PDYN US Equity☆

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year endedDecember 31, 2022

OR

Commission File Number 001-39897

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

(Exact name of registrant as specified in its charter)

650 South 500 West, Suite 150

Salt Lake City, Utah, 84101

(Address of principal executive offices)

(888) 927-7296

(Registrant’s telephone number, including area code)

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

Title of each class TradingSymbol(s) Name of each exchange on which registered

Common Stock, $0.0001 par value per share STRC The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ No ☒

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

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

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

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of June 30, 2022, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the shares of common stock on the New York Stock Exchange, was approximately $331.8 million.

As of March 1, 2023 the registrant had 154.3 million shares of Common Stock, $0.0001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the registrant’s 2023 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the registrant’s fiscal year ended December 31, 2022. Except with respect to information specifically incorporated by reference, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.

Table of Contents

Page

PART I

Item 1. Business 6

Item 1A. Risk Factors 24

Item 1B. Unresolved Staff Comments 60

Item 2. Properties 60

Item 3. Legal Proceedings 60

Item 4. Mine Safety Disclosures 60

PART II

Item 6. [Reserved] 61

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 73

Item 8. Financial Statements and Supplementary Data 74

Item 9A. Controls and Procedures 103

Item 9B. Other Information 103

PART III

Item 10. Directors, Executive Officers and Corporate Governance 104

Item 11. Executive Compensation 104

Item 14. Principal Accounting Fees and Services 105

PART IV

Item 15. Exhibits, Financial Statement Schedules 106

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Explanatory Note

On September 24, 2021 (the “Closing Date”), Rotor Acquisition Corp. ("Rotor"), a Delaware corporation, consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of April 5, 2021 (the “Original Merger Agreement”), by and among Rotor, Rotor Merger Sub Corp., a Delaware corporation and a direct, wholly-owned subsidiary of Rotor (“Merger Sub”), and Sarcos Corp., a Utah corporation (“Old Sarcos”), and Amendment No. 1 to the Agreement and Plan of Merger, dated as of August 28, 2021 (the “Amendment” and the Original Merger Agreement, as amended, the “Merger Agreement”), by and among Rotor, Merger Sub and Old Sarcos. Pursuant to the terms of the Merger Agreement, the Business Combination between Rotor and Old Sarcos was effected through the merger of Merger Sub with and into Old Sarcos, with Old Sarcos continuing as the surviving corporation (the “Merger”) and a wholly-owned subsidiary of Rotor. On the Closing Date, Rotor changed its name to Sarcos Technology and Robotics Corporation.

For more information on the Business Combination, see Note 1, Basis of Presentation and Summary of Significant Accounting Policies and Note 8, Reverse Recapitalization, in the accompanying consolidated financial statements.

References to the “Company,” "Sarcos," “we,” “us,” and “our” in this report refer to Old Sarcos before the consummation of the Business Combination and to Sarcos Technology and Robotics Corporation (together with its subsidiaries) after the consummation of the Business Combination, as the context suggests. In addition, where identified or the context clearly indicates, this Annual Report on Form 10-K contains historical information about Rotor before the Business Combination.

The Business Combination was accounted for as a reverse capitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. generally accepted accounting principles ("GAAP"). Under this method of accounting, Rotor is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the combined entity represent a continuation of the financial statements of Old Sarcos with the Business Combination being treated as the equivalent of Old Sarcos issuing stock for the net assets of Rotor, accompanied by a recapitalization. The net assets of Old Sarcos and Rotor are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Old Sarcos.

Summary Risk Factors

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

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

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

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If we fail to effectively manage our growth, we may not be able to design, develop, manufacture, market and launch our robotic systems and solutions successfully.

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The success of our acquisition of RE2, Inc. is subject to numerous risks and uncertainties, including integration risks.

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Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

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Commercialization of our core systems and solutions may be delayed beyond our current expectations and therefore initial delivery to customers and receipt of anticipated revenue could be delayed.

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We are dependent on our suppliers, some of which are currently single, sole or limited source suppliers, and any inability of these suppliers to deliver necessary components of our products at the prices, volumes, performance, timing and specifications acceptable to us, could have a material adverse effect on our business, prospects, financial condition and operating results. We have not yet identified all of the suppliers that we are likely to rely on to support future commercialization of our products.

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We have very limited experience commercializing our products and may not be able to do so efficiently or effectively.

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Our business plans require a significant amount of capital. Our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.

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Our core products represent a new product category, and important assumptions about market demand, pricing, adoption rates and sales cycles for our current and future products may be inaccurate.

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With many of our products still under development, we have limited current customers and no binding orders for the commercial versions of our core systems and solutions, and expected customer trials and discussions with respect to those products may not result in binding orders.

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Even if we successfully market our products, the purchase or subscription, adoption and use of the products may be materially and negatively impacted if the employees of our customers resist the use and adoption of the products.

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We have decided to focus on a standard product sales model for our robotic systems and solutions.

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If we are successful in commercializing our products, our revenue will be concentrated in a limited number of models for the foreseeable future.

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The benefits to customers of our products could be supplanted by other technologies or solutions or competitors' products that utilize similar technology to ours in a more effective way or at a lower cost.

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Design flaws, defects, glitches or malfunctions in our products or the software that operates them, failure of our products to perform as expected, connectivity issues or user errors can result in product recalls, lower than expected return on investment for customers, harm to users and significant safety concerns, each of which could materially and adversely affect our results of operations, financial condition or reputation.

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We have no experience maintaining or servicing our products at a large scale.

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Our ability to develop and manufacture products of sufficient quality on schedule and on a large scale is unproven, and delays in the design, production and launch of our products could harm our business, prospects, financial condition and operating results.

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

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Our management as a group has limited experience in operating a publicly-traded company.

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Ongoing impacts from COVID-19 or another pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, prospects, financial condition and operating results.

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Our expected transition to an outsourced manufacturing business model may not be successful, which could harm our ability to deliver products and recognize revenue.

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Our business and prospects depend significantly on our ability to build our brands. We may not succeed in continuing to establish, maintain and strengthen our brands, and our brands and reputation could be harmed by negative publicity regarding us or our products.

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We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase.

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

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If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence

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in us and materially and adversely affect our business and operating results, as well as result in litigation, regulatory action or other risks.

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We expect to incur substantial research and development costs and devote significant resources to identifying and commercializing new products, which could significantly reduce our profitability and may never result in revenue.

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Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our products.

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We may not be able to protect our intellectual property rights in all countries.

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We may be subject to intellectual property infringement claims or misappropriation claims, which may be time consuming and expensive and, if adversely determined, could limit our ability to commercialize our products.

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PART I

Special Note Regarding Forward-Looking Statements

Certain statements in this Report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:

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our ability to sell our products to new and existing customers;

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our ability to successfully integrate RE2 and achieve the expected benefits of the acquisition;

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our product roadmap, including the expected timing of new product releases;

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our ability to manage and overcome supply chain challenges, including increases in the cost of and an interruption in the supply or availability of components, parts and materials;

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competition from existing or future businesses and technologies;

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our ability to manage our growth and expenses;

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our ability to maintain, protect and enhance our intellectual property;

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our ability to comply with modified or new laws and regulations applicable to our business;

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our ability to attract and retain qualified personnel with the necessary experience;

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our ability to introduce new products that meet our customers’ requirements and to successfully transition to high volume manufacturing of our products by third-party manufacturers or by us;

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our projected financial and operating information and estimates of market size and opportunities;

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our future financial performance;

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the impact of the COVID-19 pandemic and global economic and geopolitical conditions on our business and the business of our customers;

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changes in the market for our products and services;

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expansion plans and opportunities, including plans to expand our product availability globally;

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future capital requirements and sources and uses of cash;

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our ability to defend and the outcome of any known and unknown litigation and regulatory proceedings;

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our ability to maintain and protect our brand; and

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other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “aim,” “target” or similar expressions.

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These forward-looking statements are based on information available as of the date of this Report and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and, in any event, you should not place undue reliance on these forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include those factors described in Part I Item 1A Risk Factors of this Report. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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Item 1. Business.

The following discussion should be read in conjunction with the information about us contained elsewhere in this Report, including the information set forth in our consolidated financial statements and the related notes. Some of the information contained in this section or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read Part I Item 1A Risk Factors and the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and throughout this Report.

Overview

We are a technology leader in the design, development and manufacture of advanced robotic systems and solutions that redefine human possibilities. Our mission is to increase worker productivity and longevity and prevent injuries through robotics. Our robotic systems are designed to augment and increase human productivity by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines. We aim to bring the benefits of robotics to dynamic and unstructured environments (i.e., environments that change or that require our robotic systems to perform different tasks at different times in different places, especially outdoor environments). To do this, we design our robotic systems to be mobile, dexterous and adaptable through the use of flexible hardware designs and intelligent software. Our core systems consist of the Guardian XM (formerly known as the Sapien 6M), Guardian XT and Guardian Sea Class teleoperated/semi-autonomous systems and the Guardian XO exoskeleton. Our teleoperated/semi-autonomous systems are comprised of mobile robotic arms, sensing, wireless communications, control stations with intuitive human-robot interfaces and application-specific end-of-arm attachments (end-effectors), such as grippers, drills or spray nozzles. We create our solutions by combining our systems with use-case specific features and components, which may include third-party hardware, such as lifts, bucket trucks and underwater remotely operated vehicles, or ROVs, as well as use-case specific hardware designs, software and end-effectors.

In general, the use-cases we are targeting are currently being done by humans, at times with the aid of generic industrial equipment like a crane or forklift, and involve dangerous or injury-prone activities in areas experiencing, and expected to continue to experience, labor shortages. As a result, we believe our systems and solutions will increase safety and reduce injuries, prolong careers, broaden the pool of available workers by equalizing physical capabilities and increase productivity. While taking advantage of our proprietary intelligent software, humans continue to be an essential part of our systems’ operation, whether through teleoperation, supervised autonomy or directly operating the robot (e.g., by wearing an exoskeleton). In this way, human jobs and health are preserved while increasing productivity and helping to address labor shortages in our target markets. While we ultimately expect our systems and solutions to benefit a wide variety of markets, we are currently focusing our systems and solutions on use-cases in the aviation, construction, defense, maritime, power and utility and solar energy industries.

We adapt our teleoperated/semi-autonomous core systems for specific use-cases based on the capabilities and characteristics of each system to create solutions. We may also combine aspects of multiple systems or create a specific system for a particular solution. For example, we currently expect that the next version of our solar field construction solution will be a hybrid of our Guardian XM and Guardian XT systems, and the baggage-handling solution we are developing uses a specific system designed for that solution. Our product development efforts are led by a highly experienced robotics team, with some members of our engineering team having worked together for over 20 years. We also benefit from more than $375 million in research and development investment in our proprietary technologies and an extensive patent portfolio. Much of our technology we leverage across our systems and solutions. For example, various technologies and inventions developed for the Guardian XO have been incorporated into the Guardian XT.

Combined with our advanced, success-based learning artificial intelligence, or AI approach, our supervised autonomy software framework uses multi-modal sensor data to optimally perceive, interact, and conceptualize dynamic, unstructured environments to harness the power of real-time and learned-behavior data inputs that allow our robotic systems and solutions to successfully execute task-specific autonomy in unstructured environments. Our advanced, success-based AI enables human workers’ flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments.

Based on interest shown by our development customers and potential commercial customers in purchasing our systems and solutions, we have decided to offer our products primarily through a sales business model where the customer purchases a system or solution for a one-time, upfront amount. As a result, we do not expect the Robot-as-a-Service (RaaS) model that we had previously planned to apply to our Guardian XO and Guardian XT systems to be a focus of our business model going

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forward. We also plan to offer software upgrades and additional capabilities and to offer for sale add-on hardware components (such as additional interchangeable end-effectors).

History and Corporate Information

Sarcos is the result of a decades-long effort in research and development of robotic systems and solutions. Our original predecessor was spun-out of the University of Utah in 1983. In 2007, our predecessor was acquired by Raytheon and was operated until 2014 as a division of Raytheon known as Raytheon Sarcos. During this period, Raytheon Sarcos was focused primarily on developing cutting-edge technologies for use by U.S. governmental agencies. In December 2014, the assets of Raytheon Sarcos were acquired by a consortium led by the former Raytheon Sarcos President and our current Chief Innovation Officer Dr. Fraser Smith and technology and telecom entrepreneur Benjamin Wolff, our former Chief Executive Officer and current member of the Board of Directors. This acquisition was the basis for the establishment of Old Sarcos, which was incorporated in Utah in February 2015 as Sarcos Corp. On September 24, 2021, we completed the Business Combination whereby Old Sarcos became a wholly-owned subsidiary of Rotor Acquisition Corp. and Rotor Acquisition Corp. changed its name to Sarcos Technology and Robotics Corporation.

In April 2022, we acquired RE2, Inc., a Pittsburgh, Pennsylvania based robotics company. The acquisition added engineering talent, technology, products and customers and expanded the potential use-cases and target markets we can address.

Our principal executive offices are located at 650 South 500 West, Suite 150, Salt Lake City, Utah, 84101. Our telephone number is 888-927-7296.

Company Website

We maintain a company website with the address www.sarcos.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through the www.sarcos.com website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. These reports and other information are also available, free of charge, at www.sec.gov. In addition, our Code of Business Conduct and Ethics is available through the www.sarcos.com website and any amendments to or waivers of the Code of Conduct will be disclosed on that website.

Industry Background

Evolution of Robotics

Industrial robots have been commercially available and used in industrial and manufacturing environments for many decades. They are typically large, stationary machines designed to automate repetitive tasks in a controlled environment (e.g., a factory assembly line) that require speed and strength greater than what a human can accomplish. For manufacturing tasks, industrial robots generally execute plans by rote programming (functions that are programmed in advance by a human engineer).

Over time, industrial robots have become more sophisticated. Industrial robots have seen widespread adoption in a host of applications and have gained acceptance across many industries. However, these heavy industrial robots generally require workspaces to be configured around them and large safety cages to protect workers on the factory floor, consume significant amounts of power and space, are substantially less agile and versatile than humans and are difficult and costly to move from one location to another. These characteristics typically limit the number of use-cases to highly routinized tasks. As a result, two new categories of products, called collaborative robots, or cobots, and automated mobile robots, or AMRs, are gaining market traction.

Advances in tangential technologies such as grippers, vision systems, cloud computing, augmented reality, or AR, and artificial intelligence, or AI, have led to the broader adoption and commercial viability of cobots and AMRs. These advances have offered increased safety and operational flexibility, allowing robots to be deployed safely alongside humans, disrupting the historical industrial robotics industry and labor markets while offering more advanced capabilities than earlier models. However, neither cobots nor AMRs are designed to perform tasks in dynamic or unstructured environments, especially outdoors. As with their predecessors, they are tools of automation, designed and programmed to perform routinized tasks. They also generally lack human-like dexterity and the ability to lift and manipulate heavy objects.

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Robotic exoskeletons are also not a new concept. They have been a staple of science fiction for decades. General Electric was the first to try to move the concept from fiction to reality with its experimental Hardiman exoskeleton debuting in the 1960s. Early versions of full-body, powered exoskeletons were reliant on hydraulic power supplies connected via a cord or hydraulic lines, which greatly restricted the mobility and the number of use-cases. They also consumed large amounts of power, making it impractical to use these early versions on an untethered basis. More recently, partial-body, powered exoskeletons have primarily been deployed for healthcare and rehabilitative uses. Partial-body, non-powered devices (called passive exoskeletons) have been adopted for passive support functions such as assisting parts-assembly workers when performing repetitive, overhead manual labor. Unlike these commercial predecessors, powered, full-body industrial robotic exoskeletons seek to combine human intelligence and mobility with the strength, endurance and precision of traditional industrial robots by allowing humans and robots to operate as a single unit, substantially augmenting a typical worker's capabilities while reducing the risk of occupational injuries.

Manual Labor Market

Historically, many industries have been dependent on manual human labor and heavy equipment (such as forklifts or cranes) for physically demanding tasks. Human limitations, such as strength, potential for injury and limited reach, and equipment inflexibility, such as size constraints, power needs and limited or narrow functionality, create costly inefficiencies. Relying on human labor sources also has considerable financial and safety costs, which impact both businesses and workers. Workplace accidents and fatigue caused by heavy lifting and working at-height have significant detrimental effects on a workforce’s productivity and can cause extensive bodily harm to human workers.

Challenges to the labor market include:

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Rising average age of the labor force in developed nations. According to data collected by the Organization for Economic Co-operation and Development (OECD) (see OECD (2023), Old-age dependency ratio (indicator); as shown on March 14, 2023): as of 2022, 24.6% of the United States labor force was over the age of 65; by 2050, that percentage is expected to rise to 40.4%; worldwide (representing the average of all country data tracked by the OECD), as of 2022, 32.4% of the labor force was over the age of 65; and, by 2050, that number is expected to rise to 52.7%.

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Shrinking pool of manual laborers. Long-term trends suggest workers may avoid manual labor due to, among other factors, occupational hazards, resulting in labor shortages. According to a 2018 industry study, there will be a shortage of approximately 2.4 million workers in U.S. manufacturing by 2028 resulting in a $2.5 trillion negative impact on the U.S. economy. Moreover, although the long-term effects of COVID-19 are largely unknown, COVID-19 has resulted in many people leaving the workforce and may continue to negatively affect the availability of the labor force.

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Costs associated with physically taxing occupations. In the United States alone, (a) in 2006 The Journal of Bone & Joint Surgery reported that healthcare costs, lost wages and decreased productivity associated with back injuries cost approximately $100 billion annually, and (b) according to a 2018 U.S. Bone and Joint Initiative study, back pain

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accounts for an estimated more than 264 million lost workdays a year, the equivalent of approximately two workdays for every full-time worker in the country. Falls from heights are the fourth most disabling and costly injury, coming after such injuries as overexertion and falling from the same level, according to the 2019 Liberty Mutual Workplace Safety Index. According to a 2007 publication, OSHA reported that approximately $136 billion is lost annually due to worker fatigue.

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Many manual labor jobs are conducted in dangerous environments. In the markets we are targeting, many manual labor jobs involve dangerous environments, such as working at height, underwater or near or using explosives or dangerous equipment. According to the CDC, 18% of the non-fatal work injuries resulting in days away from work in 2020 were related to slips, trips and falls. Another study reported that injuries related to falls accounted for approximately $4.8 billion per year in lost productivity and wages in the United States.

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Equipment that is not ideal for complex environments or the task at hand. Common equipment, such as cranes, forklifts and lift-assist devices often lack the flexibility needed to address the dynamic needs of a worksite. Larger equipment sizes and inflexibility in the range of tasks they can perform often do little to address some of the common issues faced by the labor force.

The Sarcos Approach

We design our robotic systems and solutions to augment human performance by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines to enhance human safety and productivity while addressing many of the labor market’s challenges mentioned above. We aim to bring the benefits of robotics to dynamic, unstructured work environments involving dangerous or physically demanding tasks by moving humans from doing the task themselves to being an operator or supervisor of a robotic system or, in the case of exoskeletons, enhancing human capabilities to reduce the risk of physical injury by having the human and the robotic system operate as one unit. Our robotic systems and solutions combine technologically-advanced robotic hardware with advanced intelligent software, along with human operation or supervision, to increase capability, precision and productivity beyond unassisted human capabilities. As a result, we believe our robotic systems and solutions will provide the following benefits (in some cases, depending on the system):

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Fewer Injuries. Fewer employee injuries from physically demanding work, which should reduce costs associated with such injuries, such as medical costs and replacement or temporary labor costs and related delays (including hiring and training time and costs).

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Safer Work Conditions. Less hazardous job conditions, which should also reduce injury-related costs and certain other costs, such as employee insurance costs and hazard pay.

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Increased Productivity. Increased productivity through increased throughput and/or decreased time to completion, fewer errors or accidents that may compromise materials or work surfaces that then require repair or replacement and/or addressing labor shortages by enabling more work to be done with the same number of human workers (e.g., decreasing crew sizes to increase the number of available crews while increasing the productivity of any particular crew).

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Career Longevity. Increase the health and career longevity of human workers by transferring the physical demands associated with our target use-cases from humans to our robotic systems and solutions thereby enabling experienced, more productive workers to remain on the job with fewer injuries and reduced wear-and-tear on their bodies, which should reduce labor costs and shortages.

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Expanded Potential Workforce. Increased opportunities to fill jobs with workers with physical limitations that would otherwise make such jobs difficult or impossible for them by employing them to operate a robotic system, which should increase the potential labor pool.

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Mobility. Mobility, which allows our systems and solutions to be deployed at a job site and to move around the job site rather than require that the job be brought to the robotic system in a factory or other controlled environment, thereby allowing robotic systems and solutions to tackle use-cases that previously could not be addressed easily or at all through robotics.

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Adaptable Systems. The ability to teach our robotic systems and solutions through software using AI and machine learning, or ML, so that our robotic systems and solutions can learn to do multiple and changing repetitive tasks with human supervision but without the need for human operation. For example, the software we are creating will

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allow some of our systems and solutions to enable operators to train the system to set autonomous tasks such as painting or sandblasting over a particular area and then operate on its own with human supervision. Ultimately, this should further increase productivity as one human worker supervises multiple robotic systems.

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Aligned Interests of Employers and Workers. Compatibility of objectives between employers and employees because our robotic systems and solutions are intended to empower, not replace, the labor force and enhance employee safety while reducing employer costs.

We expect that our systems and solutions can benefit a wide variety of markets, including the aerospace and aviation, construction, defense, distribution and warehousing, industrial manufacturing, maritime, mining, power and utilities and solar energy industries, among others. Based on product testing and trials and customer feedback, we expect our robotic systems and solutions to increase productivity across a variety of use-cases, while significantly reducing the risk, and associated costs, of employee injuries.

We believe that our core strength is in the design and development of highly complex and technologically advanced robotic systems and solutions, including associated software. As a result, we may integrate our systems with readily available third-party products, such as lifts, bucket trucks, ROVs and other components as part of creating solutions for specific markets or use-cases. Our technological innovations include or will include:

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Human-like Dexterity with Augmented Strength and Extended Reachability. We are designing our robotic systems to provide human-like ability to operate in dynamic, unstructured environments and augment humans with the strength, stamina, precision, reach and speed of robotics.

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Energetic Autonomy (untethered, battery-powered). We are designing our systems and solutions to offer reduced power consumption via optimized power utilization.

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Safety. Our robotic systems and solutions are being developed to include advanced controls and comprehensive system recovery to increase their safety.

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Intelligent AI-Based Software. Our supervised autonomy framework uses multi-modal sensor data to optimally perceive, interact and conceptualize unstructured, outdoor environments. Combined with our advanced, success-based learning AI approach, our supervised autonomy software framework uses the power of real-time and learned-behavior data inputs that enable our robotic systems and solutions to successfully execute task-specific autonomy in unstructured environments. Our advanced, success-based AI enables human workers’ flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments. In addition, we intend to offer our software solutions separately for sale or license.

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Simulations / Mixed Reality. Our robotic systems use augmented reality (AR), virtual reality (VR), digital twin and AI-enabled simulation techniques to create a simulations environment in which we can train and optimize the robot and the human operator. Simulations allow analysis of system performance in conditions otherwise too expensive, risky or time-consuming to investigate in the physical world. By virtually inserting a physics-based representation of our robot (a.k.a. a digital twin) into a simulated work environment, we can analyze how the robot is performing as well as predict how it may perform under varying conditions. The simulation also collects training data and helps to expand the behavior tree library for the robotic system so that it continues to get smarter in how it addresses real-time impediments or fault-situations when executing a work task.

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Natural Extended Reality (XR) Interactions between Human and Robots. We are advancing the state-of-the-art in fully immersive teleoperation technology for natural XR interactions between humans and robots, which combines VR/AR, new robot affordable motion capture technology based on magnetic motion tracking, haptic feedback from the teleoperated robot to the human and advanced intelligent controls software to provide a greater sense of realism and increased performance, as well as safety and control. This technology is robot agnostic.

Our Systems, Solutions and Software

Summary

Our core robotic systems consist of: the Guardian XM, the Guardian XT, the Guardian Sea Class and the Guardian XO. Based on product development progress, combined with our views of market readiness and demand, we are currently focused on the commercialization of three of our core robotic systems: the Guardian XM, Guardian XT and Guardian Sea Class. We have begun production of initial commercial versions of the Guardian XM and Guardian XT robotic systems and offer both for sale.

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We believe that we will also begin production of the initial commercial version of the Guardian Sea Class during 2023, and therefore we also offer that system for sale. During 2022, as a result of supply chain constraints, product readiness and perceived market demand, we decided to focus on the development and commercialization of the Guardian XM and Guardian XT rather than the Guardian XO. We used that time as an opportunity to do a full product evaluation of the Guardian XO and determined that it required additional development before commercialization, in particular with regards to weight and additional safety enhancements. Although this will result in further delays in the commercialization of the Guardian XO, we continue to develop the system for commercialization and reap the benefits of our product development work on the Guardian XO as we apply its technology to our other systems and solutions. We have also seen meaningful market demand for our Guardian Sea Class system and, as that system is nearing commercial readiness, have decided to also focus on the commercialization of that system.

In addition, we offer for sale our Guardian S remote-controlled visual inspection and surveillance robotic system and our Guardian HLS heavy-lift pneumatic rescue and recovery system designed in collaboration with the Air Force Research Laboratory (AFRL) to lift armored tactical vehicles and other substantial payloads when the speed, timing and accuracy of operations are crucial. Our Guardian GT system is a custom product in the early stages of development and is being designed to be similar to the Guardian XT, but much larger in size. We expect future development and production of the Guardian GT to be on a bespoke basis in collaboration with each customer desiring the product. These systems are not currently a focus of our commercial efforts, and we do not expect the Guardian S, Guardian HLS or Guardian GT systems to comprise a meaningful part of our future revenue.

Core Robotic Systems

Guardian XM

The Guardian XM system is an intelligent robotic manipulator that offers speed, dexterity, precision and strength in a compact, lightweight package. With six degrees of freedom, an optimized strength-to-weight ratio, embedded intelligence and a hardware design that can withstand extreme temperatures and environmental conditions, the Guardian XM system can be used for a variety of complex outdoor and indoor applications. It is compatible with our autonomy software, enabling semi-autonomous mobile manipulation in structured environments, such as in a factory with controlled lighting, and in unstructured environments like outdoor construction sites. When human-in-the-loop control is required, the Guardian XM system can be teleoperated. Key features of the Guardian XM system include:

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Enhanced Mobility. The Guardian XM is designed for enhanced mobile manipulation through:

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an optimized strength-to-weight ratio;

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not requiring an external control box due to being powered with low-voltage DC embedded computing and intelligence to minimize its footprint; and

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a hardened mechanical design that is resilient to shock and vibration and can operate both indoors and outdoors.

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Standard Interfaces. Standard power and communication interfaces allow for fast and easy integration with third-party tools and sensors.

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Capable of Many Tasks. A standard end-effector interface allows for the integration of a wide variety of interchangeable end-of-arm tools.

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Durable for Use in Harsh Conditions. The Guardian XM’s rugged hardware is tolerant to extreme temperatures and harsh environmental conditions, such as rain, sleet, snow and the corrosive effects of salt spray.

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Precision. Six degrees of freedom, including continuous wrist and elbow roll joints, allow for the precise placement of end-effectors.

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Semi-autonomous Capability. The Guardian XM has the capability to perform semi-autonomous manipulation using our proprietary Detect multi-modal computer vision software and our proprietary Intellect multi-algorithm AI software.

Guardian XT

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The Guardian XT is a highly-dexterous, mobile robotic system designed to combine robotic strength and precision with human judgment and ingenuity via teleoperation and increase productivity and worker safety in dangerous, complex and unstructured industrial environments. Its versatile design enables mounting to various third-party mobile and lift platforms and allows operators to control their trade tools remotely while working at height, overhead or at ground level. The Guardian XT is based on the upper body of the Guardian XO exoskeleton and is designed to be a one- or two-armed system that is platform-agnostic and attachable to various mobile bases. The two-armed Guardian XT system can lift and manipulate up to 200 lbs. and accomplish precision tasks under various conditions. Key features of the Guardian XT system include:

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Remote, Safe and Intuitive Operation. The Guardian XT offers remote, safe operation to perform precise, dexterous tasks using intuitive, easy-to-use custom and off-the-shelf trade tools that provide situational awareness to the operator. The system comes with an intuitive Operator Control Station (OCS) that includes a controller to operate the system with an HD touch screen display for monitoring, programming and controlling the robotic system. The robotic system can be teleoperated intuitively, without any prior experience, by the human operator.

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Anthropomorphic. Operated in part by mimicking the natural movement of the operator. A robot head, equipped with cameras located consistent with where a human would see provides situational awareness with which the human operator is already familiar, including the spatial relationship between the sensory input and the robotic arm.

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Flexibility. The Guardian XT is capable of indoor and outdoor use, and is battery-operated for mobile use in unstructured environments (but can also accommodate installed power sources). Further, a combination of robotic arms, torso and actuated end-effectors enables a wide range of motion and dexterity (e.g., reach, grab, raise/lower, turn). The tasks carried out by the system can be complex, and occur in unstructured environments where automation is currently not a practical alternative.

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Strength. Each arm can lift and manipulate up to 100 lbs.

We are also developing a variant of the Guardian XT for the U.S. military, the Guardian DX, for defense logistics and maintenance applications.

Guardian Sea Class

The Guardian Sea Class robotic system is designed to provide human-like manipulation capability in complex underwater environments. Whether used for commercial applications or military operations, the system can reduce the need to put divers in the water and can explore depths that are unsafe for humans. An electromechanical system that can stay submerged for up to two hours at a time, it remains fully operational in depths up to 1 kilometer. The system is a one- or two-armed system that is integrated into third-party ROVs from major manufacturers and that can be teleoperated or operated through optional semi-autonomous control. The electromechanical system’s low-power stand-by state enables the use of mobile power sources and helps extend run time for enhanced productivity. Key features of the Guardian Sea Class system include:

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Optimized for Size and Power Usage. Electronically driven, energy-saving system that provides reduced weight, size and expense as compared with hydraulic power unit systems. Lightweight, compact design allows for a smaller “footprint,” or volume, in constricted or precarious environments.

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Water Resistant. Fewer sealed surfaces than comparable hydraulic systems to significantly lower maintenance costs and risk of system downtime due to failure. Closed, sealed design protects the electrical system from water ingress.

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One- or Two- Armed System. Can be equipped with two mirrored six-degree-of-freedom arms to improve modularity and reduce training requirements for service and repair.

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Precision. Neutral buoyancy improves ROV/system balance and control.

Guardian XO

The Guardian XO is a full-body, powered exoskeleton designed to augment user strength, endurance and precision without materially restricting freedom of movement. We expect that the Guardian XO will enable the operator to safely lift significantly

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more than the 35-40 lbs. typically recommended by OSHA with small effort in a wide range of use-cases and industrial processes. The Guardian XO’s advanced sensing and control system is designed to provide both responsiveness and fluidity of movement, making it user-friendly and intuitive to operate.

The Guardian XO is intended to enhance productivity, mitigate worker fatigue, reduce the risk of workplace injuries and democratize the labor force by augmenting the capabilities of individuals otherwise physically unable to perform the required tasks. We believe the Guardian XO has the potential to revolutionize the way work gets done in a variety of industries, such as aerospace/aviation, automotive, construction, defense, distribution and warehousing for ecommerce and other industries, industrial manufacturing, maritime and power and utilities.

Key features of the Guardian XO will include:

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Added Strength and Endurance. The exoskeleton is expected to enable the operator to carry significantly more than the 35-40 lbs. typically recommended by OSHA. It is also designed to enable a smooth lifting motion by dynamically compensating for gravity and inertia.

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Battery-powered for Mobile Performance and Near-continuous Use. The Guardian XO will be powered by onboard hot-swappable batteries intended to provide near-continuous operation. Additionally, the XO Pod docking station is expected to facilitate battery charging, donning and doffing of the system and data management.

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Sensors and Advanced Control Systems for Enhanced Maneuverability and Mobility. Integrated sensors in the Guardian XO are expected to enable the system’s advanced controls system to detect movement (position, force, angular rate, orientation, torque and speed) in milliseconds to eliminate perceived latency. Maneuverability and mobility are intended to be provided through gravity compensation, which will cause the robot to feel almost weightless to the user, and many motorized joints, or degrees of freedom, which will allow the user to move freely and naturally in unstructured environments. The Guardian XO is also expected to include a “hands-free” mode in which the user can lock the suit’s arms while carrying a heavy load and simultaneously complete dexterous tasks requiring human hands. Each system will be equipped with a user-friendly control interface for user controls and diagnostics notification display.

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Ergonomic, Safety-first Features for User Comfort and Injury Prevention. We are designing the Guardian XO to include important safety features and accommodate customer-specialized protective gear and fall-prevention devices. In the event of a sudden power loss, redundant hardware and software are expected to enable “passive braking” to prevent or reduce user injury. In addition, the systems are expected to include a highly responsive control system to enable the user to execute fall-prevention motions such as stumble-recovery. We anticipate that users will be able to don and doff a system without assistance in less than 30 seconds, with additional provisions for sudden egress.

Solutions

To address the needs of our near-term target markets, we are developing use-case specific solutions:

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Aviation.We are developing solutions to address aircraft servicing (such as de-icing) and baggage-handling (loading and unloading airplane baggage compartments) use-cases. We expect these solutions to reduce delays on the tarmac by enabling work to be done when humans are not able to perform the tasks (such as during lightning or other severe weather events) and to otherwise increase productivity by reducing the number of human workers needed to complete the tasks.

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Construction / Surface Preparation. We are developing a solution based on the Guardian XM to address surface preparation that we believe will be adaptable to a variety of contexts, such as buildings, ships and airplanes, to enable blasting and paint removal, painting, washing and similar activities. We expect this solution to address human safety and health concerns frequently associated with these activities, increase precision and productivity and reducing scaffolding work and costs.

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Defense. Some of our solutions have defense applications. For example, our surface preparation solutions can work on Navy ships and our maritime solutions can assist with mine clearing.

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Maritime. We are developing maritime solutions based on the Guardian Sea Class system to address a variety of underwater use-cases, such as ship inspection (damage or security), rudder and prop shaft clearing, contraband recovery, mine clearing, salvage and infrastructure (locks, dams, power plants) inspection and debris removal and obstruction clearing. We believe the Guardian Sea Class solutions will reduce the need for divers to be in dangerous, underwater conditions and increase the depths and duration at which work can be done.

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Power and utilities. We are developing a solution to address vegetation management for the power and utilities market. This solution is based on the Guardian XT system and is being designed to remove vegetation at a height of up to 45 feet and be able to cover over a kilometer of distance per day. Based on customer feedback, we expect this solution to extend daily work hours (multiple-shifts), reduce the impact of weather conditions (heat, wind, rain) on productivity and reduce the dependence on human workers.

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Solar Field Construction. We are developing a solar field construction solution to automate the installation of photovoltaic, or PV, panels at utility scale solar sites. Early prototypes have been based on the Guardian XM, but we expect the commercial version of this solution to be based on a new system comprising aspects of both the Guardian XM and Guardian XT systems. We believe that our solar field construction solution will increase productivity through increasing the number of panels that can be installed in a given day, reducing damage to PV panels arising from human accidents or mishandling and reducing the size of installation crews to help address the labor shortages facing the industry.

Software

Our robotic systems and solutions are the combination of advanced robot technology and software. As a result, our software is a critical part of our systems and solutions and our ability to create robotic solutions for dynamic, unstructured environments. In part with initial funding from the U.S. Airforce, we have developed and are developing software leveraging artificial intelligence and machine learning technologies that is designed to optimize the significant capabilities of our robots. Among other things, we are developing our software to enable:

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Intelligent teleoperation

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Supervised and multi-algorithm autonomy

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Multi-modal computer vision and fused perception

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Success-based reinforcement learning

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Motion planning and optimization

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Predictive fault compensation

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Fused perception

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Cybersecurity

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Physics-based simulation

Each of our robotic systems and solutions comes with a baseline software package that enables basic operation and useability of the system, teleoperation and semi-autonomous capabilities, cybersecurity, controls and communications. For our market and use-case specific solutions, we will also include additional software designed to meet the base requirements of the particular use-case. In either case, for customers who want additional features, we will sell or license upgrades to the baseline package. For example, we intend to offer supervised autonomy as an incremental service. Combined with our advanced, success-based learning AI approach, our supervised autonomy software framework uses multi-modal sensor data to optimally perceive, interact, and conceptualize unstructured environments to harness the power of real-time and learned-behavior data inputs that allow the applicable robotic systems to successfully execute task-specific autonomy in unstructured environments. Our advanced, success-based AI enables human workers’ flexibility, creativity and improvisation skills to deliver improved workflow performance and safer interactions between humans and machines in unstructured environments. Other enhancements that we intend to develop and offer include advanced teleoperation capabilities, task libraries (predefined data

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sets, tools, inferencing models and scripts for controlling specific workflow execution) and fleet management and remote monitoring to allow a human operator to remotely control or supervise several robots from a central control location.

Further, we are exploring opportunities to sell and license our software separate from our own robots for use in third-party systems. We anticipate that this will largely be done through a software-as-a-service license model.

Robot Service Platform

We refer to the combination of our software and the web-based portal we are developing to enable customers to monitor and configure the robotic systems and solutions they purchase as our “robot service platform.” We are designing our robot service platform to enable us to provide customers with additional data analytics, operational tools, systems diagnostics, bug fixes and software upgrade deployment and other features, as well as a web-based portal where the customer can access information and request upgrades.

Market Opportunity

In the long run, we believe that we will be able to offer robotic systems and solutions that will benefit many markets and industries. As a result, we believe that the global total addressable market, or TAM, for our robotic systems and solutions is large and will reach approximately $600 billion in 2029, which we estimated based on independent third-party research regarding the TAM for the solar power, construction, aerospace/aviation and maritime markets. Of the global TAM, we estimate our global serviceable addressable market, or SAM, will be approximately $9.3 billion in 2029. Finally, we believe that our global serviceable obtainable market, or SOM, will be approximately $1.2 billion by 2029, which is calculated as 13.5% of 2029 global SAM and assumes that our products will penetrate the Early Adopters phase of the Rogers' Innovation-Adoption Lifecycle by 2029. We assume that our initial customer base will be comprised of innovators and early adopters in the industries we are targeting. Following successful deployment with these early adopters, we believe that there will be many potential customers that are fast-followers.

The 2029 TAM and SAM estimates for our principal target industries were: (1) solar power - $373.8 billion and $334 million, respectively; (2) construction - $156.2 billion and $2.4 billion, respectively; (3) aerospace/aviation - $68.6 billion and $1.9 billion, respectively; and (4) maritime - $8.0 billion and $4.5 billion, respectively. Other than construction, each 2029 industry TAM estimate is from independent third-party research. To calculate the construction TAM, we projected from 2023 TAM using a 2023-2030 compound annual growth rate, or CAGR, where the 2023 TAM and 2023-2030 CAGR are from independent third-party research. To calculate each 2029 industry SAM, we projected from 2023 or 2024 industry SAM, which are from commissioned third-party research, using the industry CAGRs from the independent third-party TAM research, and assume the following: (a) average selling price (ASP) of $127,000 for each industry except maritime, where we assume $590,000 ASP, and (b) no material change in SAM from 2023 to 2024. Furthermore, global SAM assumes target markets in (a) 13 countries (Australia, Brazil, China, France, Germany, Italy, Japan, South Korea, Mexico, New Zealand, Spain, the United Kingdom and the United States) for solar power; (b) the same 13 countries plus Canada and Norway for maritime; (c) the same 13 countries for commercial aerospace/aviation and the United States only for defense aerospace/aviation; and (d) the United States only for construction. We believe our estimates are based on reasonable assumptions given our technology's leadership position in the category of industrial, highly-dexterous mobile robotic systems, the general lack of directly competitive products in this new category, our plans to further differentiate our products via AI-enabled performance enhancing software and our interactions with leading industrial companies across a number of verticals. However it is possible that these assumptions will proved incorrect, and, as a result, actual results and market sizes may deviate materially from our estimates. See Part I Item 1A Risk Factors - “Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.”

In the near-term, due to a combination of size, growth opportunities and our current product portfolio, we have decided to focus our commercialization efforts on six primary markets and related use-cases: aviation, construction, defense, maritime, power and utility and solar energy. Further, we believe that many of the potential customers within these markets for the solutions we are currently commercializing have additional use-cases beyond what we are currently targeting that we could choose to address in the future as we continue to develop our systems and solutions to expand their capabilities and applications.

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Aviation. We are initially focused on providing a baggage-handling solution and certain other solutions (such as de-icing and aircraft servicing) for the aviation ground services market.

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Construction. According to an August 2022 report by Associated Builders and Contractors, as of July 2022 there were more than 375,000 unfilled construction jobs in the United States and construction workers were quitting

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their jobs at a faster rate than they were laid off or discharged for the 17th consecutive month. Further, based on 2022 U.S. Bureau of Labor Statistics, the construction industry has the highest level of workplace injuries resulting from falls, slips and trips. As a result, we believe the construction market is a significant opportunity for our solutions, primarily for surface preparation and other at-height work use-cases, to increase productivity and address the labor shortage while increasing worker safety.

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Defense. We believe the defense industry will be an important market for us. We have worked with the U.S. Department of Defense for many years on product development to address its needs. Further, some of our commercial solutions have defense applications. For example, our surface preparation solutions can work on Navy ships and our maritime solutions can assist with mine clearing and ship inspection and repair.

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Maritime. With the capability to work underwater for up to 2 hours, at depths of up to 1000 meters and to perform dexterous tasks semi-autonomously or by teleoperation, such as inspection, repair or object removal, we believe our Guardian Sea Class system and solutions have a large market opportunity while increasing safety by reducing the need for human divers to work in dangerous underwater conditions.

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Power and Utility. We are developing solutions for vegetation management and utility pole top repair, as well as underwater dam and other infrastructure inspection or repair use-cases, for use by power utilities. We believe these use-cases are significant opportunities for our solutions because they are designed to decrease the need for humans to work at height and in dangerous weather conditions or underwater and to increase productivity.

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Solar Field Construction. President Biden has announced that the United States is targeting a carbon pollution-free electrical grid by 2035. According to the Solar Energy Industries Association, achieving the PV installation target to meet this goal will require roughly 900,000 solar panel installers. SEIA has estimated that as of 2020, there were approximately 230,000 such installers in the United States and that this number has declined since 2016. As a result, we believe there is a significant opportunity for our solution in the solar field construction market.

Growth Strategy

The key elements of our growth strategy include:

Focused Effort on Commercialization

We will continue to focus on the commercialization of select systems and solutions to increase speed to market and accelerate market penetration by targeting specific use-cases, while demonstrating our ability to sell, manufacture and service our products. We believe this will prove the benefits of our systems and solutions in everyday working conditions while confirming market demand and achieving and growing product revenue.

Continue to Develop our Robotic Systems and Solutions

We plan to pursue continuous improvement of our current systems and solutions and to develop additional systems and solutions over time. We believe that as we show the commercial viability and benefits of our products in our initial target markets and use-cases, customers and potential customers will want to use robotics, and specifically our products, to address other use-cases that previously have not been conducive to automation. As our products are highly complex, we want to ensure that we continue to develop new systems and solutions to address new markets and use-cases, and thereby grow our business.

Continued Investment in Innovation

We will continue to invest significant resources in developing proprietary technologies across hardware, firmware, software and controls to commercialize our robotic systems and solutions. We expect our research and development activities to focus on areas such as human-like dexterity with augmented strength and reach, energetic autonomy, safety, intelligent AI-based software, simulations/mixed reality and natural extended reality interactions between humans and robots. We believe that these investments will be critical to our future growth as we seek to expand the capabilities of our systems and to create new solutions to address new markets and use-cases, as well as to sell upgrades and additional functionality to previous customers.

Capital Efficient Manufacturing

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We have decided to focus on a standard product sales model for our robotic systems and solutions instead of the robot-as-a-service, or RaaS, model we previously expected to pursue particularly for the Guardian XO and Guardian XT. The standard sales model has the benefit of reducing our capital requirements since we do not need to wait to recover our production costs over many months or years of RaaS subscription payments. As a result, we expect that our capital requirements will be reduced and that we can manufacture our systems and solutions in a more capital efficient manner.

We plan to engage one or more contract manufacturing partners and that, over time, our manufacturing partner(s) will be responsible for most of our manufacturing. We believe that leveraging the core strengths of a contract manufacturing partner will have the long-term benefits of increased speed to market, high-quality volume production and the ability to scale more quickly to meet demand, as well as potentially decreasing supply chain costs, reducing delays and expanding our supplier-base. Further, we would not need to build large-scale manufacturing facilities and incur the up-front capital investment and the recurring fixed costs and overhead that would be required for us to own and operate such manufacturing facilities. We expect outsourced manufacturing to allow us to focus on our core competencies while significantly reducing overall risk and give us the flexibility to quickly scale volumes up or down to match demand levels since we can leverage an established manufacturing operation and supply chain. See “—Manufacturing and Suppliers” below.

Collaborate with Development Customers to Expand Target Markets

We have engaged, are engaging and intend to engage in the future with development customers in various industries, including aerospace/aviation, construction, defense, utilities, solar, distribution and warehousing, industrial manufacturing, maritime and power and utilities. In many cases, these development customers pay us to develop our products, and this constitutes the bulk of our services revenue. This allows us to reduce our net loss and use of cash while continuing product development efforts to improve and commercialize our products, develop new products and establish relationships with potential commercial and government customers that have helped us create products designed to meet their needs. We believe working with these development customers will allow us to accelerate our brand awareness within these and adjacent industries and develop products that will meet the needs of a variety of potential customers. These relationships have already played an important role in helping us select the markets, use-cases and product capabilities we are currently pursuing.

Additionally, while our focus has been primarily on the U.S. domestic market, we intend to explore opportunities in select non-U.S. markets as and when we deem appropriate.

Pursue Selective Strategic Acquisitions and Partnerships

We may pursue strategic acquisitions from time to time that we believe will be complementary to our existing business or otherwise increase the value proposition we deliver to our customers. We may pursue acquisitions that we believe will help us add new or enhanced capabilities or technology, expand our product offering, accelerate customer growth, enter new markets or add talent and expertise to our organization. For example, our acquisition of RE2, Inc. in April 2022 provided many of these benefits, including bringing much needed and hard to hire engineering talent into our company. In addition, the RE2 acquisition has brought us additional technology, products and customers that are key elements of many of our currently targeted markets, use-cases and solutions, such as solar field construction, baggage-handling and maritime.

We may also enter into strategic partnerships from time to time, including to combine our product offerings with those of our partners. For example, we may partner with companies whose products may serve as a mobile base for the Guardian XT or an integrated ROV for the Guardian Sea Class and offer the combined unit as a standalone product or solution. Among other benefits, these partnerships could reduce barriers to customer adoption and use of our products, allow us to leverage the partner’s existing sales and distribution channels or provide lead generation and conversion of additional potential customers for our other product offerings.

Competitive Strengths

Differentiated and Proprietary Technology

We believe our technology distinguishes us from others in the industrial robotics space because our technology seeks to augment, rather than replace, humans by combining human intelligence, instinct and judgment with the strength, endurance and precision of machines. We are a pioneer in the robotic systems industry and benefit from lessons learned over more than 30 years and $375 million in research and development investment in our proprietary technologies, as well as our extensive patent portfolio. We believe that our innovations, including advances in energetic outdoor mobile manipulation, human like dexterity, intelligent AI-based software for controls and outdoor autonomy and immersive teleoperation technology for natural

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extended reality interactions between humans and robots, together with advances in electronics, materials, motors and other components of our products, will enable us to produce machines that do not suffer from historical limitations and are intuitive to use and relatively quick and easy for setup and workflow changeover. We often have opportunities to use technology developed for one system or solution in other systems or solutions. For example, many of the technologies we developed for the Guardian XO have been incorporated into the Guardian XT and our intelligent software for controls and simulations developed for the Guardian XO has been extended to our other core products. See “-Intellectual Property” below.

Early Mover Across Wide Range of Industries

We believe we are creating a new category of industrial robotics – intelligent systems and solutions designed to be mobile, highly-dexterous, used in changing, unstructured environments and capable of different tasks as directed by human operators. We have spent many years working with and listening to people with experience in the industries we expect to target, including advisors and development customers. These early engagements have helped us form relationships with potential customers, helped fund our development efforts and provided critical customer insight and feedback into our development plans and product designs. We believe our early efforts to get this feedback and build these relationships with potential customers situate us well to create robotic systems and solutions that meet customer needs.

Visionary and Experienced Management

We have a proven and experienced team with deep operational expertise in bringing emerging technologies to market. Our team is led by Kiva Allgood, our Chief Executive Officer, who has many years of executive-level, operational experience within global telecommunications and technology companies, including Ericsson and Qualcomm. Our engineering and design efforts are led by a highly experienced robotics team with hundreds of years of cumulative robotics experience, with some members of our engineering team working together for over 20 years. Members of our board of directors have extensive experience across a wide array of disciplines, including experience in many of the industries that we intend to serve and in the production and delivery of complex hardware and software solutions.

Strategic Collaborators

We collaborate or have collaborated with various companies, including development customers, in the development of our systems and solutions, such as Delta Air Lines, Changi Airport Group, Mortensen and Microsoft. Some of the companies with which we have collaborated have also invested in Sarcos. We have also worked closely with the U.S. Department of Defense and the U.S. Department of Energy on the development of some of our products or technologies. We believe these collaborations provide valuable feedback that will enhance our early mover advantage and product development efforts.

Competition

We believe we are developing a new category of industrial robotic systems and solutions that augment, rather than replace, humans. In many cases, our primary competition will be traditional modes of human labor, sometimes assisted with material handling products such as overhead cranes, forklifts and pallet jacks. To overcome potential resistance to innovation and the adoption of new products and ways of working, we must demonstrate to customers the value proposition of our products, including increasing productivity, reducing costly occupational injuries and broadening the pool of available employees by equalizing workers’ physical capabilities to include older and less physically strong workers.

Additionally, our product offerings compete in a broad competitive landscape that includes robotics and automation companies that have both directly competing as well as alternative solutions ranging from exoskeletons, collaborative robots, industrial robots, traditional lift-assist equipment and unmanned robotic vehicles. We also view our competitive landscape to include companies who have different product lines in the automation space, such as ABB Robotics, Siasun Robot & Automation, Teradyne and Berkshire Grey. Also included in our broader competitive landscape are robotic solution suppliers, like Rockwell Automation, Honeywell, Keyence Corporation, COGNEX Corporation and Hexagon AB, which may not have a directly competing product today, but which could become competitors through diversification; these companies have existing customer relationships and channels, as well as significant financial and other resources, that could enable them to emerge as formidable competitors in the future.

The following is a breakdown of the competitive landscape for our core systems and solutions:

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Our Guardian XM and Guardian XT systems face a varied competitive landscape that includes collaborative robotics companies, such as Kuka, Fanuc, Doosan Robotics and Universal Robotics, as well as automation

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companies like Teradyne, ABB Robotics, Siasun Robot & Automation, Berkshire Grey, Ready Robotics and OMRON.

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Our Guardian Sea Class competes with robotic arm manipulator companies like Deep Trekker, Nauticus Robotics, Reach Robotics and QYSEA that provide manipulators and grippers for light and working-class ROVs.

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Our Guardian XO competes with robotics and automation solutions that help workers with heavy materials handling, heavy lift-and-transport-assist and overhead assembly type jobs. Principal competitors include Hyundai and Daewoo, who have previously shown powered exoskeleton prototype units, and companies like Cyberdyne, Samsung, Ekso Bionics, Ottobock, Lockheed Martin, SuitX and Levitate who currently sell powered, partial-body exoskeletons or passively-powered, partial-body variants.

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Our vegetation management solution competes indirectly with general purpose mechanical brush clearing solutions like the Mini-Jaraff by Jarraff Industries and the Kershaw SkyTrim product by Progress Rail and modified lift trucks, such as the BIK Boom Truck and Sennebogen, that are marketed for vegetation management.

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We believe our PV panel installation solution will compete with products under development by AES and Bailey Crane. AES, a large utility company, announced in 2021 it was developing an autonomous solar module installation point-solution. Bailey Crane has announced that it is developing a solar panel installation robot that could compete with our solution.

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Our baggage-handling solution competes with AMR and automated guided vehicle (AGV) products designed for baggage-handling by companies such as Vanderlande, Addverb Technologies, Alstef Group, Siemens and Lloyd W. Aubry Company and baggage-loader/unloader systems such as those provided by Beumer Group and BBHS.

Many of our competitors and potential competitors have products that are commercially available and/or in development. We expect some products currently in development to become commercially available in the next few years. In addition, we compete or may compete with companies that develop artificial intelligence and industrial automation solutions, such as those offered by Hyundai-Boston Dynamics, Grey Matter, Canvas Technology, DroneSense, Intuitive, iRobot, Hahn Robotics, Kuka, Fanuc, Neurala, Ready Robotics, Rethink Robotics and Yaskawa.

Our competitor base may change or expand as we continue to develop and commercialize our robotic systems and solutions in the future. These or other competitors may develop new technologies or products that provide superior results to customers or are less expensive than our products. Our technologies and products could be rendered obsolete by such developments. See Part I Item 1A Risk Factors - “We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase.”

We expect that we will compete on the following factors:

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technological innovation;

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product quality, reliability and safety;

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product features and performance, including from our intelligent software;

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product pricing;

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manufacturing efficiency and resources;

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brand;

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customer experience, including support; and

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existing customer relationships.

We believe we do and will compete favorably on the basis of these factors; however, our potential competitors may have greater financial, technical, manufacturing and other resources than we have. Our competitors may be able to deploy greater resources

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to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their cobot and industrial robotics programs than we can. Additionally, our competitors may have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other tangible and intangible resources than we have. These competitors also compete with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products. Additional mergers and acquisitions in the cobot and industrial robotics market may result in even more resources being concentrated in our competitors.

Customers and Partners

We engage with a wide-variety of potential customers in many different industries, including some of the largest companies in our target markets, small and medium-sized businesses and government agencies such as the U.S. Department of Defense and the U.S. Department of Energy. Our development customers include some of the largest enterprises in our target markets, including Delta Air Lines, Changi Airport Group, Mortenson and the U.S. Department of Defense. We have also partnered with such companies as Microsoft and Array.

Through the end of 2022 our customers have primarily been development customers – customers paying us to fund our product research and development efforts. While we expect our revenue to continue to include product development contract revenue, we also expect to begin to see meaningful product sales revenue in 2023 as we begin to sell and deliver commercial versions of our Guardian XM, Guardian XT and Guardian Sea Class systems and solutions. However, we have only recently begun to offer these systems for sale and, while we are having discussions with many potential customers that have expressed strong interest in purchasing our systems and solutions, at this time we do not yet have binding customer sales contracts for the commercial versions of these products.

Research and Development

Our research and development team is comprised of technology experts from fields including controls, perception and simulations engineering, artificial intelligence and machine learning, software/firmware engineering, mechanical and electrical engineering, systems engineering, finite element analysis, human factors and design and applications engineering. Our primary areas of focus in research and development are centered around supervised autonomy solutions, including multi-modal sensor data to optimally perceive, interact and conceptualize unstructured environments. Combined with our advanced, success-based learning AI approach, our supervised autonomy software framework uses the power of real-time and learned-behavior data inputs that enable our robotic systems and solutions to successfully execute task-specific autonomy in unstructured environments.

More specifically, among other things, we are focusing research and development efforts on: for the Guardian XM, supervised autonomy for outdoor environments that enable dexterous manipulation for aviation, solar panel construction, surface preparation and other use-cases; for the Guardian XT, immersive teleoperation technology for natural extended reality interactions between humans and robots and using the motions and task solutions of the human operator to train the system for increasing levels of autonomy; for the Guardian Sea Class, an autonomy solution for multi-modal sensor perception and dexterous manipulation of robotic arms and guidance, navigation and control of an ROV to increase autonomy for underwater applications; and for the Guardian XO, optimized bipedal walking controllers and supervised learning techniques to develop a novel, stable motion control framework to enable a hybrid use of the Guardian XO (either with or without a human operator).

Our research and development efforts also include our DfX (design for excellence) work, including comprehensive design for manufacturing, design for cost and procurement, design for testing and design for assembly. These efforts are aimed at ensuring the manufacturability, serviceability and robustness of our products.

Our research and development expenses were $34.1 million and $17.5 million in 2022 and 2021, respectively, (which does not include the research and development expenses of RE2 prior to the acquisition on April 25, 2022). Our customer first, collaborative approach is a cornerstone of our research and development processes.

Intellectual Property

Our research and development efforts over many years has resulted in significant intellectual property. Our ability to create, obtain and maintain intellectual property is important to our business. We rely upon a combination of protections afforded to owners of patents, copyrights, trade secrets and trademarks, along with employee and third-party non-disclosure agreements and other contractual restrictions to establish and protect our intellectual property rights.

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We pursue patent protection at times when we believe we have developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings. Our patents and patent applications are focused primarily on robots and robotic systems, including wearable exoskeletons to enhance human operations, humanoid robots, teleoperated robots, mobile platform-based robotic arms, teleoperated robots, unmanned ground robots and end-effectors, including patents in the areas of safety, robot vision, sensors, power efficiency, control strategies and cybersecurity. We also have patents and patent applications covering technology in the fields of counter-attack unmanned aerial vehicles (drones) for enemy drone neutralization, various micro-camera and other medical devices, augmented reality, sensors, valves, motors, actuators and others.

As of February 2023, we had approximately 90 issued and unexpired U.S. patents and approximately 100 issued and unexpired international patents, as well as approximately 135 patent applications filed in the United States or internationally. Many of our previously issued patents have expired, with others set to expire on dates ranging from 2023 to 2040, exclusive of any patent term adjustment or patent term extension. We do not know whether all of our pending patent applications will result in issued patents, or whether the examination process will require a narrowing of claimed subject matter. Furthermore, in light of the highly active fields of technology in which we are involved, particularly the field of robotics, our patents and pending patent applications may not provide us with broad-level protection.

In an effort to protect our brand, we also pursue the registration of our domain names and various trademarks in the United States and in select international locations.

Sales and Marketing

We currently offer for sale our Guardian XM, Guardian XT and Guardian Sea Class systems through a direct sales model. We focus our sales and marketing efforts on industries that we believe show a strong potential for growth and a significant need based on worker shortage, limited innovations for their tasks (such as for outdoor tasks in unstructured environments) and risk of injury. Due to their size and their potential opportunity and willingness to be early adopters, we generally direct our sales efforts toward leading companies in the industries and markets we target as we believe these companies have the potential and ability to serve as referenceable customers and drive additional sales. Notwithstanding the foregoing, we also target small and medium-sized businesses and government agencies such as the U.S. Department of Defense and the U.S. Department of Energy. We intend to continue to invest in our sales and marketing efforts in support of the commercialization of our robotic systems and solutions.

We intend to pursue strategic relationships with systems integrators, companies with complementary technologies, software application providers, distributors and consulting firms to expand the channels in which our robotic systems and solutions are marketed. We believe working with these partners will accelerate our brand awareness within various industries and provide complementary capabilities and differentiation that will attract new customers while helping us expand our customer base.

We expect that initial sales of our robotic systems and solutions will be a standard sales model where the customer pays an upfront amount to purchase the system or solution, rather than the RaaS leasing model that we previously expected to pursue particularly with our Guardian XO and Guardian XT systems. We had expected the RaaS model to be enticing to customers for a variety of reasons, though we had expected to follow a sales model for the Guardian XM, Guardian Sea Class and other products that were part of the Sapien product line acquired from RE2. However, based on interest shown by our development customers and potential commercial customers in purchasing our systems, we have decided to pursue a standard sales model and we expect that our product revenue will primarily result from standard product sales. As a result, while we could consider a RaaS or other model for a particular customer, we do not expect the RaaS model to be a focus of our business model going forward. We expect that the standard sales model will enable us to reduce our capital requirements as we will not need to bear the upfront manufacturing costs associated with building our systems and solutions and then wait to recover those costs over many months or years of RaaS subscription payments.

With respect to our software, to the extent we are successful in commercializing it separately from our robotic systems and solutions, we expect to favor a software-as-a-service (SaaS) model that would result in a recurring revenue stream, though we will also consider one-time sales. Similarly, we would also favor a SaaS model but consider one-time sales for software upgrades. We expect to continue discussions with potential customers to ultimately determine the appropriate model for us in light of market conditions.

Manufacturing and Suppliers

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We believe we can manufacture 300-500 systems per year in our current facilities, depending on the mix. However, we do not expect to use all of that capacity in 2023, especially after engaging a contract manufacturing partner to provide additional capacity and expertise. While we currently do not anticipate high-volume production by a contract manufacturing partner to be in place until at least the end of 2023, we have signed an agreement and begun initial engagement activities with a contract manufacturing partner. We expect that this contract manufacturing partner will initially focus on helping us produce sub-systems for the Guardian XT.

We believe that leveraging the core strengths of a contract manufacturing partner will have the long-term benefits of increased speed to market, high quality volume production and the ability to scale more quickly to meet demand, as well as potentially decreasing supply chain costs, reducing delays and expanding our supplier-base. Further, we would not need to build large-scale manufacturing facilities and incur the up-front capital investment and the recurring fixed costs and overhead that would be required for us to own and operate such manufacturing facilities. We expect outsourced manufacturing to allow us to focus on our core competencies while significantly reducing overall risk and give us the flexibility to quickly scale volumes up or down to match demand levels since we can leverage an established manufacturing operation and supply chain. See above discussion under “Growth Strategy - Capital Efficient Manufacturing.”

We maintain a diverse set of suppliers. Most of our suppliers are based in the United States and we often target suppliers that are local to our facilities, though we also pursue consolidation of suppliers between facilities when we deem it more cost-effective or to otherwise be beneficial. Most of our supplier relationships are purchase order based and we do not have many long-term supply contracts. In some cases, we have sole source (where the component is only available from a single vendor, often as a result of customization for our use) or single source (where we purchase from a single vendor but there are alternative sources of the component) suppliers. We seek to minimize our dependence on sole or single source suppliers in order to reduce risk in our supply chain, including the risk of losing a sole or single source supplier due to bankruptcy, discontinuing production of the particular component or some other reason.

Government Regulation

We are subject to various U.S. federal, state and local laws and regulations governing the occupational health and safety of our employees and wage regulations, including the requirements of the U.S. Occupational Safety and Health Act, as amended, or OSHA, and comparable state laws that protect and regulate employee health and safety.

We are also subject to U.S. laws and regulations that may limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, suppliers, business partners and other persons. These laws and regulations may include outright prohibitions or export license requirements. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments to the extent applicable. We maintain export compliance controls and procedures but there are risks that these compliance controls might not be effective, in which case we could be exposed to legal liabilities. Compliance with these laws has not significantly limited our sales or other transactions with third parties but could significantly limit them in the future. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to drop or make it difficult or impossible to enter affected markets, which could have a material adverse effect on our business, prospects, financial condition or results of operations.

Our robotic platforms must comply with the rules of the Federal Communications Commission (FCC) with respect to: any radio frequency, or RF, spectrum utilized for such components as the remote control or teleoperation system; the power level and frequency of any RF energy emitted (intentionally or otherwise); and any conditions imposed by the FCC on the device certification(s) issued to us or to third parties for any modular transmitters installed in our products. Such rules require, among other things, specific consumer disclosures with respect to RF emissions and proper installation and operation of the device components and any modular transmitters in our products.

We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that will require us to diligence, disclose and report whether our products contain conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products.

Legal Proceedings

From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results

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of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Human Capital

Our employees are critical to our success. As of December 31, 2023, we had approximately 280 full-time and part-time employees with the majority of our employees based in the Salt Lake City, Utah and Pittsburgh, Pennsylvania areas. We also engage consultants and contractors to supplement our permanent workforce on an as-needed basis. Approximately 45% of our employees are involved in engineering functions, including research and development. To date, we have not experienced any organized work stoppages and consider our relationship with our employees to be good. None of our employees are subject to a collective bargaining agreement or represented by a labor union.

Facilities

We currently operate in a corporate and manufacturing facility in Salt Lake City, Utah consisting of approximately 61,000 square feet, and in three facilities in Pittsburgh, Pennsylvania. The lease of our Salt Lake City facility expires in May 2033 and has two options to extend the lease for a three-year period each. The leases for our facilities (or portions thereof) in Pittsburgh, including outdoor test space and indoor office, test, manufacturing, production and warehouse space, expire in August 2023, March 2025 and June 2025, with various renewal or extension options. We believe that should we need additional or different space we will be able to obtain such space on commercially reasonable terms.

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Item 1A. Risk Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this Report occurs, our business, operating results and financial condition could be materially harmed. This Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Report or other risks that we currently deem immaterial or that may be unknown to us. References in this Item 1A Risk Factors to financial information as of dates or for periods ended on or prior to April 25, 2022 do not include the financial information of RE2 as of those dates or for those periods.

Risks Related to Our Business and Industry

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

We incurred a net loss of $157.1 million for the year ended December 31, 2022 and a net loss of $81.5 million for the year ended December 31, 2021. We believe that we will continue to incur operating and net losses until 2025 at the earliest. Even if we are able to successfully develop our robotic systems and solutions and attract customers for commercial sales, we may not become profitable. Our potential profitability is dependent upon the successful development and successful commercial introduction and adoption on a larger scale of our robotic systems and solutions and our ability to lower production costs as we achieve economies of scale through high-volume production, none of which may occur.

We expect that we will continue to incur losses in future periods as we:

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continue to design, develop, manufacture and commercialize our robotic systems and solutions;

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continue to utilize and develop potential new relationships with third-party partners for supply, design for manufacturing and manufacturing;

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expand our production capabilities, including costs associated with the outsourcing of the manufacturing of our robotic systems and solutions;

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build up inventories of parts (including replacement parts) and components for our robotic systems and solutions;

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develop our maintenance and servicing capacity and capabilities;

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manufacture an inventory of our robotic systems and solutions, including upfront expenditures to manufacture systems prior to delivery and recognition of related revenue;

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increase our sales and marketing activities and develop our sales and distribution infrastructure;

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develop our remote monitoring, updating and other cloud-based services on our robot service platform;

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develop and test safety measures for our products, including working with customers to evaluate and test the efficacy of those safety measures;

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develop and expand our technology infrastructure and cybersecurity measures, policies and controls; and

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increase our general and administrative functions and systems to support our growing operations and to operate as a publicly-traded company.

Because we will incur costs and expenses from these efforts before we receive incremental revenue with respect thereto and because we are early in the commercialization of our products, we expect that our losses in future periods will continue to be significant until we start to achieve significant product sales and associated revenue. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may result in less than expected or no additional revenue, which would further increase our losses.

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

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We had negative cash flow from operating activities of $65.4 million and $42.1 million for the years ended December 31, 2022 and 2021, respectively. We expect to continue to have negative cash flow from operating and investing activities until 2025 at the earliest as we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to commercialize our products, increase sales, engage in continuous development work and ramp up operations. Our business also will at times require significant amounts of working capital to build inventory and support the growth of additional products. An inability to generate positive cash flow for the near term may adversely affect our ability to raise capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us and have other adverse effects that may decrease our long-term viability. We may not achieve positive cash flow in the near future or at all.

If we fail to effectively manage our growth, we may not be able to design, develop, manufacture, market and launch our robotic systems and solutions successfully.

We intend to invest significantly in order to expand our business. Any failure to manage our growth effectively could materially and adversely affect our business, prospects, financial condition and operating results. As we grow our business, we will need to manage the following activities, among others:

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expanding our management, engineering and product teams;

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identifying and recruiting individuals with the appropriate relevant experience;

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hiring and training new personnel;

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commercializing our products;

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forecasting production and revenue and implementing ERP systems;

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entering into relationships with one or more third-party design for manufacturing partners and third-party manufacturers and/or expanding our internal manufacturing capabilities;

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potentially carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships;

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expanding and enhancing internal information technology, safety and security systems;

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establishing or expanding sales, customer service and maintenance and servicing facilities and organizations;

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conducting demonstrations and customer trials of robotic systems and solutions;

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entering into agreements with suppliers and service providers; and

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implementing and enhancing administrative infrastructure, systems and processes.

We may need to hire a significant number of additional personnel, including engineers, design and production personnel and service technicians for our robotic systems and solutions. Because of the innovative nature of our technology, individuals with the necessary experience have not been, and likely will continue not to be, readily available to hire, and as a result, we will need to expend significant time and expense to recruit and retain experienced employees and appropriately train any newly hired employees. Competition for individuals with experience designing, producing and servicing dexterous robots and their software is intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel. Further, since December 2021, we have hired a significant number of new employees, including Kiva Allgood, our CEO, in December 2021, and Andrew Hamer, our CFO, in October 2022, and other senior employees, as well as over 100 employees as a result of our acquisition of RE2 in April 2022. Integrating a large number of new employees in a short time can cause disruptions to processes, projects, culture, priorities and a company as a whole. New employees may not perform as expected or may not fit culturally, and long-term employees may not embrace new leaders, priorities, methods, processes or other changes and may decide to leave or may not perform as well as in the past. Further, we face these and other risks as a result of our acquisition of RE2. See “The success of our acquisition of RE2, Inc. is subject to numerous risks and uncertainties, including integration risks.” Any failure to attract, integrate, train, motivate and retain employees or difficulty adjusting to a

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larger organization with new leadership and a large number of new employees could significantly delay our product development and commercial release and materially harm our business, prospects, financial condition and operating results.

The success of our acquisition of RE2, Inc. is subject to numerous risks and uncertainties, including integration risks.

In April 2022, we completed our acquisition of RE2, Inc. We believe that RE2's business is complementary to ours, and that both RE2 and Sarcos have benefitted and will benefit from the combination of the two companies. While we have largely integrated RE2 into our business and organization, some integration activities continue. As a result, we continue to be subject to integration risks, such as risks associated with combining two organizations and cultures in two different geographies, integrating certain systems, combining product lines and technologies and achieving the expected benefits of the acquisition. While we believe that both organizations share common values and cultures and that the acquisition will help us expand our product portfolio, serve additional markets and further our product development efforts, integration involves significant risk and management attention. If we are not able to successfully continue to integrate RE2 and achieve the expected benefits of the acquisition while managing the development and commercialization of our products, commercialization of our products could be delayed, which would adversely impact our ability to generate revenue, our overall profitability and our operating performance.

Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

We are a development stage company, with very limited experience commercializing our products. Our projected financial and operating information reflect estimates of future performance and are based on multiple business, financial, technical and operational assumptions, including timely hiring of additional skilled personnel, timing of commercial launch of our robotic systems and solutions, the level of demand for our robotic systems and solutions, the size of our target markets, the performance of our robotic systems and solutions, the utilization of the robot fleet, product pricing, the useable life of the robotic systems and solutions, cost of manufacturing, cost of components and availability of adequate supply, number of systems that will need to be manufactured in each batch, the nature and length of the sales cycle, maintenance and servicing costs and the costs of refurbishing the robotic systems. However, given our limited commercial experience, it is likely that many of these assumptions will prove incorrect. Projections and other statements about future expectations are forward-looking statements that are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond our control (in addition to the information contained in these Risk Factors, see “Special Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). Some of these risks, uncertainties and contingencies that could determine whether actual operating and financial results and business developments will be consistent with our expectations and assumptions include:

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our ability to successfully continue to integrate RE2 into our business and achieve the expected benefits of the acquisition;

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our ability to adequately address customer safety requirements;

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our ability to obtain sufficient capital to sustain and grow our business;

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our ability to manage our growth;

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the contractual terms of agreements with customers, suppliers and manufacturing partners, and whether we can effectively manage and maintain relationships with these third-parties;

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the availability and costs of components and materials;

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our ability to manufacture our products and successfully engage with a contract manufacturer, including the costs, quality and output associated with any such outsourced manufacturing;

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the timing and costs of the required marketing and promotional efforts;

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the timing and cost of each sale;

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whether customers and their employees will adopt the robotic systems and solutions offered by us;

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the timing required and success of customer testing of our technology;

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competition, including from established and future competitors;

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our ability to retain existing key management, to attract additional leaders, to integrate recent hires and to attract, retain and motivate qualified personnel, including engineers, design and production personnel and service technicians;

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the overall strength and stability of domestic and international economies, including the impact of macro-economic conditions such as inflation and interest rates;

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demand for our products;

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regulatory, legislative and political changes; and

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customer requirements and preferences.

Unfavorable changes in any of these or other factors could cause us to fail to meet our operating and financial projections and could materially and adversely affect our business, prospects, financial condition and operating results.

Commercialization of our core systems and solutions may be delayed beyond our current expectations and therefore initial delivery to customers and receipt of anticipated revenue could be delayed.

We began production of the initial commercial version of our Guardian XM in September 2022 and production of the initial commercial version of our Guardian XT in December 2022, and we currently expect these systems to be available for delivery to customers beginning in the first half of 2023. We currently expect to begin production of the initial commercial version of our Guardian Sea Class in the second half of 2023, to be available for delivery to customers beginning in the second half of 2023. We have prioritized commercialization of these systems due to our expectations regarding customer demand, product readiness and our efforts to minimize supply chain risks. As a result, although we continue our development efforts with respect to the Guardian XO, we do not believe we will begin production of the initial commercial version of the Guardian XO until sometime after 2023. We continue to experience supply chain challenges, including increases in the cost of and interruptions in the supply or availability of components, parts and materials, including long lead-times. There are significant risks and challenges that could delay our continued development efforts and production of commercial systems and solutions, and therefore delivery to customers could be delayed beyond current expectations, including:

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The COVID-19 pandemic and general labor shortages of qualified applicants has affected and is likely to continue to affect our ability to recruit skilled employees to join our team, negatively affecting the development, production and commercial launch timelines for our products.

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We and our suppliers are currently experiencing increases in the cost of and an interruption in the supply or shortage of materials. Our products are complex and some contain several thousand components. Difficulty securing components and materials has resulted in delays in the development of certain of our products, including the Guardian XO, and could result in further delays in the development and commercialization of our products. Further, such difficulties could result in delays in our ability to manufacture commercial quantities of our products, which delays could be compounded if components or products require redesign or reengineering. Although we actively take steps to manage our supply chain and attempt to order parts, materials and components sufficiently in advance of when they are needed, many parts and components require significant lead-times to acquire or the lead-times vary or are unpredictable and some could take more than 12 months to acquire.

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Delays in beginning and ramping up production by a third-party contract manufacturer, whether due to delays in the development of our products or otherwise, could delay the availability of our products for customer delivery. For example, design changes in our products would likely delay production, both internally or by a third-party contract manufacturer. We have recently entered into an agreement with a third-party contract manufacturer. We expect that the contract manufacturer will initially help with the production of Guardian XT sub-systems. However, the manufacturing partner will require significant time, ramp-up, testing and coordination before high-volume production capability by the partner is achieved. We currently do not anticipate high-volume production by our contract manufacturing partner to be in place until at least the end of 2023.

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Our current estimates for completion of our pre-commercialization development efforts and the commencement of production and delivery of commercial systems to customers of the Guardian XM, Guardian XT, Guardian Sea Class and Guardian XO are dependent on our ability to continue to hire and retain qualified employees and the availability of components on a timely basis. In addition, we have seen a significant increase in personnel and materials costs due to shortages of qualified personnel in the labor market and general inflationary pressures. Geopolitical events and macro-economic conditions, such as the continuing effects of the COVID-19 pandemic, the current conflict between Russia and Ukraine, inflation and high interest rates, and responses thereto are also contributing to supply shortages and price increases. Over the past year we have experienced, and we continue to experience, challenges in both of these areas, which have negatively impacted our product development schedules and progress. We expect these challenges to continue and, if they do and if we are unable to effectively mitigate their impact, it is likely that we will be unable to meet our currently expected timelines.

Also, if ongoing product testing demonstrates that our systems and solutions have not been designed or assembled to deliver the performance, reliability and/or safety that we expect, production of commercial systems and solutions and therefore delivery to customers may be delayed as we work to address the deficiencies. For example, we continue to re-design and develop the Guardian XO to reduce its weight, increase its safety features and incorporate customer feedback prior to commercial launch while we prioritize the commercialization of the Guardian XM, Guardian XT and Guardian Sea Class, as well as certain solutions. Delays in the commercial production, sale and delivery of our products will result in a commensurate delay in revenue and profitability. As a result, our results of operations and financial condition may be materially and adversely affected. In addition, delays in developing and releasing products with the performance, reliability and/or safety we and our potential customers are expecting could materially harm our reputation and lead potential customers to seek alternative solutions. If we experience further delays in the commercial release of our products, our results of operations and financial condition would be further adversely affected, perhaps materially.

We are dependent on our suppliers, some of which are currently single, sole or limited source suppliers, and any inability of these suppliers to deliver necessary components of our products at the prices, volumes, performance, timing and specifications acceptable to us, could have a material adverse effect on our business, prospects, financial condition and operating results.We have not yet identified all of the suppliers that we are likely to rely on to support future commercialization of our products.

We rely on third-party suppliers for the provision and development of many of the key components and materials used in our products. We have not yet identified all of the suppliers, contractors and other third parties that we are likely to rely on to support the future commercialization of our products. While we plan to obtain components from multiple sources whenever possible, some of the components used in our products may have to be purchased by us from a single source and some may only be available from a sole source, for example, if we have developed custom components with a supply partner. If our third-party suppliers are unable to supply key components and materials in the required volumes, at the needed times or at acceptable prices, our sales, revenue and profitability will likely be adversely affected and we may not be able to meet our obligations to customers. Our third-party suppliers may also not be able to meet the specifications and performance characteristics required by us, which would impact our ability to achieve our product specifications and performance characteristics as well. Additionally, our third-party suppliers may be unable to obtain required certifications or provide warranties for their products that are necessary for our solutions. If we are unable to obtain components and materials used in our products from our suppliers, our business would be adversely affected.

We have less negotiating leverage with suppliers than larger and more established companies and may not be able to obtain favorable pricing and other terms. For example, agreements with suppliers may include terms that are unfavorable to us, such as requirements that we order components and manufacture systems and solutions in excess of our demand due to minimum order quantity requirements or minimum price thresholds. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in time to support our production needs, or at all, or at prices or quality levels that are favorable to us. Further, we may not be able to develop satisfactory alternatives to sole-sourced components. Any inability to find satisfactory alternatives to our single- and sole-sourced component suppliers, whether due to bankruptcy of the supplier, a decision to discontinue manufacturing the component or for any other reason, could affect our costs and component availability and have a material adverse effect on our business, prospects, financial condition and operating results.

Moreover, we and our suppliers are currently experiencing increases in the cost of and an interruption in the supply or shortage of materials. We have experienced and are experiencing significant lead-times, delays, costs and quality issues with the supply of our parts, materials and components. It is unclear how long these challenges will remain. Due to the complexity of our products, each system contains several thousand components. Difficulty securing components and materials has resulted and could continue to result in delays in the development of the Guardian XO and could result in delays in the development of our other products, which delays could be compounded if components or products require redesign or reengineering, as discussed

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under “Commercialization of our core systems and solutions may be delayed beyond our current expectations and therefore initial delivery to customers and receipt of anticipated revenue could be delayed.” Any sustained supply interruption or shortage or cost increases that result in our products being priced beyond what customers are willing to pay would prevent or delay the commercialization of our products or require us to sell products at a loss until we are able to reduce costs, whether through volume production synergies or otherwise, either of which could materially and negatively impact our business, prospects, financial condition and operating results. We and our suppliers use various materials in our businesses and products, including for example semiconductors, energy storage materials, commodity materials and specialty metal alloys, and the prices for these materials fluctuate. The available supply of some of these materials and components is currently and may continue to be unstable, depending on market conditions and global demand, and could adversely affect our business and operating results. Risks relating to our supply chain also include:

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“Buy American” or other similar requirements that may be imposed on government contractors;

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an increase in the cost, or decrease in the available supply, of semiconductor chips, electrical components, commodity materials and specialty alloys;

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