# Richtech Robotics Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Richtech Robotics Inc.](/companies/rr.md) (CIK 1963685)
- Form: 10-Q
- Filed: 2024-05-15
- Accepted by EDGAR: May 14, 2024, 21:41 ET
- Period: 2024-03-31
- Accession: 0001213900-24-043063
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1963685/000121390024043063/ea0205932-10q_richtech.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1963685/000121390024043063/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $1.2m | us-gaap:Revenues |
| Revenue | 6 months, 2023-10-01 to 2024-03-31 | $2.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $485.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-10-01 to 2024-03-31 | $982.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $680.0k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-10-01 to 2024-03-31 | $1.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $413.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-10-01 to 2024-03-31 | $1.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$945.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-10-01 to 2024-03-31 | −$3.2m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$1.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-10-01 to 2024-03-31 | −$3.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-10-01 to 2024-03-31 | −$0.06 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-10-01 to 2024-03-31 | −$0.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 66,637,256 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-10-01 to 2024-03-31 | 66,637,256 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-10-01 to 2024-03-31 | −$2.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-03-31 | $8.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $12.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $13.2m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $2.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $3.0m | us-gaap:Liabilities |
| Short-term borrowings | at 2024-03-31 | $2.1m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $10.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,810 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 “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.*

### 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.

### Standby Equity Purchase Agreement

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.

With respect to each Advance, the Company has the option to notify the Investor of a minimum acceptable price (“MAP”) by specifying the amount within an Advance notice. During any trading day within a Pricing Period, two conditions will trigger an automatic reduction to the amount of the Advance by one-third: either (i) the VWAP of the Class B common stock is below the MAP specified in the Advance notice, or (ii) there is no VWAP available (each such day, an “Excluded Day”). On each Excluded Day, an automatic one-third reduction is applied to the specified Advance amount in the Advance notice and that day will be excluded from the Pricing Period.

Each Advance is subject to certain limitations, including that the Investor cannot purchase any shares that would result in it beneficially owning more than 4.99% of the Company’s outstanding voting power of number of shares of Class B common stock at the time of an Advance or acquiring more than 19.99% of the Company’s outstanding shares of Class B common stock as of the date of the Purchase Agreement (the “Exchange Cap”). The Exchange Cap will not apply under certain circumstances, including, where the Company has obtained stockholder approval to issue in excess of the Exchange Cap in accordance with the rules of The Nasdaq Stock Market (“Nasdaq”) or such issuances do not require stockholder approval under Nasdaq’s “minimum price rule.”

The Purchase Agreement will terminate automatically on the earlier of February 16, 2025 or when the Investor has purchased an aggregate of $50 million of the Company’s shares of Class B common stock. The Company has the right to terminate the Purchase Agreement upon five trading days’ prior written notice to the Investor, subject to certain conditions.

In connection with and subject to the satisfaction of certain conditions set forth in the Purchase Agreement, upon the request of the Company, the Investor will pre-advance to the Company up to $3,000,000 of the $50,000,000 commitment amount (a “Pre-Advance”), with each Pre-Advance to be evidenced by a convertible promissory note (each, a “Note”). The first Pre-Advance, in the principal amount of $1,000,000, was advanced on February 15, 2024. The second Pre-Advance, in the principal amount of $1,000,000, was advanced on March 18, 2024. The third Pre-Advance, in the principal amount of $1,000,000, was advanced on April 15, 2024. Each Note is subject to a 4% discount to the principal amount of such Note.

Each Note will accrue interest on the outstanding principal balance at the rate of 8% per annum and has a maturity date of February 15, 2025 (as may be extended at the option of the Investor). Beginning in May 2024, the Company was required to pay, on a monthly basis, one-nineth of the outstanding principal amount of each Note, together with accrued and unpaid interest, either (i) in cash or (ii) by submitting an Advance notice pursuant to the Purchase Agreement and selling the Investor shares, or any combination of (i) or (ii) as determined by the Company. The initial repayment is due 90 days after the issuance of the first Note, followed by subsequent payments due every 30 days after the previous payment. Unless otherwise agreed to by the Investor, any funds received by the Company pursuant to the Purchase Agreement for the sale of shares will first be used to satisfy any payments due under an outstanding Note.

At the election of the Investor, all or a portion of the principal, interest, or other amounts outstanding under each Note (the “Conversion Amount”) may be converted into shares of Common Stock (the “Conversion Shares”), equal to: (x) the Conversion Amount, divided by (y) the Conversion Price. “Conversion Price” is defined as (i) $6.00 per share of Class B common stock, provided however, on May 28, 2024 (the “Reset Date”), the Conversion Price shall be adjusted (downwards only) to equal the average of the daily VWAPs for the 5 consecutive trading days immediately prior to the Reset Date, if such price is lower than the Conversion Price then in effect. The Conversion Shares are entitled to the registration rights set forth in the Purchase Agreement.

On March 14, 2024, the Company and the Investor entered into a letter agreement (the “Letter Agreement”) to amend the terms of each Note as follows: (i) the Company may redeem early a portion or all amounts (including principal and accrued and unpaid interest) outstanding under the Note with at least 10 trading days’ prior written notice by the Company to the Investor. The outstanding principal balance being redeemed by the Company shall be subject to a 10% cash redemption premium. After receipt of the Redemption Notice, the Investor shall have 10 trading days to elect to convert all or any portion of the Note; and (ii) the Conversion Price shall not be lower than $1.50 per share of Class B common stock.

The Company paid a subsidiary of the Investor a structuring fee in the amount of $25,000 and in April 2024, issued to the Investor 259.350 shares of Class B common stock (the “Commitment Shares”) as a commitment fee. The Company and the Investor made certain representations and warranties to each other that are customary for transactions similar to this one, subject to specified exceptions and qualifications. Each of the Company and the Investor also agreed to indemnify the other.

The foregoing descriptions of the Purchase Agreement and the Notes and the transactions contemplated thereby are qualified in their entirety by reference to the full text of the Purchase Agreement and the Notes, a copy or a form of which are attached hereto as Exhibits 10.1 and 4.1, respectively, each of which is incorporated herein in its entirety by reference.

### Revere Agreements

In connection with the execution of the Purchase Agreement, the Company entered into two agreements with Revere Securities, LLC (“Revere”): (i) a financial services agreement, dated as of January 22, 2024 (the “Financial Services Agreement”), pursuant to which the Company agreed to pay Revere $25,000 per month on an accrual basis for six months, with payments commencing upon the execution of the Purchase Agreement, for general financial advisory services provided by Revere, and (ii) a finder’s fee agreement, dated as of January 22, 2024 (the “Finder’s Fee Agreement”), pursuant to which the Company agreed to pay Revere (a) cash compensation equal to 7% of total proceeds from Pre-Advances raised under the Purchase Agreement, plus (b) cash compensation equal to 4% of any Advance under the Purchase Agreement, paid upon 3 business days after the closing of such Advance.

The foregoing descriptions of the Financial Services Agreement and the Finder’s Fee Agreement are qualified in their entirety by reference to the full text of the Financial Services Agreement and the Finder’s Fee Agreement, copies of which are attached hereto as Exhibits 10.6 and 10.7, respectively, each of which is incorporated herein in its entirety by reference.

### 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 because of the 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 be re-evaluated on a regular basis.
- Rising interest rates will lead to higher borrowing costs. It will increase our costs 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 on 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 will have 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 six months ended March 31, 2024 and 2023

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:

|  | Six months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue, net | $2,272 | $2,054 | $218 |
| Cost of revenue, net | 982 | 908 | 74 |
| Gross profit | 1,290 | 1,146 | 144 |
| Operating expenses: |  |  |  |
| Research and development | 1,247 | 1,272 | (25) |
| Sales and marketing | 787 | 166 | 621 |
| General and administrative | 2,464 | 1,586 | 878 |
| Total operating expenses | 4,498 | 3,024 | 1,474 |
| Loss from operations | (3,208) | (1,878) | (1,330) |
| Other income (expense): |  |  |  |
| Interest expenses,net | (660) | (1) | (659) |
| Total other expenss | (660) | (1) | (659) |
| Loss before income tax expense | (3,868) | (1,879) | (1,989) |
| Income tax benefit/(expense) | - | - | - |
| Net loss | **$(3,868)** | **$(1,879)** | **$(1,989)** |

#### Revenue

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:

| Robotics | Six months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Product revenue | $670 | $1,623 | $(953) |
| Service revenue | 899 | 257 | 642 |
| Leasing revenue | 489 | 121 | 368 |
| Total Robotics revenue | 2,058 | 2,001 | 57 |
| Smart hardware | 16 | 1 | 15 |
| Interactive system | 40 | 52 | (12) |
| Cloutea\* | 158 | — | 158 |
| Total | $2,272 | $2,054 | $218 |

#### 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 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.

#### Cost of Revenue, Net

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.

#### Gross Profit

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.

#### Research and Development Expenses

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.

#### Sales and Marketing Expenses

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.

#### General and Administrative Expenses

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.

#### Other Income (Expense)

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.

#### Income Tax Benefit/(Expense)

Income tax benefit/(expense) were zero for both six months ended March 31, 2024, and 2023.

### 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 $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.

### Comparison of the six months ended March 31, 2024 and 2023

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:

| Net cash provided by (used in): | Six months ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(2,543) | $(1,667) | (876) |
| Investing activities | (34) | (18) | (16) |
| Financing activities | 10,339 | 1,808 | 8,531 |
| Net change in cash and cash equivalents | $7,762 | $123 | 7,639 |

#### Operating Activities

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.

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.

#### Investing Activities

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.

#### Financing Activities

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.

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.

### 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, 5,129 characters.

(a) Evaluation of disclosure controls and procedures

In preparation for this Report, our management, under the supervision and with the participation of our CEO, CFO, and VP of Finance, assessed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based on this assessment, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report. The recent corrective actions addressing a previously disclosed material weakness have significantly improved the reliability of our financial reporting processes.

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

Our internal control over financial reporting (ICFR) is a process designed by, or under the supervision of, our CEO, CFO, and VP of Finance. It is affected by our Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements in accordance with generally accepted accounting principles (GAAP). The addition of the VP of Finance has significantly strengthened our ICFR framework.

### These controls include policies and procedures that:

- Maintain records that accurately and fairly reflect transactions and dispositions of our assets.
- Ensure transactions are recorded as necessary for GAAP-compliant financial statement preparation.
- Authorize receipts and expenditures in accordance with our Board and management directives.
- Provide reasonable assurance regarding the prevention or timely detection of unauthorized actions that could materially affect our financial statements.

### Evaluation, Remediation, and Ongoing Improvement：

Under the supervision of our CEO, CFO, and VP of Finance, we evaluated the effectiveness of our ICFR based on the 2013 COSO framework. We took decisive actions to address a previously identified material weakness:

- **Accounting Software Upgrade:** Implemented QuickBooks Online to centralize transaction documentation, automate key accounting processes, and enhance data security.
- **Inventory Management Enhancement:** Integrated QuickBooks’ inventory management module, improving real-time visibility, reducing calculation errors, and enhancing accuracy.

Management believes these measures successfully address the previously identified material weakness. We are confident these changes have significantly strengthened our ICFR. Additionally, we have implemented the following remediation actions that further bolster our control environment:

- **Robust Controls for SaaS Reports:** Established more specific controls to effectively address Complementary User Entity Controls arising from SaaS vendor audits.
- **Enhanced IT Governance:** Expanded management oversight and controls within our IT systems.
- **Data Accuracy Focus:** Implemented specific controls to ensure the completeness and accuracy of information produced by the entity (IPE), especially spreadsheets used in financial statement preparation.
- **Improved Access Management:** Implemented enhanced controls for internal user access management, including provisioning, periodic review, and timely removal.

We are committed to ongoing monitoring and improvement. We will continue to assess these measures to ensure a robust control environment. The material weakness will be considered remediated when the controls have operated effectively for a sufficient period and management has performed adequate testing.

### Changes in Internal Control over Financial Reporting

As of March 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 March 31, 2024, 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 March 31, 2024 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 746 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 the results of our 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 May 15, 2024.
Source: SEC EDGAR, the filing index for accession 0001213900-24-043063. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.