported sales price of our Common Stock equals or exceeds $60.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the deSPAC Warrant holders and provided certain other conditions are met.
We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers in a timely manner.
We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports 29 that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers in a timely manner.
Additionally, as our international presence expands, we may become subject to or face increasing obligations under laws and regulations in countries outside the United States, many of which, such as the European Union’s General Data Protection Regulation (“GDPR”) and national laws supplementing the GDPR, as well as legislation substantially implementing the GDPR in the United Kingdom, which generally are more stringent than those currently enforced in the United States.
Additionally, as our international presence expands, we may become subject to or face increasing obligations under laws and regulations in countries outside the United States, many of which, such as the European Union's General Data Protection Regulation ("GDPR") and national laws supplementing the GDPR, as well as legislation substantially implementing the GDPR in the United Kingdom, which generally are more stringent than those currently enforced in the United States.
Moreover, despite our efforts, we may not be successful in achieving compliance, including if our employees, contractors, service providers or vendors fail to comply with our published policies and documentation. Such failures can subject us to potential action by governmental or regulatory authorities if they are found to be deceptive, unfair, or misrepresentative of our actual practices.
Moreover, despite our efforts, we may not be successful in achieving or maintaining compliance, including if our employees, contractors, service providers or vendors fail to comply with our published policies and documentation. Such failures can subject us to potential action by governmental or regulatory authorities if they are found to be deceptive, unfair, or misrepresentative of our actual practices.
Under the Tax Cuts and Jobs Act of 2017 (the Tax Act), as modified by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the CARES Act), U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.
Under the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), as modified by the Coronavirus Aid, Relief and Economic Security Act of 2020, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.
While we plan to upgrade and adapt our software platform as we or others develop new technology, any failure by us to develop new or enhanced technologies or processes, or successfully react to changes or advances in existing technologies, could delay our development and introduction of new and enhanced products, which could result in the loss of competitiveness, decreased revenue and a loss of market share to competitors.
While we plan to upgrade and adapt our software products as we or others develop new technology, any failure by us to develop new or enhanced technologies or processes, or successfully react to changes or advances in existing technologies, could delay our development and introduction of new and enhanced products, which could result in the loss of competitiveness, decreased revenue and a loss of market share to competitors.
Any such damages, penalties, disruption or limitation in our ability to do business with a government would adversely impact, and could have a material adverse effect on, our business, prospects, financial condition and operating results. 35 We are subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations.
Any such damages, penalties, disruption or limitation in our ability to do business with a government would adversely impact, and could have a material adverse effect on, our business, prospects, financial condition and operating results. We are subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations.
In addition, certain open source licenses, like the GNU Affero General Public License, may require us to offer for no cost the components of our platform that incorporate the open source software, to make available source code for modifications or derivative works we create by incorporating or using the open source software or to license our modifications or derivative works under the terms of the particular open source license.
In addition, certain open source licenses, like the GNU Affero General Public License, may require us to offer for no cost the components of our software that incorporate the open source software, to make available source code for modifications or derivative works we create by incorporating or using the open source software or to license our modifications or derivative works under the terms of the particular open source license.
We could also be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to re-engineer our platform.
We could also be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to re-engineer our software.
Also, see “ We are subject to laws, regulations and contractual provisions as a government contractor or subcontractor, which may pose increased risk of potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition ”.
Also, see " We are subject to laws, regulations and contractual provisions as a government contractor or subcontractor, which may pose increased risk of potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition.
Our third-party suppliers may also not be able to meet the specifications and performance characteristics required by us, which would impact our ability to achieve our product specifications and performance characteristics as well. Additionally, our third-party suppliers may be unable to obtain required certifications or provide warranties for their products that are necessary for our solutions.
Our third-party suppliers may also not be able to meet the specifications and performance characteristics required by us, which would impact our ability to achieve our product specifications and performance characteristics as well. Additionally, our third-party suppliers may be unable to obtain required certifications or provide warranties for their products that are necessary for our products.
If other parties are able to use our proprietary technology or information, our ability to compete in the market could be harmed. Further, unauthorized use of our intellectual property may have occurred, or may occur in the future, without our knowledge. We also have made efforts to register and enforce our trademark rights.
If other parties are able to use our proprietary technology or information, our ability to compete could be harmed. Further, unauthorized use of our intellectual property may have occurred or may occur in the future, without our knowledge. We also have made efforts to register and enforce our trademark rights.
Our management has broad discretion in making strategic decisions to execute our growth plans and may devote time and company resources to new or expanded product offerings, potential acquisitions or strategic alliances, prospective customers 23 or other initiatives that do not necessarily improve our operating results or contribute to our growth.
Our management has broad discretion in making strategic decisions to execute our growth plans and may devote time and company resources to new or expanded product offerings, potential acquisitions or strategic alliances, prospective customers or other initiatives that do not necessarily improve our operating results or contribute to our growth.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), these U.S. federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of our company.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), these U.S. federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of our company.
Moreover, the costs of identifying and consummating acquisitions may be significant. Risks Related to Claims, Legal and Regulatory Compliance Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations.
Moreover, the costs of identifying and consummating acquisitions may be significant. Risks Related to Legal Claims and Regulatory Compliance Issues in the development and use of AI/ML, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations.
If we are required under the terms of an open source license to release our proprietary source code to the public, competitors could create similar products with lower development effort and time, which ultimately could result in a loss of sales for us.
If we are required under the terms of 23 an open source license to release our proprietary source code to the public, competitors could create similar products with lower development effort and time, which ultimately could result in a loss of sales for us.
Companies across all industries are facing increasing scrutiny related to their environmental, social and governance, or ESG, practices and reporting. Regulators, investors, customers, employees and other stakeholders have focused increasingly on ESG practices and placed increasing importance on the implications and social cost of their investments, purchases and other interactions with companies.
Companies across all industries are facing increasing scrutiny related to their environmental, social and governance ("ESG") practices and reporting. Regulators, investors, customers, employees and other stakeholders have focused increasingly on ESG practices and placed increasing importance on the implications and social cost of their investments, purchases and other interactions with companies.
We cannot guarantee that we will incorporate open source software in our platform in a manner that will not subject us to liability, or in a manner that is consistent with our current policies and procedures. Our business and prospects depend significantly on our ability to build our brand.
We cannot guarantee that we will incorporate open source software in our software in a manner that will not subject us to liability, or in a manner that is consistent with our current policies and procedures. Our business and prospects depend significantly on our ability to build our brand.
While we have policies and procedures to address compliance with such laws, our employees, business partners, third-party intermediaries, representatives and agents may take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
While we have policies and procedures to address compliance with such laws, our employees, business partners, third-party intermediaries, representatives and agents may take actions in violation of our policies and applicable law, for which we may be held responsible.
We expect to incur significant costs in an effort to detect and prevent privacy and security breaches and other privacy- and security-related incidents, and may face increased costs and requirements to expend substantial resources in the event of an actual or perceived privacy or security breach or other incident.
We expect to incur significant costs in an effort to detect and prevent privacy and security breaches and other privacy- and security-related incidents, and may face 35 increased costs and requirements to expend substantial resources in the event of an actual or perceived privacy or security breach or other incident.
Even if we prevail, litigation may be time consuming, force us to incur significant costs and divert management’s attention from managing our business while any damages or other remedies awarded to us may not be valuable or adequate.
Even if 37 we prevail, litigation may be time consuming, force us to incur significant costs and divert management's attention from managing our business while any damages or other remedies awarded to us may not be valuable or adequate.
We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase. Our products may not be competitive with other alternatives. The AI/ML and robotics industries are subject to rapid technological change, and we expect competition to increase in the future.
" We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase. Our products may not be competitive with other alternatives. The AI/ML software and robotics industries are subject to rapid technological change, and we expect competition to increase in the future.
If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If and when the deSPAC Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We may face objections to our intended collection or use of data, which may require us to implement new or modified data handling policies and mechanisms, increase our maintenance costs and costs associated with data processing and handling, and harm our business prospects.
We may face objections to our intended collection or use of data, which may require us to implement new or modified data handling policies and mechanisms, increase our maintenance costs and costs associated with data processing and handling, and harm our prospects.
The U.S. government may also have the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits.
The U.S. government may also have the right to take title to these inventions if the grant recipient fails to disclose the invention 39 to the government or fails to file an application to register the intellectual property within specified time limits.
A portion of our current revenue is currently and will continue to be generated by contracts with government entities, which make us subject to a number of uncertainties, challenges and risks. Contracts with government entities are subject to a number of risks.
A portion of our revenue is currently and will continue to be generated by contracts with government entities, which make us subject to a number of uncertainties, challenges and risks. Contracts with government entities are subject to a number of risks.
Investors may find our Common Stock or Public Warrants less attractive because we rely on these exemptions and may continue to rely on them to the extent they remain available to us.
Investors may find our Common Stock or deSPAC Public Warrants less attractive because we rely on these exemptions and may continue to rely on them to the extent they remain available to us.
The shares of Common Stock issued upon exercise of our Warrants will result in dilution to the then existing holders of Common Stock and increase the number of shares eligible for resale in the public market.
The shares of Common Stock issued upon exercise of our deSPAC Warrants will result in dilution to the then existing holders of Common Stock and increase the number of shares eligible for resale in the public market.
Our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. Our backup system may not be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events.
Our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. Our backup system may not be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, cybersecurity incidents or similar events.
Further, the intellectual property ownership and license rights, including copyright, surrounding AI/ML technologies has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption by our customers of third-party AI/ML technologies into robotic products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation or infringement.
Further, the intellectual property ownership and license rights, including copyright, surrounding AI/ML technologies have not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption by our customers of third-party AI/ML technologies into robotic products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation or infringement.
Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies .
Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. The JOBS Act permits "emerging growth companies" like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies .
As we work to grow our business, we may need to manage the following activities, among others: • maintaining effective management, engineering and other teams; • retaining and recruiting individuals with the appropriate relevant experience; • hiring and training new personnel; • commercializing our AI/ML Software Platform; • forecasting revenue and implementing enterprise resource planning (ERP) systems; • entering into relationships with one or more third-party service providers or partners, including in relation to the development and commercialization of our AI/ML Software Platform; • potentially carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships; • expanding and enhancing internal information technology, safety and security systems; • establishing or expanding sales and customer service organizations; • conducting demonstrations and customer trials of our software platform; and • implementing and enhancing administrative infrastructure, systems, controls and processes.
As we work to grow our business, we may need to manage the following activities, among others: • maintaining effective management, engineering and other teams; • retaining and recruiting individuals with the appropriate relevant experience; • hiring and training new personnel; • commercializing our AI/ML Foundational Technology and related products; • forecasting revenue and implementing enterprise resource planning, or ERP, systems; • entering into relationships with one or more third-party service providers or partners, including in relation to the development and commercialization of our AI/ML Foundational Technology and related products; • potentially carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships; • expanding and enhancing internal information technology, safety and security systems; • establishing or expanding sales and customer service organizations; • conducting demonstrations and customer trials of our software products; and • implementing and enhancing administrative infrastructure, systems, controls and processes.
Projections and other statements about future expectations are forward-looking statements that are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond our control (in addition to the information contained in these Risk Factors, see “ Special Note Regarding Forward-Looking Statements ” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ”).
Projections and other statements about future expectations are forward-looking statements that are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond our control (in addition to the information contained in these Risk Factors, see " Special Note 16 Regarding Forward-Looking Statements " and " Management's Discussion and Analysis of Financial Condition and Results of Operations ").
These claims could result in litigation or require us to purchase a costly license, devote additional research and development resources to re-engineer our platform, discontinue the sale of our software product if re-engineering could not be accomplished on a timely or cost-effective basis, or make generally available our proprietary code in source code form, any of which would have a negative effect on our business and operating results, including being enjoined from the offering of the components of our platform that contained the open source software.
These claims could result in litigation or require us to purchase a costly license, devote additional research and development resources to re-engineer our software, discontinue the sale of our software products if re-engineering could not be accomplished on a timely or cost-effective basis, or make generally available our proprietary code in source code form, any of which would have a negative effect on our business and operating results, including being enjoined from the offering of the components of our software that contained the open source software.
These provisions include: • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • only the board of directors (pursuant to a majority vote of the whole board), the chairperson of the board of directors, or the Chief Executive Officer may call a special meeting; • stockholder vote of at least 66-2/3% required to remove a director for “cause”; • stockholder vote of at least 66-2/3% required to approve certain amendments to the Charter and Bylaws; and • the designation of Delaware and federal courts as the exclusive forums for certain disputes.
These provisions include: • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • only the board of directors (pursuant to a majority vote of the whole board), the chairperson of the board of directors, or the Chief Executive Officer may call a special meeting; • stockholder vote of at least 66-2/3% required to remove a director for "cause"; 43 • stockholder vote of at least 66-2/3% required to approve certain amendments to the Charter and Bylaws; and • the designation of Delaware and federal courts as the exclusive forums for certain disputes.
Any such occurrence could cause delay in market acceptance of our software platform, damage to our reputation, increased service and warranty costs, product liability claims and loss of revenue. We anticipate that in the ordinary course of business we may be subject to product liability claims alleging defects in the design of our software platform.
Any such occurrence could cause delay in market acceptance of our software products, damage to our reputation, increased service and warranty costs, product liability claims and loss of revenue. We anticipate that in the ordinary course of business we may be subject to product liability claims alleging Defects in the design of our software products.
In addition, changes to our software, or changes in applicable export control, import or economic sanctions laws and regulations may create delays in the introduction and sale of our software platform, constrain collaboration with suppliers or other business partners or, in some cases, prevent the export or import of our software to certain countries, governments or persons altogether.
In addition, changes to our software, or changes in applicable export control, import or economic sanctions laws and regulations may create delays in the introduction and sale of our software products, constrain collaboration with suppliers or other business partners or, in some cases, prevent the export or import of our software to certain countries, governments or persons altogether.
Any change in export, import or economic sanctions laws and regulations, shift in the enforcement or scope of existing laws and regulations or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our software platform systems, as well as our decreased ability to export or market our software to potential customers.
Any change in export, import or economic sanctions laws and regulations, shift in the enforcement or scope of existing laws and regulations or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our software, as well as our decreased ability to export or market our software to potential customers.
In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology or software platform from competition or fail to enforce our patents due to lack of information about the exact use of technology or processes by third parties or for a variety of other reasons.
In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology or software products from competition or fail to enforce our patents due to lack of information about the exact use of technology or processes by third parties or for a variety of other reasons.
Any failure of our platform to operate effectively with future software, such as third-party robotic operating systems, and technologies or to evolve and scale to address the changing needs of our customers could reduce the demand for our platform or result in customer dissatisfaction.
Any failure of our products to operate effectively with future software, such as third-party robotic operating systems and technologies or to evolve and scale to address the changing needs of our customers could reduce the demand for our products or result in customer dissatisfaction.
There is no guarantee that the Warrants will ever be in the money prior to their expiration, and as such, the Warrants may expire worthless. We may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to Warrant holders, thereby making their Warrants worthless .
There is no 42 guarantee that the deSPAC Warrants will ever be in the money prior to their expiration, and as such, the deSPAC Warrants may expire worthless. We may redeem unexpired deSPAC Warrants prior to their exercise at a time that is disadvantageous to deSPAC Warrant holders, thereby making their deSPAC Warrants worthless .
We may be unable to secure customers from these or other businesses or we may be unable to generate meaningful revenue from these key potential customers.
We may be unable to secure customers from these or other businesses or we may be unable to generate meaningful revenue from these potential customers.
Any delays in the successful commercialization and sales of our software product will negatively impact our ability to generate revenue, our profitability and our overall operating performance and result in the need to raise additional capital sooner than expected.
Any delays in the successful commercialization and sales of our software products will negatively impact our ability to generate revenue, our profitability and our overall operating performance and result in the need to raise additional capital sooner than expected.
If some investors find our Common Stock or Public Warrants less attractive as a result of these exemptions and reduced disclosure as an emerging growth company, there may be a less active trading market for and/or more price volatility with respect to our Common Stock or Public Warrants. 45 Item 1B. Unresolv ed Staff Comments. None.
If some investors find our Common Stock or deSPAC Public Warrants less attractive as a result of these exemptions and reduced disclosure as an emerging growth company, there may be a less active trading market for and/or more price volatility with respect to our Common Stock or deSPAC Public Warrants. 44 Item 1B. Unresolv ed Staff Comments. None.
In addition, the U.S. government may have the right, under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if the U.S. government determines that: (1) adequate steps have not been taken to commercialize the invention; (2) government action is necessary to meet public health or safety needs; or (3) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).
In addition, the U.S. government may have the right, under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if the U.S. government determines that: (1) adequate steps have not been taken to commercialize the invention; (2) government action is necessary to meet public health or safety needs; or (3) government action is necessary to meet requirements for public use under federal regulations (also referred to as "march-in rights").
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited commercial software experience, customer unfamiliarity with our software, any delays in development to meet demand, product performance, competition and uncertainty regarding the future of AI and robotics.
Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited commercial software experience, customer unfamiliarity with our software, any delays in development, product performance, competition and uncertainty regarding the future of AI and robotics.
The success of our strategy to build recurring revenue streams through software licenses depends on our ability to successfully market our software platform and the benefits of our product to customers and to successfully develop a network of ongoing customers that maintain or renew their licenses, pay for upgrades, license additional functionality, or expand the use of the software within their robotic systems.
The success of our strategy to build recurring revenue streams through software licenses depends on our ability to successfully market our products and their benefits to customers and to successfully develop a network of ongoing customers that maintain or renew their licenses, pay for upgrades, license additional functionality, or expand the use of the software within their robotic systems.
Further, incorporating AI gives rise to litigation risk and risk of non-compliance and unknown cost of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed.
Further, incorporating AI gives rise to litigation risk and risk of non-compliance and unknown costs of compliance, as AI is an emerging technology for which the legal and regulatory landscape is not fully developed.
If any of these relationships are established, they may subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third-party and increased expenses in establishing new relationships, any of which could materially and adversely affect our business.
If any of these relationships are established, they may subject us to a number of risks, including risks associated with sharing proprietary information, non-performance or significant delays in performance by the third-party and increased expenses in establishing new relationships, any of which could materially and adversely affect our business.
“Sell-to-cover” transactions can be used in connection with the vesting and settlement of equity awards that are granted to our employees so that shares of our Common Stock are sold on behalf of our employees in an amount sufficient to cover the tax withholding obligations and, if applicable, exercise price associated with these awards.
"Sell-to-cover" transactions can be used in connection with the vesting and settlement of equity awards that are granted to our employees so that shares of our Common Stock are sold on behalf of our employees in an amount sufficient to cover the tax withholding obligations and, if applicable, exercise price associated with these awards.
We have no previous history or experience with commercializing software products and may not be able to do so efficiently or effectively or at all. We were unsuccessful in our efforts to commercialize the hardware technologies that we and our predecessor companies developed over the past several decades.
We were unsuccessful in our efforts to commercialize the hardware technologies that we and our predecessor companies developed over the past several decades. We have no previous history or experience commercializing AI/ML software products and may not be able to do so efficiently or effectively or at all.
Further, our products may not be competitive with other alternatives. Our competitor base may change or expand as we continue to develop and commercialize our software platform in the future.
Further, our products may not be competitive with other alternatives. 21 Our competitor base may change or expand as we continue to develop and commercialize software products in the future.
We are subject to reporting and other requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted by the SEC and Nasdaq. Our management and other personnel devote a substantial amount of time to these compliance initiatives.
We are subject to reporting and other requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted by the SEC and the Nasdaq Stock Market LLC. Our management and other personnel devote a substantial amount of time to these compliance initiatives.
An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
An "ownership change" pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company's stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
Even if we are able to successfully develop our software platform when anticipated, we may not produce sales in excess of the costs of development, and our software platform may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features.
Even if we are able to successfully develop our products when and as anticipated, we may not produce sales in excess of the costs of development, and our products may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features.
If any remaining analyst covering our company now or in the future were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the prices and trading volumes of the Common Stock and Public Warrants to decline.
If any analyst covering our company in the future were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the prices and trading volumes of the Common Stock and deSPAC Public Warrants to decline.
Any failure of our software platform to perform as expected could harm our reputation and result in adverse publicity, lost revenue, license cancellation, harm to our brand, delays in availability, product liability claims and significant warranty and other expenses and could have a material adverse impact on our business, prospects, financial condition and operating results. 19 We currently intend to target many customers that are large businesses with substantial negotiating power, exacting product standards and potentially competitive internal solutions.
Any failure of our products to perform as expected could harm our reputation and result in adverse publicity, lost revenue, license cancellation, harm to our brand, delays in availability, product liability claims and significant warranty and other expenses and could have a material adverse impact on our business, prospects, financial condition and operating results. 20 We currently intend to target many customers that are large businesses with substantial negotiating power, exacting product standards and potentially competitive internal solutions.
We plan to conduct investigations, where applicable, to identify the cause or causes of incidents and, when appropriate, implement changes to testing protocols or to the systems and solutions to prevent such incidents from reoccurring. However, any implemented improvements may not fully prevent similar or other incidents in the future.
We plan to conduct investigations, where applicable, to identify the cause or causes of incidents and, when appropriate, implement changes to testing protocols or to the products to prevent such incidents from reoccurring. However, any implemented improvements may not fully prevent similar or other incidents in the future.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following January 20, 2026, the fifth anniversary of Rotor’s initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock and Public 44 Warrants that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following January 20, 2026, the fifth anniversary of Rotor's initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock and deSPAC Public Warrants that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (1) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, (2) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
In addition, we cannot predict all the ways in which the use or misuse of our platform can lead to injury or damage to property, and our training resources and safety systems may not be successful at preventing all incidents.
In addition, we cannot predict all the ways in which the proper use or misuse of our products can lead to injury or damage to property, and our training resources and safety systems may not be successful at preventing all incidents.
If these technologies are material to our business after the term of the license, our inability to use them could adversely affect our business and profitability. We have taken and continue to take precautions to initiate safeguards to protect our information technology systems.
If these technologies are material to our business after the term of the license and we are unable to use them, it could adversely affect our business and profitability. We have taken and continue to take precautions to initiate safeguards to protect our information technology systems.
Even if the market grows as expected, if potential customers do not adopt our AI/ML Software Platform, our business, operating results, financial condition and growth prospects will be materially and adversely affected. If we are not able to generate material revenues from our AI/ML Software Platform before we exhaust our financial resources, we may need to cease business operations.
Even if the market grows as expected, if potential customers do not adopt our software products, our business, operating results, financial condition and growth prospects will be materially and adversely affected. If we are not able to generate material revenues from our software products before we exhaust our financial resources, we may need to cease business operations.
Further, uncertainties about the timing and nature of new software or technologies, or modifications to our platform or existing software or technologies, could increase our research and development expenses.
Further, uncertainties about the timing and nature of new software or technologies, or modifications to our software or products or existing software or technologies, could increase our research and development expenses.
We may also settle tax withholding obligations in connection with vesting of awards through “net settlement,” in which we remit cash to satisfy the tax withholding obligation and withhold a number of the vested shares on each vesting date.
We may also settle tax withholding obligations in connection with vesting of awards through "net settlement," in which we remit cash to satisfy the tax withholding obligation and withhold a number of the vested shares on each vesting date.
The introduction of AI/ML technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns or other complications that could adversely affect our business, reputation or financial results or limit the functionality of our software platform or our ability to sell our software platform.
The introduction of AI/ML technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, technical or operational risks, safety risks, ethical concerns or other complications that could adversely affect our business, reputation or financial results or limit the functionality of our software or our ability to sell our software products.
Depending on the fair value of our Common Stock and the number of awards vesting on any applicable vesting date, such net settlement could require us to expend substantial funds to satisfy tax withholding. 40 The markets for our Common Stock and Warrants have been volatile and may not continue at all.
Depending on the fair value of our Common Stock and the number of awards vesting on any applicable vesting date, such net settlement could require us to expend substantial funds to satisfy tax withholding. 40 The markets for our publicly traded securities have been volatile and may not continue at all.
Our research and development program may not produce successful results or, be sufficient to adapt to new or changing technologies (such as AI), and our products may not achieve market acceptance, create additional revenue or become profitable.
Our research and development program may not produce successful results or, be sufficient to adapt to new or changing technologies (such as AI) and our products may not achieve market acceptance, create meaningful or any revenue or become profitable.
For example, it has been more difficult and more expensive for us to obtain director and officer liability insurance and we have incurred substantially higher costs to obtain appropriate coverage than we incurred as a private company. We cannot accurately predict or estimate the amount or timing of all the additional costs we may incur.
For example, it has been more expensive for us to obtain appropriate director and officer liability insurance coverage than we incurred as a private company. We cannot accurately predict or estimate the amount or timing of all the additional costs we may incur.
The IT and infrastructure used in our business may be vulnerable to cyber attacks or security breaches or incidents, and third parties may be able to access data, including personal data and other sensitive 34 and proprietary data of ours and our customers, collaborators and partners, our employees’ personal data or other sensitive and proprietary data accessible through those systems, or such data otherwise may be subject to unauthorized use, disclosure, unavailability, modification or other processing.
The Information Technology ("IT") infrastructure used in our business may be vulnerable to cybersecurity attacks or security breaches or incidents, and third parties may be able to access data, including personal data and other sensitive and proprietary data of ours and our customers, collaborators and partners, our employees' personal data or other sensitive and proprietary data accessible through those systems, or such data otherwise may be subject to unauthorized use, disclosure, unavailability, modification or other processing.
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. We are a development stage company, with no experience commercializing software products.
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. We are an early stage company, with no experience commercializing software products.
Our projected financial and operating information reflect estimates of future performance and are based on multiple business, financial, technical and operational assumptions, including product strategy, timely hiring or retention of needed personnel, timing of commercial launch of our AI/ML Software Platform, the level of demand for our software platform, the size of our target markets, the performance of our software platform, the utilization of the platform, product pricing and the nature and length of the sales cycle.
Our projected financial and operating information reflect estimates of future performance and are based on multiple business, financial, technical and operational assumptions, including product strategy, timely hiring or retention of needed personnel, timing and success of commercial launch of our software products, the level of demand for our software products, the size of our target markets, the performance and utilization of our software products, product pricing and the nature and length of the sales cycle.
Even if we are able to attract customers, these customers may not maintain a high level of commitment to our software platform. In addition, we will incur marketing, sales or other expenses, including referral fees, to attract new customers, which will offset revenue from such customers.
Even if we are able to attract customers, these customers may not maintain a high level of commitment to our software products. In addition, we will incur marketing, sales and other expenses, including referral fees, to attract new customers, which will offset revenue from such customers.
Although we monitor use of open source software and try to ensure that none is used in a manner that would subject our platform to unintended conditions, few courts have interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our AI/ML Software Platform.
Although we monitor use of open source software and try to ensure that none is used in a manner that would subject our software to unintended conditions, few courts have interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our AI/ML Foundational Technology and related products.
Economic uncertainty or future deterioration in general economic conditions might also cause our customers to cut or delay their spending, and such cuts might disproportionately affect businesses like ours to the extent customers view our AI/ML Software Platform as too costly or as discretionary. Moreover, market acceptance of our AI/ML Software Platform is critical to our continued success.
Economic uncertainty or future deterioration in general economic conditions might also cause our customers to cut or delay their spending, and such cuts might disproportionately affect businesses like ours to the extent customers view our software products as too costly or discretionary. Moreover, market acceptance of our AI/ML Foundational Technology and related products is critical to our continued success.
Our facilities or operations, or any potential third-party suppliers, partners, or service providers could be adversely affected by events outside of our or their control, such as natural disasters, wars, health epidemics, such as the COVID-19 pandemic, and other calamities and force majeure events.
Our facilities or operations, or any potential third-party suppliers, partners, or service providers could be adversely affected by events outside of our or their control, such as natural disasters, wars, health epidemics and other calamities and force majeure events.
Integrating new employees can also cause disruptions to processes, projects, culture, priorities and the Company as a whole.
Integrating new employees can also cause disruptions to processes, projects, culture, priorities and our company as a whole.
Item 1A. Risk Factors. You should carefully consider the following risk factors, in addition to the other information contained in this Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes.
Item 1A. Risk Factors. You should carefully consider the following risk factors, in addition to the other information contained in this Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes.

… 313 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+1 added−1 removed3 unchanged
Biggest changeOur VP of Information Systems provides regular updates on cybersecurity to the Audit Committee of the Board of Directors. Engagement of Third Parties on Risk Management We engage with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized knowledge and insights.
Biggest changeEngagement of Third Parties on Risk Management We engage with a range of external experts, including cybersecurity assessors, consultants and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized knowledge and insights. Our collaboration with these third parties includes regular audits, threat assessments and consultation on security enhancements.
Managing Material Risks & Integrated Overall Risk Management We have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems. Our cybersecurity program is aligned with industry standards and includes technical, administrative, and physical controls, including encryption, firewalls, anti-virus systems, and well-documented processes and policies.
Managing Material Risks and Integrated Overall Risk Management We have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business a nd information systems. Our cybersecurity program is aligned with industry standards and includes technical, administrative and physical controls, including encryption, firewalls, anti-virus systems and well-documented processes and policies.
For additional information regarding whether any risks from cybersecurity threats, including as a result of any cybersecurity incidents are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this annual report on Form 10-K, including the risk factor entitled " We are subject to cybersecurity risks to our operational systems, security systems, infrastructure, and data processed by us or third-party vendors ."
For additional information regarding whether any risks from cybersecurity threats, including as a result of any cybersecurity incidents are reasonably likely to materially affect our company, including our business strategy, results of operations or financial condition, please refer to Item 1A, "Risk Factors," in this Annual Report on Form 10-K, including the risk factor entitled " We are subject to cybersecurity risks to our operational systems, security systems, infrastructure, and data processed by us or third-party vendors ."
We have an experienced Information Technology (“IT”) team led by our Vice President of Information Systems who reports directly to the Chief Executive Officer and works closely with our management team to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
We have an experienced IT team led by our Vice President of Information Systems, who has many years of experience in IT management, and reports directly to the Chief Executive Officer and works closely with our management team to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
For example, our Security Operations Center, employs a Security Information and Event Management (SIEM) and other systems to monitor risks while also conducting thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards.
Oversight of Third-Party Risk We have established processes to oversee and manage risks relating to third-party service providers. For example, our Security Operations Center, employs a Security Information and Event Management ("SIEM") and other systems to monitor risks while also conducting security assessments of third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards.
Removed
Our collaboration with these third parties includes regular audits, threat assessments, and consultation on security enhancements. Oversight of Third-Party Risk We have established processes to oversee and manage risks relating to third-party service providers.
Added
Our VP of Information Systems provides regular updates on cybersecurity to the Audit Committee of the board of directors. Our board of directors, as a whole and through the Audit Committee of the board of directors, exercises oversight with respect to cybersecurity and our risk management strategy, consistent with its approach to overseeing our enterprise risk management as a whole.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures. Not applicable. 46 PART II
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. 45 Item 4. Mine Safety Disclosures. Not applicable. 46 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed1 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock and Warrants are traded on The Nasdaq Stock Market under the symbols “STRC” and “STRCW,” respectively.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock and deSPAC Public Warrants are traded on the Nasdaq Global Market under the symbols "PDYN" and "PDYNW," respectively.
Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities None. Repurchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Holders As of February 14, 2024, there were 429 stockholders of record of our Common Stock and 29 holders of record of our warrants. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We have never declared or paid any cash dividends on our capital stock.
Holders As of February 11, 2025, there were 382 stockholders of record of our Common Stock and 32 holders of record of our warrants. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We have never declared or paid any cash dividends on our capital stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

68 edited+33 added−37 removed23 unchanged
Biggest changeOther Income (Loss) The following table presents other income (loss) for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 vs. 2022 Change (In thousands) 2023 2022 Change % Change Other income Interest income, net $ 3,294 $ 1,831 $ 1,463 80 % Gain on warrant liability 162 13,442 (13,280 ) (99 )% Other income, net 1,914 743 1,171 158 % Total other income $ 5,370 $ 16,016 $ (10,646 ) (66 )% Other income decreased by $10.6 million for the year ended December 31, 2023 as compared to the prior year period as a result of decreased unrealized mark-to-market gains on our outstanding private placement warrants, partially offset by increased interest income from our investments in marketable securities and increased other income related to employee retention credit refunds received during the current year.
Biggest changeThere were no significant asset write-down and restructuring costs for the year ended December 31, 2024. 53 Other (Loss) Income The following table presents other (loss) income for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 vs. 2023 Change (In thousands) 2024 2023 Change % Change Other (loss) income Interest income, net $ 1,244 $ 3,294 $ (2,050 ) (62 )% (Loss) gain on warrant liabilities (46,935 ) 162 (47,097 ) (29,072 )% Other income, net 2 1,914 (1,912 ) (100 )% Total other (loss) income $ (45,689 ) $ 5,370 $ (51,059 ) (951 )% Other (loss) income decreased by $51.1 million from other income of $5.4 million to other loss of $45.7 million for the year ended December 31, 2024 as compared to the prior year period as a result of increased unrealized mark-to-market losses on our outstanding warrants, the lack of employee retention credit refunds received in 2024 as compared to 2023 and decreased interest income from our investments in marketable securities due to the reduction in invested funds during 2024.
Additional financing may not be available at all or, if available, may not be available on terms favorable to us or that we find acceptable. For additional information around the risks associated with our capital needs see Part I Item 1A Risk Factors “ Our business plans require a significant amount of capital.
Additional financing may not be available at all or, if available, may not be available on terms favorable to us or that we find acceptable. For additional information around the risks associated with our capital needs see Part I Item 1A Risk Factors "Our business plans require a significant amount of capital.
All long-lived assets are maintained in, and all losses are attributable to, the United States of America. See Note 13, Segment Information, in the accompanying consolidated financial statements for more information about our operating segment. Components of Results of Operations Revenue, net We historically derived our revenue from two sources.
All long-lived assets are maintained in, and all losses are attributable to, the United States of America. See Note 13, Segment Information, in the accompanying consolidated financial statements for more information about our operating segment. Components of Results of Operations Revenue, Net We have historically derived our revenue from two sources.
Revenue on cost-type contracts is recognized over time as goods and services are provided. Fixed-price contracts – Fixed-price development contracts relate primarily to the development of technology in the area of robotic systems. Fixed-price development contracts generally require a significant service of integrating a complex set of tasks and components into a single deliverable.
Revenue on cost-type contracts is recognized over time as goods and services are provided. Fixed-price contracts – Fixed-price development contracts relate primarily to the development of technology in the area of robotic systems and software. Fixed-price development contracts generally require a significant service of integrating a complex set of tasks and components into a single deliverable.
It is important that we continually identify and respond to rapidly evolving customer requirements and competitive threats, develop and introduce innovative products, enhance our products and generate active market demand for our products.
It is important that we continually identify and respond to rapidly evolving customer requirements and competitive threats, develop and introduce innovative products, enhance our products and generate active market demand for and sell our products.
At the time product revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance. 50 Operating Expenses Cost of Revenue Our cost of revenue consists of direct and overhead expenses related to either the sale of our products or our product development contract revenue.
At the time product revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance. Operating Expenses 50 Cost of Revenue Our cost of revenue consists of direct and overhead expenses related to either the sale of our legacy hardware products or our product development contract revenue.
Our critical accounting policies and estimates include those related to: Revenue Recognition We have historically recognized revenue from our products and from contractual arrangements to perform product development contract services that are fully funded by our customers.
Our critical accounting policies and estimates include those related to: Revenue Recognition We have historically recognized revenue from our legacy hardware products and from contractual arrangements to perform product development contract services that are fully funded by our customers.
Any delays in the successful commercialization and sales of our software platform will negatively impact our ability to generate revenue, our profitability and our overall operating performance and result in the need to raise additional capital sooner than expected.
Any delays in the successful commercialization and sales of our software products will negatively impact our ability to generate revenue, our profitability and our overall operating performance and result in the need to raise additional capital sooner than expected.
Among other things, these and similar factors can affect our ability to hire or retain qualified personnel, our labor and materials costs, the prices we charge for our software platform and the budgets of our customers and their expected return-on-investment from the purchase of a license for our software platform.
Among other things, these and similar factors can affect our ability to hire or retain qualified personnel, our labor and materials costs, the prices we charge for our software products and the budgets of our customers and their expected return-on-investment from the purchase of a license for our software product.
For fixed priced contracts we measure progress toward satisfaction of performance obligations using costs incurred to date relative to total estimated costs (“cost-to-cost”). Research and development contracts may last multiple years and estimation of the total transaction price and expected cost requires management’s judgment.
For fixed priced contracts we measure progress toward satisfaction of performance obligations using costs incurred 56 to date relative to total estimated costs ("cost-to-cost"). Research and development contracts may last multiple years and estimation of the total transaction price and expected cost requires management's judgment.
Based on the nature of the Company’s research and development contracts, the work to be performed is often complex and may involve new processes, procedures, and tasks which creates uncertainty in estimating contract costs. All estimates impacting revenue recognition, including estimates of total expected costs, or Estimates at Completion, are reviewed on a periodic basis, at least quarterly.
Based on the nature of our research and development contracts, the work to be performed is often complex and may involve new processes, procedures, and tasks which creates uncertainty in estimating contract costs. All estimates impacting revenue recognition, including estimates of total expected costs, are reviewed on a periodic basis, at least quarterly.
Emerging Growth Company Status Section 102(b)(1) of the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
Emerging Growth Company Status Section 102(b)(1) of the Jumpstart our Business Startups Act of 2012 (the "JOBS Act") exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our product development efforts, our ability to sell our software products and thereby recognize associated revenue, capital and human capital requirements to develop a commercial version of our software platform prior to receiving payments sufficient to cover our costs and our ability to lower product costs as volumes increase.
The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our product development efforts, our ability to sell our software products and thereby recognize associated revenue, capital and human capital requirements to develop and sell products prior to receiving payments sufficient to cover our costs and our ability to lower product costs as volumes increase.
These contracts are billed at cost plus a margin as defined by the contract and Federal Acquisition Regulation (“FAR”). The FAR establishes regulations around procurement by the government and provides guidance on the types of costs that are allowable in establishing prices for goods and services delivered under government contracts.
These contracts are billed at cost plus a margin as defined by the contract and the FAR. The FAR establishes regulations around procurement by the government and provides guidance on the types of costs that are allowable in establishing prices for goods and services delivered under government contracts.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of Common Stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2025, and we expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.
We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which the market value of Common Stock that is held by non-affiliates exceeds $700 million as of the end of that year's second fiscal quarter, (2) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (3) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period and (4) December 31, 2026, and we expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.
Second, we have historically sold our products and related parts and repair services. Product revenue primarily consists of sales of our products. Due to our recent shift in focus away from sales of our hardware products and to licensing of our AI/ML Software Platform, in the future we expect to derive revenue from licensing fees.
Second, we have historically sold our legacy hardware products and related parts and repair services. Product revenue primarily consists of sales of our legacy hardware products. Due to our recent shift in focus away from sales of our hardware products and to licensing of our software products, in the future we expect to derive revenue from licensing fees.
Continued Investment and Innovation We are a pioneer in the robotic systems industry and benefit from lessons learned over 30-plus years and significant investment in research and development in our proprietary technologies.
Continued Investment and Innovation We are a pioneer in the robotic systems industry and benefit from lessons learned over 30-plus years and significant investment in research and development.
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.
We are an "emerging growth company" as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.
Customer Demand Although demand for AI/ML platforms and applications has grown in recent years, the market for these platforms and applications continues to evolve. The market demand for our software platform is unproven, and important assumptions about the characteristics of targeted markets, pricing and sales cycles may be inaccurate.
Customer Demand Although demand for AI/ML software products has grown in recent years, the market continues to evolve. The market demand for our software is unproven, and important assumptions about the characteristics of targeted markets, pricing and sales cycles may be inaccurate.
While we believe that our AI/ML Software Platform will provide significant benefits and return on investment to customers, as it is a new technology and product, we are dependent on customers who are willing to adopt, purchase, and implement new technologies and products.
While we believe that our products will provide significant benefits and return on investment to customers, as it is a new technology, we are dependent on customers who are willing to adopt, purchase and implement new technologies and products.
Product Development Contract Revenue Revenue derived from product development contracts decreased by $9.0 million, or 63%, from $14.2 million for the year ended December 31, 2022 to $5.3 million for the year ended December 31, 2023. The decrease was primarily due to the completion of certain product development contracts during 2023 that have not yet been replaced with new contracts.
Product Development Contract Revenue Revenue derived from product development contracts decreased by $0.1 million, or 3%, from $5.3 million for the year ended December 31, 2023 to $5.1 million for the year ended December 31, 2024. The decrease was primarily due to the completion of certain product development contracts during 2023 that have not yet been replaced with new contracts.
General and Administrative Our general and administrative expenses consist primarily of employee-related costs for our finance, legal, people success and other administrative teams, as well as certain executives.
General and Administrative Our general and administrative expenses consist primarily of employee-related costs for our finance, legal, human resources and other administrative teams, as well as certain executives.
Asset Write-down and Restructuring Asset write-down and restructuring expenses consist primarily of severance and benefit payments, and acceleration of stock-based compensation expense related to the RIFs announced during 2023, the write-down of inventory, accelerated amortization of our intangible assets, accelerated depreciation of our property, plant and equipment and the write-off of certain assets as a result of our product development reprioritization and pivot in strategy.
Asset Write-down and Restructuring Asset write-down and restructuring expenses consist primarily of severance and benefit payments, and acceleration of stock-based compensation expense related to the 2023 RIFs, the write-down of inventory, accelerated amortization of our intangible assets, accelerated depreciation of our property, plant and equipment and the write-off of certain assets as a result of our product development reprioritization and pivot in strategy to focus on our AI/ML Foundational Technology and related products.
If we fail to do this, our market position and revenue may be adversely affected, and our investments in these technologies will not be recovered. 49 Geopolitical and Macro-economic Environment Geopolitical and macro-economic factors, such as inflation, interest rates, oil prices, unemployment rates, international conflicts, such as the wars between Israel and Hamas and between Russia and Ukraine, volatility in the stock market and political or social unrest, can have significant impacts on economic activity, which in turn could affect demand for our AI/ML Software Platform or our ability to cost-effectively develop and sell our software platform.
If we fail to do this, our market and financial position and revenue may be adversely affected, and our investments in these technologies will not be recovered. 49 Geopolitical and Macro-economic Environment Geopolitical and macro-economic factors, such as inflation, tariffs or the threat of tariffs, interest rates, oil prices, unemployment rates, international conflicts, such as the current wars between Russia and Ukraine and in the middle east, volatility in the stock market and political or social unrest, can have significant impacts on economic activity, which in turn could affect demand for our products or our ability to cost-effectively develop and sell our products.
If customer demand does not develop as expected or we do not accurately forecast pricing, adoption rates and sales cycles for our AI/ML Software Platform, our business, results of operations and financial condition will be adversely affected.
If customer demand does not develop as expected or we do not accurately estimate pricing, adoption rates and sales cycles for our products, our business, results of operations and financial condition will be adversely affected.
If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.” As of December 31, 2023, our total minimum lease payments are $15.6 million, of which $2.0 million are due in the next 12 months.
If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations." As of December 31, 2024, our total minimum lease payments are $13.7 million, of which $1.6 million are due in the next 12 months.
First, we enter into research and development agreements primarily relating to the commercialization of our products. We expect to continue to derive revenue from research and development agreements in future periods. Product development contract revenue consists of revenue arising from different types of contractual arrangements, including cost-type contracts and fixed-price contracts.
First, we enter into research and development agreements primarily with the government and leverage these contracts to further our product development efforts. We expect to continue to derive revenue from research and development agreements in future periods. Product development contract revenue consists of revenue arising from different types of contractual arrangements, including cost-type contracts and fixed-price contracts.
In accordance with Accounting Standards Codification 606, for fixed price contracts, we will recognize losses at the contract level in earnings in the period in which they are incurred. Product Revenue Product revenue has related to sales of our products, and certain miscellaneous parts, accessories and repair services. We have generally provided a limited one-year warranty on hardware product sales.
In accordance with Accounting Standards Codification 606, for fixed price contracts, we recognize losses at the contract level in earnings in the period in which they are incurred. Product Revenue Product revenue has related to sales of our legacy hardware products, and certain miscellaneous parts, accessories and repair services.
Intangible Amortization Expense Amortization of intangible assets primarily consists of amortization of identified finite-lived trade name and trademarks, developed technology, and customer relationship assets that were allocated a portion of the purchase price from the acquisition of RE2. These costs are amortized on a straight-line basis over their expected useful lives.
Intangible Amortization Expense Amortization of intangible assets primarily consists of amortization of identified finite-lived trade name and trademarks, developed technology and customer relationship assets that were acquired as part of the acquisition of RE2, Inc. These costs were amortized on a straight-line basis over their expected useful lives.
Research and Development Research and development expenses are mainly comprised of costs from the continuing development and refinement of robotic systems, which are now suspended, and our AI/ML Software Platform and the continuing research and development costs associated with future products.
Research and Development Research and development expenses are mainly comprised of costs from the continuing development and refinement of our AI/ML Foundational Technology and related products, the continuing research and development costs associated with current and future products and now suspended development of our robotic systems.
Whether we are successful depends on many factors, including those discussed under Part I Item 1A Risk Factors “ Risks Related to Our Business. ” Such risks may result in delay of the anticipated commercial launch of our software platform, which would adversely affect our financial condition and operating results.
Whether we are successful in these efforts depends on many factors, including those discussed under Part I Item 1A Risk Factors " Risks Related to Our Business. " Such risks may result in delay in achieving product revenues, which would adversely affect our financial condition and operating results.
We believe that our cash, cash equivalents and marketable securities on hand will be sufficient to support operations, working capital and capital expenditure requirements for at least the next 12 months from the date of this Report.
We believe that our cash, cash equivalents and marketable securities on hand will be sufficient to support operations, working capital and capital expenditure requirements for at least the next 12 months from the date of this Report. Our primary use of cash is for operations and administrative activities including employee-related expenses and general, operating and overhead expenses.
Product warranties are considered assurance-type warranties and are not considered to be separate performance obligations. Product revenue is recognized at the point in time when ownership of the goods is transferred, generally at the time of shipment to the customer.
We have generally provided a limited one-year warranty on hardware product sales. Product warranties are considered assurance-type warranties and are not considered to be separate performance obligations. Product revenue is recognized at the point in time when ownership of the goods is transferred, generally at the time of shipment to the customer.
The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our product development efforts, our ability to develop and deliver our commercial AI/ML Software Platform and thereby recognize associated revenue and capital requirements to develop our commercial AI/ML Software Platform prior to receiving payments sufficient to cover our costs.
The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our product development efforts, our ability to release and license our commercial products and thereby recognize associated revenue and capital requirements to conduct marketing and sales activities prior to receiving payments sufficient to cover our costs.
Net Cash Used In Financing Activities Our net cash used in financing activities during the twelve months ended December 31, 2023 decreased by $7.4 million as compared to the prior year period.
Net Cash Provided by (Used in) Financing Activities Our net cash provided in financing activities during the twelve months ended December 31, 2024 increased by $23.9 million as compared to the prior year period.
Any delays in the successful commercialization and sales of our AI/ML Software Platform will negatively impact our ability to generate revenue, our profitability, our cash flows and our overall operating performance and result in the need to raise additional capital sooner than expected.
Any delays in the successful commercialization and sales of our AI/ML software products will negatively impact our ability to generate revenue, our profitability, our cash flows, our overall operating performance and our ability to continue operations and may result in the need to raise additional capital. We will continue to carefully evaluate our use of cash and liquidity.
The deferred income taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.
Income Tax Expense Income taxes 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 the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.
Our 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.
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.
This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. 56 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.
This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
We may sell additional equity or debt securities to meet capital needs or as we may otherwise determine to be advisable that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
Our backlog is equal to our remaining performance obligations under contracts or the expected value of exercised contracts, both funded and unfunded, less revenue recognized to date. Our total estimated contract value, which combines backlog with estimated potential contract value, including unexercised options from existing firm contracts, was $18.1 million as of December 31, 2023.
Backlog and Total Estimated Contract Value Our backlog, as of December 31, 2024, was $3.0 million, $2.4 million of which was funded and $0.6 million of which was unfunded. Our backlog is equal to our remaining performance obligations under contracts or the expected value of exercised contracts, both funded and unfunded, less revenue recognized to date.
As a result, we intend to continue monitoring our liquidity, financial and business results and outlook and market conditions, and may be opportunistic and raise capital when we consider market conditions are good or a favorable opportunity exists.
However, we may decide to seek additional financing, and we intend to continue monitoring our liquidity, financial and business results and outlook and market conditions, and may be opportunistic and raise capital when market conditions are good or a favorable opportunity exists including under our "at-the-market" equity offering programs.
The increase in cash provided by investing activities is predominantly due to $65.5 million of maturities of marketable securities, net of purchases, during the twelve months ended December 31, 2023, as compared to the $77.9 million of purchase of marketable securities, net of maturities, and $29.7 million of net cash that was included as part of the purchase consideration for the RE2 acquisition during the twelve months ended December 31, 2022.
The decrease in cash provided by investing activities is predominantly due to the maturities, net of purchases, of $65.5 million of marketable securities during the twelve months ended December 31, 2023, as compared to the maturities, net of purchases, of $7.1 million of marketable securities during the twelve months ended December 31, 2024.
Additionally, net cash used in operating activities related to changes in operating assets and liabilities increased by $2.5 million, driven mainly by increased inventory purchases, offset partially by decreases in unbilled receivables. Net Cash Provided by (Used in) Investing Activities Our net cash provided by investing activities during the twelve months ended December 31, 2023 increased by $173.7 million.
Additionally, net cash used in operating activities related to changes in operating assets and liabilities decreased by $4.5 million, primarily the result of decreased inventory purchases. Net Cash Provided by Investing Activities Our net cash provided by investing activities during the twelve months ended December 31, 2024 decreased by $57.8 million.
Comparison of the Years Ended December 31, 2023 and 2022 Revenue, net The following table presents our revenue for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 vs. 2022 Change (In thousands) 2023 2022 Change % Change Product Development Contract Revenue $ 5,256 $ 14,239 $ (8,983 ) (63 )% Product Revenue 890 330 560 170 % Revenue, net $ 6,146 $ 14,569 $ (8,423 ) (58 )% Revenue decreased by $8.4 million, or 58%, from $14.6 million in the year ended December 31, 2022, to $6.1 million in the year ended December 31, 2023, as explained below.
Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 Revenue, net The following table presents our revenue for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 vs. 2023 Change (In thousands) 2024 2023 Change % Change Product Development Contract Revenue $ 5,120 $ 5,256 $ (136 ) (3 )% Product Revenue 2,666 890 1,776 200 % Revenue, net $ 7,786 $ 6,146 $ 1,640 27 % Revenue increased by $1.6 million, or 27%, from $6.1 million in the year ended December 31, 2023 to $7.8 million in the year ended December 31, 2024, as explained below.
However, we may need to seek additional financing during that time to bolster our cash reserves and increase our ability to continue to pursue our business objectives.
" We believe we have sufficient liquidity to operate for at least the next 12 months without the need to raise additional capital. However, we may decide to seek additional financing during that time to bolster our cash reserves and increase our ability to continue to pursue our business objectives.
We may be required to seek additional equity or debt financing to facilitate these arrangements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all.
If additional financing is required from outside sources in connection with these arrangements, we may not be able to raise it on terms acceptable to us, or at all. We currently primarily use cash from equity financings to fund operations and capital expenditures and meet working capital requirements.
This increase was driven by an increase in professional service fees related to third-party platform expense utilized in data management of our products and services, increased promotional and event expense during the current year period, and increased expenses related to additional headcount due in part to our RE2 acquisition.
This decrease was driven by decreases in professional service fees related to third-party platform expense utilized in data management of our products and services, labor and labor-related expenses due to the 2023 RIFs and events and public relations expenses.
We expect future revenue from product development contracts to fluctuate due to the timing of additional development contracts signed and the completion of existing contracts.
We expect future revenue from product development contracts to fluctuate due to the timing of additional development contracts signed and the completion of existing contracts. For the time being, we intend to take on only those development contracts that we believe support and contribute to our AI/ML Foundational Technology and related product development efforts.
If we are unable to raise additional capital when desired or needed, our business, results of operations and financial condition would be materially and adversely affected. If additional funds are required to support our working capital requirements, for acquisitions or for other purposes, we may seek to raise funds through additional debt or equity financings or from other sources.
If additional funds are required to support our working capital requirements, for acquisitions or for other purposes, we may seek to raise funds through additional debt or equity financings or from other sources. We have taken numerous steps to manage our use of cash, including conducting the 2023 RIFs and other related actions.
The increase to net cash used in operating activities was primarily attributable to a net decrease of $50.2 million in non-cash expenses driven mainly by decreases in goodwill impairment and stock-based compensation, offset partially by a $41.5 million decrease to net loss, a decrease to gains on warrant liability revaluation and an increase in asset write-down expenses.
The decrease in net cash used in operating activities was primarily attributable to a $43.0 million decrease in net loss, which was driven by the 2023 RIFs, and a net increase of $6.5 million in 55 non-cash expenses due to increases in the change in fair value of our warrant liabilities, partially offset by a decrease in asset write-down expenses.
Operating Expenses The following table presents our operating expenses for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 vs. 2022 Change (In thousands) 2023 2022 Change % Change Operating expenses: Cost of revenue $ 5,041 $ 11,614 $ (6,573 ) (57 )% Research and development 39,012 34,144 4,868 14 % General and administrative 31,454 63,480 (32,026 ) (50 )% Sales and marketing 10,828 9,949 879 9 % Intangible amortization expense 2,821 2,184 637 29 % Asset write-down and restructuring 37,946 — 37,946 *NM Goodwill impairment — 70,236 (70,236 ) (100 )% Total operating expenses $ 127,102 $ 191,607 $ (64,505 ) (34 )% *NM - Not Meaningful Cost of Revenue Cost of revenue decreased by $6.6 million, or 57%, from $11.6 million for the year ended December 31, 2022, to $5.0 million for the year ended December 31, 2023.
The increase was primarily due to one-time legacy hardware product sales during the year ended December 31, 2024. 52 Operating Expenses The following table presents our operating expenses for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 vs. 2023 Change (In thousands) 2024 2023 Change % Change Operating expenses: Cost of revenue $ 3,488 $ 5,041 $ (1,553 ) (31 )% Research and development 10,437 39,012 (28,575 ) (73 )% General and administrative 16,842 31,454 (14,612 ) (46 )% Sales and marketing 4,134 10,828 (6,694 ) (62 )% Intangible amortization expense — 2,821 (2,821 ) (100 )% Asset write-down and restructuring (192 ) 37,946 (38,138 ) (101 )% Total operating expenses $ 34,709 $ 127,102 $ (92,393 ) (73 )% Cost of Revenue Cost of revenue decreased by $1.6 million, or 31%, from $5.0 million for the year ended December 31, 2023 to $3.5 million for the year ended December 31, 2024.
See also Part I Special Note Regarding Forward-Looking Statements in this Annual Report. Overview Our mission is to deliver software to our 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.
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.
Through our development efforts on our hardware products such as the Guardian XO, Guardian XT, Guardian XM and Guardian Sea Class, we have developed a significant amount of advanced technology that we are leveraging to develop our AI/ML Software Platform.
Through our hardware development efforts over many years, including our AI-related software development efforts, we developed a significant amount of advanced technology that we are leveraging to develop our AI/ML Foundational Technology and related products. We believe our financial performance is dependent on our ability to successfully develop and commercialize our products.
Cost of revenue decreased mainly due to decreased labor and material expense charged to product development contracts during the year ended December 31, 2023. Research and Development Research and development expenses increased by $4.9 million, or 14%, from $34.1 million for the year ended December 31, 2022, to $39.0 million for the year ended December 31, 2023.
Cost of revenue decreased mainly due to decreased labor and material expenses charged to product development contracts due to contract mix, partially offset by increased product costs associated with our product revenue during the year ended December 31, 2024.
For additional information around the risks associated with our strategy decision-making see Part I Item 1A Risk Factors “ Due to our limited resources and access to capital, and our failure to properly estimate the time and expense required to commercialize our hardware-centric industrial robotics solutions, we must make decisions on the allocation of resources and have discontinued development and commercialization of certain products; these decisions may prove to be wrong and may adversely affect our business.” 48 Key Factors Affecting Operating Results We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I Item 1A Risk Factors of this Annual Report on Form 10-K.
Current and future decisions may not be successful in achieving our business objectives or may have unintended consequences that negatively impact our growth prospects ". 48 Key Factors Affecting Operating Results We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I Item 1A Risk Factors of this Annual Report on Form 10-K.
Any delays in the successful commercialization of our software product will negatively impact our ability to generate revenue, our profitability and our overall operating performance. In addition, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies, which may require acquisition capital as well as operational capital for these acquisitions or arrangements.
We may enter into arrangements to acquire or invest in complementary businesses, services and technologies, which may require acquisition capital as well as operational capital for these acquisitions or arrangements. We may be required to seek additional equity or debt financing to facilitate these arrangements.
Financing of Operations Prior to commercialization, we must complete the development and testing of our AI/ML Software Platform. As a result, we will use our cash on hand to develop our software platform and fund operations as we seek to commercialize and achieve revenue from the sale of the product.
Financing of Operations We intend to use our cash on hand to continue to enhance our software products, conduct product development activities, pursue marketing and sales opportunities and fund operations as we seek to commercialize and achieve revenue from our products.
We believe this “human-like” ability to learn and adapt will be a key differentiator in helping our customers maintain optimal productivity in dynamic or unstructured environments, where new situations and unexpected challenges are more likely to cause delays and costly downtime.
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.
As a result of our refined strategy we are optimizing our organization in pursuit of this AI/ML Software Platform opportunity and are reducing costs, including our recent RIFs, shifting all operations to the Salt Lake City, Utah location and winding down substantially all of our operations in Pittsburgh, Pennsylvania.
As a result of our business evaluation and refined product strategy announced in 2023, we reorganized our operations to focus on the development and commercialization of our AI/ML Foundational Technology and have taken actions to reduce costs, including the 2023 RIFs and winding down substantially all of our operations in Pittsburgh, Pennsylvania.
In addition, we have taken numerous steps to manage our use of cash. For example, on July 12, 2023 and on November 14, 2023 we announced reductions in force intended to further conserve our current cash resources and manage operating expenses.
We have taken and continue to take numerous steps to manage our use of cash. For example, the 2023 RIFs allowed us to further conserve our cash resources and manage operating expenses. The last cash payments related to the 2023 RIFs were paid during the first quarter of 2024.
General and Administrative General and administrative expenses decreased by $32.0 million, or 50%, from $63.5 million for the year ended December 31, 2022, to $31.5 million for the year ended December 31, 2023. General and administrative expense decreased primarily due to reduced stock-based compensation expense of $28.4 million due to certain awards vesting in the prior year.
Research and Development Research and development expenses decreased by $28.6 million, or 73%, from $39.0 million for the year ended December 31, 2023 to $10.4 million for the year ended December 31, 2024. The decrease was driven primarily by reduced labor and labor related expenses due to the 2023 RIFs.
For detail regarding our lease obligations refer to Note 4 Leases to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 55 Cash Flows The following table summarizes our cash flow data for the periods presented: Year Ended December 31, 2023 vs. 2022 Change (In thousands) 2023 2022 Change % Change Net cash provided by (used in): Net cash used in operating activities $ (76,620 ) $ (65,391 ) $ (11,229 ) 17 % Net cash provided by (used in) investing activities 64,682 (109,045 ) 173,727 (159 )% Net cash used in financing activities (82 ) (7,519 ) 7,437 (99 )% Net decrease in cash, cash equivalents $ (12,020 ) $ (181,955 ) $ 169,935 (93 )% Net Cash Used in Operating Activities Cash flows used in operating activities during the twelve months ended December 31, 2023, increased by $11.2 million to $76.6 million from $65.4 million during the same period in 2022.
Cash Flows The following table summarizes our cash flow data for the periods presented: Year Ended December 31, 2024 vs. 2023 Change (In thousands) 2024 2023 Change % Change Net cash provided by (used in): Net cash used in operating activities $ (22,627 ) $ (76,620 ) $ 53,993 (70 )% Net cash provided by investing activities 6,876 64,682 (57,806 ) (89 )% Net cash provided by (used in) financing activities 23,800 (82 ) 23,882 (29,124 )% Net increase (decrease) in cash, cash equivalents $ 8,049 $ (12,020 ) $ 20,069 (167 )% Net Cash Used in Operating Activities Cash flows used in operating activities during the twelve months ended December 31, 2024, decreased by $54.0 million to $22.6 million from $76.6 million during the prior year.
In addition to the decrease in stock-based compensation expense, business insurance expenses decreased during the current year period to more favorable rates resulting from the latest renewal and legal fees decreased in comparison to the prior year primarily due to the lack of acquisition-related legal expenses arising from the RE2 acquisition during the prior year period.
General and administrative expense decreased primarily due to reduced labor and labor related expenses, including stock-based compensation, due to the 2023 RIFs. Legal and business insurance expenses also decreased due to the overall decrease in operations as compared to the prior year.
Other Income, net Other income, net consists primarily of other miscellaneous non-operating items such as proceeds from the CARES Act employee retention credit. Income Tax Benefit (Expense ) Income taxes 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.
Treasury securities at various points during the year. 51 (Loss) Gain on Warrant Liabilities (Loss) gain on warrant liabilities consists of the change in fair value of the deSPAC Warrants and the 2024 Warrants. Other Income, Net Other income, net consists primarily of other miscellaneous non-operating items such as proceeds from the CARES Act employee retention credit.
Based on the results of the quantitative goodwill impairment assessment we concluded that the carrying value of our goodwill exceeded its fair value and that our goodwill was fully impaired as of December 31, 2022. Other Income (Loss) Interest Income, net Interest income consists primarily of interest received or earned on our cash and marketable securities balances.
Other (Loss) Income Interest Income, Net Interest income consists primarily of interest received or earned on our cash and marketable securities balances. Portions of our cash resided in money market investments and in U.S.
Development, Testing and Commercial Launch of our AI/ML Software Platform We currently expect to derive revenue from our AI/ML Software Platform, which is in its development phase. Prior to commercialization, we must complete the development and testing of our product.
Development, Testing and Commercial Launch of our AI/ML Foundational Technology We currently expect to derive commercial licensing revenues from Palladyne IQ and Palladyne Pilot beginning in 2025. We expect to continue commercialization efforts, internal testing and customer trials for both products throughout 2025.
Income Tax Benefit (Expense) Income tax benefit decreased to $7,000 for the year ended December 31, 2023, compared to $3.9 million in income tax benefit for the year ended December 31, 2022.
Income Tax Benefit (Expense) We had no significant income tax expense for the years ended December 31, 2024 and 2023.
Removed
Our value proposition is further enhanced relative to other competitive solutions because robotic systems using our AI/ML Software Platform are not required to be continuously connected to the cloud for our software to function, thereby reducing the performance issues associated with poor connectivity and latency typically associated with processing in the cloud.
Added
See also Part I Special Note Regarding Forward-Looking Statements in this Annual Report. Overview 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.
Removed
Our approach also reduces the expense typically associated with transmitting large amounts of data to and from the cloud. As a pioneer in the robotic systems industry, we benefit from both experiences and lessons gained from our 30-plus years, as well as significant investment in our internal research and development efforts.
Added
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").
Removed
Software has been an integral part of our development efforts over the years. Our vision for our AI/ML Software Platform began in 2017 as a foundational technology to enhance training for the autonomous operation of our own internally developed hardware solutions and progressed to our first CYTAR (Cybernetic Training for Autonomous Robots) government project in 2019.
Added
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.
Removed
Significant design and development work began in 2020 when our Chief Technology Officer, Dr. Denis Garagic, joined our team. We have since continued to develop our AI/ML software both for the U.S. Department of Defense and in connection with our development of commercial robotic systems.
Added
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.
Removed
As previously disclosed, in November 2023, we decided to suspend our hardware product development efforts to focus on commercializing our AI/ML Software Platform, although some de minimis hardware-related research and development efforts continue.
Added
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.
Removed
By de-coupling our AI/ML Software Platform from our own hardware systems and applying it to a wide range of third-party robotics systems, from industrial robots and cobots to mobile systems potentially including drones, autonomous mobile robots (AMR), autonomous underwater vehicles (AUV) and remotely operated vehicles (ROV), we believe we can reach a much broader market more quickly and better utilize our remaining cash resources.
Added
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.

… 58 more changes not shown on this page.

Other PDYNW 10-K year-over-year comparisons