Palladyne AI (PDYN) risk factors, FY2025 10-K

Palladyne AI's FY2025 10-K, filed Mar 05, 2026, lists 59 risk factors in 6 groups. Against the prior year's 59: 8 new, 8 dropped, 25 substantially reworded.

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Risk factors listed
596 groups
New this year
8vs 59 last year
Dropped
8since the prior 10-K
Substantially reworded
25of those kept
Section length
26k wordsItem 1A

What the changes say

  • Palladyne AI expanded through November 2025 acquisitions of GuideTech, Warnke Precision Machining, and MKR Fabricators, introducing integration risks and defense industry manufacturing exposures.

What changed since the prior 10-K

New

  • NewRisks Related to Our Business

    If we are unable to maintain our technological and manufacturing process expertise, our business could be adversely affected

    Failing to maintain technological and manufacturing process expertise could adversely affect our engineering and manufacturing services.

  • NewRisks Related to Our Operations and Growth

    The success of our recent acquisitions of GuideTech, Warnke Precision Machining and MKR Fabricators is subject to numerous risks and uncertainties, including integration risks

    We face numerous integration and operational risks following our November 2025 acquisitions of GuideTech, Warnke Precision Machining, and MKR Fabricators.

  • NewRisks Related to Our Operations and Growth

    If we are unable to effectively manage these and any other risks resulting from the acquisitions, the value of our investment in one or more of the acquired companies may be adversely affected and the expected benefits of the acquisitions may not be realized

    Integrating our recent acquisitions may divert management resources and delay commercialization of our AI/ML Foundational Technology and other products.

  • NewRisks Related to Our Operations and Growth

    Our business involves significant risks and uncertainties that may not be covered by indemnity or insurance

    Designing and manufacturing advanced defense products creates liabilities that may exceed our insurance or government indemnifications under Public Law 85-804 or the SAFETY Act.

  • NewRisks Related to Our Operations and Growth

    disputes with insurance carriers over coverage terms or the insolvency of one or more of our insurance carriers may significantly affect the amount or timing of our cash flows

    Insurance coverage disputes, carrier insolvency, or uninsured product failures could negatively impact our cash flows, financial condition, and reputation.

  • NewRisks Related to Legal Claims and Regulatory Compliance

    If our manufacturing or engineering processes and services do not comply with applicable regulatory requirements, or if we manufacture or design products containing defects, demand for our services may decline and we may be subject to liability claims

    Noncompliance with Department of War and FAA regulatory requirements or manufacturing defects could result in liability claims, penalties, and canceled orders.

  • NewRisks Related to Legal Claims and Regulatory Compliance

    to apply, to our operations may result in substantial costs and may necessitate changes to our business practices, which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise adversely affect our business, prospects, results of operations, and financial condition

    Failing to comply with published privacy policies or data protection regulations could subject us to regulatory enforcement actions and substantial costs.

  • NewRisks Related to Our Intellectual Property

    material to our business after the term of the license and we are unable to use them, it could adversely affect our business and profitability

    Inadequate IT safeguards or reverse engineering by well-funded competitors could compromise our proprietary software and technology rights.

Dropped

  • DroppedRisks Related to Our Business

    do so. If we are unable to develop and commercialize our software products in a cost efficient manner, our financial results, financial condition and prospects would be materially and adversely affected

  • DroppedRisks Related to Our Business

    Our anticipated revenues are expected to be primarily derived from the licensing of our AI/ML software products for the foreseeable future

  • DroppedRisks Related to Our Business

    We currently intend to target many customers that are large businesses with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If we are unable to sell our software products to these customers, our prospects and results of operations will be adversely affected

  • DroppedRisks Related to Our Operations and Growth

    Even if our AI/ML Foundational Technology performs properly and our products are used as intended, if personal injuries occur while operating third-party products that use our AI/ML software, we could be exposed to liability and our results of operations, financial condition and reputation may be adversely affected

  • DroppedRisks Related to Our Operations and Growth

    implementing and enhancing administrative infrastructure, systems, controls and processes

  • DroppedRisks Related to Our Finances

    our customers, employees, investors and other third-party partners, and could have an adverse impact on our business and results of operations

  • DroppedRisks Related to Legal Claims and Regulatory Compliance

    The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We may not be able to monitor and react to all developments in a timely manner

    Challenges in developing and commercializing software products efficiently.

  • DroppedRisks Related to Legal Claims and Regulatory Compliance

    Moreover, international sales of our software may be subject to first obtaining licenses, clearances or authorizations from various regulatory entities. If we are not allowed to export our software or the clearance process is burdensome and costly, our ability to generate revenue would be adversely affected

    Anticipated revenue concentration primarily in AI/ML software licensing.

Reworded

  • 76% rewrittenRisks Related to Legal Claims and Regulatory Compliance

    We are subject to governmental export and import controls and laws that could subject us to liability if we are not in compliance with such laws

    Broadened from software-specific export controls to cover the provision of all products, technology, and services.

  • 71% rewrittenRisks Related to Our Business

    Successful commercialization of our technology and products may be delayed beyond our current expectations and therefore product availability to customers, customer acquisition and receipt of product revenue could be delayed

    Added the risk that an inability to recruit and retain employees could delay commercialization of our products.

    Was: Successful commercialization of our AI/ML Foundational Technology and related products may be delayed beyond our current expectations and therefore product availability to customers, customer acquisition and receipt of software licensing revenue could be delayed

  • 69% rewrittenRisks Related to Our Business

    The benefits of our AI/ML Foundational Technology and related products to customers and projected return on investment have not been substantiated through customer use

    Added that we target large businesses, including large U.S. government prime contractors with substantial negotiating power and internal solutions.

  • 65% rewrittenRisks Related to Our Business

    A portion of our revenue is currently and will continue to be generated by contracts with government entities, which makes us subject to a number of uncertainties, challenges and risks

    Updated to emphasize that future growth depends on competitive government contract procurement processes and evaluation periods.

    Was: A portion of our revenue is currently and will continue to be generated by contracts with government entities, which make us subject to a number of uncertainties, challenges and risks

  • 64% rewrittenRisks Related to Our Finances

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

    Updated financial figures and expanded revenue fluctuation factors to include demand for products and services beyond software.

    Was: Our financial results may vary significantly from period to period due to fluctuations in our operating costs, revenues (including from development contracts), product demand and other factors

  • 61% rewrittenRisks Related to Our Business

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

    Updated historical financials, showing a 2025 operating loss of $32.4 million and accumulated deficit of $480.8 million.

  • 58% rewrittenRisks Related to Our Business

    Important assumptions about market demand, pricing, adoption rates and sales cycles for our products and services may be inaccurate

    Added specific sales cycle estimates of 12 to 18 months or longer for Palladyne IQ, while avionics, UAV, and SwarmOS sales cycles remain unknown.

    Was: Important assumptions about market demand, pricing, adoption rates and sales cycles for our software products may be inaccurate

  • 56% rewrittenRisks Related to Our Business

    We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase. Our products may not be competitive with other alternatives

    Expanded industry scope to explicitly include the UAV and robotics industries alongside AI/ML software.

  • 55% rewrittenRisks Related to Legal Claims and Regulatory Compliance

    We may be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal, regulatory and administrative proceedings and face potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition

  • 54% rewrittenRisks Related to Legal Claims and Regulatory Compliance

    Changes in tax laws could have a material adverse effect on our business, cash flows, results of operations or financial condition

  • 46% rewrittenRisks Related to Our Business

    We may not be able to successfully enhance our product offerings through our research and development efforts

    Was: We may not be able to complete or enhance our product offerings through our research and development efforts

  • 44% rewrittenRisks Related to Our Operations and Growth

    We may be unable to adequately control the costs associated with our operations in order to achieve profitability

  • 43% rewrittenRisks Related to Our Business

    Our AI/ML Foundational Technology and other technologies and products are new, and customer trials and discussions may not result in purchases

    Was: Our AI/ML Foundational Technology and related products are new technologies, and customer trials and discussions may not result in purchases

  • 40% rewrittenRisks Related to Our Operations and Growth

    Our business and prospects depend significantly on our ability to build our brands. We may not succeed in establishing, maintaining and strengthening effective brands, and our brands and reputation could be harmed by negative publicity regarding us or our technologies, products or services

    Was: Our business and prospects depend significantly on our ability to build our brand. We may not succeed in establishing, maintaining and strengthening an effective brand, and our brand and reputation could be harmed by negative publicity regarding us or our AI/ML Foundational Technology and related products

  • 40% rewrittenRisks Related to Our Business

    If we are unable to successfully introduce and implement enhancements, new features or modifications to our technologies and products, our business would be harmed

    Was: If we are unable to successfully introduce and implement enhancements, new features or modifications to our AI/ML Foundational Technology and related products, our business would be harmed

  • 39% rewrittenRisks Related to Our Business

    Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, as they often have in the past, our actual operating results may be materially different from our expected or forecasted results

  • 39% rewrittenRisks Related to Our Operations and Growth

    If we fail to effectively manage our business, we may not be able to develop, market and commercialize our technologies and products successfully

    Was: If we fail to effectively manage our business, we may not be able to design, develop, market and commercialize our software products successfully

  • 36% rewrittenRisks Related to Ownership of our Securities

    If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Common Stock, the price and trading volume of our Common Stock could decline

    Was: If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Common Stock, then the price and trading volume of our Common Stock could decline

  • 32% rewrittenRisks Related to Our Intellectual Property

    Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to our AI/ML Foundational Technology and our other technologies and products

    Was: Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to our software and other technologies

  • 31% rewrittenRisks Related to Ownership of our Securities

    There is no guarantee that the deSPAC Public Warrants or the deSPAC Private Placement Warrants will ever be in the money, and they may expire worthless

  • 30% rewrittenRisks Related to Our Business

    We have no or limited previous history or experience with commercializing our products and may not be able to do so efficiently, effectively or at all. We were unsuccessful in our efforts to commercialize our legacy hardware technologies that we and our predecessor companies developed over the past several decades

    Was: We have no previous history or experience with commercializing software products and may not be able to do so efficiently, effectively or at all. We were unsuccessful in our efforts to commercialize the hardware technologies that we and our predecessor companies developed over the past several decades

  • 29% rewrittenRisks Related to Our Business

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

  • 27% rewrittenRisks Related to Our Business

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

  • 26% rewrittenRisks Related to Our Operations and Growth

    We face risks related to wars, natural disasters, health epidemics and other calamities and supply chain disruption, any of which could significantly disrupt our operations

  • 24% rewrittenRisks Related to Our Finances

    We have been and may in the future be subject to risks associated with strategic relationships, acquisitions or transactions and may not identify or form desired strategic relationships in the future

    Was: We have been and may in the future be subject to risks associated with strategic relationships or transactions and may not identify or form desired strategic relationships in the future

All 59 risk factors

Headings as the filing states them, in filing order.

Risks Related to Our Business

  1. 01We are an early stage company with a history of losses, and expect to incur significant losses for the foreseeable future61% rewritten
  2. 02maintain our general and administrative functions and systems to support our operations and to operate as a publicly-traded company
  3. 03Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, as they often have in the past, our actual operating results may be materially different from our expected or forecasted results39% rewritten
  4. 04We have yet to achieve positive operating cash flow, and our ability to generate positive cash flow is uncertain29% rewritten
  5. 05We have no or limited previous history or experience with commercializing our products and may not be able to do so efficiently, effectively or at all. We were unsuccessful in our efforts to commercialize our legacy hardware technologies that we and our predecessor companies developed over the past several decades30% rewritten
  6. 06Successful commercialization of our technology and products may be delayed beyond our current expectations and therefore product availability to customers, customer acquisition and receipt of product revenue could be delayed71% rewritten
  7. 07Any issues in the development and use of our AI/ML Foundational Technology or AI-enabled products, or issues in products developed by others, may result in reputational harm or liability
  8. 08Our AI/ML Foundational Technology and other technologies and products are new, and customer trials and discussions may not result in purchases43% rewritten
  9. 09If we are unable to successfully introduce and implement enhancements, new features or modifications to our technologies and products, our business would be harmed40% rewritten
  10. 10We may fail to attract or retain customers at sufficient rates or in sufficient numbers or at all27% rewritten
  11. 11We have no previous history with our licensing sales model for our software products
  12. 12Important assumptions about market demand, pricing, adoption rates and sales cycles for our products and services may be inaccurate58% rewritten
  13. 13The benefits of our AI/ML Foundational Technology and related products to customers and projected return on investment have not been substantiated through customer use69% rewritten
  14. 14A portion of our revenue is currently and will continue to be generated by contracts with government entities, which makes us subject to a number of uncertainties, challenges and risks65% rewritten
  15. 15We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase. Our products may not be competitive with other alternatives56% rewritten
  16. 16If we are unable to maintain our technological and manufacturing process expertise, our business could be adversely affectedNew
  17. 17We may not be able to successfully enhance our product offerings through our research and development efforts46% rewritten

Risks Related to Our Operations and Growth

  1. 18The success of our recent acquisitions of GuideTech, Warnke Precision Machining and MKR Fabricators is subject to numerous risks and uncertainties, including integration risksNew
  2. 19If we are unable to effectively manage these and any other risks resulting from the acquisitions, the value of our investment in one or more of the acquired companies may be adversely affected and the expected benefits of the acquisitions may not be realizedNew
  3. 20We use "open source" software, which could negatively affect our ability to offer our technologies and products and subject us to possible litigation
  4. 21required under the terms of an open source license to release our proprietary source code to the public, competitors could create similar products with lower development effort and time, which ultimately could result in a loss of sales for us
  5. 22Our business and prospects depend significantly on our ability to build our brands. We may not succeed in establishing, maintaining and strengthening effective brands, and our brands and reputation could be harmed by negative publicity regarding us or our technologies, products or services40% rewritten
  6. 23If we fail to effectively manage our business, we may not be able to develop, market and commercialize our technologies and products successfully39% rewritten
  7. 24We may be unable to adequately control the costs associated with our operations in order to achieve profitability44% rewritten
  8. 25We expect to incur substantial research and development costs and devote significant resources to developing and commercializing our AI/ML Foundational Technology, other technologies and products, and we may never reach profitability and/or achieve significant or any licensing revenue
  9. 26Our business involves significant risks and uncertainties that may not be covered by indemnity or insuranceNew
  10. 27disputes with insurance carriers over coverage terms or the insolvency of one or more of our insurance carriers may significantly affect the amount or timing of our cash flowsNew
  11. 28We face risks related to wars, natural disasters, health epidemics and other calamities and supply chain disruption, any of which could significantly disrupt our operations26% rewritten

Risks Related to Our Finances

  1. 29Our financial results may vary significantly from period to period due to fluctuations in our operating costs, revenues, product demand and other factors64% rewritten
  2. 30We incur significant expenses and administrative burdens as a publicly-traded company, which could have a material adverse effect on our business, prospects, financial condition and operating results
  3. 31If 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
  4. 32We have incurred operating losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. To the extent that we continue to generate tax losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire
  5. 33We have been and may in the future be subject to risks associated with strategic relationships, acquisitions or transactions and may not identify or form desired strategic relationships in the future24% rewritten

Risks Related to Legal Claims and Regulatory Compliance

  1. 34Issues in the development and use of AI/ML, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations
  2. 35If our manufacturing or engineering processes and services do not comply with applicable regulatory requirements, or if we manufacture or design products containing defects, demand for our services may decline and we may be subject to liability claimsNew
  3. 36Changes in tax laws could have a material adverse effect on our business, cash flows, results of operations or financial condition54% rewritten
  4. 37We may be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal, regulatory and administrative proceedings and face potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition55% rewritten
  5. 38to apply, to our operations may result in substantial costs and may necessitate changes to our business practices, which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise adversely affect our business, prospects, results of operations, and financial conditionNew
  6. 39We are subject to cybersecurity risks to our operational systems, security systems, infrastructure and data processed by us or third-party vendors
  7. 40We are subject to laws, regulations and contractual provisions as a government contractor and subcontractor, which may pose increased risk of potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition
  8. 41We are subject to governmental export and import controls and laws that could subject us to liability if we are not in compliance with such laws76% rewritten

Risks Related to Our Intellectual Property

  1. 42Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to our AI/ML Foundational Technology and our other technologies and products32% rewritten
  2. 43material to our business after the term of the license and we are unable to use them, it could adversely affect our business and profitabilityNew
  3. 44We may not be able to effectively protect our intellectual property rights in our target markets or at all
  4. 45We 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 software or other products
  5. 46We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees' former employers

Risks Related to Ownership of our Securities

  1. 47The issuance or sale of shares of our Common Stock, or rights to acquire shares of our Common Stock could depress the trading price of our Common Stock and may cause dilution to our existing stockholders
  2. 48The price of our Common Stock could decline due to the large number of shares of our Common Stock being subject to employee equity awards
  3. 49The markets for our publicly traded securities have been volatile and may not continue at all
  4. 50general economic and political conditions such as recessions, interest rates, changes in U.S. trade policy including tariffs and expectations of tariffs, fuel prices, international currency fluctuations and acts of war or terrorism
  5. 51Our publicly traded securities are subject to potential delisting from the Nasdaq Global Market if we do not meet Nasdaq's continued listing requirements, which would likely impair the liquidity of the trading market for our Common Stock and warrants
  6. 52If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Common Stock, the price and trading volume of our Common Stock could decline36% rewritten
  7. 53There is no guarantee that the deSPAC Public Warrants or the deSPAC Private Placement Warrants will ever be in the money, and they may expire worthless31% rewritten
  8. 54We may redeem unexpired deSPAC Warrants prior to their exercise at a time that is disadvantageous to deSPAC Warrant holders, thereby making their deSPAC Warrants worthless
  9. 55DeSPAC Warrants are exercisable for Common Stock, and their exercise would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
  10. 562024 Warrants are exercisable for Common Stock, and their exercise would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
  11. 57Anti-takeover provisions contained in our Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could limit the price investors might be willing to pay in the future for our Common Stock
  12. 58Our Bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders
  13. 59The JOBS Act permits "emerging growth companies" like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies

Other Palladyne AI 10-Ks

  • FY2024 10-K risk factors
    59 risks

    Palladyne AI is an early stage software company transitioning from unsuccessful hardware products to AI/ML foundational technology licensing, carrying severe historical losses and negative cash flows.

    Filed Feb 20, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.