Zacks Investment Research has recently initiated coverage of Palladyne AI Corp. (PDYN) with a Neutral recommendation, reflecting a balanced view of the company’s emerging opportunities and ongoing operational challenges. Palladyne AI, headquartered in Salt Lake City, UT, is developing edge-based artificial intelligence software that enables drones and robotic systems to operate autonomously without relying on centralized infrastructure, a technology that has drawn attention in both defense and industrial se ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 001-39897 Palladyne AI Corp. (Exact Name of Registrant as Specified in its Charter) Delaware 85-2838301 (State or oth ...

Financial Performance - The company incurred a net loss of $115.6 million for the year ended December 31, 2023, and a net loss of $72.6 million for the year ended December 31, 2024, with an accumulated deficit of $490.8 million as of December 31, 2024[87]. - The net loss for 2024 was $72.617 million, compared to a net loss of $115.593 million in 2023, reflecting an improvement of about 37%[344]. - The company reported a loss from operations of $(26.923) million for 2024, a significant reduction from $(120.956) million in 2023[344]. - The accumulated deficit as of December 31, 2024, was approximately $490.831 million, compared to $418.214 million at the end of 2023[353]. - Total operating expenses for 2024 were $34.709 million, significantly reduced from $127.102 million in 2023, indicating a decrease of approximately 73%[344]. - Cash flows from operating activities showed a net cash used of $22.627 million in 2024, compared to $76.620 million in 2023, indicating a substantial decrease in cash outflow[350]. Revenue and Customer Base - The company has no commercial customers as of the report date, despite having revenue-generating contracts with U.S. government customers related to its AI/ML Foundational Technology[101]. - The anticipated revenues are expected to be primarily derived from licensing AI/ML software products, with a need to enhance products and grow the customer base to diversify revenue[99]. - Revenue concentration was high, with two customers accounting for 98% of total revenue in 2024, compared to five customers accounting for 85% in 2023[365]. Cash Flow and Capital Needs - Negative cash flow from operating activities was $76.6 million for the year ended December 31, 2023, and $22.6 million for the year ended December 31, 2024, with expectations of continued negative cash flow in the foreseeable future[91]. - The company believes it has sufficient capital to fund its business for at least the next 12 months but may seek additional financing to bolster cash reserves and pursue business objectives[149]. - The company may need to raise additional capital through equity or debt securities, which could dilute existing shareholders or impose operational restrictions[148]. Operational Challenges - The company expects to incur significant losses for the foreseeable future due to ongoing research and development, sales and marketing, and general administrative expenses[88]. - The company has begun initial customer testing for its Palladyne IQ product in June 2024, but customer testing may take longer than anticipated, potentially leading to longer sales cycles[103]. - The commercialization of AI/ML Foundational Technology may face delays, affecting product availability and customer acquisition[94]. - The company anticipates that product development delays may occur due to the complexity of its software and the need for ongoing testing and debugging[123]. Market and Competitive Landscape - The market demand for the company's AI/ML software products is unproven, and assumptions about pricing and adoption rates may be inaccurate[112]. - The company operates in a competitive industry with rapid technological changes, and its products may not remain competitive against alternatives[117]. - The company recognizes that large businesses may have competitive internal solutions, which could impact its ability to secure contracts and generate revenue[115]. Regulatory and Compliance Risks - The European Union's AI Act, effective by August 2, 2026, may impose regulatory obligations that could require changes in the company's use of AI technologies[174]. - Noncompliance with the AI Act could result in fines of up to €35 million or 7% of annual global turnover, whichever is higher[174]. - The company is subject to evolving data privacy and security laws, and failure to comply could lead to significant fines and harm to reputation[182]. - Compliance with the Department of Defense's cybersecurity requirements, including the CMMC program, is necessary to compete for contracts, with full compliance expected by 2026[183]. Human Resources and Management - The company is highly dependent on key personnel, and the unexpected loss of senior management could adversely affect product development and business operations[154]. - The company may face challenges in attracting and retaining qualified personnel, particularly in the AI/ML software field, due to intense competition[157]. - The company has closed its facility in Pittsburgh, which may hinder its ability to attract skilled employees in that location[158]. Strategic Direction and Future Outlook - The company pivoted its business focus in November 2023 to prioritize the development and commercialization of its AI/ML Foundational Technology, moving away from hardware products[138]. - The company plans to continue focusing on the development of its AI/ML foundational technology to enhance its product offerings and market presence[356]. - Strategic business relationships are expected to be crucial for growth, but the company may face challenges in identifying and securing suitable opportunities[171]. Financial Instruments and Market Conditions - The company has faced volatility in its publicly traded securities, which may continue to fluctuate significantly due to various factors beyond its control[224]. - The company has received notices of non-compliance with Nasdaq's continued listing requirements in the past, which could lead to potential delisting and impair liquidity[227]. - Current capital market conditions have increased borrowing rates, significantly raising the cost of capital compared to prior periods[150].

Palladyne AI Corp. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 20, 2025 (Exact name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation) Delaware 001-39897 85-2838301 (Commission File Number) (IRS Employer Identification No.) 650 South 500 West, Suite 150 Salt Lake City, Utah 84101 (Address o ...

AI: From Large Language Models to RoboticsMost Wall Street investors, even casual ones, are probably familiar with artificial intelligence’s impact on the market. Think back to the heat of the 2022 bear market, and you’ll recall that stocks were in a debilitating downtrend, inflation was at 40-year highs, the Fed was hiking rates, and investors were unsure where the growth would come from to fuel the next bull market. However, tech stocks, the most beaten-down market area, began to furiously rebound off the ...

Core Viewpoint - The rise of autonomous drone stocks, particularly Red Cat and Palladyne AI, is driven by recent military contracts and technological advancements, leading to significant stock price increases of 268% and 503% respectively over the past three months as of January 2 [1] Group 1: Red Cat - Red Cat has experienced a substantial stock surge due to multiple military contracts, including a $2.5 million deal with NATO members and approximately $4.5 million in awards from the U.S. government [2] - The company's stock skyrocketed after being selected by the U.S. Army for the Short-Range Reconnaissance (SRR) Program, requiring the production of nearly 1,200 drones annually to meet a five-year target of 5,880 systems [3] - Red Cat is projecting $100 million in revenue for calendar year 2025, which is over six times its revenue from the last 12 months, indicating a significant operational challenge [3] - The company is collaborating with Palantir to utilize its Visual Navigation software in drones, enhancing navigation capabilities in electronic warfare environments [4] - Red Cat will also implement Palantir's Warp Speed manufacturing software to optimize production and improve margins, which is crucial for meeting its ambitious production goals [5] Group 2: Palladyne AI - Palladyne AI's stock has surged following the announcement of the SRR deal with Red Cat, as the two companies expanded their partnership [6] - The integration of Palladyne's Pilot AI software into Red Cat's drones enhances their autonomous capabilities, allowing for persistent detection and tracking of objects of interest [6] - The software facilitates shared situational awareness among drones, improving resource allocation and data collection efficiency [7] - Palladyne demonstrated its technology's effectiveness with a successful autonomous flight that tracked and followed a target, further boosting investor confidence [8] Group 3: Future Outlook - Both Red Cat and Palladyne AI's future prospects heavily depend on the successful execution of the SRR deal, which is critical for justifying their increased valuations [9] - Red Cat is seeking to raise capital to support its production needs, with plans to pursue Department of Defense loans as a preferable option to issuing new shares [9]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 001-39897 Palladyne AI Corp. (Exact Name of Registrant as Specified in its Charter) Delaware 85-2838301 (State or ...

Revenue and Financial Performance - The Company generated $0.2 million and $0.9 million in revenue from international customers during the three and six months ended June 30, 2023, respectively, indicating a strong reliance on U.S. customers[74]. - Revenue for the three months ended June 30, 2024, increased by $1.4 million, or 112%, to $2.7 million compared to $1.3 million for the same period in 2023[95]. - Revenue for the six months ended June 30, 2024, increased by $2.6 million, or 72%, to $6.2 million compared to $3.6 million for the same period in 2023[107]. - Product revenue for the six months ended June 30, 2024, increased significantly by $2.6 million, or 85,200%, from $3 in 2023[109]. - Other income decreased by $2.4 million to $588,000 for the six months ended June 30, 2024, primarily due to a 64% decline in interest income from investments in marketable securities[117]. Operating Expenses and Cost Management - Total operating expenses decreased by $22.7 million, or 73%, from $31.2 million in Q2 2023 to $8.5 million in Q2 2024[99]. - Research and development expenses dropped by $9.4 million, or 80%, from $11.7 million in Q2 2023 to $2.3 million in Q2 2024, primarily due to reduced labor costs[101]. - General and administrative expenses decreased by $4.0 million, or 48%, from $8.3 million in Q2 2023 to $4.3 million in Q2 2024[102]. - Sales and marketing expenses fell by $3.0 million, or 69%, from $4.4 million in Q2 2023 to $1.4 million in Q2 2024[103]. - Total operating expenses for the six months ended June 30, 2024, decreased by $37.4 million, or 66%, from $56.7 million in 2023 to $19.3 million[110]. - Cost of revenue for the six months ended June 30, 2024, decreased by $0.3 million, or 10%, from $2.7 million in 2023 to $2.5 million[111]. Product Development and Market Strategy - The Company is developing two products: Palladyne IQ for stationary industrial robots and Palladyne Pilot for mobile robotic platforms, with expected commercial launches in the second half of 2024 and first quarter of 2025, respectively[83][84]. - Customer trials for Palladyne IQ began in June 2024, with ongoing trials expected to continue throughout the second half of 2024, aiming to generate revenue from commercial customers in 2025[83]. - The Company expects to derive commercial licensing revenues from its products starting in 2025, with ongoing commercialization efforts and customer trials throughout 2024[89]. - The market demand for AI/ML platforms remains unproven, and the Company is dependent on customer adoption and implementation of new technologies[92]. - The AI/ML Software Platform is expected to enable robotic systems to perform tasks in dynamic environments, enhancing productivity and reducing downtime[80]. Liquidity and Financing - The Company believes it has sufficient liquidity to operate for at least the next twelve months without raising additional capital, but may seek financing to bolster cash reserves[91]. - Cash, cash equivalents, and marketable securities totaled $25.8 million as of June 30, 2024, expected to support operations for at least the next 12 months[120]. - The company may need to seek additional financing if cash reserves are insufficient to support working capital or acquisitions[122]. - The company plans to monitor liquidity and may opportunistically raise capital when market conditions are favorable[123]. Government Contracts and Development Milestones - The Company has met all development milestones for U.S. government contracts related to its AI/ML Software Platform and products, recognizing revenue based on completed work[85]. Tax and Accounting - The effective tax rate for the six months ended June 30, 2024, was impacted by net losses and a full valuation allowance on deferred tax assets[118]. - The company is classified as an emerging growth company and has elected to take advantage of the extended transition period for new accounting standards[130]. Other Financial Metrics - Net cash used in operating activities decreased by 67% to $13.0 million for the six months ended June 30, 2024, driven by a $37.6 million decrease in net loss[126]. - Net cash provided by investing activities decreased by $14.7 million, primarily due to a reduction in maturities of marketable securities[127]. - The backlog as of June 30, 2024, was $1.5 million, with $0.4 million funded and $1.1 million unfunded, while the total estimated contract value was $11.4 million[119]. - The company recorded a 4,500% loss on warrant liability, resulting in a loss of $132,000 for the six months ended June 30, 2024[117].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Delaware 001-39897 85-2838301 (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share PDYN The Nasdaq Stock Market LLC Redeemable warrants, exercisable for shares of Common Stock at an exercise price of $69.0 ...

Financial Performance - For the three months ended March 31, 2024, net revenue was $3,441,000, representing a 50% increase from $2,296,000 in the same period of 2023[93] - Revenue increased by $1.1 million, or 50%, from $2.3 million for the three months ended March 31, 2023, to $3.4 million for the three months ended March 31, 2024[94] - Product development contract revenue decreased by 62% from $2,296,000 in Q1 2023 to $882,000 in Q1 2024[93] - Product development contract revenue decreased by $1.4 million, or 62%, from $2.3 million for the three months ended March 31, 2023, to $0.9 million for the three months ended March 31, 2024[95] - Total operating expenses decreased by $14.7 million, or 58%, from $25.5 million for the three months ended March 31, 2023, to $10.8 million for the three months ended March 31, 2024[97] - Research and development expense decreased by $6.5 million, or 69%, from $9.4 million for the three months ended March 31, 2023, to $2.9 million for the three months ended March 31, 2024[99] - General and administrative expense decreased by $4.6 million, or 47%, from $9.7 million for the three months ended March 31, 2023, to $5.1 million for the three months ended March 31, 2024[100] - Net cash used in operating activities decreased by $12.9 million to $7.2 million from $20.1 million during the same period in 2023[111] - As of March 31, 2024, the company had $31.8 million in cash, cash equivalents, and marketable securities[105] - Other income decreased by $1.6 million for the three months ended March 31, 2024, primarily due to decreased interest income from investments in marketable securities[102] Operational Changes - The company has implemented reductions in force in July and November 2023 to conserve cash resources and manage operating expenses[88] - The majority of cash payments related to the July 2023 RIF were made in Q3 2023, while payments for the November 2023 RIF were completed in early 2024[88] - The company believes it has sufficient liquidity to operate for at least the next twelve months without needing additional capital[88] Product Development - The AI/ML Software Platform is expected to be ready for initial customer testing by June 2024, with revenue generation anticipated to begin in 2025[84] - The AI/ML Software Platform is designed to be hardware agnostic, compatible with most industrial robots, and aims to enhance robotic systems' adaptability in dynamic environments[84] - The company is focusing on the development of its AI/ML Software Platform, suspending the commercialization of hardware products due to limited resources[85] Market Conditions - Customer demand for AI/ML platforms is evolving, and the company is dependent on customers adopting new technologies[89] - Geopolitical and macroeconomic factors, such as inflation and international conflicts, may significantly impact the company's business and operating results[92] Backlog and Contracts - The backlog as of March 31, 2024, was $4.2 million, with $2.8 million funded and $1.4 million unfunded[104] - Total estimated contract value, including backlog and estimated potential contract value, was $14.1 million as of March 31, 2024[104] Compliance and Controls - The company is classified as a smaller reporting company and is not required to provide certain disclosures under the Exchange Act[119] - Disclosure controls and procedures were evaluated by the Certifying Officers and deemed effective as of March 31, 2024[119] - There were no changes in internal control over financial reporting during the fiscal quarter ended March 31, 2024, that materially affected internal controls[121] - The company is not currently involved in any legal proceedings that could materially impact its business or financial condition[122]