# Richtech Robotics Inc.: Form 10-Q for the period ended Dec 31, 2023

- Company: [Richtech Robotics Inc.](/companies/rr.md) (CIK 1963685)
- Form: 10-Q
- Filed: 2024-02-14
- Accepted by EDGAR: Feb 14, 2024, 22:01 ET
- Period: 2023-12-31
- Accession: 0001213900-24-014132
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1963685/000121390024014132/f10q1223_richtech.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1963685/000121390024014132/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-10-01 to 2023-12-31 | $1.1m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-10-01 to 2023-12-31 | $496.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-10-01 to 2023-12-31 | $610.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-10-01 to 2023-12-31 | $834.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-10-01 to 2023-12-31 | −$2.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-10-01 to 2023-12-31 | −$2.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-10-01 to 2023-12-31 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-10-01 to 2023-12-31 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-10-01 to 2023-12-31 | 64,309,409 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-10-01 to 2023-12-31 | −$1.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-12-31 | $7.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-12-31 | $11.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-12-31 | $12.3m | us-gaap:Assets |
| Current liabilities | at 2023-12-31 | $838.0k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-12-31 | $964.0k | us-gaap:Liabilities |
| Short-term borrowings | at 2023-12-31 | $50.0k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-12-31 | $11.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,873 characters.

*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 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 and elsewhere in this Report. These risks could cause our actual results to differ materially from any future performance suggested below.*

### Overview

We are a leading provider of service robotic solutions by developing, manufacturing, and deploying novel products that address the growing need for automation in the service industry. We develop and provide service automation solutions that directly address the labor shortage problem affecting the US service industry. Our solutions include delivery, commercial cleaning, food & beverage service, and customization and development service, which has been implemented in more than 80 cities across the United States in restaurants, hotels, casinos, senior living homes, factories and retail centers. Our solutions automate repetitive and time-consuming tasks which allows clients to reallocate labor hours to more value-creating roles. Many of our clients see our robotic solutions as crucial to expanding and scaling their businesses.

Our product family was designed to provide labor-intensive businesses with robotic automation solutions. Hospitality is the most labor-intensive industry, which is why we have deployed our robots across restaurants, hotels, casinos, hospitals, bars, event spaces, and senior living homes. The market is currently in the phase where end-users and system integrators are still gaining experience in adoption and implementation of nonindustrial service robots. In North America, the primary driver for adoption will be the ongoing trend to automate menial or non-value-adding-tasks. These tasks include cleaning, transport and delivery, and food preparation.

### Factors and Trends Affecting Our Business and Results of Operations

The following trends and uncertainties either affected our financial performance historically or are likely to impact our results of operations in the future:

- As our robotic products market potential is seen by others, more competitors enter the market, which will lead to price competition and a decline in profit margins;
- A recession will lead to a decline in customer demand in our robotic products and services;
- Some of the products are currently assembled by suppliers in China, which may delay the supply if they are affected by international shipping, epidemic, geopolitical conflicts and other factors;
- We anticipate that our general and administrative expenses will increase in the future as a result of increased costs associated with being a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys, and accountants, and personnel-related stock-based compensation costs, among other expenses, and, in the case of public company-related expenses, services associated with strengthening our internal control over financial reporting, maintaining compliance with Nasdaq listing and SEC reporting requirements, director and officer liability insurance costs, and investor and public relations costs, among other expenses.
- Inflationary pressures are also a concern as it is difficult to make reliable projections for the cost of components. This means profit margins could be affected, and our pricing would need to re-evaluated on a regular basis.
- The rising interest rate will lead to a higher borrowing cost. It will increase our cost for any potential future borrowing and financing activities. Higher interest rates reduce consumer spending and business investment, causing the economy to contract, which will impact our business and will reduce our customers’ purchasing power.
- We may adopt a new compensation plan that will introduce adjustments to executive compensation packages and a new vesting schedule. The potential impact of a new compensation plan may include increased costs associated with higher executive salaries and performance-based incentives. Additionally, a new vesting schedule may impact employee retention and talent acquisition strategies. The ultimate impact of the plan will be decided by the terms of the final plan, which are subject to approval by the Compensation Committee.

### Results of Operations

### Comparison of the three months ended December 31, 2023 and 2022

The following table summarizes our results of operations (in thousands) for the three months ended December 31, 2023 and 2022, together with the dollar change in those items from period to period:

|  | Three months ended December 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue, net | $1,106 | $946 | $160 |
| Cost of revenue, net | 496 | 446 | 50 |
| Gross profit | 610 | 500 | 110 |
| Operating expenses: |  |  |  |
| Research and development | 834 | 855 | (21) |
| Sales and marketing | 595 | 79 | 516 |
| General and administrative | 1,443 | 767 | 676 |
| Total operating expenses | 2,872 | 1,701 | 1,171 |
| Loss from operations | (2,262) | (1,201) | (1,061) |
| Other income (expense): |  |  |  |
| Interest expense, net | (486) | (1) | (485) |
| Total other expense | (486) | (1) | (485) |
| Loss before income tax expense | (2,748) | (1,202) | (1,546) |
| Income tax benefit/(expense) | — | — | — |
| **Net loss** | **$(2,748)** | **$(1,202)** | **$(1,546)** |

#### Revenue

The total revenue for the three months ended December 31, 2023, and 2022, was approximately $1,106 thousand and $946 thousand, respectively. The approximate $160 thousand, or 20%, increase in revenue in the three months ended December 31, 2023 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 three months ended December 31 is shown below:

| Robotics | Three months ended December 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Product revenue | $187 | $613 | $(426) |
| Service revenue | 799 | 232 | 567 |
| Leasing revenue | 13 | 91 | (78) |
| Total Robotics revenue | 999 | 936 | 63 |
| Smart hardware | 16 | 1 | 15 |
| Interactive system | 30 | 9 | 21 |
| Cloutea\* | 61 | — | 61 |
| Total | $1,106 | $946 | $160 |

#### Notes:

\* Cloutea is the revenue generated from our boba tea store opened in May 2023, in order to further develop our business model. This is our model store of interactive robot barista by utilizing our ADAM robot.

For the three months ended December 31, 2023 and 2022, our overall robotics revenue was approximately $999 thousand and $936 thousand, respectively. The increase of approximately $63 thousand, or 7%, was brought on primarily by our increased service revenue of approximately $567 thousand, or 244%, partially offset by the decrease in product revenue of approximately $426 thousand, or 69%. We were upgrading our product line during the first quarter of 2024. We have taken the initiative to reduce the proportion of robotic product sales and leasing robotics, and have been focusing instead on robot services such as event activities and customized development. However, after the upgrading of the product line, it is expected that both product and leasing revenue will return to growth.

#### Cost of Revenue, Net

Cost of revenue, net, was approximately $496 thousand and approximately $446 thousand for the three months ended December 31, 2023 and 2022, respectively. The approximately $50 thousand increase, or 11%, was due primarily to the increase of our robotics service revenue in 2023. Robotic service revenue has a higher margin comparing to other revenue streams.

#### Gross Profit

Gross profit as a percentage of total revenue was approximately 61% for the three months ended December 31, 2023 compared to approximately 53% for the three months ended December 31, 2022. The increase in the gross profit percentage in 2023 was driven primarily by the occurrence and recognition of our robotic service revenue, which has a higher margin.

#### Research and Development Expenses

Research and development expenses were approximately $834 thousand and approximately $855 thousand for the three months ended December 31, 2023 and 2022, respectively. Our expenditure in developing new products has been consistent for both periods. We anticipate that our R&D expenses will increase by approximately 20-30% in 2024 and 2025

#### Sales and Marketing Expenses

Sales and marketing expenses were approximately $595 thousand and approximately $79 thousand for the three months ended December 31, 2023 and 2022, respectively. The increase of approximately $516, or 653%, 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.

#### General and Administrative Expenses

General and administrative expenses were approximately $1,443 thousand and approximately $767 thousand for the three months ended December 31, 2023 and 2022, respectively. The approximately $676 thousand increase, or 88%, was due primarily to an increase in professional service fees and related expenses to maintain a public company status.

#### Other Income (Expense)

Total other expense was approximately $486 thousand and approximately $1 thousand for the three months ended December 31, 2023 and 2022, respectively. The approximately $485 thousand, or 48,500%, net increase in total other expense was primarily due to the interest expense occurred incurred within the three months ended December 31, 2023. During 2023, we entered into ten short-term loan agreements with different financial entities for the total principal amount of approximately $1,853 thousand. As of December 31, 2023, the short-term loan balance was approximately $50 thousand.

#### Income Tax Benefit/(Expense)

Income tax benefit/(expense) were nil for both three months ended December 31, 2023, and 2022.

### Liquidity and Capital Resources

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 $1,212 thousand for the three months ended December 31, 2023 and $1,237 thousand for the three months ended December 31, 2022, our working capital is in net asset position with $10,665 thousand as of December 31, 2023 and 4,092 thousand as of December 31, 2022. 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, 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.

### Comparison of the three months ended December 31, 2023 and 2022

The following table summarizes our cash flow information (in thousands) for the three months ended December 31, 2023 and 2022, together with the dollar change in those items from period to period:

| Net cash provided by (used in): | Three months ended December 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(1,212) | $(1,237) | 25 |
| Investing activities | (25) | (21) | (4) |
| Financing activities | 8,339 | 1,489 | 6,850 |
| Net change in cash and cash equivalents | $7,102 | $231 | 6,871 |

#### Operating Activities

Net cash used in operating activities for the three months ended December 31, 2023 was approximately $1,212 thousand, primarily due to a net loss of approximately $2,748 thousand and an increase of approximately $1,536 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 $2,432 thousand and inventory of approximately $167 thousand, partially offset by decreases in accounts payable of approximately $1,066 thousand.

Net cash used in operating activities for the three months ended December 31, 2022 was approximately $1,237 thousand, primarily due to a net loss of approximately $1,202 thousand and a decrease of approximately $35 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 accounts receivable of approximately $284 thousand, and a decrease in accounts payable of approximately $127 thousand, tax payable of approximately $113 thousand, and current operating lease liabilities of approximately $108 thousand, partially offset by decrease in inventory of approximately $477 thousand, and increases in non-current operating lease liabilities of approximately $93 thousand.

#### Investing Activities

Net cash used for investing activities was approximately $25 thousand and approximately $21 thousand for investing activities for the three months ended December 31, 2023 and 2022, respectively. These amounts consisted of sale of property and equipment and/or cash used for lending to related parties for both periods.

#### Financing Activities

Net cash provided by financing activities totaled approximately $8,339 thousand for the three months ended December 31, 2023. We raised approximately $9,286 thousand from issuance of ordinary shares, offset by approximately $152 thousand payment of related party debt and approximately $795 thousand payment of short-term loans.

Net cash provided by financing activities totaled approximately $1,489 thousand for the three months ended December 31, 2022. We raised approximately $1,400 thousand from issuance of ordinary shares, and received proceeds of approximately $89 thousand from related party debt.

### Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

### Trend Information

Other than as disclosed elsewhere in this registration statement, particularly with respect to government regulations relating to nicotine and cannabis, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

### Seasonality

Seasonality does not materially affect our business or the results of our operations.

### Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.

### Recent Accounting Pronouncements Not Yet Adopted

See Note 2 to our unaudited financial statements included elsewhere in this Form 10-Q for more information.

### Critical Accounting Policies and Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Management bases its estimates on historical experience, market and other conditions, and various other assumptions it believes to be reasonable. See Note 2 to our audited financial statements included elsewhere in this Form 10-Q for more information.

### JOBS Act

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period.

For as long as we remain an “emerging growth company” under the recently enacted JOBS Act, we will, among other things:

- be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal controls over financial reporting;
- be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act and instead provide a reduced level of disclosure concerning executive compensation; and
- be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.

Although we are still evaluating the JOBS Act, we currently intend to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company,” including the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company and the market price of our common stock may be materially and adversely affected.

## Controls and procedures

As filed, 7,257 characters.

(a) Evaluation of disclosure controls and procedures

In connection with the preparation of this Report, our management conducted an assessment of the effectiveness of our internal controls over financial reporting as of the end of the period covered by this report (under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”)). Based on that assessment, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective due to a material weakness in internal control over financial reporting, as described below. Management’s assessment of the effectiveness of our disclosure controls and procedures is expressed at a level of reasonable assurance because management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

### Management’s Report on Internal Controls over Financial Reporting

Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our Board and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and participation of our management, including our CEO, we evaluated the effectiveness of our internal control over financial reporting based on the framework set forth in *Internal Control - Integrated Framework* issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. As part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, management identified the following material weakness: the Company did not adequately design and maintain effective general information technology controls over third-party information systems and applications that are relevant to the preparation of the Company’s financial statements:

- Information and Technology Controls: Certain individual control deficiencies related to information technology (“IT”) general controls and report reviews aggregate into a material weakness, as follows:
- Controls were not fully documented responding to all of the Complementary User Entity Controls forwarded through Software as a Service (SaaS) vendor audit reports in the design and implementation of suggested controls.
- There were not always appropriate IT controls related to information produced by the entity (IPE), including spreadsheets, that are relevant to the preparation of our consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

This material weakness did not result in any identified material misstatements to the financial statements, and there were no changes to previously released financial results. Based on this material weakness, management concluded that as of December 31, 2023, internal control over financial reporting was not effective.

This Report does not include an attestation report of our internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

### Remediation

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include the following:

- establish more specific controls to respond to Complementary User Entity Controls forwarded through SaaS vendor audit reports in the design and implementation of suggested controls;
- expand the management and governance over IT system controls;
- establish more specific controls to gain additional comfort over the completeness and accuracy of IPE, including data used in spreadsheets used in the preparation of consolidated financial statements; and
- implement enhanced process controls around internal user access management including provisioning, removal, and periodic review.

We believe that these actions will remediate the material weakness, once management has performed its assessment of our internal controls over financial reporting including the remedial measures described above. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

### Changes in Internal Control over Financial Reporting

As of December 31, 2023, as a privately owned company, we were not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies with respect to the establishment of internal controls over financial reporting. As described within the remedial measures above, during the year ended December 31, 2023, we developed and commenced the implementation of internal controls over financial reporting, and we are continuing to develop and implement internal controls over financial reporting.

### Inherent Limitations on Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

(b) Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 742 characters.

As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, there have been no material changes with respect to those risk factors previously disclosed in our (i) registration statement for our initial public offering and (ii) 2023 Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Filed Feb 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001213900-24-014132. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.