Richtech Robotics Inc.: Form 10-Q for the period ended Mar 31, 2025

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 2024 Annual Report 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, manufacture, and deploy cutting-edge robots that streamline operations, enhance efficiency, and alleviate labor shortages across a diverse range of sectors, including restaurants, hotels, casinos, senior living facilities, and retail centers. Our commitment to technological advancement and customer-centric solutions has positioned us as a key player in the rapidly evolving robotics landscape.

Key Business Highlights for the Second Quarter of Fiscal Year 2025

• Strategic Transition to Robotics-as-a-Service: We continued to advance the implementation of our RaaS model during the second quarter. This business model is designed to generate more consistent and recurring revenue by increasing customer access to our robotic solutions. During the quarter, we engaged in active negotiations with several leading enterprise groups in the automobile sector regarding large-scale RaaS deployments. As a result, in April 2025, we signed a Master Services Agreement (MSA) with a car retailer/dealership enterprise group with more than 150 locations in its dealership network, creating potential deployments for our products. This agreement represents a key milestone in the ongoing expansion of our RaaS strategy and is expected to meaningfully accelerate deployment activity and revenue conversion in the second half of the fiscal year.
• Continued Investment in Research and Development: In the second quarter of fiscal year 2025, we continued to expand our investment in research and development, reflecting our ongoing commitment to innovation and long-term growth. In addition to recruiting top talent in robotics and artificial intelligence, we are in discussion in regards to potential collaboration with leading technology organizations in Silicon Valley and well-established U.S. universities. These efforts are focused on the development of a new generation of robotic systems designed to address a wider range of commercial applications across multiple industries. The new robot currently under development is expected to be introduced by the end of calendar year 2025. Its design emphasizes scalability, adaptability, and deployment efficiency, with a particular focus on modular construction to streamline production and reduce on-site installation time. We are also accelerating the integration of advanced AI capabilities into both the software and hardware layers to enhance autonomous performance and operational flexibility in complex business environments.
• Expansion of Sales and Marketing Efforts: In the second quarter of fiscal year 2025, we continued to scale our sales and marketing efforts to support RaaS adoption. We expanded online campaigns and participated in industry events and trade shows to increase visibility. As more paying event clients used our ADAM and Scorpion robots in short-term applications, product exposure and brand recognition grew across multiple sectors. These commercial use cases, combined with strong customer feedback and visible ROI, contributed to positive word-of-mouth and increased inbound interest. Additionally, at CES 2025, our ADAM robot was featured in the opening keynote presentation by NVIDIA, further raising our profile within the technology and robotics industries.
• In partnership with Ghost Kitchen Brands, we are supporting the rollout of One Kitchen (a brand under Ghost Kitchen Brands) within select Walmart locations. The first store opened near Chicago in the first quarter of fiscal year 2025. A second location opened on March 1, 2025, in Peachtree City, Georgia, expanding our presence in the Southeast and serving as a pilot for refining operations. An additional location near San Jose, California, is planned for summer 2025.

In February 2025, we also launched our first Clouffee & Tea store, introducing our own robotic coffee and tea concept. We plan to expand this brand with additional locations in the coming months.

Recent Developments

In January 2025, we received warrant exercise notices from three investors, collectively exercising an aggregate of 3,814,611 warrants. As a result, we issued an aggregate of 3,814,611 shares of Class B common stock and received aggregate proceeds of $5,149,724.85. Rodman was paid a fee equal to 7% of the gross proceeds of the warrant exercises, pursuant to the Rodman Engagement Letter.

On February 10, 2025, we entered into a warrant exercise inducement offer letter with a holder of Existing Warrants exercisable for an aggregate of 2,699,797 shares of its Class B common stock, to exercise its Existing Warrants at the existing exercise price of $1.35 per share, generating gross proceeds of approximately $3,644,726 before deducting financial advisory fees. In consideration for the immediate exercise of the Existing Warrants, we issued to such holder 2,699,797 Inducement Warrants with an exercise price of $4.00 per share, which are immediately exercisable and valid for five years from issuance. The shares of Class B common stock underlying the Inducement Warrants are entitled to registration rights. In connection with the Armistice Warrant Inducement, and pursuant to the Rodman Engagement Letter, Rodman was paid a fee equal to 7% of the gross proceeds of the Existing Warrant exercises and will be entitled to 7% of the proceeds from any exercise of the Inducement Warrants. In addition, we issued to Rodman warrants to purchase an aggregate of 188,986 shares of Class B common stock at an exercise price of $5.00 per share, which are immediately exercisable and valid for five years from issuance, pursuant to the Rodman Engagement Letter.

On February 13, 2025, we entered into a Settlement Agreement with ACSS, pursuant to which the parties agreed to mutually release and all claims against each other arising out of that certain engagement letter, dated as of July 2, 2024, by and between the Company and ACSS. Pursuant to the Settlement Agreement, we agreed to pay to ACSS a sum of $430,000.

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 could 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 continue to increase in the future as a result of increased costs associated with operating as 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 costs for any potential future borrowings 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.
• Tariffs and Trade Policies: Changes and uncertainty in United States and international trade policies, including the imposition or expansion of tariffs, may adversely affect our operations, cost structure, and ability to engage in long-term planning.
• We have implemented domestic manufacturing and supply chain strategies to mitigate exposure to tariff-related risks. Based on our internal analysis, the estimated impact of current tariffs on cost of our goods sold is approximately 1 percent to 5 percent. Future policy changes or new trade restrictions may disrupt the supply chain and limit our ability to expand into international markets. We are actively monitoring trade policy developments and are evaluating mitigation strategies, including supplier diversification and adjustments to our pricing models, to reduce potential adverse effects.

Results of Operations

Comparison of the six months ended March 31, 2025 and 2024

The following table summarizes our results of operations (in thousands) for the six months and the three months ended March 31, 2025 and 2024, together with the dollar change in those items from period to period:

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Revenue

For the six months ended March 31, 2025, net revenue increased by $152 thousand, or approximately 6.7%, to $2,424 thousand, compared to $2,272 thousand for the same period in 2024.

For the three months ended March 31, 2025, net revenue increased slightly by $2 thousand, or approximately 0.2%, to $1,167 thousand, compared to $1,165 thousand for the same period in 2024.

The overall increase in revenue is primarily attributable to the continued positive impact of our Robots-as-a-Service (RaaS) model and the ongoing expansion of Alphamax Management LLC, a wholly-owned subsidiary of the Company (“Alphamax”).

* Cloutea is the revenue generated from our boba tea store opened in May, 2023. We opened this store as a model to further develop the concept of an interactive robot barista utilizing our ADAM robot. Cloutea has been rebranded “Clouffee and Tea,” which has been opened in a new location in Las Vegas in February 2025.

* Alphamax is a wholly-owned subsidiary of the Company, established to spearhead our expansion into the food and beverage sector. As a consulting and management company, Alphamax oversees the operation of our innovative food and beverage concepts, including the interactive robot barista cafe. This initiative will serve as a model for future development and expansion within the food and beverage industry, showcasing the potential of our advanced robotic technologies in revolutionizing customer experiences and streamlining operations.

Cost of Revenue, net

Cost of revenue, net, decreased significantly for both the six and three months ended March 31, 2025:

For the six months ended March 31, 2025, cost of revenue, net, decreased by $405 thousand, or approximately 41.2%, to $577 thousand, compared to $982 thousand for the same period in 2024.

For the three months ended March 31, 2025, cost of revenue, net, decreased by $31 thousand, or approximately 6.4%, to $454 thousand, compared to $485 thousand for the same period in 2024.

This overall decrease is primarily attributable to the continued transition towards our Robots-as-a-Service (RaaS) model.

Under the RaaS model, we recognize revenue from leasing our robots to customers, rather than from outright sales. This shift impacts the timing of cost recognition. When a robot is leased, certain upfront costs, which would have been recognized immediately under a sales model, are instead recognized over the lease term. This results in lower cost of revenue in the current periods. We expect the RaaS model to continue to influence our cost of revenue in future periods as it becomes a larger portion of our business.

Product Revenue: Product revenue increased substantially for both periods, indicating continued strong demand for our robotic solutions:

• For the six months ended March 31, 2025, product revenue increased by $744 thousand, or approximately 111.0%, to $1,414 thousand, compared to $670 thousand in 2024.
• For the three months ended March 31, 2025, product revenue increased by $182 thousand, or approximately 37.7%, to $664 thousand, compared to $482 thousand in 2024.

Service/Rental Revenue: Service/Rental revenue decreased significantly, reflecting the ongoing strategic shift towards our RaaS model:

• For the six months ended March 31, 2025, service/rental revenue decreased by $781 thousand, or approximately 64.3%, to $433 thousand, compared to $1,214 thousand in 2024.
• For the three months ended March 31, 2025, service/rental revenue decreased by $115 thousand, or approximately 27.7%, to $300 thousand, compared to $415 thousand in 2024.

Leasing Revenue: Leasing revenue showed a notable increase over the six-month period, demonstrating the growing adoption of our RaaS model:

• For the six months ended March 31, 2025, leasing revenue increased by $71 thousand, or approximately 40.8%, to $245 thousand, compared to $174 thousand in 2024.
• For the three months ended March 31, 2025, leasing revenue decreased by $54 thousand, or approximately 33.5%, to $107 thousand, compared to $161 thousand in 2024.

Gross Profit

Gross profit increased significantly for both the six and three months ended March 31, 2025:

For the six months ended March 31, 2025, gross profit increased by $557 thousand, or approximately 43.2%, to $1,847 thousand, compared to $1,290 thousand for the same period in 2024.

For the three months ended March 31, 2025, gross profit increased by $32 thousand, or approximately 4.7%, to $712 thousand, compared to $680 thousand for the same period in 2024.

This improvement in gross profit is directly related to the decrease in cost of revenue, net, as discussed in the preceding section.

The substantial increase in gross profit for the six months ended March 31, 2025, is primarily due to shift in our sales mix towards higher-margin RaaS offerings. A relatively less increase in gross profit for the three months ended March 31, 2025 compared to the same period in 2024 is due to the timing of a key customer’s transition from pilot phase to a signed Master Services Agreement in April 2025, resulting in the deferral of related deployments and revenue to future periods.

Research and development expenses

Research and development expenses decreased substantially for both the six and three months ended March 31, 2025:

For the six months ended March 31, 2025, research and development expenses decreased by $443 thousand, or approximately 35.5%, to $804 thousand, compared to $1,247 thousand for the same period in 2024.

For the three months ended March 31, 2025, research and development expenses decreased by $93 thousand, or approximately 22.5%, to $320 thousand, compared to $413 thousand for the same period in 2024.

The decrease in research and development expenses is primarily due to: completion of major development projects. The Company completed several major development projects during the latter part of 2024, which has resulted in a reduction in hardware-related R&D spending in the first half of 2025.

Sales and Marketing Expenses

Sales and marketing expenses showed mixed trends for the six and three months ended March 31, 2025:

For the six months ended March 31, 2025, sales and marketing expenses decreased by $172 thousand, or approximately 21.8%, to $615 thousand, compared to $787 thousand for the same period in 2024.

For the three months ended March 31, 2025, sales and marketing expenses increased by $178 thousand, or approximately 92.7%, to $370 thousand, compared to $192 thousand for the same period in 2024.

The overall trend reflects a shift in the timing of our sales and marketing activities.

The decrease in sales and marketing expenses for the six months ended March 31, 2025, is primarily due to:

• Reduced spending on specific marketing campaigns that occurred in the prior year’s period.
• Cost-saving measures implemented to improve efficiency in sales operations.
• A shift towards more cost-effective digital marketing strategies.

The increase in sales and marketing expenses for the three months ended March 31, 2025, is primarily due to:

• Increased investment in sales personnel to support the growth of our RaaS model.
• Higher advertising and promotional expenses related to a new product launch.
• Participation in industry trade shows and events.

We are continuously evaluating the effectiveness of our sales and marketing investments to ensure they align with our strategic objectives and drive sustainable revenue growth.

General and Administrative Expenses

General and administrative expenses increased substantially for both the six and three months ended March 31, 2025:

For the six months ended March 31, 2025, general and administrative expenses increased by $6,801 thousand, or approximately 275.9%, to $9,265 thousand, compared to $2,464 thousand for the same period in 2024.

For the three months ended March 31, 2025, general and administrative expenses increased by $3,942 thousand, or approximately 386.5%, to $4,962 thousand, compared to $1,021 thousand for the same period in 2024.

The increase in general and administrative expenses for the current period was primarily driven by the following factors:

Settlement expenses: A significant portion of the increase was attributable to a settlement reached with AC Sunshine Securities LLC (“ACSS”). As disclosed in the Settlement Agreement dated February 13, 2025, the Company agreed to pay $430 thousand to ACSS to resolve a dispute related to a prior engagement letter. This amount is included in general and administrative expenses for the period.

Increased personnel costs: Increased salaries expenses related to hiring additional personnel to support our growth. This expansion includes key hires in engineering, finance and accounting, legal and compliance, and human resources.

Professional fees: Higher professional fees for external services such as legal counsel, independent auditors, and consulting engagements. These increased fees are related to compliance with public company reporting requirements and ongoing legal matters. The legal fees related to the ACSS settlement are included in this line item.

We are committed to carefully managing our general and administrative expenses while ensuring we have the necessary resources to support the company’s growth and meet our obligations. While the increase in G&A expenses is a natural consequence of our growth and transition to becoming a public company, we are committed to managing these expenses effectively. We are actively implementing cost optimization measures, streamlining processes, and leveraging technology to improve efficiency and control costs. We believe that our strategic investments in human capital, infrastructure, and compliance are essential to support our long-term growth objectives. As we continue to scale our operations and expand our market presence, we anticipate that G&A expenses will continue to increase, but we are committed to managing these costs prudently and ensuring that they align with our overall financial performance.

Interest expenses

Net: Interest expenses, net, decreased significantly for both the six and three months ended March 31, 2025.

For the six months ended March 31, 2025, interest expenses, net, decreased by $651 thousand to $(9 thousand), compared to $(660 thousand) for the same period in 2024.

For the three months ended March 31, 2025, interest expenses, net, decreased by $169 thousand to $(5 thousand), compared to $(174 thousand) for the same period in 2024. This decrease is primarily due to repayment of debt.

Investment Income

Investment income increased substantially for both the six and three months ended March 31, 2025.

For the six months ended March 31, 2025, investment income increased by $720 thousand to $720 thousand, compared to $0 for the same period in 2024.

For the three months ended March 31, 2025, investment income increased by $387 thousand to $387 thousand, compared to $0 for the same period in 2024. This increase is primarily due to increase in investment income with higher interest rates on cash balances.

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, which consist of cash on hand and short-term investments that are readily convertible to cash. As of March 31, 2025, our cash and cash equivalents totaled $11.1 million. This represents about 3.5 million decrease from $14.6 million at the end of the prior fiscal year. The substantial increase in our cash position is primarily attributable to the net proceeds of $9.2 million received from the exercise and issuance of warrants. These proceeds significantly strengthened our balance sheet and provided us with financial flexibility to invest in our growth initiatives, including expanding our R&D team, purchase of property and equipment to support our expanding operations. This increase was partially offset by cash used in operating activities, primarily due to our net loss and investments in working capital.

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Operating Activities

Net cash used in operating activities was $8,076 thousand for the six months ended March 31, 2025, compared to $2,543 thousand for the same period in 2024. The increase in cash outflows was primarily due to a higher net loss of $8,076 thousand in the current period, compared to a net loss of $3,868 thousand in the prior-year period.

Changes in net operating assets and liabilities had a relatively minor impact on operating cash flow for the current period, resulting in a net outflow of approximately $50 thousand. This was primarily driven by a decrease in accounts receivable of $321 thousand and a decrease in inventory of $343 thousand, partially offset by changes in other working capital items.

In the prior-year period, changes in net operating assets and liabilities resulted in a larger net outflow of approximately $1,325 thousand, primarily driven by a decrease in accounts receivable of $1,823 thousand and a decrease in inventory of $530 thousand, partially offset by an increase in accounts payable of $969 thousand. Non-cash adjustments to reconcile net loss to net cash used in operating activities for the current period included depreciation and amortization of $730 thousand.

Investing Activities

Net cash used for investing activities was $15,130 thousand for the six months ended March 31, 2025, primarily due to $14,773 thousand on purchase of short-term investments and $241 thousand on long-term investments.

Financing Activities

Net cash provided by financing activities totaled $19,766 thousand for the six months ended March 31, 2025, compared to $10,339 thousand for the same period in 2024. The increase was primarily due to the exercise of warrants during the period.

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 a smaller reporting company under Rule 12b-2 of the Exchange Act, the Company is not required to provide risk factors in this report. For our current risk factors relating to our operations, other than as set forth below, see the section entitled “Risk Factors” contained in our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2024 filed with the SEC on March 4, 2025.

Our business and international expansion may be negatively affected by global political events and foreign policy responses, including tariffs.

There have recently been significant changes to international trade policies and tariffs affecting imports and exports. Any significant increases in tariffs on goods or materials or other changes in trade policy could negatively affect our business and our plans to expand to international markets as we continue to seek partnerships with businesses located outside the U.S., including China.

Recently, the U.S. has implemented a range of new tariffs and increases to existing tariffs. On April 2, 2025, the U.S. instituted a 54% tariff on all goods from China through an executive order. On April 9, 2025, implementation of the executive order issued on April 2, 2025, was paused for a period of 90 days with respect to all countries other than China. As of May 5, 2025, tariffs on most Chinese-made products entering the U.S. were 145% and may continue to increase, or decrease, over the near term. Some of our products are currently assembled by suppliers in China, although our flagship ADAM and Scorpion robot systems are assembled at our Las Vegas headquarters. Any continuation or increase of tariffs on products imported from China could materially and adversely affect our business, financial condition, and results of operations.

The progress and continuation of trade negotiations between the U.S. and China continues to be uncertain and a further escalation of the trade war remains a possibility. These tariffs have, and will continue to have, an adverse effect on our results of operations and profit margins. We can provide no assurance regarding the magnitude, scope or duration of the imposed tariffs or the magnitude, scope or duration from any relief in increases to such tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., China or other countries, nor that any strategies we may implement to mitigate the impact of such tariffs or other trade actions will be successful.