Palladyne AI Corp.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30,2026

OR

For the transition period from _______ to _______

Commission File Number:001-39897

Palladyne AI Corp.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (888)927-7296

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒

As of July 29, 2026 the registrant had 49,338,510 shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

Summary Risk Factors.

Our business is subject to numerous risks and uncertainties, including those highlighted in Part II, Item 1A Risk Factors of this report. The following is a summary of the principal risks we face:

•

We are an early stage company with a history of losses, and expect to incur significant losses for the foreseeable future.

•

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

•

We have yet to achieve positive operating cash flow and our ability to generate positive cash flow is uncertain.

•

We have no or limited previous history or experience with commercializing our products and may not be able to do so efficiently, effectively or at all. We were unsuccessful in our efforts to commercialize our legacy hardware technologies that we and our predecessor companies developed over the past several decades.

•

Any issues in the development and use of our AI/ML Foundational Technology or AI-enabled products, or issues in products developed by others, may result in reputational harm or liability.

•

Our AI/ML Foundational Technology and other technologies and products are new and customer trials and discussions may not result in purchases.

•

If we are unable to successfully introduce and implement enhancements, new features or modifications to our technologies and products, our business will be harmed.

•

We may fail to attract or retain customers at sufficient rates or in sufficient numbers or at all.

•

We have no previous history with our licensing sales model for our software products.

•

Important assumptions about market demand, pricing, adoption rates and sales cycles for our products and services may be inaccurate.

•

Some of our products require hardware components, and we are dependent on our suppliers, some of which are currently single, sole or limited source suppliers. Any 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 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 may not be able to successfully enhance our product offerings through our research and development efforts.

•

Real or perceived design flaws, errors, defects, glitches, bugs or malfunctions in our technologies, products and services, failure of our products to perform as expected, connectivity issues or user errors can result in lower than expected return on investment for customers, personal injury or property damage and significant security or safety concerns, each of which could materially and adversely affect our results of operations, financial condition or reputation.

•

We use "open source" software, which could negatively affect our ability to offer our technologies and products and subject us to possible litigation.

•

Our business and prospects depend significantly on our ability to build our brands. We may not succeed in establishing, maintaining and strengthening effective brands, and our brands and reputation could be harmed by negative publicity regarding us or our technologies, products or services.

•

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.

•

If we fail to effectively manage our business, we may not be able to develop, market and commercialize our technologies and products successfully.

•

We may be unable to adequately control the costs associated with our operations in order to achieve profitability.

•

We expect to incur substantial research and development costs and devote significant resources to developing and commercializing our AI/ML Foundational Technology, other technologies and products, and we may never reach profitability and/or achieve significant or any revenue.

•

Our business plans require a significant amount of capital. 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. If we require additional capital and are not able to secure new funding, we may not be able to continue our business operations.

•

Our financial results may vary significantly from period to period due to fluctuations in our operating costs, revenues, product demand and other factors.

•

We are highly dependent on the services of our senior management and other key employees and, if we are unable to attract, integrate and retain a sufficient number of qualified employees, our ability to design and commercialize our technologies and products, offer our services, operate our business and compete could be harmed.

•

If we fail to maintain and strengthen effective systems of disclosure controls and procedures and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected.

•

We have been and may in the future be subject to risks associated with strategic relationships, acquisitions or transactions and may not identify or form desired strategic relationships in the future.

•

If our manufacturing or engineering processes and services do not comply with applicable regulatory requirements, or if we manufacture or design products containing defects, demand for our services may decline and we may be subject to product or other liability claims.

•

Our business involves significant risks and uncertainties that may not be covered by indemnity or insurance.

•

We may become subject to new or changing governmental regulations relating to the design, manufacturing, development, marketing, licensing, distribution or use of our technology and products or to the providing of customer service or in connection with the entry into certain transactions with foreign entities, and a failure to comply with such regulations could lead to delays in launching our products and/or withdrawal of our products from the market, delay our projected revenues, increase costs and/or make our business unviable.