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]

PART I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Sarcos pivots to an AI/ML Software Platform for third-party robots, enabling 'on the edge' learning and adaptation - Sarcos' mission is to deliver **AI/ML software** that enhances third-party stationary and mobile robotic systems, enabling them to **observe, learn, reason, and act** in diverse environments without extensive programming[22](index=22&type=chunk) - In **November 2023**, Sarcos **suspended hardware product development** to focus on commercializing its **AI/ML Software Platform**, aiming for a broader market reach and better cash resource utilization[23](index=23&type=chunk)[76](index=76&type=chunk) - The AI/ML Software Platform is designed to be **hardware agnostic**, compatible with most industrial robots, and capable of real-time, **'on the edge' decision-making**, reducing reliance on continuous cloud connectivity and associated costs[24](index=24&type=chunk)[33](index=33&type=chunk) [Overview](index=8&type=section&id=Overview) Sarcos is shifting its focus to an AI/ML Software Platform for robotic systems, suspending most hardware development - Sarcos' AI/ML Software Platform is designed to enable robotic systems to perceive, adapt, and learn from experience in real-time, **'on the edge,'** reducing reliance on cloud connectivity and extensive programming[22](index=22&type=chunk) - The company pivoted in **November 2023** to focus on commercializing its AI/ML Software Platform, suspending most hardware development to target a broader market and optimize cash resources[23](index=23&type=chunk) [Industry Background](index=9&type=section&id=Industry%20Background) Traditional industrial robots face limitations in dynamic environments, while current AI solutions incur high cloud costs - Traditional industrial robots are typically fixed, perform repetitive tasks, and require costly, time-consuming reprogramming for dynamic environments or production changes[27](index=27&type=chunk)[28](index=28&type=chunk) - Current AI solutions for dynamic environments often rely on extensive cloud-based databases and LLMs, leading to increased costs and latency due to persistent connectivity requirements[29](index=29&type=chunk) [Our Solution](index=9&type=section&id=Our%20Solution) Sarcos' AI/ML Software Platform enables industrial robots to learn, reason, and make real-time decisions 'on the edge' - Sarcos' AI/ML Software Platform aims to enable industrial robots to be quickly programmed/reprogrammed, observe and assess environments, learn tasks with minimal data, reason dynamically, and make real-time decisions **'on the edge'** without cloud dependency[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The platform's **'on the edge' operation** and **closed-loop autonomy** are key differentiators, allowing robots to adapt to new circumstances efficiently and fuse multi-sensor data for improved situational awareness[33](index=33&type=chunk) [The AI/ML Software Platform](index=10&type=section&id=The%20AI%2FML%20Software%20Platform) The AI/ML Software Platform enables robots to observe, learn from demonstrations, reason, and act adaptively in real-time - The AI/ML Software Platform enables robots to observe (using various sensors), learn (from **1-5 human demonstrations**, creating a 'Task Library'), reason (using probabilistic ML), and act (adapting in real-time to complete tasks despite disruptions)[35](index=35&type=chunk)[36](index=36&type=chunk) - The platform will be provided with baseline edge computing and training hardware, including a controller, sensor package, and human/machine interface, alongside a cloud-based customer portal for software management and support[38](index=38&type=chunk)[39](index=39&type=chunk) [Market Opportunity](index=11&type=section&id=Market%20Opportunity) The AI/ML software market for industrial robotics is growing, offering Sarcos opportunities to augment existing solutions - The market for AI/ML software in industrial robotics is expected to grow significantly, driven by the need for more efficient and flexible manufacturing processes[40](index=40&type=chunk) - Sarcos' AI/ML Software Platform is expected to augment existing robotic hardware and AI solutions from companies like ABB, Fanuc, and KUKA, and has potential applicability in cobots, UAV, ROV, and UGV markets[41](index=41&type=chunk)[42](index=42&type=chunk) - Initial target customers include innovators and early adopters in industrial manufacturing, warehousing, logistics, defense, infrastructure maintenance, energy, and aerospace/aviation[43](index=43&type=chunk) [Commercialization & Growth Strategy](index=12&type=section&id=Commercialization%20%26%20Growth%20Strategy) Sarcos plans to offer its AI/ML Software Platform in packages, pursue R&D, and collaborate with development customers - Sarcos plans to offer its AI/ML Software Platform in packages, with or without teleoperation devices, and will continue R&D to improve the platform and develop additional functionalities[44](index=44&type=chunk)[45](index=45&type=chunk) - The company intends to collaborate with development customers to validate the platform's benefits, fund development, and build relationships, accelerating brand awareness and product refinement[46](index=46&type=chunk)[47](index=47&type=chunk) [Competitive Strengths](index=13&type=section&id=Competitive%20Strengths) Sarcos leverages extensive robotics experience, R&D investment, early customer engagements, and an experienced management team - Sarcos leverages over **30 years of robotics experience** and significant R&D investment, including previous innovations in hardware and related software, to develop its hardware-agnostic AI/ML Software Platform[48](index=48&type=chunk)[49](index=49&type=chunk) - The company benefits from early customer engagements and an experienced management team, including CEO Benjamin Wolff and CTO Dr. Denis Garagic (**25+ years in AI/ML**), to drive its commercialization efforts[50](index=50&type=chunk)[51](index=51&type=chunk) [Competition](index=13&type=section&id=Competition) Sarcos competes with automation software companies and faces potential competition from industrial robotics manufacturers - Sarcos competes with companies focused on automation-enhancing software capabilities, such as Bright Machines, C3.ai, and Dexterity, many of whom have commercially available products or significant resources[52](index=52&type=chunk)[54](index=54&type=chunk)[56](index=56&type=chunk) - Industrial robotics manufacturers and system integrators (e.g., Fanuc, KUKA) are potential customers/partners but could also become formidable competitors through internal development or acquisitions[53](index=53&type=chunk) [Customers and Partners](index=14&type=section&id=Customers%20and%20Partners) Historically, Sarcos served development customers like the U.S. Department of Defense, and anticipates initial commercial customers in various industrial sectors - Historically, Sarcos' customers have been development customers, including the U.S. Department of Defense, which contributed to the AI/ML Software Platform's development[57](index=57&type=chunk) - The company currently has no commercial customers for its AI/ML Software Platform but anticipates initial customers in industrial manufacturing, warehousing, logistics, defense, and other sectors[57](index=57&type=chunk) [Intellectual Property](index=14&type=section&id=Intellectual%20Property) Sarcos protects its IP through various means but is culling its patent portfolio to reduce costs and focus on essential assets - Sarcos protects its intellectual property through patents, copyrights, trade secrets, trademarks, and non-disclosure agreements[58](index=58&type=chunk) - The company is seeking patent protection for its AI/ML Software Platform but is also culling its extensive patent portfolio to reduce maintenance costs and focus on essential assets[59](index=59&type=chunk) [Sales and Marketing](index=14&type=section&id=Sales%20and%20Marketing) Sarcos is engaging potential customers, leveraging existing relationships, and plans to invest in sales and marketing for its licensing model - Sarcos is actively engaging potential customers for its AI/ML Software Platform, leveraging existing relationships from previous hardware efforts, and plans to invest in sales and marketing[61](index=61&type=chunk) - The company intends to pursue strategic relationships with system integrators, technology partners, distributors, and consulting firms to expand market reach and customer base[62](index=62&type=chunk) - The AI/ML Software Platform is expected to be offered through a term-based licensing model for recurring revenue, with potential add-on functionalities and upfront fees for teleoperation devices[64](index=64&type=chunk) [Suppliers](index=15&type=section&id=Suppliers) Sarcos relies on a limited set of U.S.-based, single or sole-source suppliers for minimal hardware components, posing supply chain risks - Sarcos relies on a limited set of U.S.-based suppliers for minimal hardware components, some of which are sole or single-source, posing supply chain risks[65](index=65&type=chunk) [Government Regulation](index=15&type=section&id=Government%20Regulation) Sarcos is subject to various U.S. federal, state, and local laws, including occupational health and safety, export controls, and government procurement regulations - Sarcos is subject to various U.S. federal, state, and local laws, including occupational health and safety, export controls, FCC rules for sensors, and government procurement regulations (FAR, DFARS)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) [Legal Proceedings](index=16&type=section&id=Legal%20Proceedings) Sarcos is not currently involved in any legal proceedings expected to materially adversely affect its business or financial condition - Sarcos is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations[71](index=71&type=chunk) [Human Capital](index=16&type=section&id=Human%20Capital) Sarcos conducted significant workforce reductions in 2023 due to its strategic pivot, with approximately 70 employees as of February 2024 - Sarcos conducted two reductions in force (RIFs) in 2023, affecting approximately **24% (July)** and **70% (November)** of its workforce, as a result of shifting its strategy to focus on the AI/ML Software Platform[72](index=72&type=chunk) - As of **February 1, 2024**, the company had approximately **70 full-time and part-time employees**, with about **65% in engineering functions**[73](index=73&type=chunk) [Facilities](index=16&type=section&id=Facilities) Sarcos operates a primary corporate and manufacturing facility in Salt Lake City, Utah, and is winding down its Pittsburgh office - Sarcos operates a primary corporate and manufacturing facility in Salt Lake City, Utah (**61,000 sq ft**, lease expires **May 2033**) and is winding down operations in its Pittsburgh, Pennsylvania office[74](index=74&type=chunk) [History, Corporate Information and Website](index=16&type=section&id=History%2C%20Corporate%20Information%20and%20Website) Sarcos has a long history in robotics, including acquisitions and a recent strategic pivot to AI/ML software in November 2023 - Sarcos originated from a University of Utah spin-out in **1983**, was acquired by Raytheon in **2007**, and re-established as Sarcos Corp. in **2014**. It merged with Rotor Acquisition Corp. in **2021** and acquired RE2, Inc. in **2022**[75](index=75&type=chunk) - On **November 14, 2023**, the company announced a strategic pivot to prioritize its commercial AI/ML Software Platform and suspend hardware commercialization efforts[76](index=76&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Sarcos faces significant risks as an early-stage company with a history of losses and uncertain software commercialization - Sarcos is an early-stage company with a history of significant net losses (**$115.6 million in 2023**, **$157.1 million in 2022**) and expects to incur further losses, with profitability dependent on successful AI/ML Software Platform commercialization and cost reduction[82](index=82&type=chunk)[84](index=84&type=chunk) - The company's pivot to AI/ML software, after unsuccessful hardware commercialization, is a complex, long-term initiative with uncertain market acceptance and potential delays due to hiring challenges, increased costs, and lack of prior software commercialization experience[86](index=86&type=chunk)[87](index=87&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk) - Key risks include potential software defects leading to property damage or injury, dependence on single/sole source hardware suppliers, intense competition in a rapidly changing industry, and the need for significant capital that may dilute stockholders[130](index=130&type=chunk)[152](index=152&type=chunk)[119](index=119&type=chunk)[158](index=158&type=chunk) - The company faces cybersecurity risks, evolving data privacy regulations (e.g., CCPA, GDPR), and legal liabilities as a government contractor, alongside challenges in protecting its intellectual property in a complex technological landscape[205](index=205&type=chunk)[201](index=201&type=chunk)[213](index=213&type=chunk)[225](index=225&type=chunk) - The price of Sarcos' Common Stock has been volatile and may decline due to factors like fluctuating financial results, market expectations, and potential delisting from Nasdaq if minimum bid price or market value requirements are not met[248](index=248&type=chunk)[249](index=249&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) [Summary Risk Factors](index=4&type=section&id=Summary%20Risk%20Factors) Sarcos faces risks as an early-stage company with a history of losses, unproven software commercialization, and intense competition - Sarcos is an early-stage company with a history of losses and expects significant future losses, having suspended hardware development due to limited resources and misestimated commercialization costs[4](index=4&type=chunk)[5](index=5&type=chunk) - The company has no prior experience commercializing software products, and the AI/ML Software Platform's commercialization may be delayed, with anticipated revenues primarily derived from its licensing[6](index=6&type=chunk)[7](index=7&type=chunk) - Key risks include potential failure to attract customers, inaccurate market demand assumptions, dependence on single-source hardware suppliers, intense competition, and the possibility of product flaws or reputational harm[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Risks Related to Our Business and Industry](index=18&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Sarcos faces risks from its history of losses, unproven software commercialization, and intense competition in a rapidly changing industry - Sarcos has a history of losses, including **$115.6 million in 2023** and **$157.1 million in 2022**, and expects continued operating and net losses as it develops and commercializes its AI/ML Software Platform[82](index=82&type=chunk)[84](index=84&type=chunk) - The company's pivot to AI/ML software, after unsuccessful hardware commercialization, is a complex, long-term initiative with uncertain market acceptance and potential delays due to hiring challenges and increased costs[86](index=86&type=chunk)[87](index=87&type=chunk)[95](index=95&type=chunk) - Sarcos has no prior experience commercializing software products and faces risks that its AI/ML Software Platform may not meet customer expectations, leading to delayed or no revenue, and potential reputational harm from development issues[92](index=92&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - The company operates in a rapidly changing and competitive AI/ML and robotics industry, with risks that its products may not keep pace with technological advancements or compete effectively against well-resourced competitors[119](index=119&type=chunk)[120](index=120&type=chunk)[124](index=124&type=chunk) [Risks Related to Our Operations & Growth](index=25&type=section&id=Risks%20Related%20to%20Our%20Operations%20%26%20Growth) Operational risks include software defects, open-source software use, reputational harm, dependence on key personnel, and single-source suppliers - Defects, connectivity issues, or user errors in the AI/ML Software Platform could lead to lower customer ROI, property damage, personal injury, and significant safety concerns, adversely affecting operations and reputation[130](index=130&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - The use of 'open source' software in the AI/ML platform could negatively impact commercialization, potentially requiring the release of proprietary source code or leading to costly litigation[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - Sarcos' brand and reputation could be harmed by negative publicity, especially given past unsuccessful hardware commercialization, and the company plans a costly re-branding effort[141](index=141&type=chunk)[142](index=142&type=chunk) - The company is highly dependent on its senior management and key employees, particularly its CTO, Dr. Denis Garagic, for AI/ML Software Platform development, and their loss could severely harm the business[168](index=168&type=chunk)[169](index=169&type=chunk) - Sarcos relies on a limited set of single or sole-source suppliers for minimal hardware components, posing risks of supply chain disruptions, increased costs, and inability to meet product specifications[152](index=152&type=chunk)[153](index=153&type=chunk) [Risks Related to Our Finances](index=29&type=section&id=Risks%20Related%20to%20Our%20Finances) Sarcos' financial risks include significant capital needs, potential equity dilution, and volatile financial results due to workforce reductions - Sarcos' business plans require significant capital, and while it believes it has sufficient funds for **12 months**, additional financing may be needed, potentially leading to equity dilution or restrictive debt covenants[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) - Recent workforce reductions (RIFs) in **July and November 2023**, affecting **24%** and **70%** of staff respectively, aim to improve cost structure but may not yield anticipated savings, could incur higher-than-expected costs, and disrupt business operations[164](index=164&type=chunk)[165](index=165&type=chunk) - The company's financial results are expected to vary significantly period-to-period due to fluctuations in operating costs, revenue from development contracts, and product demand, making quarter-to-quarter comparisons unreliable[166](index=166&type=chunk)[167](index=167&type=chunk) [Risks Related to Claims, Legal and Regulatory Compliance](index=31&type=section&id=Risks%20Related%20to%20Claims%2C%20Legal%20and%20Regulatory%20Compliance) Sarcos faces risks from evolving AI/ML regulations, data privacy laws, cybersecurity threats, and government contract compliance - The evolving regulatory landscape for AI/ML technologies, including new laws like the EU AI Act and U.S. Executive Orders, could impose onerous obligations, increase costs, limit functionality, and expose Sarcos to litigation or reputational harm[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Sarcos is subject to various U.S. and international laws and regulations, including data privacy (CCPA, GDPR), cybersecurity, export controls, and anti-corruption laws, with non-compliance potentially leading to significant fines, penalties, and business disruption[194](index=194&type=chunk)[195](index=195&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - As a government contractor, Sarcos faces increased risks from audits, investigations, and potential termination of contracts for non-compliance with specific government procurement laws and regulations[213](index=213&type=chunk)[214](index=214&type=chunk) - Cybersecurity risks, including sophisticated attacks, data breaches, and system outages, could disrupt operations, lead to loss of intellectual property or sensitive data, harm reputation, and result in significant legal and financial exposure[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[212](index=212&type=chunk) [Risks Related to Our Intellectual Property](index=41&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Sarcos' success depends on IP protection, but patent litigation is costly, foreign protection is difficult, and government funding may limit rights - Sarcos' success depends on its ability to obtain and maintain intellectual property protection (patents, trademarks, trade secrets), which is challenging due to the complex and evolving nature of robotics software and AI[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Patent litigation is costly and uncertain, potentially leading to invalidation or narrow interpretation of patents, and the company plans to reduce resources on new patent filings and maintenance to cut operational expenses[227](index=227&type=chunk)[228](index=228&type=chunk) - Protecting IP in foreign markets is expensive and difficult, especially in countries with weaker IP laws, potentially allowing competitors to use Sarcos' technologies without authorization[233](index=233&type=chunk) - Intellectual property developed with U.S. government funding may be subject to 'march-in' rights, reporting requirements, and a preference for U.S.-based manufacturing, potentially limiting exclusive rights and manufacturing options[241](index=241&type=chunk)[242](index=242&type=chunk) [Risks Related to Ownership of our Securities](index=44&type=section&id=Risks%20Related%20to%20Ownership%20of%20our%20Securities) Sarcos' stock price faces volatility, potential delisting from Nasdaq, and warrant expiration risks - The price of Sarcos' Common Stock could decline due to large sales from employee equity awards, especially during concentrated vesting periods or 'sell-to-cover' transactions for tax obligations[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - The markets for Sarcos' Common Stock and Warrants have been volatile and may continue to fluctuate significantly due to various factors, including financial results, market expectations, competition, and changes in laws[248](index=248&type=chunk)[249](index=249&type=chunk) - Sarcos' Common Stock is likely to be delisted from The Nasdaq Global Market due to non-compliance with minimum bid price (**$1.00**) and market value (**$15 million**) requirements, which would impair liquidity and reduce investor interest[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk)[256](index=256&type=chunk) - Warrants may expire worthless as their exercise price (**$11.50 per share**, adjusted **1-for-6** for reverse stock split) is higher than typical, and Sarcos may redeem unexpired warrants at a disadvantageous time for holders[260](index=260&type=chunk)[261](index=261&type=chunk) [Item 1B. Unresolved Staff Comments](index=52&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) Sarcos Technology and Robotics Corporation has no unresolved staff comments from the SEC - The company has no unresolved staff comments[276](index=276&type=chunk) [Item 1C. Cybersecurity](index=52&type=section&id=Item%201C.%20Cybersecurity) Sarcos maintains a risk-based cybersecurity program, led by its VP of Information Systems, with external audits and no material incidents to date - Sarcos implements a risk-based cybersecurity program aligned with industry standards, including technical, administrative, and physical controls like encryption, firewalls, and anti-virus systems[277](index=277&type=chunk) - The Vice President of Information Systems leads the IT team, reports directly to the CEO, and provides regular cybersecurity updates to the Audit Committee of the Board of Directors[277](index=277&type=chunk) - Sarcos engages external cybersecurity experts for audits, threat assessments, and consultations, and has established processes for overseeing third-party service provider risks, including ongoing monitoring[277](index=277&type=chunk)[278](index=278&type=chunk) - To date, Sarcos has not encountered cybersecurity challenges that have materially impaired its business strategy, results of operations, or financial condition[279](index=279&type=chunk) [Item 2. Properties](index=52&type=section&id=Item%202.%20Properties) Sarcos' primary corporate and manufacturing facility is a 61,000 square foot leased space in Salt Lake City, Utah, expiring in May 2033 - Sarcos' primary facility is a **61,000 square foot** leased corporate and manufacturing space in Salt Lake City, Utah[280](index=280&type=chunk) - The lease for the Salt Lake City facility expires in **May 2033** and includes two options for three-year extensions[280](index=280&type=chunk) [Item 3. Legal Proceedings](index=52&type=section&id=Item%203.%20Legal%20Proceedings) Sarcos is not currently involved in any material legal proceedings, though litigation can negatively impact the company - Sarcos is not currently a party to or aware of any legal proceedings that are believed to have a material adverse effect on its business, financial condition, or results of operations[281](index=281&type=chunk) - Litigation can adversely impact the company due to defense and settlement costs, as well as the diversion of management resources[281](index=281&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Sarcos Technology and Robotics Corporation - This item is not applicable[282](index=282&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=53&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Sarcos' Common Stock and Warrants trade on Nasdaq, with no anticipated cash dividends as earnings are retained for growth - Sarcos' Common Stock and Warrants are traded on The Nasdaq Stock Market under symbols **"STRC"** and **"STRCW"**[283](index=283&type=chunk) - As of **February 14, 2024**, there were **429 stockholders of record** for Common Stock and **29 for warrants**[283](index=283&type=chunk) - The company intends to retain all available funds and future earnings for business growth and does not plan to pay cash dividends in the foreseeable future[284](index=284&type=chunk) [Item 6. [Reserved]](index=53&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sarcos transitions to AI/ML software, optimizing cash and accelerating licensing revenue, reporting a **$115.6 million net loss** in 2023 - Sarcos' mission is to deliver AI/ML software to enhance third-party robotic systems, enabling them to observe, learn, reason, and act in structured and unstructured environments[286](index=286&type=chunk) - In **November 2023**, Sarcos suspended hardware product development to focus on commercializing its AI/ML Software Platform, optimizing its organization and reducing costs through recent RIFs and consolidating operations to Salt Lake City[287](index=287&type=chunk)[289](index=289&type=chunk) - The company's future success depends on the development, testing, and commercial launch of its AI/ML Software Platform, securing financing, generating customer demand, and continuous innovation in a volatile geopolitical and macroeconomic environment[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Overview](index=54&type=section&id=Overview) Sarcos is focusing on its AI/ML Software Platform, suspending hardware development to optimize cash and consolidate operations - Sarcos is focusing on its AI/ML Software Platform to enhance third-party robotic systems, enabling them to learn and adapt in real-time **'on the edge'** without continuous cloud connectivity[286](index=286&type=chunk) - The company suspended hardware development in **November 2023** to prioritize AI/ML software commercialization, aiming for a broader market and efficient use of cash resources[287](index=287&type=chunk) - This strategic shift includes optimizing the organization, reducing costs through RIFs, and consolidating operations to Salt Lake City, Utah[289](index=289&type=chunk) [Key Factors Affecting Operating Results](index=55&type=section&id=Key%20Factors%20Affecting%20Operating%20Results) Sarcos' future success depends on its AI/ML Software Platform's development, market acceptance, financing, and cost management - Sarcos' future success hinges on the timely and successful development, testing, and commercial launch of its AI/ML Software Platform, which is currently in its development phase[291](index=291&type=chunk) - The company relies on existing cash and may seek additional financing to fund operations and product development, with recent RIFs (**July and November 2023**) aimed at conserving cash and managing expenses[292](index=292&type=chunk) - Customer demand for the unproven AI/ML Software Platform is critical, and the company's financial performance is dependent on its ability to innovate, respond to evolving customer needs, and manage geopolitical and macroeconomic factors[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Basis of Presentation](index=56&type=section&id=Basis%20of%20Presentation) Sarcos operates as a single segment, with all long-lived assets and losses attributable to the United States - Sarcos conducts business through a single operating segment, with all long-lived assets and losses attributable to the United States[296](index=296&type=chunk) [Components of Results of Operations](index=56&type=section&id=Components%20of%20Results%20of%20Operations) Future revenue is expected from AI/ML Software Platform licensing, while operating expenses include R&D, G&A, and asset write-downs - Historically, revenue came from product development contracts and product sales; future revenue is expected primarily from AI/ML Software Platform licensing fees, with no licensing revenue recognized yet[297](index=297&type=chunk)[298](index=298&type=chunk) - Operating expenses include cost of revenue, R&D, G&A, sales & marketing, intangible amortization, asset write-down & restructuring, and goodwill impairment[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Other income (loss) components include interest income, gain/loss on warrant liability, and other miscellaneous non-operating items[310](index=310&type=chunk)[311](index=311&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Sarcos reported a net loss of **$115.6 million** in 2023, an improvement from **$157.1 million** in 2022, driven by reduced G&A and no goodwill impairment Revenue, Net (2023 vs. 2022) | (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)%** | - Product Development Contract Revenue decreased by **$9.0 million (63%)** due to the completion of certain contracts not yet replaced. Product Revenue increased by **$0.6 million (170%)** primarily from the sale of two Guardian Sea Class systems[315](index=315&type=chunk)[316](index=316&type=chunk) Operating Expenses (2023 vs. 2022) | (In thousands) | 2023 | 2022 | Change | % Change | |:---------------|:-----|:-----|:-------|:---------| | 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)%** | - General and administrative expenses decreased by **$32.0 million (50%)** primarily due to reduced stock-based compensation and lower legal/insurance fees. Asset write-down and restructuring expenses were **$37.9 million** in 2023, including inventory write-downs and accelerated amortization of intangibles due to product development reprioritization[320](index=320&type=chunk)[323](index=323&type=chunk) - Goodwill impairment was **$0** in 2023, down from **$70.2 million** in 2022, as goodwill was fully impaired in the prior year due to sustained decreases in share price and market capitalization[324](index=324&type=chunk) Other Income (Loss) (2023 vs. 2022) | (In thousands) | 2023 | 2022 | Change | % Change | |:---------------|:-----|:-----|:-------|:---------| | 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)%** | [Backlog and Total Estimated Contract Value](index=63&type=section&id=Backlog%20and%20Total%20Estimated%20Contract%20Value) Sarcos' backlog was **$8.1 million** as of December 31, 2023, with a total estimated contract value of **$18.1 million** - As of **December 31, 2023**, Sarcos' backlog (remaining performance obligations) was **$8.1 million**, with **$6.5 million funded** and **$1.6 million unfunded**, mostly expected to be recognized within **12 months**[327](index=327&type=chunk) - Total estimated contract value, including backlog and unexercised options, was **$18.1 million** as of **December 31, 2023**[327](index=327&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Sarcos had **$39.1 million** in cash as of December 31, 2023, sufficient for **12 months**, but future funding may be needed - As of **December 31, 2023**, Sarcos had **$39.1 million** in cash, cash equivalents, and marketable securities, which it believes is sufficient to support operations for at least the next **12 months**[328](index=328&type=chunk) - Future funding requirements depend on product development, commercialization success, and capital needs. Delays in software commercialization will negatively impact revenue and profitability, potentially requiring additional capital sooner[329](index=329&type=chunk)[330](index=330&type=chunk) - The company may opportunistically raise additional equity or debt financing, which could dilute existing stockholders or impose restrictive covenants[331](index=331&type=chunk) [Cash Flows](index=64&type=section&id=Cash%20Flows) Net cash used in operating activities increased by **$11.2 million** in 2023, while investing activities provided **$173.7 million** more cash Cash Flow Data (2023 vs. 2022) | (In thousands) | 2023 | 2022 | Change | % Change | |:---------------|:-----|:-----|:-------|:---------| | 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 increased by **$11.2 million** to **$76.6 million** in 2023, primarily due to a decrease in non-cash expenses (goodwill impairment, stock-based compensation) partially offset by a decrease in net loss[334](index=334&type=chunk) - Net cash provided by investing activities increased by **$173.7 million**, mainly due to **$65.5 million** in marketable securities maturities (net of purchases) in 2023, compared to **$77.9 million** in purchases and **$29.7 million** for the RE2 acquisition in 2022[335](index=335&type=chunk) - Net cash used in financing activities decreased by **$7.4 million**, primarily due to an **$8.0 million** decrease in funds used for tax withholdings upon equity award vesting[336](index=336&type=chunk) [Emerging Growth Company Status](index=64&type=section&id=Emerging%20Growth%20Company%20Status) Sarcos is an "emerging growth company" under the JOBS Act, allowing for an extended transition period for accounting standards - Sarcos is an **"emerging growth company" (EGC)** under the JOBS Act and has elected to use the extended transition period for new or revised financial accounting standards[337](index=337&type=chunk)[338](index=338&type=chunk) - This EGC status allows Sarcos to delay adopting certain accounting standards until private companies are required to comply, potentially making financial comparisons with non-EGCs difficult[338](index=338&type=chunk) [Critical Accounting Policies and Estimates](index=66&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies include revenue recognition for long-term contracts and stock-based compensation fair value estimation - Critical accounting policies and estimates include revenue recognition (especially for long-term product development contracts using cost-to-cost method) and stock-based compensation (fair value estimation using Black-Scholes model)[339](index=339&type=chunk)[340](index=340&type=chunk)[342](index=342&type=chunk) - Estimates for revenue recognition, such as total expected costs, are reviewed at least quarterly, and changes are recognized on a cumulative catch-up basis[340](index=340&type=chunk)[341](index=341&type=chunk) [Recent Accounting Pronouncements](index=66&type=section&id=Recent%20Accounting%20Pronouncements) Sarcos adopted ASU 2016-13 with no material impact and expects no material impact from ASU 2023-09 in 2026 - Sarcos adopted ASU 2016-13 (Financial Instruments—Credit Losses) on **January 1, 2023**, with no material impact on its financial statements[403](index=403&type=chunk) - ASU 2023-09 (Income Taxes) issued in **December 2023**, requiring improved income tax disclosures, will be effective for Sarcos in annual periods beginning **January 1, 2026**, and is not expected to have a material impact[404](index=404&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Sarcos is a smaller reporting company and is therefore not required to provide market risk disclosures - Sarcos is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[344](index=344&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Presents audited consolidated financial statements for 2023 and 2022, reflecting the AI/ML pivot and a **$115.6 million net loss** - The consolidated financial statements for Sarcos Technology and Robotics Corporation as of **December 31, 2023 and 2022**, and for the two years then ended, have been audited by Ernst & Young LLP and present fairly the financial position, results of operations, and cash flows in conformity with U.S. GAAP[346](index=346&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2023 | December 31, 2022 | |:-------|:------------------|:------------------| | Cash and cash equivalents | $23,139 | $35,159 | | Marketable securities | $15,947 | $79,337 | | Total current assets | $45,063 | $129,099 | | Total assets | $60,426 | $167,625 | | Total liabilities | $19,521 | $23,175 | | Total stockholders' equity | $40,905 | $144,450 | | Accumulated deficit | $(418,214) | $(302,621) | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:-------|:------------------------|:------------------------| | Revenue, net | $6,146 | $14,569 | | Total operating expenses | $127,102 | $191,607 | | Loss from operations | $(120,956) | $(177,038) | | Net loss | $(115,593) | $(157,130) | | Basic and diluted net loss per share | $(4.51) | $(6.42) | Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:-------|:------------------------|:------------------------| | Net cash used in operating activities | $(76,620) | $(65,391) | | Net cash provided by (used in) investing activities | $64,682 | $(109,045) | | Net cash used in financing activities | $(82) | $(7,519) | | Net decrease in cash, cash equivalents | $(12,020) | $(181,955) | [Report of Independent Registered Public Accounting Firm](index=68&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified opinion on Sarcos' 2023 and 2022 consolidated financial statements, affirming GAAP conformity - Ernst & Young LLP audited Sarcos' consolidated financial statements for **2023 and 2022**, expressing an unqualified opinion that they present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[346](index=346&type=chunk) - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement and evaluating accounting principles and estimates[348](index=348&type=chunk)[349](index=349&type=chunk) [Consolidated Balance Sheets](index=69&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet (in thousands) | Assets | Dec 31, 2023 | Dec 31, 2022 | |:-------|:-------------|:-------------| | Cash and cash equivalents | $23,139 | $35,159 | | Marketable securities | $15,947 | $79,337 | | Accounts receivable | $555 | $1,866 | | Unbilled receivables | $2,034 | $4,160 | | Inventories | $1,065 | $3,562 | | Prepaid expenses and other current assets | $2,323 | $5,015 | | **Total current assets** | **$45,063** | **$129,099** | | Property and equipment, net | $4,842 | $7,640 | | Intangible assets, net | $— | $19,116 | | Operating lease assets | $10,092 | $11,283 | | Other non-current assets | $429 | $487 | | **Total assets** | **$60,426** | **$167,625** | | Liabilities | | | | Accounts payable | $1,291 | $3,620 | | Accrued liabilities | $5,805 | $6,025 | | Current operating lease liabilities | $1,360 | $887 | | **Total current liabilities** | **$8,456** | **$10,532** | | Operating lease liabilities | $11,036 | $12,387 | | Other non-current liabilities | $29 | $256 | | **Total liabilities** | **$19,521** | **$23,175** | | Stockholders' Equity | | | | Additional paid-in capital | $459,113 | $447,085 | | Accumulated other comprehensive income (loss) | $3 | $(17) | | Accumulated deficit | $(418,214) | $(302,621) | | **Total stockholders' equity** | **$40,905** | **$144,450** | | **Total liabilities and stockholders' equity** | **$60,426** | **$167,625** | [Consolidated Statements of Operations](index=70&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations (in thousands, except per share data) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:-------|:------------------------|:------------------------| | Revenue, net | $6,146 | $14,569 | | Operating expenses: | | | | Cost of revenue | $5,041 | $11,614 | | Research and development | $39,012 | $34,144 | | General and administrative | $31,454 | $63,480 | | Sales and marketing | $10,828 | $9,949 | | Intangible amortization expense | $2,821 | $2,184 | | Asset write-down and restructuring | $37,946 | $— | | Goodwill impairment | $— | $70,236 | | Total operating expenses | $127,102 | $191,607 | | Loss from operations | $(120,956) | $(177,038) | | Interest income, net | $3,294 | $1,831 | | Gain on warrant liability | $162 | $13,442 | | Other income, net | $1,914 | $743 | | Loss before income tax (expense) benefit | $(115,586) | $(161,022) | | Income tax (expense) benefit | $(7) | $3,892 | | **Net loss** | **$(115,593)** | **$(157,130)** | | Net loss per share (Basic and diluted) | $(4.51) | $(6.42) | | Weighted-average shares used in computing net loss per share (Basic and diluted) | 25,639,270 | 24,473,212 | [Consolidated Statements of Comprehensive Loss](index=71&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:-------|:------------------------|:------------------------| | Net loss | $(115,593) | $(157,130) | | Change in unrealized gain (loss) on available-for-sale investments | $20 | $(17) | | **Total other comprehensive income (loss)** | **$20** | **$(17)** | | **Comprehensive loss** | **$(115,573)** | **$(157,147)** | [Consolidated Statements of Cash Flows](index=71&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Cash flows from operating activities: | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:--------------------------------------|:------------------------|:------------------------| | Net loss | $(115,593) | $(157,130) | | Stock-based compensation | $12,043 | $35,645 | | Depreciation of property and equipment | $1,554 | $1,409 | | Amortization of intangible assets | $2,821 | $2,184 | | Change in fair value of warrant liability | $(162) | $(13,442) | | Asset write-down | $30,101 | $— | | Goodwill impairment | $— | $70,236 | | Changes in operating assets and liabilities (net) | $(6,330) | $2,042 | | **Net cash used in operating activities** | **$(76,620)** | **$(65,391)** | | Cash flows from investing activities: | | | | Purchases of property and equipment | $(782) | $(1,498) | | Acquisition of a business, net of cash acquired | $— | $(29,687) | | Purchases of marketable securities | $(64,536) | $(177,860) | | Maturities of marketable securities | $130,000 | $100,000 | | **Net cash provided by (used in) investing activities** | **$64,682** | **$(109,045)** | | Cash flows from financing activities: | | | | Proceeds from exercise of stock options | $— | $683 | | Shares repurchased for payment of tax withholdings | $(78) | $(8,107) | | Payment of obligations under capital leases | $(4) | $(95) | | **Net cash used in financing activities** | **$(82)** | **$(7,519)** | | **Net decrease in cash, cash equivalents** | **$(12,020)** | **$(181,955)** | | Cash and cash equivalents at end of period | $23,139 | $35,159 | [Consolidated Statements of Stockholders' Equity](index=73&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | Dec 31, 2023 | Dec 31, 2022 | |:-------|:-------------|:-------------| | Class A Shares | 25,877,865 | 25,708,519 | | Additional Paid-In Capital | $459,113 | $447,085 | | Accumulated Other Comprehensive Income (Loss) | $3 | $(17) | | Accumulated Deficit | $(418,214) | $(302,621) | | **Total Stockholders' Equity** | **$40,905** | **$144,450** | [Notes to Consolidated Financial Statements](index=74&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Basis of Presentation and Summary of Significant Accounting Policies](index=74&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Sarcos' financial statements reflect its pivot to AI/ML software, significant restructuring charges, and sufficient liquidity for **12 months** - Sarcos' mission is to deliver AI/ML software to enhance third-party robotic systems, enabling them to observe, learn, reason, and act in structured and unstructured environments[361](index=361&type=chunk) - The company completed a business combination with Rotor Acquisition Corp. in **September 2021** and acquired RE2, Inc. in **April 2022**. A **1-for-6 reverse stock split** was effected on **July 5, 2023**[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - In **2023**, Sarcos announced two restructuring efforts (**July and November**) to pivot its strategy to focus on the AI/ML Software Platform, resulting in total charges of **$37.9 million**, including inventory write-downs, accelerated intangible amortization, and severance[366](index=366&type=chunk)[367](index=367&type=chunk) - As of **December 31, 2023**, cash, cash equivalents, and marketable securities totaled **$39.1 million**, with an accumulated deficit of **$418.2 million**. The company believes it has sufficient liquidity for at least the next **12 months**[369](index=369&type=chunk)[370](index=370&type=chunk) - Sarcos' revenue is primarily from product development contracts and product sales, with future revenue expected from AI/ML Software Platform licensing. Revenue recognition for contracts is generally over time using a cost-to-cost input method[389](index=389&type=chunk)[390](index=390&type=chunk)[392](index=392&type=chunk) [2. Fair Value Measurements](index=83&type=section&id=2.%20Fair%20Value%20Measurements) Sarcos measures financial assets and liabilities at fair value using a three-level hierarchy, with warrants transferred to Level 2 in Q1 2022 - Sarcos measures certain financial assets and liabilities at fair value on a recurring basis, categorizing them into a three-level hierarchy based on observable inputs[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk) Financial Assets and Liabilities Measured at Fair Value (in thousands) | Category | December 31, 2023 | December 31, 2022 | |:---------|:------------------|:------------------| | **Assets:** | | | | U.S. Treasury securities (Cash equivalents) | $4,973 (Level 1) | $— | | U.S. Treasury securities (Marketable securities) | $15,947 (Level 1) | $79,337 (Level 1) | | **Total assets** | **$20,920** | **$79,337** | | **Liabilities:** | | | | Warrant liability | $29 (Level 2) | $253 (Level 2) | | **Total liabilities** | **$29** | **$253** | - In **Q1 2022**, the fair value measurement of private placement warrants was transferred from Level 3 to Level 2 due to the availability of public warrant trading prices[408](index=408&type=chunk) [3. Balance Sheet Components](index=85&type=section&id=3.%20Balance%20Sheet%20Components) Sarcos' inventories decreased significantly in 2023, and property and equipment, net, also declined due to depreciation Inventories, Net (in thousands) | Category | December 31, 2023 | December 31, 2022 | |:---------|:------------------|:------------------| | Raw materials | $— | $2,081 | | Work-in-process | $— | $180 | | Finished goods, net | $1,065 | $1,301 | | **Total inventories** | **$1,065** | **$3,562** | Property and Equipment, Net (in thousands) | Category | December 31, 2023 | December 31, 2022 | |:---------|:------------------|:------------------| | Robotics and manufacturing equipment | $1,841 | $1,610 | | Leasehold improvements | $4,458 | $4,442 | | Computer equipment | $1,729 | $1,719 | | Financed leased computer equipment | $19 | $271 | | Software | $44 | $389 | | Furniture and fixtures, and other fixed assets | $1,018 | $1,835 | | Property and equipment, gross | $9,109 | $10,266 | | Accumulated depreciation | $(4,267) | $(2,626) | | **Property and equipment, net** | **$4,842** | **$7,640** | - Depreciation expenses were **$2.8 million** in 2023, including **$1.2 million** of accelerated depreciation related to shutting down Pittsburgh facilities, compared to **$1.4 million** in 2022[411](index=411&type=chunk) [4. Leases](index=87&type=section&id=4.%20Leases) Sarcos leases office space with a weighted-average remaining lease term of **9.0 years** and total future minimum payments of **$15.6 million** - Sarcos leases real estate for office space under operating leases expiring through **2033**. Lease costs for operating leases were **$1.86 million** in 2023 and **$1.64 million** in 2022[414](index=414&type=chunk)[415](index=415&type=chunk) - The weighted-average remaining lease term for operating leases was **9.0 years** as of **December 31, 2023**, with a weighted-average discount rate of **5.4%**[416](index=416&type=chunk) Undiscounted Future Minimum Lease Payments (in thousands) | Year | Operating Leases | |:-----|:-----------------| | 2024 | $1,968 | | 2025 | $1,619 | | 2026 | $1,488 | | 2027 | $1,529 | | 2028 | $1,571 | | 2029 and thereafter | $7,465 | | **Total lease payments** | **$15,640** | | Less interest | $3,244 | | **Present value of lease liabilities** | **$12,396** | [5. Acquisition](index=88&type=section&id=5.%20Acquisition) Sarcos acquired RE2, Inc. in **April 2022** for **$90.1 million**, recognizing **$70.2 million** in goodwill and **$21.3 million** in intangible assets - On **April 25, 2022**, Sarcos acquired RE2, Inc., a developer of mobile robotic systems, for an aggregate consideration of **$90.1 million**, comprising **$30.7 million in cash**, **$44.0 million in common stock**, and **$15.4 million in assumed options**[420](index=420&type=chunk) - The acquisition resulted in the recognition of **$70.2 million in goodwill** and **$21.3 million in identifiable intangible assets**, including trade names, developed technology, and customer relationships[422](index=422&type=chunk)[423](index=423&type=chunk) Identifiable Intangible Assets Acquired (in thousands) | Category | Amounts | Useful Life (in years) | |:---------|:--------|:-----------------------| | Trade name and trademarks | $1,000 | 6 | | Developed technology | $9,600 | 5 | | Customer relationships | $10,700 | 9 | | **Total intangible assets** | **$21,300** | **7** | [6. Goodwill and Intangible Assets](index=90&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) Sarcos fully impaired its goodwill in 2022 and recorded **$16.3 million** in accelerated intangible asset amortization in 2023 - Sarcos fully impaired its goodwill, recording a non-cash goodwill impairment of **$70.2 million** as of **December 31, 2022**, due to sustained decreases in its publicly quoted share price and market capitalization[425](index=425&type=chunk) Acquired Intangible Assets, Net (in thousands) | Category | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |:---------|:----------------------|:-------------------------|:--------------------| | **December 31, 2023** | | | | | Trade name and trademarks | $1,000 | $1,000 | $— | | Developed technology | $9,600 | $9,600 | $— | | Customer relationships | $10,700 | $10,700 | $— | | **Total** | **$21,300** | **$21,300** | **$—** | | **December 31, 2022** | | | | | Trade name and trademarks | $1,000 | $111 | $889 | | Developed technology | $9,600 | $1,280 | $8,320 | | Customer relationships | $10,700 | $793 | $9,907 | | **Total** | **$21,300** | **$2,184** | **$19,116** | - In **2023**, Sarcos recorded **$16.3 million** of accelerated amortization expense for intangible assets due to its product development reprioritization, resulting in a net carrying amount of **$0** for all acquired intangible assets by year-end[427](index=427&type=chunk) [7. Earn-Out Shares](index=91&type=section&id=7.%20Earn-Out%20Shares) Holders of Old Sarcos capital stock are entitled to up to **4,687,500 Earn-Out Shares** if specific common stock price thresholds are met - Holders of Old Sarcos capital stock are entitled to up to **4,687,500 Earn-Out Shares**, payable if the company's common stock closing price meets specific thresholds (**$90.00 or $120.00**) within defined periods post-Business Combination[428](index=428&type=chunk) - These Earn-Out Shares are treated as equity-linked instruments and are not included in shares outstanding on the consolidated balance sheets[429](index=429&type=chunk) [8. Warrants](index=91&type=section&id=8.%20Warrants) Sarcos has **20,549,453 Warrants** outstanding as of December 31, 2023, each for one-sixth of a share at **$11.50**, expiring September 24, 2026 - Sarcos has Public Warrants and Private Placement Warrants outstanding, each entitling the holder to purchase **one-sixth of a Common Stock share at $11.50**, expiring **September 24, 2026**[430](index=430&type=chunk)[431](index=431&type=chunk) - As of **December 31, 2023**, there were **20,549,453 Warrants** outstanding[431](index=431&type=chunk) - The company may redeem outstanding Warrants if the Common Stock price equals or exceeds **$108.00** (at **$0.01 per Warrant**) or **$60.00** (at **$0.10 per Warrant**, with cashless exercise option), subject to certain conditions[435](index=435&type=chunk)[437](index=437&type=chunk) [9. Stock-based Compensation](index=92&type=section&id=9.%20Stock-based%20Compensation) Sarcos' 2021 Equity Incentive Plan had **2.7 million shares** available for grant as of December 31, 2023, with **$10.4 million** in unrecognized compensation cost - Sarcos' 2021 Equity Incentive Plan allows for stock options, RSUs, RSAs, and performance awards, with **2.7 million shares** available for grant as of **December 31, 2023**[438](index=438&type=chunk) Stock Option Activity (2023 vs. 2022) | Metric | Number of Shares (2023) | Weighted Average Exercise Price (2023) | Number of Shares (2022) | Weighted Average Exercise Price (2022) | |:-------|:------------------------|:---------------------------------------|:------------------------|:---------------------------------------| | Outstanding – Dec 31 | 2,845,084 | $9.82 | 2,377,503 | $16.80 | | Granted | 1,859,200 | $2.78 | 1,255,904 | $12.31 | | Cancelled | (1,391,619) | $12.35 | (233,953) | $33.08 | Stock-Based Compensation Expense (in thousands) | Category | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:---------|:------------------------|:------------------------| | Cost of revenue | $107 | $87 | | Research and development | $1,127 | $712 | | Sales and marketing | $808 | $863 | | General and administrative | $5,606 | $33,983 | | Asset write-down and restructuring | $4,395 | $— | | **Total stock-based compensation expense** | **$12,043** | **$35,645** | - As of **December 31, 2023**, unrecognized stock-based compensation cost was approximately **$10.4 million**, expected to be recognized over a weighted average period of **2.5 years**[448](index=448&type=chunk) [10. Net loss per Share](index=97&type=section&id=10.%20Net%20loss%20per%20Share) Sarcos reported a basic and diluted net loss per share of **$(4.51)** in 2023 and **$(6.42)** in 2022 Net Loss Per Share (Basic and Diluted) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:-------|:------------------------|:------------------------| | Net loss (in thousands) | $(115,593) | $(157,130) | | Weighted average shares outstanding | 25,639,270 | 24,473,212 | | **Basic and diluted net loss per share** | **$(4.51)** | **$(6.42)** | - Basic and diluted net loss per share were the same for both periods as the inclusion of potential common stock shares would have been anti-dilutive[449](index=449&type=chunk) [11. Income taxes](index=97&type=section&id=11.%20Income%20taxes) Sarcos recorded a **$7 thousand** income tax expense in 2023, with a full valuation allowance against deferred tax assets Income Tax Benefit (Expense) (in thousands) | Category | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |:---------|:------------------------|:------------------------| | Current | $(7) | $(3) | | Deferred | $0 | $3,895 | | **Total income tax benefit (expense)** | **$(7)** | **$3,892** | - Sarcos recorded a **$7 thousand** income tax expense in 2023, a decrease from a **$3.9 million** benefit in 2022, which was due to the removal of a valuation allowance on deferred tax assets from the RE2 acquisition[326](index=326&type=chunk)[450](index=450&type=chunk) - As of **December 31, 2023**, Sarcos had cumulative federal net operating losses of **$201.5 million** (mostly with indefinite carryforward) and state net operating losses of **$145.5 million**[454](index=454&type=chunk)[456](index=456&type=chunk) - A full valuation allowance of **$78.6 million** was recorded against deferred tax assets as of **December 31, 2023**, due to cumulative losses, indicating uncertainty of future realization[453](index=453&type=chunk) [12. Commitments and Contingencies](index=101&type=section&id=12.%20Commitments%20and%20Contingencies) Sarcos has no material loss contingencies from legal proceedings and has not accrued liabilities for indemnifications - Sarcos may be involved in various claims and lawsuits in the normal course of business but has not recorded any material loss contingency related to legal proceedings as of **December 31, 2023 and 2022**[461](index=461&type=chunk) - The company provides indemnifications to investors, directors, officers, employees, customers, or vendors, but has not accrued a liability for these obligations as the likelihood of material payment is not probable or estimable[462](index=462&type=chunk) [13. Segment information](index=101&type=section&id=13.%20Segment%20information) Sarcos operates as a single reportable segment, with most revenue and all long-lived assets attributable to the U.S - Sarcos operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM) who allocates resources and makes operating decisions based on consolidated financial information[463](index=463&type=chunk) - The majority of Sarcos' revenue is derived from U.S. customers, with **$1.9 million** from non-U.S. customers in 2023 and **$2.8 million** in 2022. All long-lived assets and losses are attributable to operations within the United States[464](index=464&type=chunk) [14. Employee Benefits](index=101&type=section&id=14.%20Employee%20Benefits) Sarcos offers 401(k) plans with matching contributions, which increased to **$1.5 million** in 2023 - Sarcos offers defined contribution 401(k) plans to substantially all employees, with matching contributions beginning in **April 2022**[465](index=465&type=chunk) - The company recognized **$1.5 million** in 401(k) matching contributions expense in 2023, an increase from **$0.9 million** in 2022[465](index=465&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=102&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Sarcos Technology and Robotics Corporation reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - There have been no changes in or disagreements with accountants on accounting and financial disclosure[466](index=466&type=chunk) [Item 9A. Controls and Procedures](index=102&type=section&id=Item%209A.%20Controls%20and%20Procedures) Sarcos' management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Sarcos' management, including its Certifying Officers, concluded that disclosure controls and procedures were effective as of **December 31, 2023**[467](index=467&type=chunk) - Management also concluded that internal control over financial reporting was effective as of **December 31, 2023**, based on the COSO framework[469](index=469&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended **December 31, 2023**[470](index=470&type=chunk) [Item 9B. Other Information](index=102&type=section&id=Item%209B

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Sarcos Technology and Robotics Corporation, including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific balance sheet components [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | September 30, 2023 (Unaudited) (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :------------------------------- | | Total current assets | $61,390 | $129,099 | | Total assets | $95,583 | $167,625 | | Total current liabilities | $7,947 | $10,532 | | Total liabilities | $19,428 | $23,175 | | Total stockholders' equity | $76,155 | $144,450 | | Accumulated deficit | $(381,738) | $(302,621) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended September 30, 2023 (in thousands) | Three Months Ended September 30, 2022 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2022 (in thousands) | | :----------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Revenue, net | $1,827 | $4,667 | $5,400 | $8,448 | | Loss from operations | $(30,754) | $(27,250) | $(83,901) | $(81,862) | | Net loss | $(28,981) | $(22,499) | $(79,117) | $(64,819) | | Net loss per share (Basic and diluted) | $(1.13) | $(0.89) | $(3.09) | $(2.68) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) | Metric | Three Months Ended September 30, 2023 (in thousands) | Three Months Ended September 30, 2022 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2022 (in thousands) | | :------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Comprehensive loss | $(28,967) | $(22,633) | $(79,098) | $(64,953) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | December 31, 2022 (in thousands) | September 30, 2023 (in thousands) | | :-------------------------- | :------------------------------- | :-------------------------------- | | Total Stockholders' Equity | $144,450 | $76,155 | | Accumulated Deficit | $(302,621) | $(381,738) | | Stock-based compensation (9M) | N/A | $10,808 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Nine Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2022 (in thousands) | | :------------------------------------------ | :-------------------------------------------------- | :-------------------------------------------------- | | Net cash used in operating activities | $(60,123) | $(44,448) | | Net cash provided by (used in) investing activities | $60,345 | $(149,429) | | Net cash used in financing activities | $(71) | $(7,108) | | Net increase (decrease) in cash, cash equivalents | $151 | $(200,985) | | Cash and cash equivalents at end of period | $35,310 | $16,129 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Sarcos is a leader in advanced robotic technology, focusing on AI/ML software for generalizable autonomy in challenging, dynamic environments[16](index=16&type=chunk) - The company completed a **1-for-6 reverse stock split** on July 5, 2023, retroactively adjusting all share and per share amounts[26](index=26&type=chunk) - In July 2023, the company refined its sales strategy to focus on products with near-term revenue potential, including its commercial AI/ML software platform, leading to **$5.5 million** in restructuring charges for Q3 2023 and **$10.6 million** for the nine months ended September 30, 2023[27](index=27&type=chunk) - Subsequent to September 30, 2023, the company announced a decision to suspend commercialization efforts on subsea, aviation, and solar robotics hardware programs to focus on its commercial AI/ML software platform, anticipating an additional **$22 million** to **$24 million** in restructuring expenses in Q4 2023 and Q1 2024[28](index=28&type=chunk)[29](index=29&type=chunk) | Revenue Source | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Product Development Contract Revenue | $1,044 | $4,488 | $4,614 | $8,203 | | Product Revenue | $783 | $179 | $786 | $245 | | **Total Revenue, net** | **$1,827** | **$4,667** | **$5,400** | **$8,448** | [2. Fair Value Measurements](index=15&type=section&id=2.%20Fair%20Value%20Measurements) | Asset/Liability | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :-------------------------------- | :------------------------------- | | Total assets at fair value | $41,646 | $79,337 | | Warrant liability | $92 | $253 | [3. Balance Sheet Components](index=16&type=section&id=3.%20Balance%20Sheet%20Components) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Inventories, net | $1,108 | $3,562 | | Inventory reserves | $1,100 | $400 | | Prepaid expenses and other current assets | $2,146 | $5,015 | | Property and equipment, net | $6,693 | $7,640 | | Accrued liabilities | $4,580 | $6,025 | [4. Acquisitions](index=18&type=section&id=4.%20Acquisitions) - On April 25, 2022, Sarcos acquired RE2, Inc., a developer of autonomous and teleoperated mobile robotic systems, for an aggregate consideration of **$90.1 million**[58](index=58&type=chunk) | Acquired Intangible Asset | Amounts (in thousands) | Weighted Average Useful Life (in years) | | :------------------------ | :--------------------- | :-------------------------------------- | | Trade name and trademarks | $1,000 | 6 | | Developed technology | $9,600 | 5 | | Customer relationships | $10,700 | 9 | | **Total intangible assets** | **$21,300** | **7** | | Goodwill | $70,236 | N/A | [5. Goodwill and Intangible Assets](index=20&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) - Goodwill was **fully impaired** as of December 31, 2022, due to sustained decreases in the company's publicly quoted share price[63](index=63&type=chunk) | Acquired Intangible Asset | Net Carrying Amount (in thousands) as of Sep 30, 2023 | | :------------------------ | :---------------------------------------------------- | | Trade name and trademarks | $764 | | Developed technology | $6,880 | | Customer relationships | $9,016 | | **Total** | **$16,660** | | Period | Amortization Expense (in thousands) | | :----- | :---------------------------------- | | 3 Months Ended Sep 30, 2023 | $800 | | 3 Months Ended Sep 30, 2022 | $800 | | 9 Months Ended Sep 30, 2023 | $2,500 | | 9 Months Ended Sep 30, 2022 | $1,400 | [6. Reverse Recapitalization](index=21&type=section&id=6.%20Reverse%20Recapitalization) - The business combination was accounted for as a reverse recapitalization, with Old Sarcos deemed the accounting acquirer[66](index=66&type=chunk) - Earn-Out Shares of up to **4,687,500 common shares** are potentially issuable upon achievement of stock price milestones (**$90.00** and **$120.00** per share) and are treated as equity-linked instruments, not outstanding shares[67](index=67&type=chunk)[68](index=68&type=chunk) [7. Warrants](index=21&type=section&id=7.%20Warrants) - As of September 30, 2023, there were outstanding warrants to purchase **3,424,908 shares** of Common Stock at an exercise price of **$11.50** per warrant (adjusted for the reverse stock split), expiring on September 24, 2026[70](index=70&type=chunk) - The company may redeem outstanding warrants under certain conditions, including if the common stock price equals or exceeds **$108.00** or **$60.00** per share[74](index=74&type=chunk)[76](index=76&type=chunk) [8. Stock-based Compensation](index=22&type=section&id=8.%20Stock-based%20Compensation) - The 2021 Equity Incentive Plan has **2.5 million shares** available for grant as of September 30, 2023[78](index=78&type=chunk) | Stock Option Activity | September 30, 2023 | | :-------------------- | :----------------- | | Options Outstanding | 3,164,964 | | Weighted Average Exercise Price | $9.79 | | Exercisable Options | 1,358,810 | | Weighted Average Exercise Price (Exercisable) | $11.26 | | Restricted Stock Units Activity | September 30, 2023 | | :------------------------------ | :----------------- | | RSUs Outstanding | 1,196,605 | | Weighted-Average Grant-Date Fair Value | $5.67 | | Stock-based Compensation Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | | Total stock-based compensation expense | $6,074 | $10,808 | [9. Net Loss Per Share](index=25&type=section&id=9.%20Net%20Loss%20Per%20Share) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(28,981) | $(22,499) | $(79,117) | $(64,819) | | Weighted average shares outstanding | 25,706,023 | 25,156,756 | 25,563,895 | 24,180,445 | | Basic and diluted net loss per share | $(1.13) | $(0.89) | $(3.09) | $(2.68) | - Anti-dilutive securities totaling **12,473,978** for the nine months ended September 30, 2023, were excluded from diluted share calculation due to net losses[84](index=84&type=chunk) [10. Income Taxes](index=25&type=section&id=10.%20Income%20Taxes) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax (expense) benefit | $0 | $2,465 | $(3) | $4,071 | - The company recorded a full valuation allowance on net deferred tax assets due to net losses, resulting in an effective tax rate differing from the U.S. federal statutory rate[86](index=86&type=chunk) [11. Commitments and Contingencies](index=25&type=section&id=11.%20Commitments%20and%20Contingencies) - The company is involved in various legal proceedings but has not recorded any **material loss contingency** as of September 30, 2023, or December 31, 2022[87](index=87&type=chunk) - No liability has been accrued for indemnification obligations as the likelihood of incurring a **material payment** is not probable or reasonably estimable[88](index=88&type=chunk) [12. Segment Information](index=26&type=section&id=12.%20Segment%20Information) - The company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker[89](index=89&type=chunk) | Revenue from Customers Outside US (in thousands) | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :----------------------------------------------- | :-------------------------- | :-------------------------- | | Revenue | $1,100 | $2,000 | [13. Employee Benefits](index=26&type=section&id=13.%20Employee%20Benefits) - The company offers a defined contribution 401(k) plan to substantially all employees, with matching contributions initiated in April 2022[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the strategic pivot to focus on AI/ML software, the impact of restructuring efforts, and key factors affecting financial performance [Special Note Regarding Forward-Looking Statements](index=27&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) - The report contains forward-looking statements regarding future financial performance, business strategies, and expectations, including the successful pivot to AI/ML software, development and sales capabilities, market size, product roadmap, competition, growth management, intellectual property, and compliance[93](index=93&type=chunk)[94](index=94&type=chunk) - These statements are based on current expectations and assumptions, involve risks and uncertainties, and should not be unduly relied upon, with no obligation to update them except as required by law[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Overview](index=28&type=section&id=Overview) - Sarcos is a leader in advanced robotic technology, specializing in AI/ML software for generalizable autonomy to enhance industrial robot intelligence, efficiency, and productivity[99](index=99&type=chunk) - On November 14, 2023, the company announced a **strategic pivot** to prioritize the development of its commercial AI/ML software platform, suspending commercialization efforts on subsea, aviation, and solar robotics hardware programs to reduce capital requirements and pursue near-term revenue[100](index=100&type=chunk) - The AI/ML software platform, initially conceived as CYTAR for internal hardware, is being de-coupled for application to a wide range of third-party robotics systems and will be offered through a software-as-a-service (SaaS) revenue model[102](index=102&type=chunk) [Continuing Impact of COVID-19](index=29&type=section&id=Continuing%20Impact%20of%20COVID-19) - The COVID-19 pandemic has caused disruptions in recruitment, retention of qualified employees, supply chains, and customer demand, adversely affecting the business, results of operations, and financial condition[104](index=104&type=chunk) [Key Factors Affecting Operating Results](index=29&type=section&id=Key%20Factors%20Affecting%20Operating%20Results) - The company's near- to mid-term financial success is dependent on the successful development, launch, and sale of its commercial AI/ML software platform, with potential delays impacting financial condition and operating results[106](index=106&type=chunk) - The company expects to launch its commercial AI/ML software platform in the first half of 2024 and begin recognizing revenue in the second half of 2024, with recent **workforce reductions** (RIFs) in July and November 2023 aimed at conserving cash and managing operating expenses[107](index=107&type=chunk)[108](index=108&type=chunk) - Customer demand for the AI/ML software platform is **unproven**, and inaccurate assumptions about market characteristics, pricing, and sales cycles could adversely affect the business[109](index=109&type=chunk) - Financial performance relies on continuous investment in R&D to adapt to evolving customer requirements and competitive threats, with geopolitical and macro-economic factors also influencing demand and costs[110](index=110&type=chunk)[111](index=111&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended September 30, 2023, and 2022](index=30&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202023,%20and%202022) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $1,827 | $4,667 | $(2,840) | (61)% | | Product Development Contract Revenue | $1,044 | $4,488 | $(3,444) | (77)% | | Product Revenue | $783 | $179 | $604 | 337% | - Product development contract revenue decreased due to the completion of contracts not yet replaced, while product revenue increased significantly due to the sale of two Guardian Sea Class systems[115](index=115&type=chunk)[116](index=116&type=chunk) | Operating Expense | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Total operating expenses | $32,581 | $31,917 | $664 | 2% | | Cost of revenue | $1,222 | $3,578 | $(2,356) | (66)% | | Research and development | $10,011 | $10,497 | $(486) | (5)% | | General and administrative | $7,557 | $14,646 | $(7,089) | (48)% | | Sales and marketing | $1,750 | $2,405 | $(655) | (27)% | | Asset write-down and restructuring | $11,222 | $0 | $11,222 | *NM | - Asset write-down and restructuring expenses of **$11.2 million** were incurred, including severance, accelerated stock-based compensation, inventory write-down, and asset write-down, with additional expenses anticipated in Q4 2023 and Q1 2024[123](index=123&type=chunk) [Comparison of the Nine Months Ended September 30, 2023 and 2022](index=32&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202023%20and%202022) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $5,400 | $8,448 | $(3,048) | (36)% | | Product Development Contract Revenue | $4,614 | $8,203 | $(3,589) | (44)% | | Product Revenue | $786 | $245 | $541 | 221% | - Product development contract revenue decreased due to contract completions, while product revenue increased significantly from Guardian Sea Class system sales[129](index=129&type=chunk)[130](index=130&type=chunk) | Operating Expense | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Total operating expenses | $89,301 | $90,310 | $(1,009) | (1)% | | Cost of revenue | $3,951 | $7,212 | $(3,261) | (45)% | | Research and development | $31,120 | $23,947 | $7,173 | 30% | | General and administrative | $25,544 | $50,584 | $(25,040) | (50)% | | Sales and marketing | $9,901 | $7,202 | $2,699 | 37% | | Intangible amortization expense | $2,457 | $1,365 | $1,092 | 80% | | Asset write-down and restructuring | $16,328 | $0 | $16,328 | *NM | - R&D expenses increased due to headcount and focus on new product development, but are expected to decrease significantly due to RIFs and the AI/ML software pivot. G&A expenses decreased due to reduced stock-based compensation and legal fees, also expected to decrease further[133](index=133&type=chunk)[135](index=135&type=chunk) | Other Income (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total other income | $4,787 | $12,972 | $(8,185) | (63)% | - Other income decreased primarily due to a decrease in unrealized mark-to-market gain on warrant liability, partially offset by increased interest income and employee retention credit refunds[140](index=140&type=chunk) [Backlog and Total Estimated Contract Value](index=35&type=section&id=Backlog%20and%20Total%20Estimated%20Contract%20Value) | Metric | As of September 30, 2023 (in millions) | | :------------------------------ | :------------------------------------- | | Backlog | $9.2 | | Funded Backlog | $7.4 | | Unfunded Backlog | $1.8 | | Total Estimated Contract Value | $19.1 | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | As of September 30, 2023 (in millions) | | :------------------------------------ | :------------------------------------- | | Cash, cash equivalents and marketable securities | $55.1 | - The company believes it has **sufficient liquidity** to operate for at least the next **12 months** and well into 2025 without needing to raise additional capital, but may seek opportunistic financing[143](index=143&type=chunk)[146](index=146&type=chunk) - Future funding requirements depend on product development, commercialization success, and capital needs, with delays negatively impacting revenue and profitability[144](index=144&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows) | Cash Flow Activity | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Net cash used in operating activities | $(60,123) | $(44,448) | $(15,675) | 35% | | Net cash provided by (used in) investing activities | $60,345 | $(149,429) | $209,774 | (140)% | | Net cash used in financing activities | $(71) | $(7,108) | $7,037 | (99)% | - The increase in cash used in operating activities was primarily due to a **$14.3 million** increase in net loss, a **$4.2 million** increase in non-cash expenses, and increased inventory purchases[148](index=148&type=chunk) - Net cash provided by investing activities increased significantly due to marketable securities maturities and the absence of a business acquisition (RE2) cash outflow seen in the prior year[149](index=149&type=chunk) - Net cash used in financing activities decreased due to a reduction in share repurchases for tax withholding obligations[150](index=150&type=chunk) [Emerging Growth Company Status](index=36&type=section&id=Emerging%20Growth%20Company%20Status) - The company is an 'emerging growth company' and has elected to use the extended transition period for new or revised financial accounting standards, which may affect comparability with other public companies[151](index=151&type=chunk)[152](index=152&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no **material changes** to the company's critical accounting policies or estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022[154](index=154&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 1 for information on recently adopted and recently issued accounting pronouncements not yet adopted[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Sarcos Technology and Robotics Corporation is **not required** to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is **not required** to provide quantitative and qualitative disclosures about market risk[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the Certifying Officers, evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2023, concluding they were **deemed effective** - The company's disclosure controls and procedures were evaluated and **deemed effective** as of September 30, 2023[156](index=156&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2023[158](index=158&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is **not currently involved** in any legal proceedings that are expected to have a **material adverse effect** on its business, financial condition, or results of operations, though litigation can still have an adverse impact - The company is **not currently involved** in any legal proceedings expected to have a **material adverse effect** on its business, financial condition, or results of operations[160](index=160&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks and uncertainties that could materially harm the company's business, operating results, and financial condition, spanning across business operations, financial stability, legal and regulatory compliance, intellectual property, and ownership of securities, emphasizing the challenges of an **early-stage company** pivoting its strategy to focus on AI/ML software [Risks Related to Our Business](index=38&type=section&id=Risks%20Related%20to%20Our%20Business) - The company is an **early-stage company** with a **history of losses**, expecting to incur **significant expenses and losses** until at least 2025, primarily due to the development and commercialization of its AI/ML software platform[162](index=162&type=chunk)[163](index=163&type=chunk) - The **strategic pivot** to focus on the AI/ML software platform, suspending hardware commercialization, may not be effective and could be delayed beyond current expectations, impacting revenue and financial condition[165](index=165&type=chunk)[174](index=174&type=chunk) - Revenue will be concentrated in the AI/ML software platform for the foreseeable future, and customer trials may not result in binding subscriptions due to the platform still being under development and the company's lack of commercialization history with software products[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)[171](index=171&type=chunk) - The company operates in a competitive industry subject to rapid technological change, and failure to innovate or adapt to customer needs could harm its business[198](index=198&type=chunk)[185](index=185&type=chunk) [Risks Related to Our Operations & Growth](index=43&type=section&id=Risks%20Related%20to%20Our%20Operations%20%26%20Growth) - Design flaws, errors, or malfunctions in the AI/ML software platform could lead to lower customer ROI, property damage, personal injury, and **significant safety concerns**, adversely affecting reputation and financial results[207](index=207&type=chunk)[208](index=208&type=chunk) - The use of 'open source' software in the AI/ML platform could negatively affect the ability to offer the platform and subject the company to litigation or require proprietary source code release[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) - The company's business and prospects depend significantly on building and maintaining its brand, which could be harmed by negative publicity or failure to provide high-quality software[219](index=219&type=chunk)[220](index=220&type=chunk) - Failure to effectively manage growth, including expanding teams, commercializing the AI/ML platform, and integrating new employees, could materially and adversely affect the business[224](index=224&type=chunk)[227](index=227&type=chunk) [Risks Related to Our Finances](index=47&type=section&id=Risks%20Related%20to%20Our%20Finances) - The company's business plans require **significant capital**, and future needs may necessitate selling additional equity or debt securities, potentially **diluting stockholders** or restricting operations[235](index=235&type=chunk)[236](index=236&type=chunk) - Recent **workforce reductions** (RIFs) in July and November 2023, while intended to improve cost structure, may not result in anticipated savings, could incur greater-than-expected costs, and disrupt business operations[240](index=240&type=chunk)[241](index=241&type=chunk) - Financial results may vary significantly due to fluctuations in operating costs and product demand, making quarter-to-quarter comparisons **unreliable indicators** of future performance[242](index=242&type=chunk) - The company is **highly dependent** on senior management and key employees; inability to attract and retain qualified personnel, especially after RIFs, could harm product design, business operations, and competitiveness[243](index=243&type=chunk)[246](index=246&type=chunk) [Risks Related to Claims, Legal and Regulatory Compliance](index=53&type=section&id=Risks%20Related%20to%20Claims,%20Legal%20and%20Regulatory%20Compliance) - Prior **material weaknesses** in internal control over financial reporting and the **restatement of financial statements** expose the company to potential litigation or disputes[269](index=269&type=chunk)[270](index=270&type=chunk) - The company may become subject to new or changing governmental regulations related to AI/ML software, and non-compliance could lead to market withdrawal, revenue delays, increased costs, or make the business unviable[275](index=275&type=chunk)[276](index=276&type=chunk) - Evolving laws and regulations concerning data privacy and security, including CCPA, CPRA, and GDPR, could harm the company's reputation, lead to **significant fines**, and increase compliance costs[280](index=280&type=chunk)[284](index=284&type=chunk) - Issues in AI/ML development and an **uncertain regulatory environment** may result in reputational harm, liability, or adverse consequences, potentially limiting functionality or sales of the software platform[286](index=286&type=chunk)[287](index=287&type=chunk) [Risks Related to Our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Success depends on obtaining and maintaining protection for intellectual property (patents, trademarks, trade secrets), but patent positions are **uncertain**, and enforcement can be **expensive and time-consuming**[308](index=308&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) - Protecting intellectual property rights in all countries is **prohibitively expensive**, and foreign laws may not offer the same level of protection as in the U.S., potentially allowing competitors to use technologies without authorization[317](index=317&type=chunk) - The company may face intellectual property infringement or misappropriation claims, which could be costly, divert management attention, and limit the ability to commercialize software products[320](index=320&type=chunk)[323](index=323&type=chunk) [Risks Related to Ownership of our Securities](index=61&type=section&id=Risks%20Related%20to%20Ownership%20of%20our%20Securities) - Resales of a substantial number of Common Stock shares, including those from the Business Combination and RE2 acquisition, could **depress the market price** of the company's Common Stock[329](index=329&type=chunk)[330](index=330&type=chunk) - The markets for the company's Common Stock and Warrants have been **volatile** and may continue to fluctuate significantly due to various factors, including financial results, market expectations, and competition[337](index=337&type=chunk)[338](index=338&type=chunk) - The company's Common Stock may be **delisted** from The Nasdaq Global Market if it fails to satisfy continued listing requirements, such as the minimum bid price and market value of publicly held shares[344](index=344&type=chunk)[345](index=345&type=chunk) - The exercise price of the company's Warrants is higher than typical, and there is no guarantee they will ever be 'in the money,' potentially **expire worthless**[351](index=351&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were **no unregistered sales** of equity securities or use of proceeds to report for the period - **No unregistered sales** of equity securities or use of proceeds to report[369](index=369&type=chunk) [Item 3. Defaults Upon Senior Securities](index=67&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - **Not Applicable**[369](index=369&type=chunk) [Item 4. Mine Safety Disclosures](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are **not applicable** to the company - **Not applicable**[369](index=369&type=chunk) [Item 5. Other Information](index=67&type=section&id=Item%205.%20Other%20Information) During the last fiscal quarter, **no director or officer adopted or terminated** a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - **No director or officer adopted or terminated** a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[370](index=370&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, separation agreements, certifications, and XBRL-related documents - The exhibits include the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Separation Agreements, Certifications of Principal Executive and Financial Officers, and Inline XBRL documents[372](index=372&type=chunk) [Signatures](index=69&type=section&id=Signatures) The report is duly signed on November 14, 2023, by Laura J. Peterson, President and Chief Executive Officer, and Andrew Hamer, Chief Financial Officer - The report was signed on November 14, 2023, by Laura J. Peterson (President and CEO) and Andrew Hamer (CFO)[375](index=375&type=chunk)

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of Sarcos Technology and Robotics Corporation's financial performance and condition [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Sarcos Technology and Robotics Corporation's unaudited condensed consolidated financial statements and detailed explanatory notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from $167.6 million to $120.7 million, primarily due to reduced cash and marketable securities, while total stockholders' equity significantly declined Balance Sheets Data | Metric | Dec 31, 2022 (in millions) | Jun 30, 2023 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $35.16 | $25.57 | $(9.59) | | Marketable securities | $79.34 | $49.58 | $(29.76) | | Total current assets | $129.10 | $85.27 | $(43.83) | | Total assets | $167.63 | $120.67 | $(46.96) | | Total current liabilities | $10.53 | $9.69 | $(0.85) | | Total liabilities | $23.18 | $21.62 | $(1.56) | | Total stockholders' equity | $144.45 | $99.05 | $(45.40) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company experienced a significant decrease in revenue and an increased net loss for both the three and six months ended June 30, 2023 Statements of Operations Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $1.28 | $3.04 | $(1.76) | (58)% | | Cost of revenue | $0.94 | $3.15 | $(2.20) | (70)% | | Research and development | $11.71 | $7.57 | $4.14 | 55% | | General and administrative | $8.25 | $18.15 | $(9.89) | (55)% | | Sales and marketing | $4.41 | $2.59 | $1.82 | 71% | | Intangible amortization expense | $0.82 | $0.57 | $0.25 | 43% | | Asset write-down and restructuring | $5.11 | $0.00 | $5.11 | *NM | | Net loss | $(28.66) | $(23.12) | $(5.54) | 24% | | Net loss per share (Basic and diluted) | $(1.12) | $(0.95) | $(0.17) | 18% | Statements of Operations Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $3.57 | $3.78 | $(0.21) | (6)% | | Cost of revenue | $2.73 | $3.63 | $(0.91) | (25)% | | Research and development | $21.11 | $13.45 | $7.66 | 57% | | General and administrative | $17.99 | $35.94 | $(17.95) | (50)% | | Sales and marketing | $8.15 | $4.80 | $3.35 | 70% | | Intangible amortization expense | $1.64 | $0.57 | $1.06 | 185% | | Asset write-down and restructuring | $5.11 | $0.00 | $5.11 | *NM | | Net loss | $(50.14) | $(42.32) | $(7.82) | 18% | | Net loss per share (Basic and diluted) | $(1.97) | $(1.79) | $(0.18) | 10% | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a comprehensive loss primarily driven by the net loss, with minor impact from changes in unrealized gains/losses on investments Comprehensive Loss Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net loss | $(28.66) | $(23.12) | $(50.14) | $(42.32) | | Change in unrealized (loss) gain on available-for-sale investments | $(0.05) | $0.00 | $0.00 | $0.00 | | Comprehensive loss | $(28.71) | $(23.12) | $(50.13) | $(42.32) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased primarily due to the accumulated deficit from net losses, partially offset by stock-based compensation Stockholders' Equity Data | Metric | Dec 31, 2022 (in millions) | Jun 30, 2023 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Common Stock (shares) | 25,708,519 | 25,841,889 | 133,370 | | Additional Paid-In Capital | $447.08 | $451.82 | $4.73 | | Accumulated Other Comprehensive Loss | $(0.02) | $(0.01) | $0.00 | | Accumulated Deficit | $(302.62) | $(352.76) | $(50.14) | | Total Stockholders' Equity | $144.45 | $99.05 | $(45.40) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased, while investing activities shifted to a net provision, and financing activities saw a significant decrease in cash used Cash Flows Data | Cash Flow Activity | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash used in operating activities | $(39.98) | $(27.92) | $(12.06) | | Net cash provided by (used in) investing activities | $30.46 | $(109.88) | $140.34 | | Net cash used in financing activities | $(0.06) | $(6.05) | $5.98 | | Net decrease in cash, cash equivalents | $(9.59) | $(143.86) | $134.26 | | Cash, cash equivalents at end of period | $25.57 | $73.26 | $(47.69) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide essential context to the financial statements, detailing the company's business, accounting policies, and significant events including liquidity [1. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Sarcos designs, develops, and manufactures advanced robotic systems, with recent events including a reverse stock split and a restructuring charge - Sarcos is a technology leader in designing, developing, and manufacturing advanced robotic systems, solutions, and AI/ML software for dynamic and unstructured environments[18](index=18&type=chunk) - On July 5, 2023, the company effected a **1-for-6** reverse stock split, retroactively adjusting all share and per share amounts[28](index=28&type=chunk) - The company announced a restructuring on July 12, 2023, to focus on products with near-term revenue potential, incurring **$5.1 million** in charges for inventory write-down (**$4.4 million**) and fixed asset impairment (**$0.7 million**) in Q2 2023[29](index=29&type=chunk) Basis of Presentation and Summary of Significant Accounting Policies Data | Metric | Jun 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Cash, cash equivalents and marketable securities | $75.14 | $114.50 | | Accumulated deficit | $(352.76) | $(302.62) | | Working capital | $75.58 | $118.57 | - The company expects to have sufficient financial resources for at least the next **12 months**[32](index=32&type=chunk) Basis of Presentation and Summary of Significant Accounting Policies Data | Revenue Source | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Product Development Contract Revenue | $1.27 | $2.98 | $3.57 | $3.72 | | Product Revenue | $0.00 | $0.06 | $0.00 | $0.07 | | Total Revenue, net | $1.28 | $3.04 | $3.57 | $3.78 | - As of June 30, 2023, the company had **$4.8 million** in backlog (remaining performance obligations), mostly expected to be recognized within the next **12 months**[45](index=45&type=chunk) [2. Fair Value Measurements](index=15&type=section&id=2.%20Fair%20Value%20Measurements) The company measures certain financial assets and liabilities at fair value, primarily marketable securities and warrant liability Fair Value Measurements Data | Asset/Liability | Fair Value (Jun 30, 2023, in millions) | Fair Value (Dec 31, 2022, in millions) | Fair Value Hierarchy Level | | :------------------------------------ | :-------------------------------------- | :-------------------------------------- | :------------------------- | | Marketable securities (U.S. treasury securities) | $49.58 | $79.34 | Level 1 | | Warrant liability | $0.19 | $0.25 | Level 2 | [3. Balance Sheet Components](index=16&type=section&id=3.%20Balance%20Sheet%20Components) Inventories, net, increased while prepaid expenses, property and equipment, and accrued liabilities decreased Balance Sheet Data | Metric | Jun 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Inventories, net | $3.72 | $3.56 | $0.16 | | Raw materials | $2.76 | $2.08 | $0.68 | | Inventory reserves | $1.10 | $0.40 | $0.70 | Balance Sheet Data | Metric | Jun 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Prepaid expenses and other current assets | $3.59 | $5.02 | $(1.42) | | Prepaid insurance | $1.30 | $3.42 | $(2.12) | Balance Sheet Data | Metric | Jun 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Property and equipment, net | $6.76 | $7.64 | $(0.88) | | Accumulated depreciation | $(3.31) | $(2.63) | $(0.69) | Balance Sheet Data | Metric | Jun 30, 2023 (in millions) | Dec 31, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Accrued liabilities | $4.05 | $6.03 | $(1.98) | | Payroll and related costs | $2.97 | $4.27 | $(1.30) | [4. Acquisitions](index=17&type=section&id=4.%20Acquisitions) Sarcos acquired RE2, Inc. for $90.1 million, expanding its engineering team and product offerings, with goodwill of $70.2 million - On April 25, 2022, Sarcos acquired RE2, Inc., a developer of manipulator arms and autonomy capabilities, for an aggregate consideration of **$90.1 million**[57](index=57&type=chunk) - The acquisition included **$30.7 million** in cash, **$44.0 million** in common stock (**1.6 million shares**), and **$15.4 million** in assumed options (**646,173 shares**)[57](index=57&type=chunk) Acquisition Details Data | Acquired Asset/Liability | Amount (in millions) | | :------------------------------------ | :-------------------- | | Intangible assets | $21.30 | | Goodwill | $70.24 | | Total acquisition consideration | $90.08 | [5. Goodwill and Intangible Assets](index=18&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) The company fully impaired its goodwill, while acquired intangible assets totaled $17.5 million net of amortization - All goodwill was fully impaired as of December 31, 2022, due to sustained decreases in the company's publicly quoted share price[62](index=62&type=chunk) Goodwill and Intangible Assets Summary Data | Intangible Asset | Net Carrying Amount (Jun 30, 2023, in millions) | Weighted Average Remaining Useful Life (in years) | | :------------------------------------ | :----------------------------------------------- | :------------------------------------------------ | | Trade name and trademarks | $0.81 | 4.8 | | Developed technology | $7.36 | 3.8 | | Customer relationships | $9.31 | 7.8 | | Total | $17.48 | | Goodwill and Intangible Assets Summary Data | Year | Amortization Expense (in millions) | | :------------------------------------ | :---------------------------------- | | 2023 (remaining) | $1.64 | | 2024 | $3.28 | | 2025 | $3.28 | | 2026 | $3.28 | | 2027 | $2.00 | | 2028 and thereafter | $4.02 | | Total | $17.48 | [6. Reverse Recapitalization](index=18&type=section&id=6.%20Reverse%20Recapitalization) The Business Combination was accounted for as a reverse recapitalization, entitling holders to earn-out shares - The Business Combination was accounted for as a reverse recapitalization, with Old Sarcos deemed the accounting acquirer[65](index=65&type=chunk) - Holders of Old Sarcos capital stock are entitled to up to **4.7 million shares** of Common Stock upon achieving stock price thresholds of **$90.00** and **$120.00**[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [7. Warrants](index=19&type=section&id=7.%20Warrants) Outstanding warrants to purchase 3.4 million shares of Common Stock exist at an exercise price of $11.50 per warrant, redeemable under certain conditions - As of June 30, 2023, there were outstanding warrants to purchase **3.4 million shares** of Common Stock[70](index=70&type=chunk) - Each whole warrant entitles the holder to purchase one-sixth of a share of Common Stock at **$11.50** per warrant, subject to adjustment[70](index=70&type=chunk) - The company may redeem warrants if the common stock price equals or exceeds **$108.00** per share (at **$0.01** per warrant) or **$60.00** per share (at **$0.10** per warrant, with cashless exercise option)[73](index=73&type=chunk)[75](index=75&type=chunk) [8. Stock-based Compensation](index=20&type=section&id=8.%20Stock-based%20Compensation) The company operates under the 2021 Stock Plan, with 1.9 million shares available for grant, and reported $4.7 million in stock-based compensation expense for the six months ended June 30, 2023 - As of June 30, 2023, **1.9 million shares** were available to grant under the **2021** Plan[76](index=76&type=chunk) Stock-based Compensation Summary Data | Stock Option Activity | Dec 31, 2022 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | | Options Outstanding (Number of Shares) | 2,377,503 | 3,618,404 | | Weighted Average Exercise Price | $16.80 | $10.08 | | Exercisable (Number of Shares) | 1,414,864 | 1,429,424 | Stock-based Compensation Summary Data | Stock-Based Compensation Expense | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Total stock-based compensation expense | $2.07 | $10.27 | $4.73 | $21.12 | [9. Net Loss Per Share](index=21&type=section&id=9.%20Net%20Loss%20Per%20Share) The basic and diluted net loss per share was $(1.12) and $(1.97) for the three and six months ended June 30, 2023, respectively, with anti-dilutive securities excluded Net Loss Per Share Data | Metric | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(28.66) | $(23.12) | $(50.14) | $(42.32) | | Weighted average shares outstanding, basic and diluted | 25,512,057 | 24,379,549 | 25,491,654 | 23,685,766 | | Basic and diluted net loss per share | $(1.12) | $(0.95) | $(1.97) | $(1.79) | | Anti-dilutive securities, excluded | 13,389,271 | 11,586,027 | 13,389,271 | 11,586,027 | [10. Income Taxes](index=22&type=section&id=10.%20Income%20Taxes) The company recorded an income tax expense of $3 thousand for both periods, with the effective tax rate differing due to net losses and a full valuation allowance Income Tax Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Income tax (expense) benefit | $0.00 | $1.61 | $0.00 | $1.61 | - The company recorded net losses during the period with a corresponding full valuation allowance on the net deferred tax assets[85](index=85&type=chunk) [11. Commitments and Contingencies](index=23&type=section&id=11.%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings but has not recorded any material loss contingency, and had an unconditional purchase commitment of $2.0 million - The company has not recorded any material loss contingency related to legal proceedings as of June 30, 2023, or December 31, 2022[86](index=86&type=chunk) - The maximum potential amount of future payments under indemnification provisions is indeterminable[87](index=87&type=chunk) - As of June 30, 2023, the company had an unconditional purchase commitment of **$2.0 million**, which was paid during the third quarter of 2023[88](index=88&type=chunk) [12. Segment Information](index=23&type=section&id=12.%20Segment%20Information) The company operates as a single reportable segment, with revenue primarily derived from U.S. customers - The company has a single reportable segment and operating segment structure, as the CODM allocates resources and makes decisions based on consolidated financial information[89](index=89&type=chunk) Segment Data | Revenue from Customers Outside US | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Revenue | $0.20 | $0.60 | $0.90 | $0.60 | [13. Employee Benefits](index=24&type=section&id=13.%20Employee%20Benefits) The company offers a defined contribution 401(k) plan to employees, with matching contributions initiated in April 2022 - The company has a defined contribution **401(k)** plan covering substantially all employees[92](index=92&type=chunk) - The company began providing **401(k)** matching on a portion of employee contributions in April 2022[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting a refined sales strategy and restructuring charges [Special Note Regarding Forward-Looking Statements](index=25&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions readers that the report contains forward-looking statements about future financial performance and strategies, subject to significant risks - The report contains forward-looking statements regarding future financial performance, business strategies, and product releases[95](index=95&type=chunk)[96](index=96&type=chunk) - These statements are subject to risks and uncertainties, including the impact of **COVID-19**, supply chain challenges, competition, and the ability to manage growth and expenses[95](index=95&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) - The company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by applicable securities laws[97](index=97&type=chunk) [Overview](index=26&type=section&id=Overview) Sarcos is a technology leader in advanced robotic systems and AI/ML software, having refined its sales strategy to focus on near-term revenue potential products - Sarcos is a technology leader in designing, developing, and manufacturing advanced robotic systems, solutions, and AI/ML software to augment human productivity and prevent injuries[100](index=100&type=chunk) - On July 12, 2023, the company refined its sales strategy to focus on products with near-term revenue growth potential, specifically Guardian Sea Class, aviation, solar solutions, and a commercial AI autonomy software platform[102](index=102&type=chunk) - Optimization efforts include reducing headcount and consolidating Pittsburgh manufacturing into Salt Lake City, incurring **$5.1 million** in Q2 2023 restructuring charges and anticipating an additional **$6.0 million** in Q3 2023[103](index=103&type=chunk) - The company plans to offer robotic systems and solutions through a standard product sales model and commercial AI autonomy software via a **SaaS** model[105](index=105&type=chunk) [Continuing Impact of COVID-19](index=27&type=section&id=Continuing%20Impact%20of%20COVID-19) The COVID-19 pandemic has caused and may continue to cause supply chain disruptions, affecting recruitment and timelines, leading to accelerated material purchases - The **COVID-19** pandemic has caused and may continue to cause disruptions in the company's supply chain, affecting its ability to recruit skilled employees and meet product development timelines[107](index=107&type=chunk) - The company has accelerated purchases of materials, parts, and components to manage potential supply chain risks, which has increased and will likely continue to increase cash usage[107](index=107&type=chunk) - The duration and extent of the **COVID-19** pandemic's impacts cannot be accurately predicted, and its full effect may not be reflected in operating results until future periods[108](index=108&type=chunk) [Key Factors Affecting Operating Results](index=27&type=section&id=Key%20Factors%20Affecting%20Operating%20Results) The company's future success depends on the successful development and commercial launch of its focus products, facing significant capital requirements and unproven market demand [Development, Testing and Commercial Launch of our Products](index=27&type=section&id=Development%2C%20Testing%20and%20Commercial%20Launch%20of%20our%20Products) The company's near- to mid-term financial success depends on successfully developing and selling its focus products, with potential delays from hiring, component availability, and cost increases - The company's near- to mid-term financial success depends on the successful development, launch, and sale of its focus products: Guardian Sea Class, aviation, solar solutions, and a commercial AI autonomy software platform[110](index=110&type=chunk) - Delays in product development and commercialization are influenced by the ability to hire and retain qualified employees, timely component availability, and increased personnel and materials costs due to inflation and supply chain issues[174](index=174&type=chunk)[175](index=175&type=chunk) - Product testing and improvements may delay estimated production and customer delivery timelines, potentially harming reputation and financial condition[176](index=176&type=chunk) [Financing of Operations](index=28&type=section&id=Financing%20of%20Operations) The company will incur significant cash expenditures for product development and operations, expecting positive operating cash flow no earlier than 2025, and may seek opportunistic financing - The company will spend a material portion of its cash on hand to develop products and fund operations for the foreseeable future[111](index=111&type=chunk) - The company expects to achieve positive operating cash flow no earlier than **2025** and believes it has sufficient liquidity to operate into **2025** without needing additional capital, partly due to a reduction in force[111](index=111&type=chunk)[112](index=112&type=chunk) - The company may opportunistically raise capital when market conditions are favorable to bolster cash reserves, reduce financial risk, and finance product manufacturing and inventory costs[112](index=112&type=chunk) [Acquisition and Integration of RE2](index=28&type=section&id=Acquisition%20and%20Integration%20of%20RE2) The company acquired RE2, Inc. on April 25, 2022, integrating its activities into Sarcos' consolidated financial statements from the acquisition date - On April 25, 2022, Sarcos acquired RE2, Inc., a developer of manipulator arms and autonomy capabilities[113](index=113&type=chunk) - The financial results presented include RE2's activity from the acquisition date through June 30, 2023[113](index=113&type=chunk) [Customer Demand](index=28&type=section&id=Customer%20Demand) The company refined its sales strategy to focus on specific solutions and AI autonomy software, acknowledging that market demand for these new product categories is unproven - The company refined its sales and product development strategy to focus on specific solutions (Guardian Sea Class, aviation, solar) and a commercial AI software platform, based on customer feedback for specialized systems[114](index=114&type=chunk) - Market demand for these new product categories is unproven, and inaccurate assumptions about market demand, pricing, adoption rates, and sales cycles could adversely affect the business[114](index=114&type=chunk) [Manufacturing of Our Products](index=28&type=section&id=Manufacturing%20of%20Our%20Products) The company plans to outsource manufacturing to a third-party contract manufacturer, with high-volume production not anticipated until after 2023, posing risks if the transition is unsuccessful - The company intends to outsource manufacturing of its products to a third-party contract manufacturer over time[115](index=115&type=chunk) - High-volume production by the contract manufacturing partner is not anticipated until after **2023**, and the transition may be delayed by the new sales and product development strategy[115](index=115&type=chunk) - The company believes it has sufficient internal manufacturing capacity to meet near-term demand for its focus products[115](index=115&type=chunk) [Continued Investment and Innovation](index=28&type=section&id=Continued%20Investment%20and%20Innovation) The company's financial performance relies heavily on maintaining its leading position through continuous investment in research and development and innovation - Financial performance is significantly dependent on maintaining a leading position in the robotic systems industry through continuous investment in research and development[116](index=116&type=chunk) - The company must continually identify and respond to evolving customer requirements, competitive threats, and introduce innovative products to avoid adverse effects on market position and revenue[116](index=116&type=chunk) [Geopolitical and Macro-economic Environment](index=28&type=section&id=Geopolitical%20and%20Macro-economic%20Environment) Geopolitical and macroeconomic factors can significantly impact economic activity, affecting demand, supply chain reliability, and costs - Geopolitical and macroeconomic factors (e.g., inflation, interest rates, war in Ukraine) can significantly impact economic activity and demand for products[117](index=117&type=chunk) - These factors can affect the supply chain, ability to hire, labor and materials costs, product pricing, and customer budgets[117](index=117&type=chunk) - Inability to manage business successfully in response to these factors could adversely affect business and operating results[118](index=118&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) The company's results of operations for the three and six months ended June 30, 2023, show decreased revenue, impacted by R&D, G&A, and restructuring charges [Comparison of the Three Months Ended June 30, 2023, and 2022](index=29&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202023%2C%20and%202022) For the three months ended June 30, 2023, revenue decreased by 58% to $1.3 million, with operating expenses slightly down, but R&D up and G&A down, alongside restructuring charges [Revenue, Net](index=29&type=section&id=Revenue%2C%20Net_3M) Total revenue decreased by $1.8 million (58%) to $1.3 million for the three months ended June 30, 2023 Revenue Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $1.28 | $3.04 | $(1.76) | (58)% | [Product Development Contract Revenue](index=29&type=section&id=Product%20Development%20Contract%20Revenue_3M) Product development contract revenue decreased by $1.7 million (57%) to $1.3 million, mainly due to contract completion and a shift to commercial sales focus Product Development Contract Revenue Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Product Development Contract Revenue | $1.27 | $2.98 | $(1.71) | (57)% | - The decrease was primarily due to the completion of certain product development contracts that have not yet been replaced[121](index=121&type=chunk) - Future revenue from product development contracts is expected to decrease as a percentage of total revenue as the company focuses on initial commercial sales[121](index=121&type=chunk) [Product Revenue](index=29&type=section&id=Product%20Revenue_3M) Product revenue remained insignificant due to customer budget constraints, macroeconomic factors, and lack of near-term customer need for general-purpose systems Product Revenue Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Product Revenue | $0.00 | $0.06 | $(0.05) | (95)% | - Lack of significant product sales in Q2 2023 was due to customer budget constraints, macroeconomic factors, and lack of near-term customer need for general-purpose systems (other than Guardian Sea Class)[122](index=122&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses_3M) Total operating expenses decreased slightly by 2% to $31.2 million, driven by reduced cost of revenue and general and administrative expenses, offset by increases in R&D and restructuring charges Operating Expenses Summary Data | Operating Expense | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Total operating expenses | $31.24 | $32.02 | $(0.78) | (2)% | [Cost of Revenue](index=30&type=section&id=Cost%20of%20Revenue_3M) Cost of revenue decreased by $2.2 million (70%) to $0.9 million, primarily due to reduced labor and material expenses charged to product development contracts Cost of Revenue Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Cost of revenue | $0.94 | $3.15 | $(2.20) | (70)% | - Decrease mainly due to decreased labor and material expenses charged to product development contracts[125](index=125&type=chunk) [Research and Development](index=30&type=section&id=Research%20and%20Development_3M) Research and development expense increased by $4.1 million (55%) to $11.7 million, driven by higher headcount and a shift of labor from cost of revenue to R&D Research and Development Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Research and development | $11.71 | $7.57 | $4.14 | 55% | - Increase driven by increased labor and overhead expense due to higher headcount (RE2 acquisition) and a shift of labor from cost of revenue to R&D, focusing on new product development[126](index=126&type=chunk) [General and Administrative](index=30&type=section&id=General%20and%20Administrative_3M) General and administrative expense decreased by $9.9 million (55%) to $8.3 million, primarily due to reduced stock-based compensation expense General and Administrative Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | General and administrative | $8.25 | $18.15 | $(9.89) | (55)% | - Decrease primarily due to reduced stock-based compensation expense of **$8.5 million** from certain awards vesting in the prior year[127](index=127&type=chunk) [Sales and Marketing](index=30&type=section&id=Sales%20and%20Marketing_3M) Sales and marketing expense increased by $1.8 million (71%) to $4.4 million, driven by higher professional service fees and increased promotional and event expenses Sales and Marketing Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Sales and marketing | $4.41 | $2.59 | $1.82 | 71% | - Increase driven by higher professional service fees for third-party data management platforms and increased promotional/event expenses[128](index=128&type=chunk) [Intangible Amortization Expense](index=30&type=section&id=Intangible%20Amortization%20Expense_3M) Intangible amortization expense increased by $0.2 million (43%) to $0.8 million, due to amortization expenses on intangible assets acquired in the RE2 acquisition Intangible Amortization Expense Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Intangible amortization expense | $0.82 | $0.57 | $0.25 | 43% | - Increase due to amortization expenses on identified intangible assets recorded as part of the RE2 acquisition[129](index=129&type=chunk) [Asset Write-down and Restructuring](index=30&type=section&id=Asset%20Write-down%20and%20Restructuring_3M) The company incurred $5.1 million in asset write-down and restructuring expenses from product development reprioritization Asset Write-down and Restructuring Summary Data | Metric | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Asset write-down and restructuring | $5.11 | $0.00 | $5.11 | *NM | - Expenses include **$4.4 million** for inventory write-down and **$0.7 million** for fixed asset impairment due to product development reprioritization[130](index=130&type=chunk) [Other Income](index=30&type=section&id=Other%20Income_3M) Total other income decreased by $3.0 million (69%) to $1.3 million, primarily due to a lower gain on warrant liability Other Income Summary Data | Other Income | 3 Months Ended Jun 30, 2023 (in millions) | 3 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Interest income, net | $0.87 | $0.15 | $0.73 | 491% | | Gain on warrant liability | $0.44 | $4.11 | $(3.67) | (89)% | | Other loss, net | $(0.01) | $0.00 | $(0.01) | 450% | | Total other income | $1.30 | $4.26 | $(2.96) | (69)% | - Decrease primarily due to reduced unrealized mark-to-market gain on private placement warrants, partially offset by increased interest income[133](index=133&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and 2022](index=31&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) For the six months ended June 30, 2023, total revenue decreased by 6% to $3.6 million, with operating expenses down, and significant changes in R&D, G&A, and restructuring charges [Revenue, Net](index=31&type=section&id=Revenue%2C%20Net_6M) Total revenue decreased by $0.2 million (6%) to $3.6 million for the six months ended June 30, 2023 Revenue Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Revenue, net | $3.57 | $3.78 | $(0.21) | (6)% | [Product Development Contract Revenue](index=31&type=section&id=Product%20Development%20Contract%20Revenue_6M) Product development contract revenue decreased by $0.1 million (4%) to $3.6 million, primarily due to contract completion and a shift to commercial sales focus Product Development Contract Revenue Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Product Development Contract Revenue | $3.57 | $3.72 | $(0.15) | (4)% | - The decrease was primarily due to the completion of certain product development contracts that have not yet been replaced[135](index=135&type=chunk) - Future revenue from product development contracts is expected to decrease as a percentage of total revenue as the company focuses on initial commercial sales[135](index=135&type=chunk) [Product Revenue](index=31&type=section&id=Product%20Revenue_6M) Product revenue remained insignificant due to customer budget constraints, macroeconomic factors, and lack of near-term customer need for general-purpose systems Product Revenue Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Product Revenue | $0.00 | $0.07 | $(0.06) | (95)% | - Lack of significant product sales in H1 2023 was due to customer budget constraints, macroeconomic factors, and lack of near-term customer need for general-purpose systems (other than Guardian Sea Class)[136](index=136&type=chunk) [Operating Expenses](index=31&type=section&id=Operating%20Expenses_6M) Total operating expenses decreased by $1.7 million (3%) to $56.7 million, influenced by reduced cost of revenue and general and administrative expenses, offset by increases in R&D and restructuring charges Operating Expenses Summary Data | Operating Expense | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------- | | Total operating expenses | $56.72 | $58.39 | $(1.67) | (3)% | [Cost of Revenue](index=32&type=section&id=Cost%20of%20Revenue_6M) Cost of revenue decreased by $0.9 million (25%) to $2.7 million, primarily due to reduced labor and material expenses charged to product development contracts Cost of Revenue Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Cost of revenue | $2.73 | $3.63 | $(0.91) | (25)% | - Decrease mainly due to decreased labor and material expenses charged to product development contracts[139](index=139&type=chunk) [Research and Development](index=32&type=section&id=Research%20and%20Development_6M) Research and development expense increased by $7.7 million (57%) to $21.1 million, driven by higher headcount and a shift of labor from cost of revenue to R&D Research and Development Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Research and development | $21.11 | $13.45 | $7.66 | 57% | - Increase driven by increased labor and overhead expense due to higher headcount (RE2 acquisition) and a shift of labor from cost of revenue to R&D, focusing on new product development[140](index=140&type=chunk) [General and Administrative](index=32&type=section&id=General%20and%20Administrative_6M) General and administrative expense decreased by $18.0 million (50%) to $18.0 million, primarily due to reduced stock-based compensation expense General and Administrative Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | General and administrative | $17.99 | $35.94 | $(17.95) | (50)% | - Decrease primarily due to reduced stock-based compensation expense of **$16.8 million** from certain awards vesting in the prior year[141](index=141&type=chunk) [Sales and Marketing](index=32&type=section&id=Sales%20and%20Marketing_6M) Sales and marketing expense increased by $3.4 million (70%) to $8.2 million, driven by higher professional service fees, promotional expenses, and additional headcount Sales and Marketing Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Sales and marketing | $8.15 | $4.80 | $3.35 | 70% | - Increase driven by higher professional service fees, increased promotional/event expenses, and additional headcount from the RE2 acquisition[142](index=142&type=chunk) [Intangible Amortization Expense](index=32&type=section&id=Intangible%20Amortization%20Expense_6M) Intangible amortization expense increased by $1.1 million (185%) to $1.6 million, due to amortization expenses on intangible assets acquired in the RE2 acquisition Intangible Amortization Expense Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Intangible amortization expense | $1.64 | $0.57 | $1.06 | 185% | - Increase due to amortization expenses on identified intangible assets recorded as part of the RE2 acquisition[143](index=143&type=chunk) [Asset Write-down and Restructuring](index=32&type=section&id=Asset%20Write-down%20and%20Restructuring_6M) The company incurred $5.1 million in asset write-down and restructuring expenses, including inventory write-down and fixed asset impairment from product development reprioritization Asset Write-down and Restructuring Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Asset write-down and restructuring | $5.11 | $0.00 | $5.11 | *NM | - Expenses include **$4.4 million** for inventory write-down and **$0.7 million** for fixed asset impairment due to product development reprioritization[144](index=144&type=chunk) [Other Income](index=32&type=section&id=Other%20Income_6M) Total other income decreased by $7.7 million (72%) to $3.0 million, primarily due to a lower gain on warrant liability, partially offset by increased interest income and employee retention credit refunds Other Income Summary Data | Other Income | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | :------- | | Interest income, net | $1.97 | $0.16 | $1.81 | 1,141% | | Gain on warrant liability | $0.00 | $10.53 | $(10.52) | (100)% | | Other income, net | $1.04 | $0.00 | $1.04 | *NM | | Total other income | $3.01 | $10.69 | $(7.67) | (72)% | - Decrease primarily due to reduced unrealized mark-to-market gain on private placement warrants, partially offset by increased interest income and employee retention credit refunds[145](index=145&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company had $75.1 million in cash, cash equivalents, and marketable securities, believing it has sufficient liquidity for at least the next 12 months Liquidity and Capital Resources Summary Data | Metric | Jun 30, 2023 (in millions) | | :------------------------------------ | :-------------------------- | | Cash, cash equivalents and marketable securities | $75.10 | - The company believes it has sufficient liquidity to operate into **2025** without the need to raise additional capital, partly due to a reduction in force[149](index=149&type=chunk) - The company expects to need additional capital before becoming cash flow positive, which is not anticipated until at least **2025**[149](index=149&type=chunk) Liquidity and Capital Resources Summary Data | Cash Flow Activity | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash used in operating activities | $(39.98) | $(27.92) | $(12.06) | | Net cash provided by (used in) investing activities | $30.46 | $(109.88) | $140.34 | | Net cash used in financing activities | $(0.06) | $(6.05) | $5.98 | [Net Cash Used in Operating Activities](index=33&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) Net cash used in operating activities increased by $12.1 million to $40.0 million, primarily due to a higher net loss and increased cash used for changes in operating assets and liabilities Operating Cash Flow Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash used in operating activities | $(39.98) | $(27.92) | $(12.06) | - Increase primarily attributable to a **$7.8 million** increase in net loss and a net decrease of **$0.8 million** in non-cash expenses[151](index=151&type=chunk) - Changes in operating assets and liabilities increased cash used by **$3.4 million**, driven by increased inventory purchases and decreases in accrued liabilities[151](index=151&type=chunk) [Net Cash Provided by (Used in) Investing Activities](index=33&type=section&id=Net%20Cash%20Provided%20by%20(Used%20in)%20Investing%20Activities) Net cash provided by investing activities increased by $140.3 million, shifting from a net use to a net provision, predominantly due to marketable securities maturities Investing Cash Flow Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash provided by (used in) investing activities | $30.46 | $(109.88) | $140.34 | - Increase predominantly due to **$31.1 million** of maturities of marketable securities, net of purchases, in **2023**[153](index=153&type=chunk) - In **2022**, investing activities included **$79.5 million** in marketable securities purchases and **$29.7 million** for the RE2 acquisition[153](index=153&type=chunk) [Net Cash Used In Financing Activities](index=34&type=section&id=Net%20Cash%20Used%20In%20Financing%20Activities) Net cash used in financing activities decreased by $6.0 million, primarily due to a reduction in funds used to repurchase shares for tax withholding obligations Financing Cash Flow Summary Data | Metric | 6 Months Ended Jun 30, 2023 (in millions) | 6 Months Ended Jun 30, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Net cash used in financing activities | $(0.06) | $(6.05) | $5.98 | - Decrease mainly due to a **$6.6 million** reduction in funds used to repurchase shares for tax withholding obligations[154](index=154&type=chunk) [Emerging Growth Company Status](index=34&type=section&id=Emerging%20Growth%20Company%20Status) The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to take advantage of exemptions from certain reporting requirements - The company is an "**emerging growth company**" (**EGC**) under the **JOBS Act**[155](index=155&type=chunk) - As an **EGC**, it is exempt from auditor attestation for internal controls, say-on-pay votes, and has reduced executive compensation disclosure obligations[155](index=155&type=chunk) - The company has elected to use the extended transition period for new accounting standards, which may make financial statements difficult to compare with non-**EGCs** or **EGCs** that opted out[156](index=156&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements are prepared in accordance with GAAP, with no material changes to its critical accounting policies or estimates - Financial statements are prepared in accordance with **GAAP**, requiring estimates and judgments[157](index=157&type=chunk) - No material changes to critical accounting policies or estimates were disclosed in the **2022** Form **10-K**[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2016-13 on January 1, 2023, with no material impact, and has elected to delay new accounting pronouncements as an emerging growth company - The company adopted **ASU 2016-13** on January 1, 2023, with no material impact on its financial statements[47](index=47&type=chunk) - As an emerging growth company, the company has elected to delay the adoption of new or revised accounting pronouncements until they are applicable to private companies[46](index=46&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Sarcos is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2023[160](index=160&type=chunk) - Disclosure controls and procedures provide reasonable, not absolute, assurance that objectives are met[161](index=161&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2023[162](index=162&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company may be involved in various legal claims and lawsuits but is not currently a party to any proceedings expected to have a material adverse effect on its business - The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations[164](index=164&type=chunk) - Litigation can have an adverse impact due to defense and settlement costs and diversion of management resources[164](index=164&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks and uncertainties that could materially harm the company's business, emphasizing its early stage, history of losses, and unproven commercialization efforts [Risks Related to Our Business](index=36&type=section&id=Risks%20Related%20to%20Our%20Business) The company is an early-stage entity with a history of significant losses, limited experience commercializing products at scale, and faces delays in product development - The company is an early-stage company with a history of losses, incurring a net loss of **$50.1 million** for the six months ended June 30, 2023, and expects to incur significant expenses and losses until **2025** at the earliest[166](index=166&type=chunk)[169](index=169&type=chunk) - The company has very limited experience commercializing products at a large scale, and its new sales strategy focusing on specific solutions (Guardian Sea Class, aviation, solar, AI/ML software) may not be effective[171](index=171&type=chunk)[173](index=173&type=chunk) - Commercialization may be delayed due to challenges in hiring, component availability, increased personnel and materials costs, and the need for product improvements based on testing and customer use[174](index=174&type=chunk)[176](index=176&type=chunk) - Revenue will be concentrated in a limited number of products, and the market demand for new product categories (robotic systems and AI autonomy software) is unproven, with important assumptions about pricing, adoption rates, and sales cycles potentially inaccurate[177](index=177&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - The company has limited current customers and no binding orders for commercial versions of its focus products, and expected customer trials may not result in binding orders[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Customer employees may resist the adoption of robotic products due to lack of instruction, perceived difficulties, labor union resistance, or workplace injuries, negatively impacting sales[194](index=194&type=chunk) - The company operates in a competitive industry subject to rapid technological change, with competition expected to increase from existing and new players offering alternative or superior solutions[199](index=199&type=chunk)[201](index=201&type=chunk)[204](index=204&type=chunk) [Risks Related to Our Operations & Growth](index=43&type=section&id=Risks%20Related%20to%20Our%20Operations%20%26%20Growth) The company's ability to develop and manufacture products at scale is unproven, with plans to outsource manufacturing and reliance on single-source suppliers posing significant risks - The company's ability to develop and manufacture products of sufficient quality on schedule and at a large scale is unproven, with plans to largely outsource manufacturing to third-party partners, which could lead to delays and reduced control[210](index=210&type=chunk)[211](index=211&type=chunk) - Dependence on single, sole, or limited source suppliers for key components, and the inability to identify all future suppliers, poses significant risks to supply, pricing, and product specifications[214](index=214&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk) - Continued supply chain disruptions, including cost increases and availability issues for components (e.g., semiconductors, lithium-ion batteries), could delay commercialization and negatively impact profitability[219](index=219&type=chunk) - Design or manufacturing flaws, defects, glitches, or user errors in products can result in recalls, lower **ROI** for customers, harm to users, and significant safety concerns, adversely affecting operations, financial condition, or reputation[221](index=221&type=chunk)[222](index=222&type=chunk)[225](index=225&type=chunk) - The company has no experience maintaining or servicing its products at a large scale and may face challenges in establishing a widespread service network, potentially impacting customer satisfaction and sales[230](index=230&type=chunk)[231](index=231&type=chunk) - The expected transition to an outsourced manufacturing business model may not be successful, leading to delays, lost revenue, increased costs, and reduced control over quality and supply[234](index=234&type=chunk)[235](index=235&type=chunk) - Failure to effectively manage growth, including challenges in expanding management, engineering, and product teams, and integrating new employees, could materially and adversely affect business operations[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - Recent workforce reductions (affecting **~24%** of workforce) may not result in anticipated savings, could incur greater-than-expected costs, and disrupt business operations, including loss of expertise and impact on employee morale[265](index=265&type=chunk) [Risks Related to Our Finances](index=50&type=section&id=Risks%20Related%20to%20Our%20Finances) The company requires significant capital for its business plans, expecting to need additional financing before achieving positive operating cash flows - The company's business plans require significant capital, and it expects to need additional financing before achieving positive operating cash flows, which are not anticipated until at least **2025**[258](index=258&type=chunk)[259](index=259&type=chunk) - Future capital needs may require selling additional equity or debt securities, potentially diluting stockholders or introducing restrictive covenants[258](index=258&type=chunk)[263](index=263&type=chunk) - Financial results may vary significantly from period to period due to fluctuations in operating costs, product demand, and the pace of product development and manufacturing[266](index=266&type=chunk)[267](index=267&type=chunk) - Strategic alliances or acquisitions carry risks such as sharing proprietary information, non-performance by third parties, increased expenses, and integration challenges, which may not yield anticipated benefits[268](index=268&type=chunk)[269](index=269&type=chunk)[272](index=272&type=chunk) - Operating and financial projections rely on management assumptions and analyses, which, given limited commercial experience, may prove incorrect, leading to actual results materially different from forecasts[273](index=273&type=chunk)[274](index=274&type=chunk) - Adverse events or perceptions affecting the financial services industry could impact the company's operating results, liquidity, financial condition, and prospects, as seen with recent bank failures[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) [Risks Related to Claims, Legal and Regulatory Compliance](index=55&type=section&id=Risks%20Related%20to%20Claims%2C%20Legal%20and%20Regulatory%20Compliance) The company faces potential litigation due to prior material weaknesses, is subject to evolving data privacy and security laws, and new risks from AI technologies - The company faces potential litigation or disputes due to prior material weaknesses in internal control over financial reporting and the restatement of financial statements[295](index=295&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - Changes in tax laws, such as the **Tax Cuts and Jobs Act of 2017** and the **Inflation Reduction Act of 2022**, could adversely affect the company's effective tax rate, operating results, and cash flows[300](index=300&type=chunk)[302](index=302&type=chunk) - The company may become subject to new or changing governmental regulations related to product design, manufacturing, marketing, distribution, servicing, or use, with non-compliance potentially leading to product withdrawal, delays, increased costs, or making the business unviable[303](index=303&type=chunk)[304](index=304&type=chunk) - The company is subject to evolving laws, regulations, standards, and contractual obligations related to data privacy and security (e.g., **CCPA**, **CPRA**, **GDPR**), with actual or perceived failure to comply potentially harming reputation, leading to significant fines, and liability[308](index=308&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - Issues in the development and use of artificial intelligence (**AI**), combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences due to complexity, ethical concerns, and potential for inaccurate content[314](index=314&type=chunk)[315](index=315&type=chunk)[

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Sarcos' Q1 2023 unaudited financials report a **$21.5 million net loss**, with **assets at $147.9 million** and **equity at $125.7 million** [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets to **$147.9 million** at March 31, 2023, primarily from reduced cash and marketable securities Balance Sheet Summary | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :----------------------------- | :------------------------------ | | Total Assets | $147,860 | $167,625 | | Cash and cash equivalents | $25,368 | $35,159 | | Marketable securities | $69,352 | $79,337 | | Inventories, net | $6,058 | $3,562 | | Intangible assets, net | $18,297 | $19,116 | | Total Liabilities | $22,128 | $23,175 | | Total Stockholders' Equity | $125,732 | $144,450 | | Accumulated deficit | $(324,097) | $(302,621) | | Common Stock Shares Issued and Outstanding | 154,282,881 | 154,252,704 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a **net loss of $21.5 million** for Q1 2023, with revenue increasing **209% to $2.3 million** from product development contracts Statements of Operations Summary | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :----------------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Revenue, net | $2,296 | $743 | | Cost of revenue | $1,786 | $488 | | Research and development | $9,403 | $5,881 | | General and administrative | $9,735 | $17,792 | | Sales and marketing | $3,741 | $2,211 | | Intangible amortization expense | $819 | $— | | Total operating expenses | $25,484 | $26,372 | | Loss from operations | $(23,188) | $(25,629) | | Interest income, net | $1,099 | $11 | | (Loss) gain on warrant liability | $(436) | $6,414 | | Other income, net | $1,049 | $2 | | Net loss | $(21,476) | $(19,202) | | Net loss per share (Basic and diluted) | $(0.14) | $(0.14) | | Weighted-average shares used in computing net loss per share | 152,827,729 | 137,908,690 | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The comprehensive loss for Q1 2023 was **$21.4 million**, slightly lower than the net loss due to unrealized gains on investments Statements of Comprehensive Loss Summary | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net loss | $(21,476) | $(19,202) | | Change in unrealized gain on available-for-sale investments | $59 | $— | | Total other comprehensive income | $59 | $— | | Comprehensive loss | $(21,417) | $(19,202) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased to **$125.7 million** by March 31, 2023, primarily due to the net loss incurred during the period Stockholders' Equity Summary | Metric | December 31, 2022 (in thousands) | March 31, 2023 (in thousands) | | :---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Total Stockholders' Equity | $144,450 | $125,732 | | Stock-based compensation | $2,664 | $10,850 | | Net loss | $(21,476) | $(19,202) | | Other comprehensive gain | $59 | $— | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$20.1 million** in Q1 2023, while investing activities provided **$10.3 million** Cash Flows Summary | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Net cash used in operating activities | $(20,122) | $(12,452) | $(7,670) | 62% | | Net cash provided by (used in) investing activities | $10,338 | $(514) | $10,852 | (2,111)% | | Net cash used in financing activities | $(7) | $(5,190) | $5,183 | (100)% | | Net decrease in cash, cash equivalents | $(9,791) | $(18,156) | $8,365 | (46)% | | Cash, cash equivalents at end of period | $25,368 | $198,958 | | | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of Sarcos' business, accounting policies, acquisitions, and financial instruments [Note 1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Sarcos designs mobile robotic systems, acquired RE2, Inc. in April 2022, and believes it has sufficient liquidity for the next 12 months - Sarcos designs and produces highly-dexterous mobile robotic systems and solutions for use in dynamic and unstructured environments[15](index=15&type=chunk) - Acquired RE2, Inc. on April 25, 2022, a developer of autonomous and teleoperated mobile robotic systems, with RE2's activity included from the acquisition date[24](index=24&type=chunk) Liquidity and Accumulated Deficit | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Cash, cash equivalents and marketable securities | $94,700 | $114,500 | | Accumulated deficit | $(324,100) | $(302,621) | | Working capital | $101,100 | | - The Company believes it has sufficient financial resources for at least the next **12 months** from the date of this Report[27](index=27&type=chunk) - Revenue is recognized from the sale of products and from the delivery of goods and services arising out of contractual arrangements to provide product development contract services, following a five-step process[28](index=28&type=chunk)[33](index=33&type=chunk) Revenue Breakdown | (In thousands) | For the three months ended March 31, 2023 | For the three months ended March 31, 2022 | | :----------------------------- | :---------------------------------------- | :---------------------------------------- | | Product Development Contract Revenue | $2,296 | $733 | | Product Revenue | $— | $10 | | **Revenue, net** | **$2,296** | **$743** | - As of March 31, 2023, the Company had backlog, or revenue related to remaining performance obligations, of **$3.8 million**, with most expected to be recognized over the next **12 months**[41](index=41&type=chunk) - Adopted ASU 2016-13 (Financial Instruments—Credit Losses) on January 1, 2023, with no material impact on the condensed consolidated financial statements[43](index=43&type=chunk) [Note 2. Fair Value Measurements](index=14&type=section&id=Note%202.%20Fair%20Value%20Measurements) The company measures marketable securities (Level 1) and warrant liability (Level 2) at fair value on a recurring basis Fair Value Measurements | (In thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | **Assets (March 31, 2023):** | | | | | | U.S. treasury securities | $69,352 | $— | $— | $69,352 | | **Li

Financial Performance - The company incurred a net loss of $157.1 million for the year ended December 31, 2022, compared to a net loss of $81.5 million for the year ended December 31, 2021, and expects to continue incurring losses until at least 2025[160]. - Negative cash flow from operating activities was $65.4 million for the year ended December 31, 2022, and $42.1 million for the year ended December 31, 2021, with expectations of continued negative cash flow until 2025[164]. - The company has not yet achieved positive operating cash flow, and its ability to generate such cash flow remains uncertain[163]. - The company does not expect to achieve positive operating cash flows until at least 2025, necessitating additional financing for ongoing operations[192]. - The company may not achieve profitability in the near future, as it continues to generate taxable losses[300]. Product Development and Commercialization - The company began production of the initial commercial version of the Guardian XM in September 2022 and the Guardian XT in December 2022, with expected customer deliveries starting in the first half of 2023[175]. - Production of the Guardian Sea Class is expected to begin in the second half of 2023, with deliveries anticipated in the same timeframe[175]. - The company anticipates delays in the commercialization of core systems, which could postpone initial deliveries and revenue recognition[186]. - The company has limited experience in large-scale commercialization of robotic systems, which may hinder effective market penetration[190]. - The company anticipates significant additional product development efforts and expenses, with ongoing challenges in commercializing core and future products[211]. - The company may face delays in product development phases, which could postpone customer testing and lead to missed sales opportunities[213]. Supply Chain and Operational Challenges - The company has faced supply chain challenges, including increased costs and interruptions in the supply of components, which could delay product development and commercialization[176]. - The company is dependent on suppliers, some of which are sole or limited source suppliers, and any inability to secure necessary components could adversely affect its business[181]. - The company relies on third-party suppliers for key components, which may affect sales, revenue, and profitability if supply issues arise[182]. - The company has limited negotiating leverage with suppliers, potentially leading to unfavorable pricing and terms[183]. - Significant increases in material costs and supply chain disruptions are currently impacting the company, particularly in securing components for product development[184]. - The company is experiencing disruptions and delays in its supply chain, which could materially affect its business and financial condition[242]. Human Resources and Management - The company continues to experience challenges in hiring qualified personnel, which could impact product development and commercialization timelines[179]. - The ongoing COVID-19 pandemic has adversely impacted the company's ability to recruit skilled employees and meet product development timelines[242]. - The company faces risks related to hiring and retaining qualified employees, which could harm its ability to compete and operate effectively[236]. - The management team has limited experience in operating a publicly-traded company, which may affect its ability to manage regulatory obligations[238]. Legal and Regulatory Compliance - The company incurs significant legal and accounting expenses as a publicly-traded entity, which could adversely impact its financial condition[240]. - The company may face litigation risks related to past accounting issues and the potential for future material weaknesses in financial reporting[287]. - The California Consumer Privacy Act (CCPA) and other state laws may increase compliance costs and potential liabilities as the company expands operations[311]. - Compliance with evolving data privacy laws, such as the GDPR, may result in substantial costs and necessitate changes to business practices[312]. - The company is subject to audits and investigations by government agencies, which could divert resources and impact operations[326]. Strategic Initiatives and Market Position - The acquisition of RE2, completed in April 2022, is expected to enhance the company's product portfolio and market reach, although integration risks remain[169]. - The company plans to expand its production capabilities and sales infrastructure, which will require significant investment and may lead to increased operational costs[161]. - The company is shifting to a standard product sales model for its robotic systems, reducing capital requirements and improving manufacturing efficiency[207]. - The company targets large multinational businesses as customers, which have substantial negotiating power and may develop competitive internal solutions[265]. - The competitive landscape includes established companies like ABB Robotics and Honeywell, which could pose significant challenges[269]. Financial Risks and Capital Needs - Future capital needs may require the company to seek additional financing, potentially diluting stockholder equity[191]. - The company has recorded a full valuation allowance related to net operating loss carryforwards due to uncertainty in realizing future benefits[304]. - Significant capital is required for business development, including R&D, production, and marketing, leading to ongoing high expenses that may impact profitability[258]. - The company may face challenges in developing production processes within projected costs and timelines, which could adversely affect its business prospects[252]. Cybersecurity and Data Protection - The company faces increasing cybersecurity risks due to remote work and geopolitical tensions, particularly related to the war in Ukraine[315]. - The company has implemented security measures to protect data, but these cannot guarantee complete security against breaches[320]. - The company may incur significant costs related to privacy and security breaches, impacting its financial condition[322]. Environmental and Compliance Risks - Environmental costs and regulations related to climate change could adversely affect future earnings and product affordability[345]. - Future climate change regulations may lead to increased direct compliance costs and indirect costs from suppliers and customers, potentially decreasing demand for products[347]. - Compliance with export control laws is critical, as non-compliance could lead to severe penalties and affect revenue generation[333].

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, 2022 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 SARCOS TECHNOLOGY AND ROBOTICS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaw ...

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 June 30, 2022 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 SARCOS TECHNOLOGY AND ROBOTICS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 8 ...

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, 2022 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 SARCOS TECHNOLOGY AND ROBOTICS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (I.R.S. Employer Identification No.) 650 South 500 West, Suite 150 Salt Lake City, Utah, 84101 (Address of principal executive offices) (888) 927-7296 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commissio ...