🔥 What This Document Is

This is a PRELIMINARY PROXY STATEMENT (PRE 14A) for Palladyne AI Corp. Think of it as an official invitation and information packet for the company's upcoming annual shareholder meeting. It's "preliminary" because it's a draft version filed with the SEC for review before the final, definitive version is sent to shareholders. Its purpose is to give shareholders the information they need to vote on important company matters.

🏢 What The Company Does

👉 In simple terms, Palladyne AI builds the "brains" for robots and drones. They create AI software that allows machines like industrial robots, collaborative robots (cobots), and unmanned aerial vehicles (UAVs/drones) to perceive their environment, make decisions, and act autonomously in the real world, without needing constant connection to the cloud.

• Business Model: They sell this autonomy software (like Palladyne IQ for factories, SwarmOS for drone swarms) and also offer related services like aircraft engineering, avionics, and precision manufacturing for both defense and commercial customers.
• Key Strategy: They are pivoting from being a hardware robotics company to focusing on their AI software as a hardware-agnostic platform. Their goal is to become a mid-tier U.S. defense contractor, using their AI to provide intelligent, cost-effective systems like attritable (expendable) weapons and drone swarms.

📅 The Annual Meeting

• When: Monday, June 8, 2026, at 2:00 p.m. Mountain Time.
• Where: 650 South 500 West, Suite 150, Salt Lake City, Utah 84101.
• Who Can Vote: Shareholders who owned stock as of the close of business on April 14, 2026.
• How to Vote: You can vote by internet, phone, or mail before the meeting, or attend in person. If your shares are held by a broker, you need a proxy from them to vote in person.

🗳️ The Four Key Proposals

Shareholders are being asked to vote on four main items. The Board of Directors recommends voting FOR all of them.

Proposal 1: Elect a Director

• What: Vote to elect Dennis Weibling as a Class II director for a 3-year term until 2029.
• Why it matters: Directors oversee the company's strategy and management. Mr. Weibling is the current Board Chairman.

Proposal 2: Ratify the Auditor

• What: Vote to approve KPMG LLP as the company's independent accountant for 2026.
• Why it matters: This is a standard annual vote to ensure shareholders approve of the firm checking the company's financial books. The company switched from Ernst & Young to KPMG in April 2024.

Proposal 3: Expand the Employee Stock Plan

• What: Vote to add 4,500,000 new shares to the company's 2021 Equity Incentive Plan.
• Why it matters: The company needs this "pool" of stock to attract, retain, and motivate employees in a competitive tech labor market by giving them stock awards. As of March 31, 2026, only about 1.4 million shares were left in the current pool.

Proposal 4: Approve Executive Bonuses (RSUs)

• What: Vote to approve specific Restricted Stock Unit (RSU) awards for senior executives.
• Why it matters: This is a "say-on-pay" vote. Shareholders get a direct say on a portion of executive compensation, which is designed to align executives' interests with shareholders' long-term success.

👥 Board & Governance Snapshot

• Board Size: 6 directors (as of the filing date).
• Key Members: Dennis Weibling (Chairman), Benjamin Wolff (CEO), Brian Finn, Eric Olson, Stephen Twitty, Michael Young.
• Meeting Frequency: The Board met 5 times in 2025. Directors are expected to attend annual meetings.
• Director Pay: In 2025, non-employee directors earned a $50,000 annual cash fee plus equity awards valued at about $100,000 each. Total 2025 compensation ranged from $93,364 (for a director who joined mid-year) to $260,197.
• Key Policies: The company has policies that generally prohibit executives and directors from hedging or pledging company stock (with a specific, limited waiver granted to CEO Benjamin Wolff to cover tax liabilities on a stock award).

🧪 Company Strategy: "Crawl, Walk, Run"

Palladyne AI frames its progress in stages:

• 2026 (Crawl): Prove the integrated AI model works at scale, convert backlog into revenue, and run live demos for new products like SwarmOS and Palladyne IQ 2.0.
• 2027 (Walk): Aim for repeatable success—broaden product integrations, win more contracts, and establish multiple revenue streams.
• 2028 (Run): Expect scaled, systematic growth where their autonomy technology operates seamlessly across domains, driving meaningful revenue and profit.

💡 Why This Matters

👉 This meeting is about fueling the company's pivot and growth. Shareholders are being asked to approve the tools (expanded stock pool, executive incentives) and leadership (board director) needed to execute an ambitious plan to become a major AI-powered defense contractor and industrial automation provider. The outcomes will signal shareholder confidence in management's strategy.

⚖️ Big Picture: Strengths & Risks

👍 Strengths:

• Deep Expertise: Over 40 years of history in robotics and autonomous systems.
• Clear Strategic Focus: Pivoting to a high-margin, hardware-agnostic AI software model.
• Dual-Market Play: Targeting both large defense contracts and commercial industrial automation.

⚠️ Risks:

• Execution Risk: The "crawl, walk, run" plan is ambitious and unproven at scale.
• Financial Pressure: The company is investing heavily in R&D; consistent revenue generation is key.
• Competition: Faces established players in both defense contracting and industrial AI.

🧠 The Analogy

Think of Palladyne AI as a master chef who no longer wants to run a restaurant. Instead, they are creating a revolutionary, proprietary cooking system (their DECA AI architecture) that can be installed in any kitchen (any robot or drone). This meeting is about getting the investors (shareholders) to approve hiring more chefs (expanding the stock plan) and endorsing the head sous-chef (re-electing the director) to help roll out this system to kitchens worldwide, starting with the most demanding ones (military and complex factories).

🧩 Final Takeaway

Shareholders are being asked to approve the board's recommended director, auditor, and—most critically—the expansion of the employee stock plan and specific executive pay packages. These votes are essential for Palladyne AI to execute its high-stakes pivot from a hardware robotics builder to an AI software platform leader for autonomous machines.