Supplemental Prospectus - Form 424B3

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-260296

PROSPECTUS SUPPLEMENT

(To Prospectus dated April 6, 2022)

Up to 169,003,018 Shares of Common Stock by the Selling Securityholders

Up to 6,743,113 Warrants to Purchase Common Stock by the Selling Securityholders

Up to 20,543,113 Shares of Common Stock Underlying Warrants

This prospectus supplement supplements the prospectus dated April 6, 2022 (as supplemented to date, the "Prospectus"), which forms a part of our Registration Statement on Form S-1 (Registration Statement No. 333-260296) filed with the Securities and Exchange Commission (the "SEC") on October 15, 2021, as amended by post-effective amendment No. 1 filed on March 29, 2022 and declared effective by the SEC on April 5, 2022.

The Prospectus and this prospectus supplement relate to the resale of (i) 22,000,000 shares of common stock, par value $0.0001 per share (the "Common Stock"), of Sarcos Technology and Robotics Corporation (the "Company") issued in the PIPE Financing by certain of the selling securityholders, (ii) 133,853,945 shares of Common Stock issued or issuable to certain selling securityholders in connection with the Business Combination, (iii) 6,405,960 shares of Common Stock issued to certain security holders in a private placement prior to and in connection with our predecessor's initial public offering; (v) 6,743,113 warrants to purchase Common Stock and (vi) 6,743,113 shares of Common Stock underlying warrants. This prospectus also relates to the issuance by us of up to 20,543,113 shares of Common Stock issuable upon the exercise of warrants, in each case as further described herein. This prospectus also covers any additional securities that may become issuable by reason of stock splits, stock dividends or other similar transactions.

This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement. This prospectus supplement updates, amends, and supplements the information included or incorporated by reference in the Prospectus. If there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements to it.

Quarterly Report on Form 10-Q

On August 9, 2022, we filed a Quarterly Report on Form 10-Q with the SEC. The Form 10-Q is attached hereto.

We are an "emerging growth company," as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in the section titled "Risk Factors"beginning on page 17 of this Prospectus.

You should rely only on the information contained in this Prospectus or any prospectus supplement or amendment hereto. We have not authorized anyone to provide you with different information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is August 9, 2022.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2022

OR

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)

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

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

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 July 29, 2022, the registrant had 154.8 million shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

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Summary Risk Factors

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

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PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

See accompanying notes to the condensed consolidated financial statements.

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SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except share and per share data)

​

See accompanying notes to the condensed consolidated financial statements.

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SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands, except share data)

See accompanying notes to the condensed consolidated financial statements.

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SARCOS TECHNOLOGY AND ROBOTICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

See accompanying notes to the condensed consolidated financial statements.

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SARCOS TECHNOLOGY AND ROBOTICS CORPORTATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

​

Description of the Business

Sarcos Technology and Robotics Corporation (the "Company" or "Sarcos"), designs and produces highly dexterous mobile robotic systems for use in unstructured environments.

Basis of Presentation and Consolidation

​

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

The condensed consolidated financial statements as of June 30, 2022, are unaudited. The condensed consolidated balance sheet as of December 31, 2021, included herein was derived from the audited consolidated financial statements as of that date. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. As such, the information included herein should be read in conjunction with the consolidated financial statements and accompanying notes as of and for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K, filed with the SEC on March 29, 2022.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's fiscal year begins on January 1 and ends on December 31.

In the opinion of the Company's management, the unaudited condensed consolidated financial statements include all adjustments necessary for fair financial statement presentation. All adjustments are of a normal recurring nature. Interim results are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2022.

Business Combinations

On September 24, 2021 (the "Closing Date"), the Company consummated the business combination (the "Business Combination") pursuant to the terms of the Agreement and Plan of Merger, dated as of April 5, 2021, 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 the Company, Merger Sub and Old Sarcos. Pursuant to the terms of the Merger Agreement, the Business Combination between the Company 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 the Company. On the Closing Date, the registrant changed its name from Rotor Acquisition Corp. to Sarcos Technology and Robotics Corporation.

Immediately prior to the effective time of the Merger (the "Effective Time"), all issued and outstanding warrants to purchase shares of Class A common stock of Old Sarcos were net exercised and all issued and outstanding shares of preferred stock of Old Sarcos were converted into common stock of Old Sarcos (collectively, the "Old Sarcos Common Stock"). Pursuant to the terms of the Merger Agreement, at the Effective Time:

In addition, each holder of Old Sarcos capital stock (including the Old Sarcos RSA) was entitled to a right to Contingent Merger Consideration at the Closing Date in the form of earn-outs, up to an aggregate of 28,125,000 shares of Common Stock.

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On the Closing Date, certain investors (the "PIPE Investors") purchased from the Company an aggregate of 22,000,000 shares (the "PIPE Shares") of Common Stock at a price of $10.00 per share, for an aggregate purchase price of $220.0 million (the "PIPE Financing"), in a private placement pursuant to separate subscription agreements (each, a "Subscription Agreement") entered into effective as of April 5, 2021.

On September 27, 2021, the Common Stock and warrants of Sarcos Technology and Robotics Corporation (formerly those of Rotor Acquisition Corp.), ceased trading on the New York Stock Exchange and began trading on The Nasdaq Global Market ("Nasdaq") as "STRC" and "STRCW", respectively.

On April 25, 2022, the Company acquired RE2, Inc., ("RE2") a Pittsburgh, PA based developer of autonomous and teleoperated mobile robotic systems for use in the aviation, construction, defense, energy, and medical industries. The results presented herein include the activity of RE2 from the acquisition date through June 30, 2022. The Company's results do not include RE2's financial information prior to the acquisition. For further detail see Note 4.

Summary of Significant Accounting Policies

There have been no changes to the Company's significant accounting policies described in the annual consolidated financial statements for the year ended December 31, 2021 that have had a material impact on the Company's condensed consolidated financial statements and related notes.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. Modifications continue to be made to the Company's normal operations because of the COVID-19 pandemic and the Company continues to monitor its operations and government recommendations. Travel restrictions and capacity limits at customer locations, as well as supply chain disruptions, difficulty hiring and other negative impacts, resulting from the COVID-19 pandemic and other macroeconomic conditions have caused and may continue to cause delays in the assessment and deployment of the Company's products. Although it is widely expected that the impact of the pandemic will subside over time, the Company cannot predict the future extent or duration of the impact that the COVID-19 pandemic will have on its financial condition and operations. The impact of the COVID-19 pandemic on the Company's financial performance, product development and release and business generally will depend on future developments, including the duration of the outbreak, the severity of new variants and related governmental advisories and restrictions. If the financial markets, the overall economy, working conditions and supply chain, among other things, continue to be negatively impacted, the Company's operations and financial results will continue to be adversely affected.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities were $152.8 million as of June 30, 2022, compared to $217.1 million as of December 31, 2021. The Company has historically incurred losses and negative cash flows from operations. As of June 30, 2022, the Company also had an accumulated deficit of approximately $187.8 million and working capital of $154.4 million.

These financial statements have been prepared in accordance with GAAP and this basis assumes the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company's main sources of liquidity have been cash generated by equity offerings and debt. The Company's primary use of cash is for operations and administrative activities including employee-related expenses, and general, operating and overhead expenses. Future capital requirements will depend on many factors, including the Company's timing and extent of development efforts, the expansion of sales and marketing activities, customer growth rate, customer retention, the introduction of new and enhanced product offerings and market acceptance of the Company's products. The Company believes it has sufficient financial resources for at least the next 12 months from the date of this Report.

​​Revenue Recognition

The Company recognizes revenue from the sale of its products and from the delivery of goods and services arising out of its contractual arrangements to provide research and development services that are fully funded by the customer. The Company recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process:

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Revenue from Contracts with Customers

The Company derives its revenue from two sources. First, the Company enters into research and development agreements primarily relating to the commercialization of the Company's core products. Second, the Company sells its products and related parts and repair services. Research and development services revenue includes revenue arising from different types of contractual arrangements, including cost-type contracts and fixed-price contracts. Product revenue primarily includes sales of the Company's commercially available products.

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Research and Development Services

Cost-type contracts - Research, development and/or testing service contracts, including cost-plus-fixed-fee and time and material contracts, relate primarily to the development of technology in the areas of robotics, artificial intelligence and unmanned systems. Cost-type contracts are generally entered into with the U.S. government. These contracts are billed at cost plus a margin as defined by the contract and the Federal Acquisition Regulation ("FAR"). The FAR establishes regulations around procurement by the government and provides guidance on the types of costs that are allowable in establishing prices for goods and services delivered under government contracts. Revenue on cost-type contracts is recognized over time as goods and services are provided.

Fixed-price contracts - Fixed-price development contracts relate primarily to the development of technology in the area of robotic platforms. Fixed-price development contracts generally require a significant service of integrating a complex set of tasks and components into a single deliverable. Revenue on fixed-price contracts is generally recognized over time as goods and services are provided. To the extent the Company's actual costs vary from the fixed fee, we will generate more or less profit or could incur a loss. The Company will recognize losses at the contract level in earnings in the period in which they are incurred.

Product Revenue

Product revenue relates to sales of the Company's commercially available products, and certain miscellaneous parts, accessories and repair services. The Company provides a limited one-year warranty on product sales. Product warranties are considered assurance-type warranties and are not considered to be separate performance obligations. Product revenue is recognized at the point in time when ownership of the goods is transferred, generally at the time of shipment to the customer. At the time product revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance.

The revenue recognized for Research and Development Services and Product Revenue were as follows:

Contract Balances

The timing of revenue recognition, billing, and cash collection results in the recognition of accounts receivable, unbilled receivables, contract assets and deferred revenue in the Company's condensed consolidated balance sheets.

Cash funds received in excess of revenue recognized that is contingent upon the satisfaction of performance obligations is accounted for as deferred revenue.

Contract assets include unbilled receivables which are amounts resulting from timing differences between revenue recognition and billing in accordance with agreed-upon contractual terms, which typically occur subsequent to revenue being recognized.

The opening and closing balances of our accounts receivable, unbilled receivables, contract assets and deferred revenue are as follows:

The Company recorded its current contract assets, long-term contract assets and current deferred revenue within prepaid expenses and other current assets, other non-current assets and accrued liabilities, respectively. During the three and six months ended June 30, 2022, the Company recognized revenue related to $0.0 million of deferred revenue which existed at December 31, 2021. During the three and six months ended June 30, 2021, the Company recognized revenue related to $0.1 million of deferred revenue which existed at December 31, 2020.

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Remaining Performance Obligations

As of June 30, 2022, the Company had backlog, or revenue related to remaining performance obligations, of $11.1 million. We expect $9.6 million of this backlog to be recognized during 2022, with the remainder expected to be recognized in 2023.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the previous guidance, and improving the consistent application of and simplification of other areas of the guidance. The Company adopted this ASU on January 1, 2022, using a prospective approach. The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Standard Pronouncements

As an emerging growth company ("EGC"), the Jumpstart Our Business Startups Act ("JOBS Act") allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

In February 2016, the FASB issued ASU 2016-02 regarding Accounting Standards Codification ("ASC") 842 Leases. The amendments in this guidance require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the consolidated financial statements. The amendments require a modified retrospective approach with optional practical expedients. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their consolidated financial statements in the year of adoption. In June 2020, the FASB Issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities. The update defers the initial effective date of ASU 2016-02 by one year for private companies and private not-for-profits. For these entities, the effective date is for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company will present the impact of the new guidance in its annual statements as of December 31, 2022 and its interim statements thereafter. The Company is currently in the process of evaluating the impact adopting ASC 842 will have on its condensed consolidated financial statements and related disclosures.

In June 2016, the FASB Issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company beginning January 1, 2023, with early application permitted. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition and financial statement disclosures.

2. Fair Value Measurements

ASC Topic 820, Fair Value Measurement, defines fair value as the exchange price that would be received for an asset, or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1-Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2-Fair value is determined using quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable.

Level 3-Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as an option pricing model, discounted cash flow or similar technique.

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Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

On a recurring basis, the Company measures certain of its financial assets and liabilities at fair value. The fair value of the Company's financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs:

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying amounts of accounts payable and accrued expenses approximate their fair values because of the relatively short periods until they are required to be settled.

The following table sets forth a reconciliation from the opening balances to the closing balances for Level 3 values:

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period in which a change in valuation technique or methodology occurs. During the first quarter of 2022 the trading price of the Public Warrants was used to value the Private Placement Warrants, and a third-party valuation was no longer deemed necessary resulting in the estimated fair value of the Private Placement Warrants being transferred from a Level 3 fair value measurement to a Level 2 fair value measurement.

3. Balance Sheet Components

Inventories, Net

Inventories, net consist of the following:

The Company had inventory reserves of $0.3 million as of June 30, 2022 and December 31, 2021.

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Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

Property and Equipment, Net

Property and equipment, net consist of the following:

Depreciation expenses were $0.3 million and $0.1 million, for the three months ended June 30, 2022 and 2021, respectively. Depreciation expenses were $0.6 million and $0.2 million, for the six months ended June 30, 2022 and 2021, respectively.

Accrued Liabilities

Accrued liabilities consist of the following:

Other Non-current Liabilities

Other non-current liabilities consist of the following:

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4. Acquisitions

On April 25, 2022, the Company acquired RE2, Inc. a Pittsburgh, PA based developer of autonomous and teleoperated mobile robotic systems for use in the aviation, construction, defense, energy and medical industries. This acquisition significantly increased our engineering team and added additional products and target markets to the Company's total addressable market. The aggregate consideration transferred was $90.2 million, of which $30.7 million was paid in cash, $44.1 million was comprised of 9,372,674 shares of common stock and $15.4 million was comprised of assumed options to purchase 3,877,039 shares of common stock. Additionally, 1,400,000 shares of common stock were issued with a fair value of $6.6 million at the time of grant. These shares are subject to risk of forfeiture which lapses in full four years after the acquisition date. These shares were excluded from the consideration transferred and will be recorded as stock-based compensation expense.

The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded as goodwill. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the issuance date of these consolidated financial statements and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. As of June 30, 2022, the primary areas that remain preliminary relate to the valuation of certain intangible items and various tax implications resulting from the acquisition.

The following table presents the preliminary purchase consideration allocation recorded in the Company's consolidated balance sheet as of the acquisition date:

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands):

Goodwill represents the future economic benefits arising from other assets that could not be individually identified and separately recognized, such as the acquired assembled workforce and synergies expected to be achieved from the integration of RE2. Goodwill is not deductible for tax purposes.

The results of operations of RE2 from the date of acquisition have been included in the Company's consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of RE2 are not material to the Company's consolidated financial statements in any period presented.

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill for the six months ended June 30, 2022 was as follows:

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There was no impairment of goodwill recorded during the six months ended June 30, 2022 and 2021.

Acquired Intangible Assets

Acquired intangible assets, net consisted of the following:

The Company recorded $0.6 million of amortization expense during the three and six months ended June 30, 2022, which was recorded as intangible amortization expense in the condensed consolidated statement of operations. There was no amortization expense during the three and six months ended June 30, 2021. There was no impairment of intangible assets recorded for the six months ended June 30, 2022 and 2021.

As of June 30, 2022, future amortization expense related to acquired intangible assets was as follows:

6. Notes Payable

Old Sarcos received two unsecured loans under the Paycheck Protection Program ("PPP") administered by the Small Business Administration, pursuant to the Coronavirus Aid, Relief, and Economic Security Act. The first loan, with a principal amount of $2.4 million, was received in April 2020, and the second loan, with a principal amount of $2.0 million, was received in March 2021. These PPP loans had an interest rate of 1.00% per year. The first PPP loan of $2.4 million was forgiven during June 2021, and the second PPP loan of $2.0 million was forgiven during November 2021. As of June 30, 2022, the Company did not have any outstanding debt.

7. Reverse Recapitalization

Pursuant to ASC 805, Business Combinations, the Business Combination was accounted for as a reverse recapitalization, rather than a business combination, for financial accounting and reporting purposes. Accordingly, Old Sarcos was deemed the accounting acquirer (and legal acquiree) and Rotor was treated as the accounting acquiree (and legal acquirer). Under this method of accounting, the reverse recapitalization was treated as the equivalent of Old Sarcos issuing stock for the net assets of Rotor, accompanied by a recapitalization. The net assets of Rotor are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Merger are those of Old Sarcos. The shares, and corresponding capital amounts and earnings per share available for common stockholders, prior to the Merger have been retroactively restated as shares reflecting the Exchange Ratio.

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Earn-Out Shares

Each holder of Old Sarcos capital stock (including the Old Sarcos RSA) is entitled to a right to Contingent Merger Consideration following the closing of the Business Combination in the form of earn-outs, up to an aggregate of 28,125,000 shares of Common Stock. The earn-outs will become payable as follows:

The Earn-Out Shares issuable to holders of Old Sarcos capital stock are accounted for as equity-linked instruments and recorded in additional paid-in capital, and the Earn-Out Shares issuable to holders of Old Sarcos capital stock subject to restricted stock awards are accounted for as share-based compensation. The earn-out shares are treated as equity-linked instruments as opposed to shares outstanding, and as such are not included in shares outstanding on the Company's condensed consolidated balance sheets.

Immediately following the Business Combination, the Company had 137,589,275 shares issued and outstanding of Common Stock. The following table presents the number of shares of the Company's Common Stock outstanding immediately following the the Business Combination:

(1) The number of Old Sarcos shares was determined from the 21,483,286 shares of Old Sarcos Common Stock warrants, Common Stock and Preferred Stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the Common and Preferred Stock redeemed, converted at the Exchange Ratio of 5.129222424. This excludes a restricted stock award for 5,129,222 shares that was unvested as of the date of the Business Combination. All fractional shares were rounded down.

8. Warrants

On January 31, 2020, Old Sarcos issued 250,000 Class A Common Stock warrants to one of the Series C Preferred Stock investors, at an exercise price of $11.3243 per share with an expiration date of January 31, 2030. Immediately prior to the Effective Time, all of the issued and outstanding warrants to purchase 250,000 shares of Class A Stock of Old Sarcos warrants were net exercised and then upon the Closing were exchanged for shares of the Company's Common Stock in an amount determined by application of the Exchange Ratio, as discussed in Note 1.

On January 20, 2021, Rotor consummated the initial public offering ("IPO") of 27,600,000 units (the "Units"), including the full exercise by the underwriters of their over-allotment option. Each Unit included one share of Class A Common Stock and one half of one warrant (the "Public Warrants"). Simultaneously with the closing of the IPO, Rotor consummated the sale of 7,270,000 warrants (the "Private Placement Warrants") in a private placement to Rotor Sponsor LLC (the "Sponsor"), an affiliate of Rotor's officers and directors, and certain funds and accounts managed by two qualified institutional buyers. At the Closing Date, Old Sarcos acquired the net liabilities from Rotor, including the Public Warrants, that were recorded as equity instruments, and the Private Placement Warrants, that were recorded as warrant liabilities (together the "Warrants").

Each whole Warrant entitles the registered holder to purchase one share of the Company's Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on January 20, 2022, provided that the Company has an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering the shares of the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on a cashless basis under the circumstances specified in the warrant agreement (the "Warrant Agreement") entered into between Continental Stock Transfer & Trust Company and Rotor and such shares are registered, qualified or exempt from registration under the securities laws of the state of residence of the holder. Pursuant to the Warrant Agreement, a Warrant holder may exercise its

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Warrants only for a whole number of shares of the Company's Common Stock. The Warrants will expire five years after the completion of the Business Combination, or September 24, 2026, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company will not be obligated to deliver any Common Stock pursuant to the exercise of a Warrant and will have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to registration, or a valid exemption from registration is available. No Warrant will be exercisable, and the Company will not be obligated to issue a share of Common Stock upon exercise of a Warrant unless the share of the Company's Common Stock issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants. If the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant will not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any Warrant. In the event a registration statement is not effective for the exercised Warrants, the purchaser in the Rotor IPO of a Unit containing such Warrant will have paid the full purchase price for the Unit solely for the share of the Company's Common Stock underlying such Unit.

Except as described herein, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants. The Private Placement Warrants will not be redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees, subject to certain exceptions. The initial purchasers or their permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis.

Redemption of Warrants When the Price per Share of the Company's Common Stock Equals or Exceeds $18.00. Once the Warrants become exercisable, the Company may call the Warrants for redemption:

If and when the Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. However, the Company will not redeem the Warrants unless an effective registration statement under the Securities Act covering the shares of the Company's Common Stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of the Company's Common Stock is available throughout the 30-day redemption period.

Redemption of Warrants When the Price per Share of Our Common Stock Equals or Exceeds $10.00. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants (except as described herein with respect to the Private Placement Warrants if the Company does not utilize this redemption provision):

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9. Stock-based Compensation

2015 Stock Plan

The Old Sarcos 2015 Equity Incentive Plan (the "2015 Plan") provided stock option awards, RSUs and RSAs for issuance to Company employees, officers, directors, non-employee agents and consultants. These awards generally vest over three to five years and are exercisable up to 10 years from the date of grant. Unvested options are forfeited upon termination. Following the closing of the Business Combination, no further awards may be made under the 2015 Plan. Any forfeited awards will be added to the 2021 Plan.

2021 Stock Plan

On September 15, 2021, the stockholders of the Company approved the Sarcos Technology and Robotics Corporation 2021 Equity Incentive Plan (the "2021 Plan"), and on the Closing Date, the 2021 Plan was approved by the board of directors. The 2021 Plan provides stock option awards, RSUs and RSAs for issuance to Company employees, officers, directors, non-employee agents and consultants. In general, these awards vest over one to four years and, in the case of options, are exercisable up to 10 years from the date of grant. The maximum number of shares of Common Stock that may be issued pursuant to the 2021 Plan is (i) 30.0 million shares of Common Stock of the Company plus (ii) any shares of Common Stock subject to stock options and other awards that were assumed in the Business Commination and expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest, with the maximum number of shares to be added to the 2021 Plan pursuant to clause (ii) equal to 12.8 million shares of Common Stock. As of June 30, 2022, 25.5 million shares were available to grant under the 2021 Plan.

RE2 Stock Plans

In connection with the acquisition of RE2, the Company assumed the outstanding stock plans and certain outstanding stock options of RE2. These stock options are governed by the plans and agreements under which they were originally issued, but are now exercisable for shares of Common Stock.

The following summarizes the Company's stock option activity for the six months ended June 30, 2022:

(a) In connection with the acquisition of RE2, the Company assumed certain outstanding options to acquire RE2 common stock which, following such assumption, were converted to rights to acquire 3.9 million shares of the Company's common stock at a weighted-average exercise price of $1.05 per share.

The following summarizes the Company's RSU activity for the six months ended June 30, 2022:

The following summarizes the Company's RSA activity for the six months ended June 30, 2022:

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One Sarcos RSA holder is eligible to receive additional shares upon achievement of earn-out targets as discussed in Note 7 above.

The Company recognized stock-based compensation expense in the condensed consolidated statement of operations and comprehensive loss as follows:

10. Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2022 and 2021:

The Company has presented the unaudited basic and diluted net loss per share for the three and six months ended June 30, 2021, which has been adjusted to give effect to the conversion of the Old Sarcos Class B common stock and all convertible preferred stock into Old Sarcos Class A common stock as though the conversion had occurred as of the beginning of the period or the original date of issuance, if later.

As the Company incurred a net loss for the three and six months ended June 30, 2022 and 2021, none of the outstanding dilutive share-based awards were included in the diluted share calculation as they would have been anti-dilutive.

11. Income Taxes

To determine the Company's quarterly provision for income taxes, the Company used an estimated annual effective tax rate that is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. Certain significant unusual or infrequently occurring items that are separately reported are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rate from quarter to quarter.

The Company recognized income tax benefits of $1.6 million for the three and six months ended June 30, 2022 as compared to income tax expense of $0.0 million for the three and six months ended June 30, 2021. The provision for income taxes for the three and six months ended June 30, 2022 and 2021 is based on the Company's estimated annualized effective tax rate for the fiscal years ending December 31, 2022 and December 31, 2021, respectively. For the three and six months ended June 30, 2022, the Company's recognized effective tax rate differs from the U.S. federal statutory rate as the Company recorded net losses during the period with a corresponding full valuation allowance on the net deferred tax assets created from the losses, offset by tax benefits from the acquisition of RE2 net deferred tax liabilities, which resulted in the removal of a portion of the Company's previously recorded valuation allowance.

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12. Commitments and Contingencies

Legal Proceedings

The Company has been and may be involved in various claims, lawsuits, investigations and other proceedings in the normal course of the business. The Company accrues a liability when management believes information available prior to the issuance of the condensed consolidated financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiation, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Legal costs are expensed as incurred. Although claims are inherently unpredictable, the Company currently is not aware of any matters that may have a material adverse effect on its business, financial position, results of operations or cash flows. Accordingly, the Company has not recorded any material loss contingency related to legal proceedings in the balance sheet as of June 30, 2022 and December 31, 2021.

Indemnifications

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to investors, directors, officers, employees, customers or vendors with respect to certain matters, including losses arising out of the Company's breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. As of June 30, 2022 and December 31, 2021, the Company has not accrued a liability for these indemnification obligations as the likelihood of incurring a material payment obligation in connection with these indemnification obligations is either not probable or not reasonably estimable due to the unique facts and circumstances involved.

Operating Leases

The Company leases facilities under noncancelable operating lease agreements. Future minimum rental payments under the noncancelable operating leases, subsequent to June 30, 2022, are as follows:

Rent expense related to noncancelable operating leases totaled $0.4 million for the three months ended June 30, 2022 and 2021. Rent expense related to noncancelable operating leases totaled $0.7 million for the six months ended June 30, 2022 and 2021. The operating lease terms include renewal options ranging from two to five years.

Capital Leases

The Company leases equipment under agreements expiring at various times during the next three years. The Company has recorded the capital lease obligations within its condensed consolidated balance sheets. Future minimum rental payments under the noncancelable capital leases, subsequent to June 30, 2022, are as follows:

Unconditional Purchase Commitments

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On April 4, 2021, the Company entered into an agreement with Palantir Technologies ("Palantir"). Pursuant to that agreement, the Company committed to purchase licenses to access software products and utilize services from Palantir over a six year period for a total cost to the Company of $42.0 million. As of June 30, 2022, the Company has an unconditional purchase commitment with Palantir as detailed in the table below:

The Company recognized $1.0 million and $1.9 million in sales and marketing expenses related to services provided by Palantir during the three and six months ended June 30, 2022, respectively. The Company had a prepaid expense balance of $1.9 million related to the Palantir contract as of June 30, 2022.

13. Segment Information

The Company's Chief Executive Officer ("CEO") is the Chief Operating Decision Maker ("CODM"). The CODM allocates resources and makes operating decisions based on financial information presented on a consolidated basis. The CODM does not evaluate profitability below the level of the consolidated company. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure.

The Company's revenue is derived primarily from U.S. customers. During the three and six months ended June 30, 2022, the Company had $0.6 million of revenue earned from customers located outside the United States. During the three and six months ended June 30, 2021, the Company had no material revenue earned from customers located outside the United States.

All long-lived assets are maintained in the United States. All losses are attributable to operations within the United States.

14. Related Party Transactions

On May 16, 2021, the Company entered into an agreement with Sparks Marketing Corp. to begin the construction of an experiential marketing mobile display to be used for demonstrations of Company products at prospective customer locations as well as other marketing and demonstration events. Negotiations of this agreement involved an account executive at Sparks Marketing Corp. who is the brother-in-law of Mr. Wolff, our former CEO and current Executive Chairman of the Board. The Company has capitalized $0.8 million related to construction in progress for the experiential mobile display as of June 30, 2022.

15. Employee Benefits

The Company has defined contribution 401(k) plans covering substantially all employees as of June 30, 2022. The plans allow employees to defer up to 100% of their employment income (subject to annual contribution limits imposed by the I.R.S.) after all taxes and applicable benefit deductions. In April 2022 the Company began providing employees with 401(k) matching contributions.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Throughout this section, unless otherwise noted, the "Company," "Sarcos Technology and Robotics Corporation," "Sarcos," "we," "us," and "our" refers to Sarcos Technology and Robotics Corporation, and its subsidiaries, collectively. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report (this "Report") as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Form 10-K") and our other filings, including Current Reports on Form 8-K, that we have filed with the SEC through the date of this Report. As discussed in the Special Note Regarding Forward-Looking Statements below, in addition to historical information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in Part II Item 1A Risk Factors and elsewhere in this Report.

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 of 1933, as amended (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:

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.

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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 II Item 1A Risk Factorsof 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.

Overview

We are a technology leader in industrial highly-dexterous mobile robotic systems for use in unstructured environments. Our mission is to increase worker productivity and longevity and prevent injuries through robotics. The robotic systems we are developing are designed to combine human intelligence, instinct, and judgment with the strength, endurance and precision of machines. Our products are designed to augment, rather than replace, humans.

We have adopted a multi-generational product roadmap such that development activities for products and programs are leveraged across the product portfolio. Our highest priority is on commercialization of our Guardian XT and Sapien 6M products for work-at-height use cases, which we believe will maximize near term product revenue potential, and solar field construction use cases, which represents a significant revenue generation opportunity but which will require additional development prior to commercialization. We will also pursue development of Guardian XO use cases, airport apron automation use cases, and subsea use cases, as well as longer term opportunities. A substantial majority of our resources will be dedicated to our near term priority while ensuring that we also advance our technological solutions for other opportunities.

We plan to offer our Guardian XO and Guardian XT primarily through a Robot-as-a-Service, or RaaS, subscription-based service model that will give customers the convenience of on-going maintenance, support, remote monitoring and software upgrades in addition to use of our products. We also anticipate that some customers will prefer to purchase these products rather than enter into RaaS subscriptions. We currently do not have any RaaS subscription agreements. As a result of our acquisition of RE2 on April 25, 2022, we now offer the Sapien line of robotic arm products. We believe that Sapien products will generally be sold, though we may also enter into RaaS subscriptions with customers with respect to our Sapien products. Revenue from our products are currently derived generally from development and sales contracts, rather than subscription arrangements.

We expect that both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:

Response to COVID-19

On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a "Public Health Emergency of International Concern" and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas and forced closures for certain types of public places and businesses.

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COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which Sarcos operates.

We have taken several actions in response to the COVID-19 pandemic that resulted in significant disruptions to how we operate our business. Our customers and partners have adopted similar policies. These actions and policies of ours and our customers and partners are evolving as laws, regulations and recommendations evolve. Although many of these measures are no longer in effect, we have experienced, and may continue to experience, an adverse impact on certain parts of our business as a result of measures to mitigate the COVID-19 pandemic and their resulting economic effects. Further, discontinued measures could be reinstituted, for example as a result of government requirements or in response to new variants of COVID-19.

We are currently experiencing disruptions in our supply chain, due in part to the global impact of the COVID-19 pandemic. Depending upon the duration of the ongoing COVID-19 pandemic and the associated business interruptions, our customers, suppliers, manufacturers and partners may suspend or delay their engagements with us, which could result in a material adverse effect on our financial condition and ability to meet current timelines. In an effort to manage potential supply chain risks, in particular increasing and unpredictable lead-times, we have accelerated and expect to continue to accelerate purchases of various materials, parts and components for the foreseeable future to support product development and prepare for production of our commercial units, which has and will likely continue to increase our use of cash. In addition, the COVID-19 pandemic has affected and may continue to affect our ability to recruit skilled employees to join our team. The conditions caused by the pandemic have adversely affected and continue to adversely affect, among other things, demand for our products, the ability to test and assess our robotic systems with potential customers, our IT and other expenses, our ability to recruit and the ability of our employees to travel, any of which adversely affects our business, results of operations and financial condition. The duration and extent of the COVID-19 pandemic and its impacts cannot be accurately predicted at this time, and the ultimate direct and indirect impacts on our business, results of operations and financial condition will depend on future developments that are highly uncertain.

We have also experienced, and may continue to experience, certain positive financial impacts on other aspects of our business, including a reduction in certain operating expenses due to reduced business travel, deferred hiring for some positions, and the virtualization or cancellation of customer and employee events. However, as restrictions ease we are incurring increased travel and other such expenses, though the exact timing and amounts of such increases are not predictable. Additionally, we believe that the COVID-19 pandemic could also enhance customer interest in our Guardian products as a means to assist and protect the current labor force and that our products are well suited to the new working environment as a result of the pandemic.

The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation and the effects on our business and operations closely. We do not yet know the full extent of potential impacts on our business or operations. In particular, the effect of the COVID-19 pandemic may not be fully reflected in our operating results until future periods. Given the uncertainty, we cannot reasonably estimate the impact of the COVID-19 pandemic on our future results of operations, cash flows, or financial condition.

Key Factors Affecting Operating Results

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part II Item 1A Risk Factors.

Development, Testing and Commercial Launch of our Core Products

We currently expect that revenue from the commercial launch of our core products, the Guardian XO, Guardian XT and Sapien 6M products, will determine our financial success. We currently believe that we will begin initial production of commercial units of the Guardian XT and Sapien 6M by the end of 2022, for delivery to customers in early 2023. In large part due to significant supply chain disruptions that have limited our supply of parts common to both the Guardian XO and Guardian XT and certain parts pertaining to the Guardian XO, we have prioritized the commercialization of the Guardian XT and Sapien 6M and delayed the commercial launch of the Guardian XO. We have chosen to prioritize the Guardian XT and Sapien 6M as we are closer to completing development of commercial units for those products and initial demand for those products appears strong, and our ongoing re-design of the Guardian XO in order to decrease its weight and integrate customer feedback will require additional time to complete. As a result, we currently anticipate beginning initial production of commercial units of the Guardian XO in the second half of 2023. Such timelines may be delayed, including due to challenges in recruiting skilled employees, difficulties in securing components and materials, development delays, difficulties relating to manufacturing of the units and other factors discussed under Part II Item 1A Risk Factors "Initial production of commercial units of our core products may be further delayed." Such challenges may result in further delay of the anticipated commercial launch of one or more of our products, which would adversely affect our financial condition and operating results.

Financing of Operations

Prior to commercialization, we must complete the development, testing and manufacturing requirements of our products. As a result, we will spend a material portion of our cash on hand to develop our products and fund operations for the foreseeable future. The amount

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and timing of our future funding requirements will depend on many factors, including the pace and results of our product development efforts, our ability to manufacture and deliver commercial products and thereby recognize associated revenue, capital requirements to build commercial products prior to receiving payments sufficient to cover our costs (especially in the case of RaaS subscription contracts) and our ability to lower product costs as volumes increase. We currently expect to obtain outside financing to help cover production costs for product orders. In addition, although we believe we have sufficient capital to fund our business for at least the next twelve months, we expect to seek additional financing during that time to bolster our cash reserves and ensure our ability to continue to pursue our business objectives. Any delays in the successful completion of the commercialization of our Guardian XO, Guardian XT and Sapien 6M products will negatively impact our ability to generate revenue, our profitability and our overall operating performance.

Acquisition and Integration of RE2

On April 25, 2022, we acquired RE2, Inc., a Pittsburgh, PA based developer of manipulator arms with human-like performance, intuitive robot interfaces and advanced autonomy capabilities for use in any environment. At closing, we paid approximately $30 million in cash, net of cash acquired, issued approximately 10.8 million shares of Common Stock and assumed certain outstanding options to acquire RE2 common stock which, following such assumption, represent rights to acquire 3.9 million shares of Common Stock. The results presented and discussed below include the activity for RE2 from the acquisition date through June 30, 2022. Our results do not include RE2's financial information prior to the acquisition.

We are in the early stages of integrating with RE2. 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 these efforts divert management time and company resources from our product development efforts, the commercial production and release of our Guardian XO and Guardian XT products could be delayed. The development and sales of our Sapien products could also be adversely affected. If we are not able to successfully integrate RE2 and achieve the expected benefits of the acquisition while managing the development and commercialization of our products, commercialization of the Guardian XO, Guardian XT and Sapien 6M could be delayed, which would adversely impact our operating results and financial condition, and the value of our investment in RE2 could be impaired.

Customer Demand

Although our Guardian XO, Guardian XT and Sapien units are not yet commercially available, we have received interest from potential customers that have tested or witnessed demonstrations of our pre-commercial units. However, because our robotic systems represent a new product category in markets that currently rely generally on conventional, manual systems, the market demand for our products is unproven, and important assumptions about the characteristics of targeted markets, pricing and sales cycles may be inaccurate. If customer demand does not develop as expected or we do not accurately forecast pricing, adoption rates and sales cycles for our products, our business, results of operations and financial condition will be adversely affected.

We expect to offer our Guardian XO and Guardian XT primarily through a RaaS subscription model, which we believe will drive accelerated adoption of our product offerings following their commercial launch, though we anticipate some customers will prefer to purchase these products. We believe the RaaS subscription model will be attractive to our customers and accelerate market adoption of our Guardian XO and Guardian XT robotic systems because it will lower the upfront costs of deployment, shift customers' capital expenditures to operating expenditures, allow customers to more nimbly scale deployments up or down in response to market conditions and make our products more accessible to customers of all sizes. However, our RaaS subscription model is unproven and may fail to gain commercial acceptance. We expect the volume of our committed RaaS contracts to be an important indicator of our future performance; however, RaaS subscriptions will require us to incur significant upfront expenditures to build our products, but we will only receive revenue over time during the term of the subscription. In contrast, we expect to offer our Sapien 6M primarily through a sale model. Although we expect a sale model to result in earlier revenue recognition and cash receipts, we anticipate that we will still need to finance the production of these units before receiving such revenue and cash. If we are not able to finance such production costs, or if we fail to meet our revenue expectations, our prospects, financial condition and operating results may be adversely impacted.

Manufacturing of Our Products

In addition, to the extent we obtain commercial orders for our products, we will need to manufacture and deliver them to our customers. We have recently conducted an extensive evaluation process with a number of potential contract manufacturing partners and expect to generally outsource manufacturing of our products. However, engaging with a manufacturing partner will likely require significant time, ramp-up, testing and coordination before high-volume production capability by the partner is achieved. 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 do expect to engage with a contract manufacturing partner that will produce a high percentage of our products from the commencement of initial commercial production. We expect that in 2023 we will have the internal capability to manufacture a total of between 300 - 500 units of a combination of Guardian XT, Guardian XO, Sapien 6M, and our existing commercial products, depending on the mix. However, we do not expect to use all of that capacity in 2023, especially after engaging a contract manufacturing partner. For additional information

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around the risks associated with contract manufacturing see Part II Item 1A Risk Factors "Our expected transition to an outsourced manufacturing business model may not be successful, which could harm our ability to deliver products and recognize revenue."

Continued Investment and Innovation

We are a pioneer in the robotic systems industry and benefit from lessons learned over 30 years and significant investment in research and development in our proprietary technologies and our extensive patent portfolio. However, our financial performance is significantly dependent on our ability to maintain this leading position and further dependent on the investments we make in research and development. It is important that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products and generate active market demand for our robotic systems. If we fail to do this, our market position and revenue may be adversely affected, and our investments into these technologies will not be recovered.

Geopolitical and Macro-economic Environment

Geopolitical and macro-economic factors, such as inflation, rising interest rates, oil prices, unemployment rates, the war in Ukraine and political or social unrest, can have significant impacts on economic activity, which in turn could affect demand for our products or our ability to cost-effectively develop, sell or obtain RaaS subscriptions for and manufacture our products. Among other things, these and similar factors can affect our supply chain, our ability to hire qualified personnel, our labor and materials costs, the prices we charge for our products and the budgets of our customers and their expected return-on-investment from the purchase of or subscription for our products. Many of these factors are outside of our control but can have a significant impact on our business success and operating results. If we are unable to manage our business successfully in response to any such factors, our business and results of operations would be adversely affected.

Results of Operations

The discussion below regarding our results of operation for the three and six months ended June 30, 2022, includes the financial results of RE2 beginning on the acquisition date through June 30, 2022. Our results do not include RE2's financial information prior to the acquisition.

Comparison of the Three Months Ended June 30, 2022, and 2021

Revenue, Net

The following table presents our revenue for the three months ended June 30, 2022 and 2021:

Revenue increased by $1.9 million, or 166%, from $1.1 million for the three months ended June 30, 2021, to $3.0 million for the three months ended June 30, 2022, as explained below.

Research and Development Services

Revenue derived from research and development services increased by $2.0 million, or 190%, from $1.0 million for the three months ended June 30, 2021 to $3.0 million for the three months ended June 30, 2022. The increase was a result of reflecting RE2 revenues beginning on April 25, 2022, partially offset by a reduction in work efforts and related revenue for various projects during the comparable periods as we continue to focus on accepting only those development contracts that are aligned with our product commercialization efforts. We expect future revenue from research and development services to increase on a year over year basis due to the inclusion of RE2 service revenues in the near term; however, to the extent we continue to focus on development contracts that support our commercialization efforts, our research and development services revenue may decline over time.

Product Revenue

Revenue derived from product sales decreased slightly during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Product sales generated during the three months ended June 30, 2022 and the three months ended June 30, 2021 were minimal and related to sales of our Guardian S product.

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Operating Expenses

The following table presents our operating expenses for the three months ended June 30, 2022 and 2021:

*NM - Not Meaningful

Cost of Revenue

Cost of revenue increased by $2.5 million, or 365%, from $0.7 million for the three months ended June 30, 2021, to $3.1 million for the three months ended June 30, 2022. Cost of revenues increased significantly due to reflecting RE2 cost of revenue beginning on April 25, 2022. Cost of revenue increased at a higher rate than revenue, driven mainly by increased labor and material costs related to several firm fixed price contracts and an increase in applied overhead expenses.

Research and Development

Research and development expenses increased by $3.5 million, or 87% from $4.1 million for the three months ended June 30, 2021, to $7.6 million for the three months ended June 30, 2022. The increase was driven primarily by an increase in labor and overhead expense as a result of increased headcount (including as a result of the RE2 acquisition) and third-party service provider costs as we focus on the development and commercialization of our Guardian XO, Guardian XT and Sapien 6M products. We expect our research and development expenses to continue to increase due to our focus on product development and as we continue to engage third party service providers in our development activities.

General and Administrative

General and administrative expenses increased by $15.2 million, or 521%, from $2.9 million for the three months ended June 30, 2021, to $18.1 million for the three months ended June 30, 2022. The largest portion of the increase, $9.7 million, is due to stock-based compensation expense, mainly for stock grants that began vesting upon the closing of the Business Combination and shares issued upon completion of the acquisition of RE2. Additionally, general and administrative expense increased due to increased legal expenses, business insurance expenses, increased headcount (including as a result of our acquisition of RE2) and related expenses. We expect our general and administrative expenses to be higher year-over-year for the remainder of 2022 as we work on our commercialization pathway, public-company compliance efforts and as we incur additional general and administrative costs resulting from our acquisition of RE2.

Sales and Marketing

Sales and marketing expenses increased by $1.4 million, or 122%, from $1.2 million for the three months ended June 30, 2021, to $2.6 million for the three months ended June 30, 2022. This increase was driven by an increase in professional service fees due to the engagement of a third-party vendor utilized in data management of our products and services, increased headcount expenses including increased stock-based compensation expense and increased expenses related to additional headcount resulting from our RE2 acquisition. We expect our sales and marketing expenses to be higher year-over-year for the remainder of 2022 as we work on our commercialization pathway.

Intangible Amortization Expense

Intangible amortization expenses increased by $0.6 million, from $0.0 million for three months ended June 30, 2021, to $0.6 million for the three months ended June 30, 2022. The increase in intangible amortization expense is due to the recognition of amortization expenses of identified intangible assets recorded as part of our RE2 acquisition.

Other Income (Loss)

The following table presents other income for the three months ended June 30, 2022 and 2021:

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*NM - Not Meaningful

Other income (loss) increased by $1.9 million for the three months ended June 30, 2022 as compared to the prior year period, as a result of the $4.1 million in unrealized mark-to-market gain on our outstanding private placement warrants, partially offset by the gain on forgiveness of notes payable recorded in the prior year period in connection with the forgiveness of the first draw of our Paycheck Protection Program ("PPP") loan.

Provision for Income Taxes

Income tax benefit increased to $1.6 million for the three months ended June 30, 2022 compared to $0.0 million in income tax expense for the three months ended June 30, 2021. The income tax benefit recorded during the three months ended June 30, 2022 is due to a net deferred tax liability recorded as part of the acquisition of RE2. The future reversal of the net deferred tax liability is a source of taxable income to be considered by us when determining whether a valuation allowance is needed for our existing net deferred tax assets. As such, we removed a portion of our previously recorded valuation allowance resulting in an income tax benefit recognized during the current year period.

Comparison of the Six Months Ended June 30, 2022, and 2021

Revenue, Net

The following table presents our revenue for the six months ended June 30, 2022 and 2021:

Revenue increased by $0.8 million, or 29%, from $2.9 million for the six months ended June 30, 2021, to $3.8 million for the six months ended June 30, 2022, as explained below.

Research and Development Services

Revenue derived from research and development services increased by $1.1 million, or 41%, from $2.6 million for the six months ended June 30, 2021 to $3.7 million for the six months ended June 30, 2022. The increase was a result of the inclusion of RE2 revenue beginning on April 25, 2022, partially offset by our decision to focus on services contracts that support our commercialization efforts, which resulted in foregoing some revenue opportunities, and a net change in work efforts for various projects during the comparable periods. We expect future revenue from research and development services to increase on a year over year basis due to the inclusion of RE2 service revenues in the near term; however, to the extent we continue to focus on development contracts that support our commercialization efforts, our research and development services revenue may decline over time.

Product Revenue

Revenue derived from product sales decreased by $0.2 million, or 79%, from $0.3 million during the six months ended June 30, 2021 to $0.1 million for the six months ended June 30, 2022. During the six months ended June 30, 2022, we had minimal product sales compared to $0.3 million in sales of our Guardian S during the six months ended June 30, 2021.

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Operating Expenses

The following table presents our operating expenses for the six months ended June 30, 2022 and 2021:

*NM - Not Meaningful

Cost of Revenue

Cost of revenue increased by $1.8 million, or 94%, from $1.9 million for the six months ended June 30, 2021, to $3.6 million for the six months ended June 30, 2022. Cost of revenues increased significantly due to reflecting RE2 cost of revenue beginning April 25, 2022. Cost of revenue increased at a higher rate than revenue, driven mainly by increased labor and material costs related to several firm fixed price contracts and an increase in applied overhead expenses.

Research and Development

Research and development expenses increased by $6.6 million, or 96% from $6.9 million for the six months ended June 30, 2021, to $13.5 million for the six months ended June 30, 2022. The increase was driven primarily by an increase in labor and overhead expense as a result of increased headcount (including as a result of the RE2 acquisition) and third-party service provider costs as we focus on the development and commercialization of our Guardian XO, Guardian XT and Sapien 6M products. We expect our research and development expenses to continue to increase due to our focus on product development and as we continue to leverage third party service providers in our development activities.

General and Administrative

General and administrative expenses increased by $30.7 million, or 586%, from $5.2 million for the six months ended June 30, 2021, to $35.9 million for the six months ended June 30, 2022. The largest portion of the increase, $20.2 million, is due to stock-based compensation expense, mainly for stock grants that began vesting upon the closing of the Business Combination. Additionally, general and administrative expense increased due to increased legal expenses, business insurance expenses, increased headcount (including as a result of our acquisition of RE2) and related expenses. We expect our general and administrative expenses to be higher year-over-year for the remainder of 2022 as we work on our commercialization pathway, public-company compliance efforts and as we incur additional general and administrative costs resulting from our acquisition of RE2.

Sales and Marketing

Sales and marketing expenses increased by $3.0 million, or 164%, from $1.8 million for the six months ended June 30, 2021, to $4.8 million for the six months ended June 30, 2022. This increase was driven by an increase in professional service fees due to the engagement of a third-party vendor utilized in data management of our products and services, increased headcount expenses, including increased stock-based compensation expense and increased expenses related to additional headcount resulting from our RE2 acquisition. We expect our sales and marketing expenses to be higher year-over-year for the remainder of 2022 as we work on our commercialization pathway.

Intangible Amortization Expense

Intangible amortization expenses increased by $0.6 million, from $0.0 million for six months ended June 30, 2021, to $0.6 million for the six months ended June 30, 2022. The increase in intangible amortization expense is due to the recognition of amortization expenses of identified intangible assets recorded as part of the RE2 acquisition.

Other Income (Loss)

The following table presents other income for the six months ended June 30, 2022 and 2021:

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*NM - Not Meaningful

Other income (loss) increased by $8.3 million for the six months ended June 30, 2022 as compared to the prior year period, as a result of the $10.5 million in unrealized mark-to-market gain on our outstanding private placement warrants, partially offset by the gain on forgiveness of notes payable recorded in the prior year period in connection with the forgiveness of the first draw of our PPP loan.

Provision for Income Taxes

Income tax benefit increased to $1.6 million for the six months ended June 30, 2022 compared to $0.0 million in income tax expense for the six months ended June 30, 2021. The income tax benefit recorded during the six months ended June 30, 2022 is due to a net deferred tax liability recorded as part of the acquisition of RE2. The future reversal of the net deferred tax liability is a source of taxable income to be considered by us when determining whether a valuation allowance is needed for our existing net deferred tax assets. As such, we removed a portion of our previously recorded valuation allowance resulting in an income tax benefit recognized during the current year period.

Liquidity and Capital Resources

Prior to the closing of the Business Combination, Old Sarcos financed its operations through private placements of redeemable convertible preferred stock, from the limited sale of Guardian S units and other commercially available products and by providing research and development services under Small Business Innovation Research contracts and as a subcontractor for prime contractors working with the U.S. Department of Defense.

Upon the closing of the Business Combination, we retained approximately $228.8 million in cash proceeds, net of fees and expenses related to the Business Combination, including $220.0 million, from the PIPE Financing.

We currently use cash to fund operations and capital expenditures and meet working capital requirements. As of June 30, 2022, we had $152.8 million in cash, cash equivalents and marketable securities. We believe that our cash, cash equivalents and marketable securities on hand will be sufficient to support operations, working capital and capital expenditure requirements for at least the next 12 months from the date of this report; however, we will need to secure additional financing prior to achieving positive operating cash flows, and we do not anticipate achieving positive cash flows through at least 2024.

The amount and timing of our future funding requirements, will depend on many factors, including the pace and results of our product development efforts, our ability to manufacture and deliver commercial products and thereby recognize associated revenue, capital requirements to build commercial products prior to receiving payments sufficient to cover our costs (especially in the case of RaaS contracts) and our ability to lower product costs as volumes increase. Any delays in the successful completion of the commercialization of our Guardian XO, Guardian XT and Sapien products will negatively impact our ability to generate revenue, our profitability and our overall operating performance.

In addition, we may enter into arrangements to acquire or invest in complementary businesses, services, and technologies, which may require acquisition capital as well as operational capital for these acquisitions or arrangements. We may be required to seek additional equity or debt financing to facilitate these arrangements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be materially and adversely affected.

We expect our operating and capital expenditures to increase as we increase headcount, expand our operations and grow our customer base. If additional funds are required to support our working capital requirements, for acquisitions or for other purposes, we may seek to raise funds through additional debt or equity financings or from other sources. We currently expect to obtain outside financing to help cover production costs for product orders. In addition, although we believe we have sufficient capital to fund our business for at least the next twelve months, we expect to seek additional financing during that time to bolster our cash reserves and ensure our ability to continue to pursue our business objectives. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our equity holders could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of existing equity holders. If we raise additional funds by obtaining loans from third parties, the terms of

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those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility and would also require us to incur additional interest expense. Additional financing may not be available at all or, if available, may not be available on terms favorable to us or that we find acceptable.

Cash Flows

The following table summarizes our cash flow data for the periods presented: