RICHTECH ROBOTICS INC

Previous wording

The following discussion should be read in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” in our annual report on form 10-K for the year ended September 30, 2023 filed with the SEC on January 11, 2024 and amended on March 27, 2024 and elsewhere in this Report. These risks could cause our actual results to differ materially from any future performance suggested below.

Current wording

The following discussion should be read in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” in our 2023 Annual Report and elsewhere in this Report. These risks could cause our actual results to differ materially from any future performance suggested below.

Previous wording

The following table summarizes our results of operations (in thousands) for the six months ended March 31, 2024 and 2023, together with the dollar change in those items from period to period:

Current wording

The following table summarizes our results of operations (in thousands) for the nine months and three ended June 30, 2024 and 2023, together with the dollar change in those items from period to period:

Previous wording

The total revenue for the six months ended March 31, 2024, and 2023, was approximately $2,272 thousand and $2,054 thousand, respectively. The approximate $218 thousand, or 11%, increase in revenue in the six months ended March 31, 2024 was a combined result of our continuous expansion of customer base and changing of our sales mode. Our revenue (in thousands) by product for the six months ended March 31 is shown below:

Current wording

The total revenue for the nine months ended June 30, 2024, and 2023, was approximately $3,715 thousand and $3,364 thousand, respectively. The approximate $351 thousand, or 11%, increase in revenue in the nine months ended June 30, 2024 was a combined result of our continuous expansion of customer base and changing of our sales mode. Our revenue (in thousands) by product for the nine months ended June 30 is shown below:

Previous wording

For the six months ended March 31, 2024 and 2023, our overall robotics revenue was approximately $2,272 thousand and $2,054 thousand, respectively. The increase of approximately $218 thousand, or 11%, was brought on primarily by our increased service revenue of approximately $642 thousand, or 250%, partially offset by the decrease in product revenue of approximately $953 thousand, or 59%. We are currently upgrading our product line to ensure we remain at the forefront of robotics technology. The RaaS model allows us to build stronger customer relationships, generate recurring revenue streams, and potentially achieve higher margins through premium services. We anticipate a temporary decrease in product sales during this transition, which we expect to last for the remainder of this year. This will be mitigated by the launch of our new product line later this year.

Current wording

For the nine months ended June 30, 2024 and 2023, our overall robotics revenue was approximately $3,366 thousand and $3,171 thousand, respectively. The increase of approximately $195 thousand, or 7%, was brought on primarily by our increased service revenue of approximately $1,252 thousand, or 485% and leasing revenue of $458 thousand, or 314%, partially offset by the decrease in product revenue of approximately $1,515 thousand, or 55%. We are currently upgrading our product line to ensure we remain at the forefront of robotics technology. The Robotics as a Service (RaaS) model allows us to build stronger customer relationships, generate recurring revenue streams, and potentially achieve higher margins through premium services. We anticipate a temporary decrease in product sales during this transition to a RaaS model, which we expect to last for the remainder of this year. This will be mitigated by the launch of our new product line later this year.

Previous wording

Cost of revenue, net, was approximately $982 thousand and approximately $908 thousand for the six months ended March 31, 2024 and 2023, respectively. The approximately $74 thousand increase, or 8%, was due primarily to the increase of our robotics service revenue in 2024. Robotic service revenue has a higher margin compared to other revenue streams.

Current wording

Cost of revenue, net, was approximately $1,411 thousand and approximately $1,520 thousand for the nine months ended June 30, 2024 and 2023, respectively. The approximately $109 thousand decrease, or 7%, was primarily due to the increase of our robotics service revenue in 2024. Robotic service revenue has a higher margin compared to other revenue streams. Cost of revenue, net, was approximately $429 thousand and $612 thousand for the three months ended June 30, 2024 and 2023, respectively. The approximately $183 thousand decrease was also primarily due to the increase of our robotics service revenue in 2024.

Previous wording

Gross profit as a percentage of total revenue was approximately 57% for the six months ended March 31, 2024 compared to approximately 56% for the six months ended March 31, 2023.

Current wording

Gross profit as a percentage of total revenue was approximately 62% for the nine months ended June 30, 2024 compared to approximately 55% for the nine months ended June 30, 2023. Gross profit as a percentage of total revenue was approximately 70% for the three months ended June 30, 2024 compared to approximately 53% for the nine months ended June 30, 2023.

Previous wording

Research and development expenses were approximately $1,247 thousand for the six months ended March 31, 2024, representing a decrease of $25 thousand compared to the same period in 2023. This decrease reflects our ongoing efforts to optimize R&D spending while continuing to invest in developing innovative new products.

Current wording

Research and development expenses were approximately $1,633 thousand for the nine months ended June 30, 2024, representing an increase of $44 thousand compared to the same period in 2023. Research and development expenses were approximately $386 thousand for the three months ended June 30, 2024, representing an increase of $69 thousand compared to the same period in 2023. This increase reflects our ongoing efforts to optimize R&D spending while continuing to invest in developing innovative new products.

Previous wording

Sales and marketing expenses were approximately $787 thousand and approximately $166 thousand for the six months ended March 31, 2024 and 2023, respectively. The increase of approximately $621 thousand, or 374%, in marketing costs was primarily due to our increased expenditure in large screen advertisement and social media marketing for our products in November and December 2023.

Current wording

Sales and marketing expenses were approximately $1,024 thousand for the nine months ended June 30, 2024, increased by approximately $808 thousand, or 375%, compared to $216 thousand for the prior year period. Sales and marketing expenses were approximately $237 thousand for the three months ended June 30, 2024, increased by approximately $187 thousand, or 375%, compared to $50 thousand for the prior year period. The increase in marketing costs was primarily due to our increased expenditure in large screen advertisement and social media marketing for our products in November and December 2023.

Previous wording

General and administrative expenses were approximately $2,464 thousand and approximately $1,586 thousand for the six months ended March 31, 2024 and 2023, respectively. The approximately $878 thousand increase, or 55%, was due primarily to an increase in professional service fees and related expenses to maintain a public company status.

Current wording

General and administrative expenses were approximately $3,750 thousand for the nine months ended June 30, 2024, increased by approximately $1,219 thousand, or 48%, compared to $2,531 thousand for the prior year period. General and administrative expenses were approximately $1,286 thousand for the three months ended June 30, 2024, increased by approximately $342 thousand, or 36%, compared to $944 thousand for the prior year period. The increase for both period was primarily due to an increase in professional service fees and related expenses to maintain a public company status.

Previous wording

Total other expenses were approximately $660 thousand and approximately $1 thousand for the six months ended March 31, 2024 and 2023, respectively. The approximately $659 thousand, net increase in total other expenses was primarily due to the interest expense incurred within the six months ended March 31, 2024. In February and March 2024, we issued two Notes with the Investor, totaling $2,000,000. The Notes were issued in connection with the Purchase Agreement, pursuant to which we issued 259,350 Commitment Shares to the Investor in April 2024. The short-term loan balance was approximately $2,053 thousand.

Current wording

Total other expenses were approximately $761 thousand for the nine months ended June 30, 2024, increased by approximately $710 thousand, compared to $51 thousand for the prior year period. Total other expenses were approximately $100 thousand for the three months ended June 30, 2024, increased by approximately $51 thousand, compared to $51 thousand for the prior year period. The net increase in total other expenses for both periods was primarily due to the interest expense incurred within the nine months ended June 30, 2024. In February, March and April 2024, we issued three Notes to the Investor, totaling $3,000,000, in connection with the Standby Equity Purchase Agreement. In April 2024, we issued 259,350 Commitment Shares to the Investor, settling the outstanding balance of approximately $2,053,000 on the Notes. The Notes were fully repaid in July 2024.

Previous wording

We believe that our existing cash as of the date of this Report will fund our current operating plans through at least the next twelve months from the date of this Report. Although we have operating cash outflows of $2,543 thousand for the six months ended March 31, 2024 and $,1,667 thousand for the six months ended March 31, 2023, our working capital is in net asset position with $9,500 thousand as of March 31, 2024 and $4,092 thousand as of September 30, 2023. In addition, if needed, we expect to finance our future cash needs within the next twelve months from the date of this Report through founder investment, public or private equity or debt financings, the Purchase Agreement, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock, including shares of common stock sold in this offering.

Current wording

We believe that our existing cash as of the date of this Report will fund our current operating plans through at least the next twelve months from the date of this Report. We had operating cash outflows of $2,121 thousand for the nine months ended June 30, 2024 and $2,265 thousand for the nine months ended June 30, 2023, our working capital is in net asset position with $8,835 thousand as of June 30, 2024 and $4,092 thousand as of September 30, 2023. In addition, if needed, we expect to finance our future cash needs within the next twelve months from the date of this Report through founder investment, public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, the financing arrangements described above, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock, including shares of common stock sold in this offering.

Previous wording

On February 15, 2024, we entered into a Standby Equity Purchase Agreement (the “Purchase Agreement”) with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor has agreed to purchase up to $50 million of the Company’s shares of Class B common stock over the course of 24 months after the date of the Purchase Agreement. The price of shares to be issued under the Purchase Agreement will be 96% of the lowest volume weighted average price (the “VWAP”) of the Company’s Class B common stock for the three trading days immediately following the delivery of each Advance notice by the Company (the “Pricing Period”). Each issuance and sale by the Company to the Investor under the Purchase Agreement (an “Advance”) is subject to a maximum amount equal to 100% of the daily trading volume of the Company’s Class B common stock, as reported by Bloomberg L.P., during the five trading days immediately preceding an Advance notice.

Current wording

The price of shares to be issued under the Purchase Agreement will be 96% of the lowest volume weighted average price (the “VWAP”) of the Company’s Class B common stock for the three trading days immediately following the delivery of each Advance notice by the Company (the “Pricing Period”). Each purchase by the Investor (an “Advance”) is subject to a daily limit of 100% of the average daily trading volume of our Class B common stock, as reported by Bloomberg L.P., during the five trading days preceding our notice.

Previous wording

The following table summarizes our cash flow information (in thousands) for six months ended March 31, 2024 and 2023, together with the dollar change in those items from period to period:

Current wording

The following table summarizes our cash flow information (in thousands) for nine months ended June 30, 2024 and 2023, together with the dollar change in those items from period to period:

Previous wording

Net cash used in operating activities for the six months ended March 31, 2024 was approximately $2,543 thousand, primarily due to a net loss of approximately $3,868 thousand and an increase of approximately $1,325 thousand in net operating assets and liabilities. The cash flow impact from changes in net operating assets and liabilities was primarily driven by decreases in accounts receivable of approximately $1,823 thousand and inventory of approximately $530 thousand, partially offset by the increase in accounts payable of approximately $969 thousand.

Current wording

Net cash used in operating activities for the nine months ended June 30, 2024 was approximately $2,121 thousand, primarily due to a net loss of approximately $5,181 thousand offset by an increase of approximately $3,060 thousand in net operating assets and liabilities. The cash flow impact from changes in net operating assets and liabilities was primarily driven by decreases in accounts receivable of approximately $2,448 thousand, decreases in deferred tax assets of $518 thousand and inventory of approximately $424 thousand, partially offset by the increase in tax payable of $197 thousands and accounts payable of $111 thousand.

Previous wording

Net cash used in operating activities for the six months ended March 31, 2023 was approximately $1,667 thousand, primarily due to a net loss of approximately $1,879 thousand and an increase of approximately $212 thousand in net operating assets and liabilities. The cash flow impact from changes in net operating assets and liabilities was primarily driven by increases in inventory of approximately $584 thousand and an increase in and current operating lease liabilities of approximately $127 thousand, partially offset by decrease in accounts receivable of approximately $201 thousand, a decrease in accounts payable of $111 thousand, and decrease in tax payable of approximately $91 thousand.

Current wording

Net cash used in operating activities for the nine months ended June 30, 2023 was $2,265 thousand, primarily due to a net loss of $2,543 thousand and an increase of $268 thousand in net operating assets and liabilities. The cash flow impact from changes in net operating assets and liabilities was primarily driven by decrease in inventory of $687 thousand and increases in current operating lease liabilities of $81 thousand, partially offset by increases in accounts receivable of $70 thousand and prepaid expenses and other current assets of $162 thousand, and a decrease in accounts payable of $51 thousand, tax payable of $73 thousand, and non-current operating lease liabilities of $75 thousand.

Previous wording

Net cash used for investing activities was approximately $34 thousand and approximately $18 thousand for the six months ended March 31, 2024 and 2023, respectively. These amounts consisted of the cash used for lending to related parties slightly offset by sales of property in both periods.

Current wording

Net cash used for investing activities was approximately $135 thousand and approximately $11 thousand for the nine months ended June 30, 2024 and 2023, respectively. These amounts consisted of the cash used for lending to related parties slightly offset by sales of property in both periods.

Previous wording

Net cash provided by financing activities totaled approximately $10,339 thousand for the six months ended March 31, 2024. We raised approximately $9,278 thousand from issuance of Class B common stock and obtained short-term loans in the form of convertible Notes totaling $2 million from the Investor, as discussed above.

Current wording

Net cash provided by financing activities totaled approximately $10,754 thousand for the nine months ended June 30, 2024. We raised approximately $9,278 thousand from issuance of Class B common stock and obtained short-term loans in the form of convertible Notes totaling $3 million from the Investor, as discussed above.

Previous wording

Net cash provided by financing activities totaled approximately $1,808 thousand for the six months ended March 31, 2023. We raised approximately $1,400 thousand from issuance of Class B common stock and obtained short-term loans with a net balance of $459 thousand from third parties, partially offset by approximately $51 thousand payment of related party debt.

Current wording

Net cash provided by financing activities totaled $2,517 thousand for the nine months ended June 30,2023. We raised $2,120 thousand from issuance of ordinary shares, received proceeds of $200 thousand from related party debt, and obtained $459 loans from third parties, offset by $140 thousand payment of related party debt and $122 thousand payment of loans from third parties.