DEF 14A of Palladyne AI Corp., Apr 23, 2024

DEF 14A of Palladyne AI Corp.

Filed Apr 23, 2024 · FY20230000950170-24-047032

Open on EDGAR

  1. Our Board

    Our Board

  2. Our Board

    | Committee Memberships | | | | | | | | | | Current Directors | Age (as of 3-31-24) | Director Since | Independent | Audit | Compensation | Nominating and Corporate Governance | Strategic Transaction | Other Public Directorships | | Brian D. Finn | 63 | 2020 | | | | | | -- | | Matthew Shigenobu Muta | 55 | 2021 | | | | | | -- | | Eric T. Olson | 72 | 2021 | | | | | | 2 | | Laura J. Peterson | 64 | 2021 | | | | | | 1 | | Dennis Weibling | 72 | 2021 | | | | | | -- | | Benjamin G. Wolff | 55 | 2021 | | | | | | 1 |

  3. Our Board

    = Member = Chair = Audit Committee Financial Expert

  4. Nominees for Director

    Nominees for Director

  5. Nominees for Director

    | | Brian D. Finn | | | Qualifications, Skills and Experience | | | | | | Brian D. Finn has served as a member of the Board of Directors since August 2020. Mr. Finn has over 40 years of experience in the financial services industry as well as a variety of corporate and philanthropic board roles. From 2008 until he retired in 2013, Mr. Finn served as Chairman and Chief Executive Officer of Asset Management Finance Corp (AMF) and as a Senior Advisor to Credit Suisse. From 2004 to 2008, Mr. Finn was Chairman and Head of Alternative Investments (AI) at Credit Suisse. From 2002 to 2005, Mr. Finn held senior managements positions within Credit Suisse, including President of Credit Suisse First Boston (CSFB), President of Investment Banking, Co-President of Institutional Securities, Chief Executive Officer of Credit Suisse USA and a member of the Office of the Chairman of CSFB. He was also a member of the Executive Board of Credit Suisse Group. Mr. Finn began his career in 1982 as a member of the Mergers & Acquisitions Group (M&A) at The First Boston Corporation, ultimately becoming Co-Head of M&A in 1993. He has advised on dozens of transactions worth well over $100 billion. In 1997, he joined the private equity firm Clayton, Dubilier & Rice as a partner and then later rejoined Credit Suisse in 2002. Mr. Finn was a member of the board of The Scotts Miracle-Gro Company (NYSE:SMG) from December 2014 to January 2023 and was a member of the board of Owl Rock Capital Corp (NYSE:ORCC) from 2016 to February 2022. He is currently Chairman of Star Mountain Capital and Chairman of Covr Financial Technologies, as well as a board member of a number of early-stage companies. He has previously been a Strategic Advisor to KKR, member of the boards of Baxter International (NYSE: BAX), Telemundo, MGM Pictures, and a number of other public and private companies. Mr. Finn is a past Chairman of the Undergraduate Executive Board of The Wharton School of the University of Pennsylvania, Vice Chairman of the Board of the City Kids Foundation and a member of the boards of the Intrepid Fallen Heroes Fund, the Gordon A. Rich Memorial Foundation and the Starmar Foundation. Mr. Finn received a Bachelor of Science Degree in Economics from The Wharton School of the University of Pennsylvania. We believe Mr. Finn is well-qualified to serve as a member of our Board due to, among other things, his extensive experience in finance, leadership positions and strategic transactions. | | Independent Committee Memberships: Nominating and Corporate Governance Strategic Transaction Other Current Public Directorships: None | |

  6. Nominees for Director

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  7. Nominees for Director

    | | Laura J. Peterson | | | Qualifications, Skills and Experience | | | | | | Laura J. Peterson has served as a member of the Board of Directors since September 2021, as our interim President and Chief Executive Officer from May 2023 until October 2023, as our President and Chief Executive Officer from October 2023 until February 2024, and as our Executive Vice Chairman since February 2024. Ms. Peterson previously served as Vice President, China Business Development, for Boeing Commercial Airplanes, from 2012 to 2016. Prior to that, Ms. Peterson held a series of executive positions at Boeing (NYSE: BA) in aircraft sales, international business development, global strategy, government relations and homeland security from 1994 to 2012. She served on the Executive Leadership Team of three Boeing Commercial Airplanes (BCA) CEOs, as well as on the Executive Leadership Teams of BCA Airplane Production and Supplier Management, BCA Strategy and Boeing International. Ms. Peterson has served on the board of directors of Air Transport Services Group, Inc. (Nasdaq: ATSG) since June 2018, and is a member of its audit committee and nominating and governance committee. Ms. Peterson holds a B.S. in Industrial Engineering from Stanford University and an M.B.A. from The Wharton School at the University of Pennsylvania and is a Fellow of the Stanford Distinguished Careers Institute. We believe Ms. Peterson's extensive experience in international business, operations, government relations and leadership roles, in particular at Boeing, in addition to her experience as a director of public companies, qualifies her to serve on our Board of Directors. | | Committee Memberships: None Other Current Public Directorships: Air Transport Services Group | |

  8. Nominees for Director

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  9. Continuing Directors

    Continuing Directors

  10. Continuing Directors

    | | Matthew Shigenobu Muta | | | Qualifications, Skills and Experience | | | | | | Matthew Shigenobu Muta has served as a member of the Board of Directors since September 2021. Mr. Muta has held various leadership roles at Delta Air Lines Inc. (NYSE: DAL), from 2014 until his retirement in March 2024, including serving as their Vice President, Innovation and Operations Technology from 2016 until March 2024, and as Vice President, Innovation & Commercial Technologies from 2014 to 2016. Mr. Muta previously held various positions at Microsoft, Inc. (Nasdaq: MSFT), including Global Managing Director, Hospitality & Travel. Mr. Muta holds a Bachelor of Arts Degree in Communications from Boise State University. We believe Mr. Muta's leadership experience at some of the world's largest companies, including in industries that we believe include potential customers of ours, and his experience working with highly sophisticated and complex technology qualifies him to serve on our Board of Directors. | | Independent Committee Memberships: Audit Compensation Other Current Public Directorships: None | |

  11. Continuing Directors

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  12. Continuing Directors

    | | Admiral Eric T. Olson (Ret.) | | | Qualifications, Skills and Experience | | | | | | Admiral Eric T. Olson (Ret.) has served as a member of the Board of Directors since September 2021. He has been President and Managing Member of ETO Group, LLC since September 2011, where he acts as an independent national security consultant supporting a wide range of private and public sector organizations. From June 2019 to May 2020, Admiral Olson served as Chief Executive Officer of Hans Premium Water, a privately held company. Admiral Olson retired from the United States Navy in 2011 as a full Admiral after 38 years of military service. He served in special operations units throughout his career, during which he was awarded several decorations for leadership and valor, including the Defense Distinguished Service Medal and the Silver Star. Admiral Olson was the first Navy SEAL officer to be promoted to three- and four-star ranks. Admiral Olson's career culminated as the head of the United States Special Operations Command from July 2007 to August 2011, where he was responsible for the mission readiness of all Army, Navy, Air Force and Marine Corps special operations forces. Admiral Olson serves on the board of directors of Under Armour, Inc. (NYSE: UAA) and is a member of its nominating and corporate governance committee. Admiral Olson also serves on the board of directors of Iridium Communications Inc. (Nasdaq: IRDM) and is a member of its nominating and corporate governance committee. In addition, he serves on the board of directors of Cyber Reliant Corporation, Newlight Technologies, Ocean Aero, Inc. and IP3. Admiral Olson has served as a director of the non-profit Special Operations Warrior Foundation. Admiral Olson also served on the Old Sarcos Advisory Board from December 2016 until joining the Board. Admiral Olson graduated from the United States Naval Academy in 1973 and earned a Master of Arts degree in National Security Affairs at the Naval Postgraduate School. He is an Adjunct Professor in the School of International and Public Affairs at Columbia University. We believe Admiral Olson's leadership experience as an Admiral in the U.S. Navy, including his leadership and management of a large and complex organization as head of the U.S. Special Operations Command, in addition to his experience as a director of various companies and his expertise with respect to the needs of the U.S. military, qualifies him to serve on our Board of Directors. | | Independent Committee Memberships: Audit Compensation Other Current Public Directorships: Under Armour Iridium Communications | |

  13. Continuing Directors

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  14. Continuing Directors

    | | Dennis Weibling | | | Qualifications, Skills and Experience | | | | | | Dennis Weibling has served as a member of the Board of Directors since September 2021 and as Chairman of the Board since February 2023. Mr. Weibling joined the board of directors of Old Sarcos in September 2016 and served as chairman of its audit committee until the Business Combination when he joined our Board and became Chairman of the Audit Committee. Mr. Weibling has served as the Managing Director of Rally Capital LLC since 2004. He served as a director of Holicity Inc. (Nasdaq: HOL) from August 2020 to June 2021 and as a director of Colicity Inc. (Nasdaq: COLI) from February 2021 to December 2022. Mr. Weibling served on Sotheby's board from 2006 until October 2019, and during that time he served as chairman of its audit and finance committee. Mr. Weibling also served as Sotheby's interim Chief Financial Officer from January 2016 until March 2016. Mr. Weibling has served on the boards of private companies including Telesphere Communications Networks, Rise Communities LLC, Telecom Transport Management, Wireless Services Corporation, Worldwide Packets, Inc., Teledesic Corporation, Geopass, Inc. d/b/a Pirq and SeaMobile, Inc. Mr. Weibling served as President of Eagle River, Inc., from October 1993 through December 2001, and as Vice Chairman of Eagle River Investments from January 2002 through November 2004. He served as Chief Executive Officer of Nextel Communications Inc. from October 1995 to March 1996, and as a director of Nextel from July 1995 until April 1, 2004. At Nextel, Mr. Weibling was a member and chairman of the operations, audit, finance and compensation committees at various times during that period. Mr. Weibling served as a board member of Nextel Partners from 1998 to 2006 and chaired the audit committee. He also served on the board of XO Communications, Inc., where he served from 1996 to 2003. Mr. Weibling holds a Bachelor of Arts Degree from Wittenberg University, a Master of Arts Degree in Psychology from the University of Nebraska, and a J.D. from the University of Nebraska. We believe Mr. Weibling's financial expertise and experience as an investor in technology companies, in addition to his experience as a director of various companies, qualify him to serve on our Board of Directors. | | Independent Committee Memberships: Audit Nominating and Corporate Governance Strategic Transaction Other Current Public Directorships: None | |

  15. Continuing Directors

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  16. Continuing Directors

    | | Benjamin G. Wolff | | | Qualifications, Skills and Experience | | | | | | Benjamin G. Wolff has served as a member of the Board of Directors since September 2021. Mr. Wolff served as Old Sarcos' Chief Executive Officer and Chairman of the Board of Directors from September 2015, its President from December 2020, and as a member of its Board of Directors from February 2015, in each case until the Business Combination, at which time he became our Chief Executive Officer, President and Chairman of our Board of Directors (until December 13, 2021, when he became our Executive Chairman). He served as Executive Chairman from December 2021 until February 2023 and as Executive Vice Chairman from October 2023 until his appointment as our Chief Executive Officer effective February 2024. Prior to joining Old Sarcos, Mr. Wolff served as Chief Executive Officer, President and Chairman at Pendrell Corporation from December 2009 to November 2014. In April 2004, Mr. Wolff co-founded Clearwire Corporation, where he served as President and Chief Executive Officer until March 2009 and Co-Chairman until October 2011. Mr. Wolff previously served on the board of the Cellular Telecommunications Industry Association (CTIA). Mr. Wolff also serves on the board of directors of Globalstar, Inc. (NYSE: GSAT) and is a member of its audit committee and compensation committee, and serves as the chairman of its strategic review committee. Mr. Wolff earned his law degree from Northwestern School of Law, Lewis & Clark College in Portland, Oregon, and his Bachelor of Science degree from California Polytechnic State University. We believe Mr. Wolff's leadership roles as a founder of and investor in technology companies, his experience as chief executive officer and director of multiple public companies, his relationships and experience with potential customers and his perspective, experience and leadership in his various roles at Palladyne AI Corp. since its inception qualify him to serve on our Board of Directors. | | Committee Memberships: Strategic Transaction Other Current Public Directorships: Globalstar | |

  17. Continuing Directors

    | | Leadership | | Technology | | Operations | | Finance | | Customers | | Global Business |

  18. Board Committees

    = Member = Chair Audit Committee The members of our Audit Committee are Matthew Shigenobu Muta, Admiral Eric T. Olson (Ret.) and Dennis Weibling, with Dennis Weibling serving as chairperson. Our Nominating and Corporate Governance Committee and Board of Directors have determined that each member of the Audit Committee meets the requirements for independence and financial literacy under the rules and regulations of the Securities and Exchange Commission, or the SEC, and the listing standards of Nasdaq applicable to audit committee members. In addition, our Board of Directors has determined that Dennis Weibling is an "audit committee financial expert" within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended, or the Securities Act. Our Audit Committee, among other things: • selects, retains, compensates, evaluates, oversees and, where appropriate, terminates our independent registered public accounting firm; • reviews and approves the scope and plans for the audits and the audit fees and approves all non-audit and tax services to be performed by our independent auditor; • evaluates the qualifications, independence and performance of our independent registered public accounting firm; • reviews our financial statements, and discusses with management and our independent registered public accounting firm the results of the annual audit and quarterly reviews; • reviews and discusses with management and our independent registered public accounting firm the quality and adequacy of our internal controls and our disclosure controls and procedures; discusses with management our procedures regarding the presentation of our financial information, and reviews earnings press releases and guidance; oversees the implementation and performance of our internal audit function, if any; • sets hiring policies with regard to the hiring of employees and former employees of our independent registered public accounting firm and oversees compliance with such policies; • reviews, approves and monitors conflicts of interest of our officers and members of our Board of Directors and related party transactions; • adopts and oversees procedures to address complaints regarding accounting, internal accounting controls and auditing matters, including confidential, anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters; • reviews and discusses with management and our independent registered public accounting firm the adequacy and effectiveness of our legal, regulatory and ethical compliance programs; • reviews and discusses with management and our independent registered public accounting firm our guidelines and policies to identify, monitor and address enterprise risks; • reviews and monitors compliance with our Code of Business Conduct and Ethics; and • oversees and assists in the exploration, evaluation, and consideration of strategic alternatives. Our Audit Committee operates under a written charter that satisfies the applicable listing standards of Nasdaq. A copy of the Audit Committee's charter is available on our website at https://investor.palladyneai.com/governance/documents-charters. Compensation Committee The members of our Compensation Committee are Matthew Shigenobu Muta and Admiral Eric T. Olson (Ret.), with Admiral Olson serving as chairperson. Our Nominating and Corporate Governance Committee and Board of Directors have determined that each member of the Compensation Committee meets the requirements for independence under the rules and regulations of the SEC and the listing standards of Nasdaq applicable to Compensation Committee members, and that each member of the Compensation Committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. Our Compensation Committee, among other things: • reviews and approves the corporate goals and objectives applicable to the compensation of our chief executive officer; • reviews and approves the compensation for our executive officers, other than our chief executive officer, and reviews and recommends the compensation of our chief executive officer to the Board for approval; • administers our equity incentive plans and oversees management's administration of our other employee benefit plans; establishes and reviews the compensation plans and programs of our employees, and ensures that they are consistent with our general compensation strategy; reviews and discusses the Company's compensation policies and practices with management to determine whether policies encourage excessive risk-taking, reviews relationships between risk management policies and compensation, and evaluates any practices that could mitigate such risk; • approves and administers our Compensation Recovery Policy; and • determines non-employee director compensation. Our Compensation Committee operates under a written charter that satisfies the applicable listing standards of Nasdaq. A copy of the Compensation Committee's charter is available on our website at https://investor.palladyneai.com/governance/documents-charters. Under its charter, the Compensation Committee may delegate its authority when it deems it appropriate and in our best interests and when such delegation would not violate applicable law, regulation or Nasdaq or SEC requirements. We engaged Mercer to advise management and the Compensation Committee with respect to our compensation philosophy, policies and practices which included: • providing compensation benchmarking for various positions and an analysis comparing our compensation with market information; • providing compensation benchmarking for executives and executive retention plan recommendations; • providing benchmarking information regarding the equity long-term incentive practices of other technology companies and equity grant practice alternatives for our consideration; and • preparing draft equity grant guidelines for new hire and annual equity grants and provided dilution and burn rate analyses, and prepared related materials for and presented to the Compensation Committee. After reviewing information provided by Mercer regarding its independence and considering the independence factors prescribed by SEC and Nasdaq rules, the Compensation Committee determined that Mercer was independent and that there were no conflicts of interest arising from the services Mercer performed for us. Nominating and Corporate Governance Committee The members of our Nominating and Corporate Governance Committee are Brian D. Finn and Dennis Weibling, with Brian D. Finn serving as chairperson. Our Nominating and Corporate Governance Committee and Board of Directors has determined that each member of the Nominating and Corporate Governance Committee meets the requirements for independence under the listing standards of Nasdaq. Our Nominating and Corporate Governance Committee, among other things: reviews and assesses and makes recommendations to our Board of Directors regarding desired qualifications, expertise and characteristics sought of Board members; identifies, evaluates, selects or makes recommendations to our Board of Directors regarding nominees for election to our Board of Directors; • develops policies and procedures for considering stockholder nominees for election to our Board of Directors; • reviews the succession planning process for our chief executive officer and any other members of our executive management team; • reviews and makes recommendations to our Board of Directors regarding the composition, organization and governance of our Board of Directors and its committees; • reviews and makes recommendations to the Board of Directors regarding our Corporate Governance Guidelines and corporate governance framework; • oversees director orientation for new directors and continuing education for our directors; •

  19. Considerations in Evaluating Director Nominees

    Considerations in Evaluating Director Nominees Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating potential director nominees. In its evaluation of director candidates, including the current directors eligible for re-election, our Nominating and Corporate Governance Committee will consider the current size and composition of our Board of Directors and the needs of our Board of Directors and the respective committees of our Board of Directors and other director qualifications. While our Board has not established minimum qualifications for Board members, some of the factors that our Nominating and Corporate Governance Committee considers in assessing director nominee qualifications include issues of character, professional ethics and integrity, judgment, business acumen, proven achievement and competence in one's field, the ability to exercise sound business judgment, tenure on the Board and skills that are complementary to the Board, an understanding of our business, an understanding of the responsibilities that are required of a member of the Board, other time commitments, diversity with respect to professional background, education, race, ethnicity, gender, age and geography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on our Board. The Nominating and Corporate Governance Committee and the Board evaluate each director in the context of the membership of the Board as a group, with the objective of maintaining a Board that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of backgrounds and experience in various areas. Although our Board of Directors does not maintain a specific policy with respect to Board diversity, our Board of Directors believes that the Board should be a diverse body, and the Nominating and Corporate Governance Committee considers a broad range of perspectives, backgrounds and experiences when considering whether to recommend the nomination of any particular director candidate. If our Nominating and Corporate Governance Committee determines that an additional or replacement director is required, then the committee may take such measures as it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search firm to gather additional information or reliance on the knowledge of the members of the committee, the Board or management. After completing its review and evaluation of director candidates, our Nominating and Corporate Governance Committee recommends to our full Board of Directors the director candidates for nomination. Our Nominating and Corporate Governance Committee has discretion to decide which individuals to recommend for nomination as directors and our Board of Directors has the final authority in determining the selection of director candidates for nomination to our Board.

  20. Policy Prohibiting Hedging or Pledging of Securities

    Policy Prohibiting Hedging or Pledging of Securities Under our insider trading policy, our employees, including our executive officers, and members of our Board of Directors are prohibited from, directly or indirectly, (1) engaging in short sales, (2) trading in publicly-traded options, such as puts and calls, and other derivative securities with respect to our securities (other than stock options, restricted stock units and other compensatory awards issued to such individuals by us), (3) purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds), or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted to them by us as part of their compensation or held, directly or indirectly, by them, (4) pledging any of our securities as collateral for any loans or as part of any other pledging transaction and (5) holding our securities in a margin account.

  21. Director Compensation

    Director Compensation Our outside director compensation policy is designed to attract, retain and reward non-employee directors. Our outside director compensation policy was amended in February 2024 to reduce compensation to help preserve the Company's cash and available equity pool. Under the outside director compensation policy, each non-employee director will receive the cash and equity compensation for Board services described below. We also will reimburse our non-employee directors for reasonable, customary and documented travel expenses to meetings of our Board of Directors or its committees and other expenses.

  22. Equity Compensation

    Equity Compensation New Director Award Each individual who becomes a non-employee director after February 2024 will automatically be granted on the date of the director's appointment a new director award of 50,000 common stock options (the "New Director Award"), with a strike price of fair market value at the time of the grant, pro-rated for any partial year of service. Prior to the adoption of the amended outside director compensation policy in February 2024, the policy provided that new non-employee directors would have received a restricted stock unit award with a grant date fair value of $150,000, also prorated for any partial year of service. Each New Director Award will vest on the earlier of (i) the one-year anniversary of the date the New Director Award is granted or (ii) the day of the annual meeting next following the date the New Director Award is granted, in each case, subject to the non-employee director continuing to be a service provider through the applicable vesting date. Annual Award Each non-employee director will automatically receive, on the date of each annual meeting of stockholders, an annual award of 50,000 common stock options (the "Annual Award"), with a strike price of fair market value at the time of the grant. Prior to the adoption of the amended outside director compensation policy in February 2024, the policy provided that each non-employee director would automatically receive, on the date of each annual meeting of stockholders, a restricted stock unit award with a grant date fair value of $150,000. For 2023, our non-employee directors, in order to reduce the number of shares used under our 2021 Equity Incentive Plan ("2021 Plan"), voluntarily waived one half of their annual equity award. Annual Awards vest on the earlier of (i) the one-year anniversary of the date the Annual Award is granted or (ii) the day prior to the date of the annual meeting next following the date the Annual Award is granted, in each case, subject to the non-employee director continuing to be a service provider through the applicable vesting date. If a non-employee director is appointed chairperson of the Board other than as of the date of the annual meeting of stockholders, such director will receive a pro rata award in connection with such appointment for the time between the appointment and the next annual meeting of stockholders. In the event of a "change in control" (as defined in our 2021 Equity Incentive Plan), each non-employee director's outstanding awards will become fully vested.

  23. Director Compensation for 2023

    Director Compensation for 2023 The following table sets forth information regarding the total compensation awarded to, earned by or paid to our non-employee directors for their service on our Board of Directors, for the fiscal year ended December 31, 2023. Directors who are also our employees receive no additional compensation for their service as directors during the time periods when they are also our employees. Following Mr. Wolff's resignation as our Executive Chairman effective as of February 1, 2023, he became a non-employee director and was compensated under our outside director compensation policy (described above). Prior to his resignation, Mr. Wolff was compensated pursuant to an amended and restated employment agreement which provided him an annual base salary of $350,000 and under which he was eligible for an annual restricted stock unit award with a target grant date fair value of $500,000. On October 19, 2023, Mr. Wolff was re-hired as an employee and began serving as our Executive Vice Chairman. As Mr. Wolff was not a Named Executive Officer for 2023, his 2023 employee and outside director compensation is included in the below table. See "Executive Compensation" for information regarding Ms. Peterson's compensation.

  24. Director Compensation for 2023

    | Name | Fees Paid or Earned in Cash ($) | Stock Awards ($)(1) | Options Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Priya Balasubramaniam | $51,500 | $75,000 | — | — | — | — | $126,500 | | Brian D. Finn | $53,000 | $75,000 | — | — | — | — | $128,000 | | Peter Klein | $57,125 | $75,000 | — | — | — | — | $132,125 | | Matthew Shigenobu Muta | $58,246 | $75,000 | — | — | — | — | $133,246 | | Admiral Eric T. Olson | $61,250 | $75,000 | — | — | — | — | $136,250 | | Dennis Weibling | $112,333 | $105,208 | — | — | — | — | $217,541 | | Benjamin G. Wolff(2) | $35,887 | $137,500 | — | — | — | $75,026 | $248,413 |

  25. Director Compensation for 2023

    (1) The amounts in this column represent the aggregate grant-date fair value of awards granted to each non-employee director pursuant to the non-employee director compensation policy, computed in accordance with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 718. See Notes 1 and 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the assumptions made by us in determining the grant-date fair value of our equity awards. Mr. Wolff, who served as our Executive Chairman until February 1, 2023 and served as our Executive Vice Chairman from October 19, 2023 until February 23, 2024 when he became our Chief Executive Officer, and was an employee during those periods of service, did not receive compensation under our outside director compensation policy for services on the Board during those periods. The figure under "All Other Compensation" for Mr. Wolff includes $30,492 for salary paid for service as our Executive Chairman during 2023 and $44,534 for salary paid for service as our Executive Vice Chairman during 2023. The following table lists all outstanding equity awards held by non-employee directors as of December 31, 2023 (including Mr. Wolff):

  26. Director Compensation for 2023

    | Name | Number of Shares Underlying Outstanding Stock Awards | Number of Shares Underlying Outstanding Options | | Priya Balasubramaniam(1) | 32,510 | — | | Brian D. Finn | 32,510 | — | | Peter Klein(2) | 32,510 | 42,744 | | Matthew Shigenobu Muta | 32,510 | — | | Eric T. Olson | 32,510 | 17,098 | | Dennis Weibling | 43,347 | 1,959 | | Benjamin G. Wolff(3) | 32,510 | 170,974 |

  27. Director Compensation for 2023

    (1) Effective January 19, 2024, Ms. Balasubramaniam resigned from the Board and her outstanding equity awards have been cancelled. (2) Effective January 19, 2024, Mr. Klein, resigned from the Board and his outstanding equity awards have been cancelled. On February 27, 2024, Mr. Wolff voluntarily cancelled the option to purchase 170,974 shares of the Common Stock in order to make more shares available under the Issuer's 2021 Equity Incentive Plan for employee recruiting and retention purposes.

  28. ELECTION OF CLASS III DIRECTORS

    ELECTION OF CLASS III DIRECTORS Our Board of Directors currently consists of six directors and is divided into three classes with staggered three-year terms. At the Annual Meeting, two current directors are up for election as Class III directors for a three-year term to succeed the same class whose term is then expiring. Each director's term continues until the expiration of the term for which such director was elected and until such director's successor is elected and qualified or until such director's earlier death, resignation or removal.

  29. Summary Compensation Table

    Summary Compensation Table The following table presents information regarding the compensation of our named executive officers for services rendered during the fiscal years ended December 31, 2023 and December 31, 2022 if they were an executive officer during those years:

  30. Summary Compensation Table

    | Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | Kiva Allgood(4) | 2023 | $170,792 | — | $450,000 | $450,000 | $547,057 | $1,617,849 | | President and Chief Executive Officer | 2022 | $432,693 | $337,500 | $900,000 | $901,768 | — | $2,571,961 | | Laura Peterson(5) | 2023 | $290,985 | — | — | — | $20,867 | $311,852 | | President and Chief Executive Officer | | | | | | | | | Jorgen Pedersen(6) | 2023 | $231,386 | — | $86,500 | $86,500 | $446,175 | $850,561 | | Chief Operating Officer | 2022 | $209,896 | $85,313 | $2,999,999 | — | — | $3,295,208 | | Andrew Hamer(7) | 2023 | $403,959 | — | $125,000 | $125,000 | $60,000 | $713,959 | | Chief Financial Officer | 2022 | $75,385 | $33,750 | $750,000 | $753,296 | — | $1,612,431 | | Denis Garagić(8) | 2023 | $332,856 | $118,000 | $125,000 | $125,000 | — | $700,856 | | Chief Technology Officer | | | | | | | |

  31. Summary Compensation Table

    The amounts in this column represent discretionary bonuses approved by our Compensation Committee after taking into account the Company's performance against targets and individual performance. (2) The amounts in this column represent the aggregate grant-date fair value of awards granted to each named executive officer, computed in accordance with the FASB ASC Topic 718. See Notes 1 and 9 to our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023 for a discussion of the assumptions made by us in determining the grant-date fair value of our equity awards. (3) Amounts reported in the "All Other Compensation" column for 2023 include (i) for Ms. Allgood, a monthly housing stipend ($63,000), severance ($473,000), and COBRA ($11,057), (ii) for Ms. Peterson, payments related to her service provided as a non-employee director ($20,867), (iii) for Mr. Pedersen, severance ($170,625), the intrinsic value of our common stock which was released in accordance with Mr. Pedersen's redemption rights agreement ($266,001), and COBRA ($9,549), and (iv) for Mr. Hamer, a monthly housing stipend ($60,000). (4) Ms. Allgood ceased to be our President and Chief Executive Officer on May 11, 2023. (5) Ms. Peterson became our President and Chief Executive Officer on May 11, 2023, and ceased to be our President and Chief Executive Officer on February 23, 2024. (6) Mr. Pedersen ceased to be our Chief Operating Officer on July 12, 2023. (7) Mr. Hamer ceased to be our Chief Financial Officer on March 5, 2024. (8) Dr. Garagić became an executive officer on March 25, 2022. Dr. Garagić was not a named executive officer in 2022. As such, Dr. Garagić's compensation for 2022 is not included in the table above.

  32. Outstanding Equity Awards at Fiscal 2023 Year-End

    Outstanding Equity Awards at Fiscal 2023 Year-End The following table sets forth information regarding outstanding equity awards held by Palladyne AI Corp.'s named executive officers as of December 31, 2023.

  33. Outstanding Equity Awards at Fiscal 2023 Year-End

    | | | Stock Awards | | Option Awards | | | | | Name | Grant Date(1) | Number of Shares, Units or Other Rights That Have Not Vested(#) | Market Value of Units of Stock that Have Not Vested (2) ($) | Number of Securities Underlying Unexercised Options (Exercisable) | Number of Securities Underlying Unexercised Options (Unexercisable) | Option Exercise Price | Option Expiration Date | | Andrew Hamer(7) | 11/20/2022 | — | — | 41,118 | 123,356(3) | $7.02 | 11/20/2032 | | Andrew Hamer | 11/20/2022 | 80,127(4) | $57,796 | — | — | — | | | Andrew Hamer | 3/29/2023 | — | — | — | 68,486(5) | $2.82 | 3/29/2033 | | Andrew Hamer | 3/29/2023 | 44,631(6) | $32,192 | — | — | — | | | Denis Garagić | 5/29/2020 | — | — | 21,372 | — | $7.44 | 5/28/2030 | | Denis Garagić | 5/20/2022 | — | — | 5,326 | 8,878(8) | $24.54 | 5/20/2032 | | Denis Garagić | 5/20/2022 | 5,615(9) | $4,050 | — | — | $— | | | Denis Garagić | 3/29/2023 | — | — | — | 68,486(5) | $2.82 | 3/29/2023 | | Denis Garagić | 3/29/2023 | 44,631(6) | $32,192 | — | — | — | |

  34. Outstanding Equity Awards at Fiscal 2023 Year-End

    (1) Represents grant dates of the stock option and stock awards. (2) The market value of unvested shares is calculated by multiplying the number of unvested shares by the closing market price of our common stock on December 29, 2023, the last trading day of the year, which was $0.7213 per share. (3) 25% of the shares subject to the option award vested on November 20, 2023, and thereafter 1/12th of the remaining portion of the shares subject to the option award will vest on each quarterly vesting date thereafter, subject to continued service through such date. (4) Represents restricted stock units with each unit representing the right to receive one share of our Common Stock ("RSUs"). 25% of the award vested on November 20, 2023, and thereafter 1/12th of the remaining portion of the award will vest on each quarterly vesting date thereafter, subject to continued service through such date. (5) 25% of the shares subject to the option award will vest on March 29, 2024, and thereafter 1/12th of the remaining portion of the shares subject to the option award will vest on each quarterly vesting date thereafter, subject to continued service through such date. Represents RSUs, 25% of the award will vest on March 29, 2024, and thereafter 1/12th of the remaining portion of the award will vest on each quarterly vesting date thereafter, subject to continued service through such date. Effective March 5, 2024, Mr. Hamer ceased to be our Chief Financial Officer and his outstanding equity awards have been cancelled, with the exception of vested options, which will expire on June 8, 2024 if not exercised prior to such date. (8) 25% of the shares subject to the option award vested on May 20, 2023, and thereafter 1/12th of the remaining portion of the shares subject to the option award will vest on each quarterly vesting date thereafter, subject to continued service through such date. (9) Represents RSUs, 25% of the award vested on May 20, 2023, and thereafter 1/12th of the remaining portion of the award will vest on each quarterly vesting date thereafter, subject to continued service through such date. In April 2024, the Company approved amendments to certain options held by seven senior employees, including Dr. Garagić's option awards granted on May 29, 2020, May 20, 2022 and March 29, 2023. These options were amended to (a) reduce the per share exercise price of the options to $1.59, which is equal to the closing price of the Company's common stock on April 17, 2024, the effective date of the amendment, and (b) revise the vesting terms to provide that none of the shares underlying such options are vested on the effective date of the amendment, and 25% of the shares underlying the options will vest on March 29, 2025, and then subsequently 1/12 of the remaining shares underlying the options will vest on each of the company's quarterly vesting dates, subject to Dr. Garagić continuing to be a service provider as of each such vesting date. The amended terms of these awards are not reflected in the table above because the amendment was entered into following the end of the 2023 fiscal year.