Palladyne AI Corp

Previous wording

We incurred a net loss of $12.6 million for the six months ended June 30, 2024, and a net loss of $115.6 million for the year ended December 31, 2023. As of June 30, 2024, we had an accumulated deficit of $430.8 million. We believe that we are likely to continue to incur operating and net losses, which could be significant, for the foreseeable future. Our shift in product development and commercialization strategy to focus on our AI/ML Software Platform has affected the timing of expected revenue and has made forecasting our quarterly and annual results more challenging. Even if we are able to successfully develop our AI/ML Software Platform and attract customers for commercial sales, we may not become profitable. Our potential profitability is dependent upon the successful development, commercial introduction and adoption on a large scale of our AI/ML Software Platform and our ability to lower costs, none of which may occur.

Current wording

We have incurred losses and negative cash flows from operations since inception and are likely to continue to incur losses and negative cash flows from operations in the near term. We incurred a net loss of $19.6 million for the nine months ended September 30, 2024, and a net loss of $115.6 million for the year ended December 31, 2023. As of September 30, 2024, we had an accumulated deficit of $437.9 million and working capital of $19.8 million. We believe that we are likely to continue to incur operating and net losses, which could be significant, for the foreseeable future. Our shift in product development and commercialization strategy to focus on our AI/ML Software Platform and related products has affected the timing of expected revenue and has made forecasting our quarterly and annual results more challenging. Even if we are able to successfully develop our AI/ML Software Platform and related products and attract customers for commercial sales, we may not become profitable. Our potential profitability is dependent upon the successful development, commercial introduction and adoption on a large scale of our AI/ML Software Platform and related products and our ability to lower costs, none of which may occur. We may not be successful in achieving meaningful revenues from these products. Further, the timing, amount and growth rate of any such revenues are unknown.

Previous wording

continue to design, develop and begin to commercialize our AI/ML Software Platform and related products;

Current wording

continue to design, develop and commercialize our AI/ML Software Platform and related products;

Previous wording

Because we will incur costs and expenses from these efforts before we receive incremental revenue with respect thereto and because we are still developing our AI/ML Software Platform and related products, we expect to incur losses in future periods, which could be significant, until we start to achieve significant software licensing revenue. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may result in less than expected or no additional revenue, which would further increase our losses and affect our ability to continue operations. We may have to obtain additional capital from external sources, and additional financing may not be available when needed or that, if available, may not be available on terms favorable to us or to our stockholders. See “Our business plans require a significant amount of capital. 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. If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.”

Current wording

Because we will incur costs and expenses from these and other efforts before we receive significant licensing revenue, we expect to incur losses in future periods, which could be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may result in less than expected or no additional revenue, which would further increase our losses and affect our ability to continue operations. We may have to obtain additional capital from external sources, and additional financing may not be available when needed or, if available, may not be available on terms favorable to us or to our stockholders. See “Our business plans require a significant amount of capital. 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. If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.”

Previous wording

Due to our limited resources and access to capital, and our failure to properly estimate the time and expense required to commercialize our prior hardware-centric industrial robotics solutions, we made the decision in late 2023 to focus on our AI/ML Software Platform product and to suspend the development and commercialization of our hardware products. These and future decisions about how to use our limited resources may prove to be wrong and may adversely affect our business.

Current wording

Due to our limited resources and access to capital, and our failure to properly estimate the time and expense required to commercialize our prior hardware-centric industrial robotics solutions, we made the decision in late 2023 to focus on our AI/ML Software Platform and related products and to suspend the development and commercialization of our hardware products. These and future decisions about how to use our limited resources may prove to be wrong and may adversely affect our business.

Previous wording

We have limited financial and human resources and, as a result, we have in the past and may in the future forgo or delay pursuit of opportunities with product candidates that might have had greater commercial potential or a greater likelihood of success. For example, on November 14, 2023, we announced a pivot in strategy to suspend our efforts to bring our hardware products to market and instead focus our resources and efforts on the development of our commercial AI/ML Software Platform and a related significant reduction in force. After continued analysis of our business and careful consideration of our hardware product’s development costs and market opportunity, and of our available resources, we concluded that focusing on our AI/ML Software Platform met our goal of pursuing significant near-term revenue tied to acute customer needs and would reduce our capital requirements and related risks in line with available resources. However, this strategy may not prove to be effective. Moreover, we may be unable to monetize assets relating to discontinued products or further reduce expenses.

Current wording

We have limited financial and human resources and, as a result, we have in the past and may in the future forgo or delay pursuit of opportunities with product candidates that might have had greater commercial potential or a greater likelihood of success. For example, on November 14, 2023, we announced a pivot in strategy to suspend our efforts to bring our hardware products to market and instead focus our resources and efforts on the development of our commercial AI/ML Software Platform and related products and a related significant reduction in force. After continued analysis of our business and careful consideration of our hardware product’s development costs and market opportunity, and of our available resources, we concluded that focusing on our AI/ML Software Platform and related products met our goal of pursuing significant near-term revenue tied to acute customer needs and would reduce our capital requirements and related risks in line with available resources. However, this strategy may not prove to be effective. Moreover, we may not be able to monetize all of the assets unrelated to our current business strategy.

Previous wording

The development of our AI/ML Software Platform is a complex and evolving process that involves the development of new and emerging technologies, continued investment, including in privacy, safety and security efforts, and potential collaborations with other companies, developers, partners and other participants. Our AI/ML Software Platform may not develop in accordance with our expectations and its market acceptance is uncertain. We regularly evaluate our product roadmaps and make significant changes as our understanding of the technological challenges and market landscape and our product ideas and designs evolve. In addition, we have no experience with commercializing a software platform, which may enable other companies to compete more effectively than us, and we may not be successful. We also may be unsuccessful in our research and product development efforts.

Current wording

The development of our software products is a complex and evolving process that involves the development of new and emerging technologies, continued investment, including in privacy, safety and security efforts, and potential collaborations with other companies, developers, partners and other participants. Market acceptance of our software products is uncertain and we may need to change product features to meet customer needs. We regularly evaluate our product roadmaps and make significant changes as our understanding of the technological challenges and market landscape and our product ideas and designs evolve. In addition, we have no experience with commercializing a software platform or software products, which may enable other companies to compete more effectively than us, and we may not be successful. We also may be unsuccessful in our research and product development efforts.

Previous wording

As we develop and commercialize our AI/ML Software Platform, we may become subject to a variety of existing or new laws and regulations in the United States and international jurisdictions, including in the areas of privacy, security, safety, competition and consumer protection, which may delay or impede the development of our AI/ML Software Platform, increase our operating costs, require significant management time and attention or otherwise harm our business. As a result of these or other factors, our product strategy may not be successful in the foreseeable future, or at all, which would adversely affect our business, reputation, or financial results.

Current wording

As we develop and commercialize our AI/ML Software Platform and related products, we may become subject to a variety of existing or new laws and regulations in the United States and international jurisdictions, such as the European Union's Artificial Intelligence Act (the "AI Act"), including in the areas of privacy, security, safety, competition and consumer protection, which may delay or impede the development and commercialization of our AI/ML Software Platform and related products, increase our operating costs, require significant management time and attention or otherwise harm our business. As a result of these or other factors, our product strategy may not be successful in the foreseeable future, or at all, which would adversely affect our business, reputation, or financial results.

Previous wording

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. However, given our limited commercial experience, many of these assumptions may prove to be incorrect. 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”).

Current wording

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 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 of our software platform and products, the utilization of the platform, product pricing and the nature and length of the sales cycle. However, given our limited commercial experience, many of these assumptions may prove to be incorrect. 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”).

Previous wording

We had negative cash flow from operating activities of $76.6 million and $65.4 million for the years ended December 31, 2023 and 2022, respectively, and negative cash flow from operating activities of $13.0 million for the six months ended June 30, 2024. We expect to continue to have negative cash flow from operating and investing activities for the foreseeable future as we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to commercialize our AI/ML Software Platform, increase sales and engage in continuous development work. We may not achieve positive cash flow in the near future or at all. Our business also will at times require significant amounts of working capital to support the growth of additional products. An inability to generate positive cash flow for the near term may adversely affect our ability to raise capital for our business on reasonable terms, adversely affect our ability to pursue our business objectives, diminish customer willingness to enter into transactions with us and have other adverse effects, all of which would affect our ability to continue operations.

Current wording

We had negative cash flow from operating activities of $76.6 million and $65.4 million for the years ended December 31, 2023 and 2022, respectively, and negative cash flow from operating activities of $17.5 million for the nine months ended September 30, 2024. We expect to continue to have negative cash flow from operating and investing activities for the foreseeable future as we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to commercialize our software products, increase sales and engage in continuous development work. We may not achieve positive cash flow in the near future or at all. Our business also may at times require significant amounts of working capital to support the growth of additional products. An inability to generate positive cash flow for the near term may adversely affect our ability to raise capital for our business on reasonable terms, adversely affect our ability to pursue our business objectives, diminish customer willingness to enter into transactions with us and have other adverse effects, all of which would affect our ability to continue operations. See "We are an early stage company with a history of losses and are likely to incur losses, which could be significant, for the foreseeable future."

Previous wording

We have no previous history or experience commercializing AI/ML software products or platforms and may not be able to do so efficiently or effectively or at all. Further, we have historically been unsuccessful in our efforts to commercialize our hardware products. Moreover, commercialization may be delayed due to the challenges discussed under “Commercialization of our AI/ML Software Platform may be delayed beyond our current expectations and therefore initial availability to customers and receipt of anticipated revenue could be delayed.” A key element of our long-term business strategy involves sales, marketing, training and customer service operations, including hiring personnel with the necessary experience. Managing and maintaining these operations is expensive and time consuming, and an inability to leverage such an organization effectively or at all could inhibit potential sales and the penetration and adoption of our AI/ML Software Platform. In addition, certain decisions we make regarding priorities and staffing in these areas in our efforts to responsibly manage our financial resources could have unintended negative effects on our revenue, such as by weakening the sales and marketing infrastructures or lowering the quality of customer service.

Current wording

We have no previous history or experience commercializing AI/ML software products or platforms and may not be able to do so efficiently or effectively or at all. Further, we have historically been unsuccessful in our efforts to commercialize our hardware products. Moreover, commercialization may be delayed due to the challenges discussed under "Successful commercialization of our AI/ML Software Platform and related products may be delayed beyond our current expectations and therefore product availability to customers, customer acquisition and receipt of software licensing revenue could be delayed." A key element of our long-term business strategy involves sales, marketing, training and customer service operations, including hiring personnel with the necessary experience. Managing and maintaining these operations is expensive and time consuming, and an inability to leverage such an organization effectively or at all could inhibit potential sales and the penetration and adoption of our software products. In addition, certain decisions we make regarding priorities and staffing in these areas in our efforts to responsibly manage our financial resources could have unintended negative effects on our revenue, such as by weakening the sales and marketing infrastructures or lowering the quality of customer service.

Previous wording

Commercialization of our AI/ML Software Platform may be delayed beyond our current expectations and therefore initial availability to customers and receipt of anticipated revenue could be delayed.

Current wording

Successful commercialization of our AI/ML Software Platform and related products may be delayed beyond our current expectations and therefore product availability to customers, customer acquisition and receipt of software licensing revenue could be delayed.

Previous wording

We are focusing our efforts on the development and commercialization of our AI/ML Software Platform. If product testing, production or customer use demonstrate that our AI/ML Software Platform does not deliver the performance, reliability, functionality and/or safety that we or our potential customers expect, commercial release and availability to customers may be delayed as we work to address the deficiencies. As a result of such delays, we may receive revenue later than expected or not at all if our potential customers decide to seek alternative solutions to our product, adversely affecting our results of operations and financial condition.

Current wording

We are focused on the development and commercialization of our AI/ML Software Platform and related products. If product testing or customer use demonstrate that our software products do not deliver the performance, reliability, functionality and/or safety that we or our potential customers expect, commercial success may be delayed as we work to address the deficiencies. As a result of such delays, we may receive revenue later than expected or not at all if our potential customers decide to seek alternative solutions to our products, adversely affecting our results of operations and financial condition.

Previous wording

Moreover, our current estimates for completion of our AI/ML Software Platform development efforts and the commencement of sales to potential customers are dependent in part on our ability to hire and retain qualified employees. We have seen a significant increase in personnel costs in recent years due to shortages of qualified personnel in the labor market and general inflationary pressures. If we are unable to recruit and retain employees as needed to complete the development of and commercialize our AI/ML Software Platform, we may be unable to do so in a timely basis or at all.

Current wording

Moreover, our current estimates for completion of our Palladyne Pilot development efforts and the achievement of software product sales to potential customers are dependent in part on our ability to hire and retain qualified employees. We have seen a significant increase in personnel costs in recent years due to shortages of qualified personnel in the labor market and general inflationary pressures. If we are unable to recruit and retain employees as needed to complete the development of and commercialize our software products, we may be unable to do so in a timely manner or at all.

Previous wording

In addition, geopolitical events and macro-economic conditions, such as the continuing effects of the COVID-19 pandemic, the current conflicts between Russia and Ukraine and between Israel and Hamas , inflation and high interest rates, and responses thereto have contributed to price increases. If we are unable to develop and commercialize our AI/ML Software Platform in a cost efficient manner, our financial results, financial condition and prospects would be materially and adversely affected.

Current wording

In addition, geopolitical events and macro-economic conditions, such as the current wars between Russia and Ukraine and in the middle east, inflation and high interest rates, and responses thereto have contributed to price increases. If we are unable to develop and commercialize our software products in a cost efficient manner, our financial results, financial condition and prospects would be materially and adversely affected.

Previous wording

Over recent years we have experienced, and we continue to experience, these challenges, which have negatively impacted our product development schedules and progress. We expect these challenges to continue and, if they do and if we are unable to effectively mitigate their impact, it is likely that we will be unable to meet our currently expected timelines.

Current wording

Although to date we have met our primary software development milestones as scheduled, over recent years we experienced, and we continue to experience, these challenges, which have at times negatively impacted our product development schedules and progress. We expect these challenges to continue and, if they do and if we are unable to effectively mitigate their impact, it is likely that we will be unable to meet our currently expected timelines.

Previous wording

Our anticipated revenues are expected to be primarily derived from the development and licensing of our AI/ML Software Platform for the foreseeable future.

Current wording

Our anticipated revenues are expected to be primarily derived from the licensing of our AI/ML Software Platform-related products for the foreseeable future.

Previous wording

If we are successful in commercializing our AI/ML Software Platform, our revenue will be concentrated in related products for the foreseeable future. We will need to continue to develop our platform and establish and grow our customer base to diversify our revenue and customers. To the extent our AI/ML Software Platform does not meet customer expectations, or cannot be completed or released on its projected timelines and in line with cost targets, our future revenue, operating results and financial condition will be adversely affected.

Current wording

If we are successful in commercializing our AI/ML Software Platform and related products, our revenue will be concentrated in licensing those software products for the foreseeable future. We will need to continue to enhance our platform, develop new capabilities and establish and grow our customer base to diversify our revenue and customers. To the extent our AI/ML Software Platform and related products do not meet customer expectations, or cannot be completed or released on their projected timelines and in line with cost targets, our future revenue, operating results and financial condition will be adversely affected.

Previous wording

Our AI/ML Software Platform and related products are still under development and any issues in the development and use of our platform or products may result in reputational harm or liability.

Current wording

Any issues in the development and use of our AI/ML Software Platform or related products, or issues in products developed by others, may result in reputational harm or liability.

Previous wording

We are in the process of developing our AI/ML Software Platform and related products, and any issues in the development of our platform or products may result in reputational harm or liability. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our business. AI algorithms and training methodologies may be flawed. Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, we may experience competitive, brand, or reputational harm or legal and/or regulatory action. 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. See "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."

Current wording

Any issues in the development or use of our AI/ML Software Platform or related products, or issues in products developed by others, may result in reputational harm or liability. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our business. AI algorithms and training methodologies may be flawed, ineffective or inadequate. AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, we may experience competitive, brand, or reputational harm or legal and/or regulatory action. 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. See

Previous wording

With our AI/ML Software Platform still under development, customer trials and discussions may not result in purchases.

Current wording

Our AI/ML Software Platform and related products are new technologies, and customer trials and discussions may not result in purchases.

Previous wording

Our AI/ML Software Platform is still under development. At present, we have revenue generating contracts with U.S. government customers related to various aspects of our AI/ML Software Platform, but no commercial customers. Our AI/ML Software Platform contains advanced software and control technologies that we have developed over many years. The design of our software products are significantly influenced by feedback from potential customers and reflects the needs they express. Even if we are able to successfully incorporate that feedback into our software platform, customers who initially expressed an interest in our software products during the design phase may not ever purchase the software. If we cannot commercialize our AI/ML Software Platform on our expected schedule, if the AI/ML Software Platform does not offer our potential customers the features, functionality and return on investment that they expect, and/or if potential customers are not willing to pay for our software products at the rates that we currently expect, our ability to generate material revenues will be materially impaired.

Current wording

Our AI/ML Software Platform and related products are new technologies. At present, we have revenue generating contracts with U.S. government customers related to various aspects of our AI/ML Software Platform and related products, but no commercial customers. Our software products contain advanced software and control technologies that we have developed over many years. The design of our software products are significantly influenced by feedback from potential customers and reflects the needs they express. Even if we are able to successfully incorporate that feedback into our software platform and products, customers who initially expressed an interest in our software platform and products during the design or testing phase may not ever purchase the software. If we cannot commercialize our AI/ML Software Platform and related products on our expected schedule, if our products do not offer our potential customers the features, functionality and return on investment that they expect, if potential customers are unwilling or hesitant to adopt new technologies and products such as ours and/or if potential customers are not willing to pay for our software products at the rates that we currently expect, our ability to generate material revenues will be materially impaired.

Previous wording

Although we began initial customer testing in June 2024, we have limited knowledge of the customer testing that will be required for customers to ultimately adopt our software platform. As a result, customer testing may take longer than we anticipate, and we may not be able to provide such testing to the satisfaction of prospective customers, which could result in longer sales cycles and fewer purchases than anticipated. We may not be able to adapt our platform to reflect customer feedback successfully or at all. If customers who initially express an interest in our software platform and influenced its design ultimately do not license our AI/ML Software platform, or if they adopt a competitors’ technology, our business, prospects, financial condition and operating results would be adversely affected.

Current wording

Although we began initial customer testing in June 2024, we continue to have limited knowledge of the customer testing that will be required for customers to ultimately license our software products. As a result, customer testing may take longer than we anticipate, and we may not be able to provide such testing to the satisfaction of prospective customers, which could result in longer sales cycles and fewer purchases than anticipated. We may not be able to adapt our products to reflect customer feedback successfully or at all. If customers who initially express an interest in our software products and influenced their designs ultimately do not license our products, or if they adopt a competitors’ technology, our business, prospects, financial condition and operating results would be adversely affected.

Previous wording

In addition, to build and maintain our business, we must maintain confidence among customers and potential customers in our AI/ML Software Platform, long-term financial viability and business prospects. 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. If we do not generate sufficient license revenue for our software platform, our business, prospects, financial condition and operating results would be materially and adversely affected. Further, if investors, analysts, rating agencies and other third parties are not confident in our AI/ML Software Platform, our ability to commercialize the platform, our financial viability, or our business prospects, we may not be able to raise any needed funding which would materially and adversely affect our financial condition and prospects and ability to continue operations.

Current wording

In addition, to build and maintain our business, we must maintain confidence among customers and potential customers in our AI/ML Software Platform and related products, long-term financial viability and business prospects. 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. If we do not generate sufficient license revenue, our business, prospects, financial condition and operating results would be materially and adversely affected. Further, if investors, analysts, rating agencies and other third parties are not confident in our AI/ML Software Platform and related products, our ability to commercialize the platform and related products, our financial viability, or our business prospects, we may not be able to raise any needed funding which would materially and adversely affect our financial condition and prospects and ability to continue operations.

Previous wording

If our target markets and the robotics industry do not continue to develop as we anticipate or if potential customers do not adopt our AI/ML Software Platform, our sales will not grow as quickly as expected, or at all, and our business, operating results and financial condition would be harmed.

Current wording

If our target markets and the robotics industry do not continue to develop as we anticipate or if potential customers do not adopt our AI/ML Software Platform and related products and license our products, our sales will not grow as quickly as expected, or at all, and our business, operating results and financial condition would be harmed.

Previous wording

The market for our AI/ML Software Platform and applications similar to the ones we are developing is relatively new and evolving. We are developing our AI/ML Software Platform to respond to an increasingly global and complex business environment with rigorous regulatory standards. If organizations do not allocate their budgets as we expect or if we do not succeed in convincing potential customers to license our AI/ML Software Platform, our sales might not grow as quickly as anticipated, or at all. 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 discretionary. Moreover, market acceptance of our AI/ML Software Platform is critical to our continued success. 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. See “Our business plans require a significant amount of capital. 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. If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.”

Current wording

The market for our AI/ML Software Platform and related products and applications similar to the ones we are developing is relatively new and evolving. We are developing our software products to respond to an increasingly global and complex business environment with rigorous regulatory standards. If organizations do not allocate their budgets as we expect or if we do not succeed in convincing potential customers to license our software products, our sales will not grow as quickly as anticipated, or at all. 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 Software Platform and related products is critical to our continued success. 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. See “We are an early stage company with a history of losses and are likely to incur losses, which could be significant, for the foreseeable future.” and “Our business plans require a significant amount of capital. 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. If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.”

Previous wording

If we are unable to successfully introduce and implement enhancements, new features or modifications to our AI/ML Software Platform, our business would be harmed.

Current wording

If we are unable to successfully introduce and implement enhancements, new features or modifications to our AI/ML Software Platform and related products, our business would be harmed.

Previous wording

We must continue to meet changing expectations and requirements of our customers. 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. 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. If we are not successful in developing modifications and enhancements to our platform or if we fail to introduce new applications to market in a timely fashion, our AI/ML Software Platform might become less marketable, less competitive or obsolete, our revenue growth might be significantly impaired and our business, operating results and financial condition could be harmed.

Current wording

We must continue to meet changing expectations and requirements of our customers. 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 products or result in customer dissatisfaction. Further, uncertainties about the timing and nature of new software or technologies, or modifications to our platform or products or existing software or technologies, could increase our research and development expenses. If we are not successful in developing modifications and enhancements to our platform or products or if we fail to introduce new applications to market in a timely fashion, our products might become less marketable, less competitive or obsolete, our revenue growth might be significantly impaired and our business, operating results and financial condition could be harmed.

Previous wording

We have no previous history or experience commercializing software products and may not be able to do so efficiently or effectively or at all. To create and grow our customer base, we must license our software to new customers, which we may not be able to do in sufficient numbers or at all. 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. For these and other reasons, we could fail to achieve revenue growth, which would adversely affect our results of operations, prospects and financial condition.

Current wording

We have no previous history or experience commercializing software products and may not be able to do so efficiently or effectively or at all. To create and grow our customer base, we must license our software to new customers, which we may not be able to do in sufficient numbers or at all. 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. For these and other reasons, we could fail to achieve revenue growth, which would adversely affect our results of operations, prospects and financial condition.

Previous wording

We expect our AI/ML Software Platform to be used with robots operating in a wide variety of environments and for a broad range of complex uses. Our success depends on our ability, and the ability of our customers, to implement our AI/ML Software Platform successfully in these environments. Customer retention will also be largely dependent on the quality and effectiveness of our customer service operations, which may be handled internally by our personnel and also by third-party service providers. We expect that we will need to often assist our customers in implementing our AI/ML Software Platform. If we or our customers are unable to implement our AI/ML Software Platform successfully, or are unable to do so in a timely manner, inadequate performance might result and customer perceptions of our platform and company might be impaired, our reputation and brand might suffer, we may face legal claims, customers might choose not to renew or expand the use of our platform and we might lose opportunities for additional sales.

Current wording

We expect our AI/ML Software Platform and related products to be used with robots operating in a wide variety of environments and for a broad range of complex uses. Our success depends on our ability, and the ability of our customers, to implement our products successfully in these environments. Customer retention will also be largely dependent on the quality and effectiveness of our customer service operations, which may be handled internally by our personnel and also by third-party service providers. We expect that we will need to often assist our customers in implementing our software products. If we or our customers are unable to implement our products successfully, or are unable to do so in a timely manner, inadequate performance might result and customer perceptions of our platform, products and company might be impaired, our reputation and brand might suffer, we may face legal claims, customers might choose not to renew or expand the use of our platform and we might lose opportunities for additional sales.

Previous wording

We have no experience with licensing software as a business model. 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 likelihood of our success must be considered in light of these risks, and our license model may not prove successful.

Current wording

We have no experience with licensing software as a business model. The success of our strategy to build recurring revenue streams through software licenses depends on our ability to successfully market our software platform and products 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 likelihood of our success must be considered in light of these risks, and our license model may not prove successful.

Previous wording

Our decision to pivot our business strategy to focus on the development of our commercial AI/ML Software Platform was based in part on our estimates of the potential addressable market, pricing, adoption rates and sales cycles for our platform. However, 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.

Current wording

Our decision to pivot our business strategy to focus on the development of our commercial AI/ML Software Platform was based in part on our estimates of the potential addressable market, pricing, adoption rates and sales cycles for our platform and related products. However, the market demand for our software platform and products is unproven, and important assumptions about the characteristics of targeted markets, pricing and sales cycles may be inaccurate.

Previous wording

Given the evolving nature of the markets in which we operate, it is difficult to predict customer demand or adoption rates for our software platform or the future growth of the markets we target. If one or more of the targeted markets experience a shift in customer demand, whether due to new solutions that better address customer needs or otherwise, our software platform may not compete as effectively, if at all, and it may not be fully developed into a commercial software product. If customer demand does not develop as expected, or if we do not accurately forecast pricing, adoption rates and sales cycles for our software platform, our business, results of operations and financial condition will be adversely affected, perhaps materially.

Current wording

Given the evolving nature of the markets in which we operate, it is difficult to predict customer demand or adoption rates for our software products or the future growth of the markets we target. If one or more of the targeted markets experience a shift in customer demand, whether due to new solutions that better address customer needs or otherwise, our software products may not compete as effectively, if at all. If customer demand does not develop as expected, or if we do not accurately forecast pricing, adoption rates and sales cycles for our software products, our business, results of operations and financial condition will be adversely affected, perhaps materially.

Previous wording

The benefits of our AI/ML Software Platform to customers and projected return on investment have not been substantiated through customer use.

Current wording

The benefits of our AI/ML Software Platform and related products to customers and projected return on investment have not been substantiated through customer use.

Previous wording

Our commercial AI/ML Software Platform and related products are under development and have not been commercially used by customers. Our software platform may not perform consistent with customers’ expectations or consistent with other products which may be or may become available. 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.

Current wording

Although we are conducting customer trials for certain of our software products, our AI/ML Software Platform and related products have not been commercially used by customers. Our software platform and related products may not perform consistent with customers’ expectations or consistent with other products that may be or may become available. Any failure of our software platform and 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.

Previous wording

We expect that many of our potential customers will be large businesses with substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our platform. These large businesses also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements and securing binding commitments from any of these businesses will require a substantial investment of our time and resources. 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. If our software platform is not selected by these large businesses or if these businesses develop or acquire competitive technology, it may have a material adverse effect on our business, prospects, financial condition and operating results.

Current wording

We expect that many of our potential customers will be large businesses with substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our platform. These large businesses also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements and securing binding commitments from any of these businesses will require a substantial investment of our time and resources. 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. If our software products are not selected by these large businesses or if these businesses develop or acquire competitive technology, it may have a material adverse effect on our business, prospects, financial condition and operating results.

Previous wording

The AI/ML and robotics industries are subject to rapid technological change, and we expect competition to increase in the future. Our research and development efforts may be unable to keep up with changes in technology or its alternatives and, as a result, our competitiveness may suffer. Developments in alternative technologies or solutions may materially and adversely affect our competitiveness in ways we do not currently anticipate. 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. We believe our AI/ML Software Platform will compete (both directly and indirectly) with companies such as Covariant, Dexterity, Formic, GrayMatter Robotics, Intrinsic, Liquid AI, Mujin and Rapid Robotics. 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.

Current wording

The AI/ML and robotics industries are subject to rapid technological change, and we expect competition to increase in the future. Our research and development efforts may be unable to keep up with changes in technology or its alternatives and, as a result, our competitiveness may suffer. Developments in alternative technologies or solutions may materially and adversely affect our competitiveness in ways we do not currently anticipate. While we plan to upgrade and adapt our software platform and 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. We believe our AI/ML Software Platform and related products will compete (both directly and indirectly) with companies such as Covariant, Dexterity, Formic, GrayMatter Robotics, Intrinsic, Liquid AI, Mujin and Rapid Robotics. 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.

Previous wording

While we view industrial robotics and cobot manufacturers such as ABB, Fanuc, Kuka, Universal Robots and Yasakawa, large system integrators such as Honeywell, Reply, and Rockwell Automation, and technology companies such as NVIDIA as potential target customers and/or channel and ecosystem partners for our software platform, we also recognize that these companies may emerge as formidable competitors through their own internal development efforts or future technology partnerships with and acquisitions of our direct competitors. They may bring their robust customer relationships, channels and significant financial resources to help accelerate the market viability of one of our direct or indirect competitors.

Current wording

While we view industrial robotics and cobot manufacturers such as ABB, Fanuc, Kawasaki, Kuka and Universal Robots, large system integrators such as Honeywell, Reply, and Rockwell Automation, and technology companies such as NVIDIA as potential target customers and/or channel and ecosystem partners for our software platform and products, we also recognize that these companies may emerge as formidable competitors through their own internal development efforts or future technology partnerships with and acquisitions of our competitors. 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.

Previous wording

Our competitor base may change or expand as we continue to develop and commercialize our software platform in the future. Competitors may develop products that utilize advanced technology similar to ours (such as computer vision, AI and ML) in a more effective way, or new technologies or products that provide superior results to customers or are less expensive than our software platform. Our technologies and software platform could be rendered obsolete by such developments.

Current wording

Our competitor base may change or expand as we continue to develop and commercialize software products in the future. Competitors may develop products that utilize advanced technology similar to ours (such as computer vision, AI and ML) in a more effective way, or new technologies or products that provide superior results to customers or are less expensive than our software products. Our technologies and products could be rendered obsolete by such developments.

Previous wording

In order to produce a commercial version of our AI/ML Software Platform, we need to complete our development efforts. Even after introduction of a commercial version of our platform, we will also likely need to continue to advance and evolve the product in response to the evolving demands of our customers in the various industries we expect to serve. Our AI/ML Software Platform is in the early stages of development and commercialization. We will incur significant additional product development efforts and expenses, and we may not be successful in commercializing or marketing our software platform at all or within our currently expected timelines or available resources.

Current wording

Even after introduction of a commercial version of a product, we will also likely need to continue to advance and evolve the product in response to the evolving demands of our customers in the various industries we expect to serve. Our Palladyne IQ product is in the early stages of commercialization and our Palladyne Pilot product remains under development. We will incur significant additional product development efforts and expenses, and we may not be successful in commercializing or marketing our products at all or within our currently expected timelines or available resources.

Previous wording

We have developed an MVP version of our Palladyne IQ product and expect to have an MVP version of our Palladyne Pilot product in the second half of 2024. We also make iterative improvements throughout the development process. If we fail to adequately communicate to customers product improvements throughout the development process, or if customer feedback is not adequately reflected in our product improvements, customers may not be persuaded of the value of our software platform. If we fail to generate demand by developing a software platform that incorporates features desired by customers, we may fail to generate revenue sufficient to achieve or maintain profitability. We have in the past experienced and may in the future experience delays in various phases of product development, including during research and development, limited release testing, and marketing and customer education efforts. Further, delays in product development would postpone demonstrations and customer testing, which are important opportunities for customer engagement, and cause us to miss expected timelines. Such delays could cause customers to delay or forgo purchases of our software platform, or to purchase competitors’ products. 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. If we are unable to successfully manage our product development and communications with customers, customers may choose to not adopt or purchase our software platform, which would adversely affect our business, prospects, financial condition and operating results.

Current wording

We released the initial commercial version of our Palladyne IQ product on October 1, 2024 on schedule, and expect to release the initial commercial version of Palladyne Pilot at the end of the first quarter of 2025. We also make iterative improvements throughout the development process and after commercial release. If we fail to adequately communicate to customers product improvements, or if customer feedback is not adequately reflected in our product improvements, customers may not be persuaded of the value of our software platform and products. If we fail to generate demand by developing products that incorporate features desired by customers, we may fail to generate revenue sufficient to achieve or maintain profitability. We have in the past experienced and may in the future experience delays in various phases of product development, including during research and development, release testing and marketing and customer education efforts. Further, delays in product development would postpone demonstrations and customer testing, which are important opportunities for customer engagement, and cause us to miss expected timelines. Such delays could cause customers to delay or forgo purchases of our products, or to purchase competitors’ products. 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 software platform and products may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features. If we are unable to successfully manage our product development and communications with customers, customers may choose to not adopt or purchase our products, which would adversely affect our business, prospects, financial condition and operating results.