SEC Filing | Sarcos Technology and Robotics Corporation

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-39897

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-2838301
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
650 South 500 West, Suite 150 Salt Lake City, Utah	84101
(Address of principal executive offices)	(Zip Code)

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

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

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share
Warrants to purchase Common Stock

STRC
STRCW

The Nasdaq Global Market
The Nasdaq Global Market

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

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

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

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

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

As of October 26, 2023, the registrant had 25.9 million shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders' Equity	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
Signatures		65

All share and per share amounts, including the exercise or conversion price of any of our securities, as applicable, shown in this report have been adjusted to reflect the occurrence of a 1-for-6 reverse split of our common stock that occurred on July 5, 2023 (the “Reverse Stock Split”).

Summary Risk Factors

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

•

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

•

Due to our limited resources and access to capital, we must make decisions on the allocation of resources and have discontinued development and commercialization of certain products; these decisions may prove to be wrong and may adversely affect our business.

•

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

•

We have no previous history or experience with commercializing software products and may not be able to do so efficiently or effectively.

•

Commercialization of our AI/ML software platform may be delayed beyond our current expectations and therefore initial availability to customers and receipt of anticipated revenue could be delayed.

•

Our revenue will be concentrated in our AI/ML software platform for the foreseeable future.

•

With our AI/ML software platform still under development, customer trials and discussions may not result in binding subscriptions.

•

If our target markets do not continue to develop as we anticipate or if potential customers do not adopt our AI/ML software platform, our sales will not grow as quickly as expected, or at all, and our business, operating results and financial condition would be harmed.

•

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

•

We do not have any history with our SaaS sales model.

•

Important assumptions about market demand, pricing, adoption rates and sales cycles for our AI/ML software platform may be inaccurate.

•

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

•

We may not be able to complete or enhance our AI/ML software platform through our research and development efforts.

•

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

•

We may use "open source" software, which could negatively affect our ability to offer our AI/ML software platform and subject us to possible litigation.

•

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

•

Our management team has broad discretion in making strategic decisions to execute our growth plans, and our management’s decisions may not be successful in achieving our business objectives or may have unintended consequences that negatively impact our growth prospects.

•

If we fail to effectively manage our business, we may not be able to design, develop, market and commercialize our AI/ML software platform successfully.

•

We may be unable to adequately control the costs associated with our operations.

•

We expect to incur substantial research and development costs and devote significant resources to developing and commercializing our AI/ML software platform, and we may never reach profitability and or achieve significant or any revenues.

•

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.

•

Our recent initiatives to improve our cost structure, including significant workforce reductions, may not result in the anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

•

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

•

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

•

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

•

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

•

Adverse events or perceptions affecting the financial services industry could adversely affect our operating results, liquidity, financial condition and prospects.

•

We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

•

We may become subject to new or changing governmental regulations relating to the design, marketing, sale, distribution, servicing or use of our AI/ML software platform, and a failure to comply with such regulations could lead to withdrawal of our platform from the market, delay our projected revenue, increase costs or make our business unviable if we are unable to modify our software products to comply.

•

Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations.

•

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

•

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

•

Our Common Stock may be delisted from The Nasdaq Global Market if we cannot satisfy Nasdaq’s continued listing requirements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	As of
	September 30, 2023			December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	35,310		$	35,159
Marketable securities		19,811			79,337
Accounts receivable		1,402			1,866
Unbilled receivables		1,613			4,160
Inventories, net		1,108			3,562
Prepaid expenses and other current assets		2,146			5,015
Total current assets		61,390			129,099
Property and equipment, net		6,693			7,640
Intangible assets, net		16,660			19,116
Operating lease assets		10,394			11,283
Other non-current assets		446			487
Total assets	$	95,583		$	167,625
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,056		$	3,620
Accrued liabilities		4,580			6,025
Current operating lease liabilities		1,311			887
Total current liabilities		7,947			10,532
Operating lease liabilities		11,389			12,387
Other non-current liabilities		92			256
Total liabilities		19,428			23,175
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.0001 par value, 165,000,000 shares authorized as of September 30, 2023, and December 31, 2022; 25,850,832 and 25,708,519 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively		3			3
Additional paid-in capital		457,888			447,085
Accumulated other comprehensive income (loss)		2			(17	)
Accumulated deficit		(381,738	)		(302,621	)
Total stockholders’ equity		76,155			144,450
Total liabilities and stockholders’ equity	$	95,583		$	167,625

See accompanying notes to the condensed consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue, net	$	1,827		$	4,667		$	5,400		$	8,448
Operating expenses:
Cost of revenue (exclusive of items shown separately below)		1,222			3,578			3,951			7,212
Research and development		10,011			10,497			31,120			23,947
General and administrative		7,557			14,646			25,544			50,584
Sales and marketing		1,750			2,405			9,901			7,202
Intangible amortization expense		819			791			2,457			1,365
Asset write-down and restructuring		11,222			—			16,328			—
Total operating expenses		32,581			31,917			89,301			90,310
Loss from operations		(30,754	)		(27,250	)		(83,901	)		(81,862	)
Interest income, net		806			806			2,779			965
Gain on warrant liability		96			1,484			99			12,011
Other income (loss), net		871			(4	)		1,909			(4	)
Loss before income tax benefit (expense)		(28,981	)		(24,964	)		(79,114	)		(68,890	)
Income tax benefit (expense)		—			2,465			(3	)		4,071
Net loss	$	(28,981	)	$	(22,499	)	$	(79,117	)	$	(64,819	)
Net loss per share
Basic and diluted	$	(1.13	)	$	(0.89	)	$	(3.09	)	$	(2.68	)
Weighted-average shares used in computing net loss per share
Basic and diluted		25,706,023			25,156,756			25,563,895			24,180,445

See accompanying notes to the condensed consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(28,981	)	$	(22,499	)	$	(79,117	)	$	(64,819	)
Other comprehensive (loss) income:
Change in unrealized gain (loss) on available-for-sale investments		14			(134	)		19			(134	)
Total other comprehensive (loss) income		14			(134	)		19			(134	)
Comprehensive loss	$	(28,967	)	$	(22,633	)	$	(79,098	)	$	(64,953	)

See accompanying notes to the condensed consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data)



	Common Stock					Additional			Accumulated Other						Total
	Class A					Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			Loss			Deficit			Equity
Balance at December 31, 2021		22,953,510		$	2	$	359,451		$	—		$	(145,491	)	$	213,962
Stock-based compensation		—			—		10,850			—			—			10,850
Common stock issued upon vesting of restricted stock awards and restricted stock units		335,649			—		—			—			—			—
Shares repurchased for payment of tax withholdings and other		(132,315	)		—		(5,250	)		—			—			(5,250	)
Exercise of stock options		13,930			—		65			—			—			65
Net loss		—			—		—			—			(19,202	)		(19,202	)
Balance at March 31, 2022		23,170,774		$	2	$	365,116		$	—		$	(164,693	)	$	200,425
Stock-based compensation		—			—		10,270			—			—			10,270
Common stock issued upon vesting of restricted stock awards and restricted stock units		233,811			—		—			—			—			—
Shares repurchased for payment of tax withholdings and other		(77,397	)		—		(1,342	)		—			—			(1,342	)
Exercise of stock options		248,734			—		486			—			—			486
Common stock and assumed equity awards in connection with a business acquisition		1,795,446			—		59,556			—			—			59,556
Net loss		—			—		—			—			(23,118	)		(23,118	)
Balance at June 30, 2022		25,371,368		$	2	$	434,086		$	—		$	(187,811	)	$	246,277
Stock-based compensation		—			—		8,466			—			—			8,466
Common stock issued upon vesting of restricted stock awards and restricted stock units		428,682			1		(1	)		—			—			—
Shares repurchased for payment of tax withholdings and other		(74,110	)		—		(1,082	)		—			—			(1,082	)
Exercise of stock options		47,030			—		112			—			—			112
Common stock and assumed equity awards in connection with a business acquisition		—			—		(146	)		—			—			(146	)
Other comprehensive loss		—			—		—			(134	)		—			(134	)
Net loss		—			—		—			—			(22,499	)		(22,499	)
Balance at September 30, 2022		25,772,970		$	3	$	441,435		$	(134	)	$	(210,310	)	$	230,994



	Common Stock					Additional			Accumulated Other						Total
	Class A					Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			(Loss) Income			Deficit			Equity
Balance at December 31, 2022		25,708,519		$	3	$	447,085		$	(17	)	$	(302,621	)	$	144,450
Stock-based compensation		—			—		2,664			—			—			2,664
Common stock issued upon vesting of restricted stock awards and restricted stock units		7,204			—		—			—			—			—
Shares repurchased for payment of tax withholdings and other		(2,170	)		—		35			—			—			35
Other comprehensive gain		—			—		—			59			—			59
Net loss		—			—		—			—			(21,476	)		(21,476	)
Balance at March 31, 2023		25,713,553		$	3	$	449,784		$	42		$	(324,097	)	$	125,732
Stock-based compensation		—			—		2,070			—			—			2,070
Common stock issued upon vesting of restricted stock awards and restricted stock units		151,327			—		—			—			—			—
Shares repurchased for payment of tax withholdings and other		(22,991	)		—		(39	)		—			—			(39	)
Other comprehensive loss		—			—		—			(54	)		—			(54	)
Net loss		—			—		—			—			(28,660	)		(28,660	)
Balance at June 30, 2023		25,841,889		$	3	$	451,815		$	(12	)	$	(352,757	)	$	99,049
Stock-based compensation		—			—		6,074			—			—			6,074
Common stock issued upon vesting of restricted stock awards and restricted stock units		19,751			—		—			—			—			—
Shares repurchased for payment of tax withholdings and other		(10,808	)		—		(1	)		—			—			(1	)
Other comprehensive gain		—			—		—			14			—			14
Net loss		—			—		—			—			(28,981	)		(28,981	)
Balance at September 30, 2023		25,850,832		$	3	$	457,888		$	2		$	(381,738	)	$	76,155

See accompanying notes to the condensed consolidated financial statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(79,117	)	$	(64,819	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		10,808			29,586
Depreciation of property and equipment		1,261			954
Amortization of intangible assets		2,457			1,365
Change in fair value of warrant liability		(99	)		(12,011	)
Amortization of investment discount		(1,833	)		(690	)
Asset write-down		10,827			—
Changes in operating assets and liabilities
Accounts receivable		465			(991	)
Unbilled receivable		2,547			367
Inventories		(7,169	)		(1,747	)
Prepaid expenses and other current assets		2,343			6,407
Other non-current assets		930			634
Accounts payable		(1,525	)		549
Accrued liabilities		(1,021	)		363
Other non-current liabilities		(997	)		(4,415	)
Net cash used in operating activities		(60,123	)		(44,448	)
Cash flows from investing activities:
Purchases of property and equipment		(1,033	)		(1,046	)
Acquisition of a business, net of cash acquired		—			(29,687	)
Purchases of marketable securities		(58,622	)		(138,696	)
Maturities of marketable securities		120,000			20,000
Net cash provided by (used in) investing activities		60,345			(149,429	)
Cash flows from financing activities:
Proceeds from exercise of stock options		—			663
Shares repurchased for payment of tax withholdings		(68	)		(7,677	)
Payment of obligations under capital leases		(3	)		(94	)
Net cash used in financing activities		(71	)		(7,108	)
Net increase (decrease) in cash, cash equivalents		151			(200,985	)
Cash and cash equivalents at beginning of period