Financial Performance - The company incurred a net loss of $115.6 million for the year ended December 31, 2023, and a net loss of $72.6 million for the year ended December 31, 2024, with an accumulated deficit of $490.8 million as of December 31, 2024[87]. - The net loss for the year was $72.617 million, a slight improvement compared to a net loss of $115.593 million in 2023, indicating a 37.2% reduction in losses[344]. - The total stockholders' equity showed a deficit of $9.533 million in 2024, a significant decline from a positive equity of $40.905 million in 2023[341]. - The accumulated deficit increased to $490.831 million as of December 31, 2024, compared to $418.214 million in 2023, indicating ongoing financial challenges[341]. - The company reported a basic and diluted net loss per share of $2.71 for 2024, improving from $4.51 in 2023[344]. - The company has incurred losses historically and does not expect to achieve profitability in the near future[166]. Cash Flow and Liquidity - Negative cash flow from operating activities was $76.6 million for the year ended December 31, 2023, and $22.6 million for the year ended December 31, 2024, with expectations of continued negative cash flow in the foreseeable future[91]. - The company's cash and cash equivalents increased to $31.188 million as of December 31, 2024, up from $23.139 million in 2023, reflecting improved liquidity[341]. - Cash flows from operating activities showed a net cash used of $22,627 thousand in 2024, compared to $76,620 thousand in 2023, indicating a 70% improvement in cash flow management[350]. - The company believes it has sufficient financial resources for at least the next 12 months, despite ongoing losses and negative cash flows from operations[361]. Revenue Generation and Customer Base - The company has no commercial customers as of the report date, despite having revenue-generating contracts with U.S. government customers related to its AI/ML Foundational Technology[101]. - The anticipated revenues are expected to be primarily derived from licensing AI/ML software products, with a need to enhance products and grow the customer base to diversify revenue[99]. - Total revenue for 2024 was significantly concentrated, with two customers accounting for 98% of the revenue, compared to five customers accounting for 85% in 2023[365]. Product Development and Market Challenges - The company expects to incur significant losses in future periods due to ongoing costs and expenses related to product development and commercialization efforts[88]. - The market for AI/ML Foundational Technology is relatively new and evolving, with potential customers' adoption being critical for sales growth[105]. - Successful commercialization of AI/ML products may be delayed, affecting product availability and revenue generation[94]. - The company has begun initial customer testing for its Palladyne IQ product in June 2024, but customer testing may take longer than anticipated, potentially leading to longer sales cycles[103]. - The company anticipates significant additional product development efforts and expenses, with risks of delays in product development affecting customer engagement and revenue generation[123]. Capital and Financing - The company may need to secure additional capital to continue operations, which could dilute stockholders or introduce restrictive covenants[88]. - The company may need to raise additional capital through equity or debt securities, which could dilute existing shareholders or impose operational restrictions[148]. - The company successfully raised $20,028 thousand through the issuance of common stock in 2024, contributing to a net increase in cash and cash equivalents[350]. Regulatory and Compliance Risks - The European Union's AI Act, effective by August 2, 2026, may impose regulatory obligations that could require changes in the company's use of AI technologies[174]. - Noncompliance with the AI Act could result in fines of up to €35 million or 7% of annual global turnover, whichever is higher[174]. - The company is subject to evolving data privacy and security regulations, and failure to comply could lead to significant fines and harm to reputation[182]. - Compliance with the Department of Defense's cybersecurity requirements, including the CMMC program, is necessary to compete for contracts, with full compliance expected by 2026[183]. Operational Risks - The company faces risks related to product defects, which could lead to significant legal costs, damage to reputation, and potential product liability claims[130]. - The company relies on a limited set of suppliers for essential hardware components, with some being sole or single source suppliers, which poses risks to its operations[142]. - The company faces risks from external factors such as wars, natural disasters, and health epidemics, which could disrupt operations and affect financial performance[145]. Strategic Direction and Market Position - The company pivoted its business focus in November 2023 to prioritize the development and commercialization of its AI/ML Foundational Technology, moving away from hardware products[138]. - The company has no previous history or experience in commercializing software products, which may hinder its ability to attract and retain customers effectively[108]. - The company recognizes that competitors may emerge with superior technologies or products, potentially rendering its offerings obsolete[120]. Stock and Market Considerations - The trading prices of the company's publicly traded securities have been volatile since the business combination on September 24, 2021, and may continue to fluctuate significantly due to various factors[223]. - The company has received notices from Nasdaq regarding non-compliance with continued listing requirements based on the minimum bid price per share, which could impair liquidity if not resolved[227]. - Issuance of additional shares of Common Stock could depress trading prices and cause dilution for existing stockholders[220].
Sarcos Technology and Robotics (STRC) - 2024 Q4 - Annual Report