RICHTECH ROBOTICS INC. (RR)

ITEM 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations

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 Securities
and Exchange Commission filings. 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” and elsewhere in this Report.
These risks could cause our actual results to differ materially from any future performance suggested below.

Overview

Richtech Robotics, Inc. is
a leading innovator and provider of advanced robotics solutions designed to 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 Fiscal Year 2024

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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:

Results of Operations

Comparison of the fiscal years ended September
30, 2024 and 2023

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

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Revenue

The total revenue
for the fiscal year ended September 30, 2024 and 2023, was $4,240 thousand and $8,759 thousand, respectively. The $4,519 thousand decrease,
or 51%, for fiscal year 2024 is primarily attributed to the strategic transition to the RaaS model, which impacts the timing of revenue
recognition. While this transition may initially reduce revenue, it is expected to generate a more predictable and recurring revenue stream
over the long term.

In 2024, the Company generated
$4.2 million in total revenue, a decrease from $8.8 million in 2023. This decrease was primarily driven by a decline in product revenue
within our Robotics category, partially offset by an increase in leasing revenue. The shift towards service and leasing reflects the ongoing
transition to our Robot-as-a-Service model, which is expected to generate more predictable and recurring revenue streams in the long term.
The following table summarizes the RaaS sales numbers (in thousand):

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Cost of Revenue

Our gross profit decreased
significantly in 2024, declining by 55% from $6.0 million in 2023 to $2.7 million in 2024, our gross margin remained relatively stable.
Our gross margin was 64% in 2024, compared to 69% in the prior year. This slight decrease in gross margin is primarily attributed to adjustments
and write-offs related to our inventory. During the year, we conducted a thorough review of our inventory and identified certain obsolete
and slow-moving items that required adjustments and write-offs. These adjustments impacted on our cost of goods sold and, consequently,
our gross margin. We have implemented measures to improve our inventory management practices and minimize the risk of future inventory
obsolescence.

Despite this slight margin compression, we are pleased with the overall stability of our
gross margin, which reflects the inherent profitability of our business model. We believe that our strategic shift towards an RaaS model,
with its higher-margin recurring revenue streams, will further enhance our profitability in the long term.

Gross Profit

Despite the decrease in revenue, our gross profit remained relatively
stable, decreasing from $6.0 million in 2023 to $2.7 million in 2024. This resulted in a gross margin of 64% in 2024, compared to 69%
in the prior year. This slight decrease in gross margin is primarily attributed to a shift in our revenue mix. As we transition towards
a Robot-as-a-Service (RaaS) model, a higher proportion of our revenue is now generated from service and leasing arrangements. These arrangements
generally have lower gross margins compared to product sales, as they involve ongoing service costs and the amortization of the robot’s
cost over the contract term. However, we believe this strategic shift towards RaaS will benefit us in the long run by creating more predictable
recurring revenue streams and fostering stronger customer relationships.

Research and Development Expenses

We remain committed to investing
in research and development to drive innovation and maintain our competitive edge. R&D expenses increased from $1.9 million in 2023
to $2.0 million in 2024 was due primarily to our increased expenditure in developing new products.

Sales and Marketing Expenses

Our sales and marketing expenses
increased significantly, from $238,000 in 2023 to $1.3 million in 2024. This increase is directly related to our strategic initiatives
to expand our market reach and promote our RaaS (Robot-as-a-Service) offerings.

General and Administrative Expenses

As a newly public company,
we incurred higher general and administrative expenses, which increased from $3.5 million in 2023 to $6.4 million in 2024. This increase
is primarily due to an increase in professional service fees associated with operating as a public company.

Other Income (Expense)

Our total other expenses
increased in 2024, rising from $734,000 in 2023 to $749,000 in 2024. This increase is mainly attributed to higher interest expenses incurred
on outstanding debt. As we scaled our operations and invested in working capital to support our growth, our interest expense increased.
However, we made a strategic decision to prioritize debt reduction and paid off a significant portion of our outstanding loans in the
middle of 2024. This proactive approach to debt management will reduce our interest burden going forward, improve our overall financial
position, and provide us with greater financial flexibility to pursue future growth opportunities

Income Tax Benefit/(Expense)

We recorded an income tax
expense of $318 thousand in 2024. This is primarily driven by the removal of deferred tax benefits. Management determined that it is more
likely than not that the Company will be unable to realize the benefits of these deductible temporary differences in the future.

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 September
30, 2024, our cash and cash equivalents totaled $14.6 million. This represents a significant increase from $433,000 at the end of the
prior fiscal year. The substantial increase in our cash position is primarily attributable to the net proceeds of $40.2 million received
from our initial public offering completed in November 2023 and subsequent financing as described in “ITEM 1. Business – Recent
Developments – Registered Offering.” These proceeds significantly strengthened our balance sheet and provided us with the
financial flexibility to invest in our growth initiatives, including the 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.

46

Comparison of the years ended September 30,
2024 and 2023

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

Operating Activities

Net
cash used in operating activities for the year ended September 30, 2024 was $5,061 thousand, primarily due to a net loss of $8,140 thousand
an increase of $3,079 thousand in net operating assets and liabilities. The cash flow impact from changes in net operating assets and
liabilities was primarily driven by decrease in accounts receivable of $4,217 thousand, deferred tax asset of $518 thousand and operating
lease liabilities of $404 thousand, partially offset by decreases in accounts payable of $976 thousand, tax payable of $456 thousand,
right-of-use asset of $405 thousand and increase in inventory of $326 thousand respectively.

Net cash used in operating
activities for the year ended September 30, 2023 was $2,896 thousand, primarily due to a net loss of $339 thousand and a decrease of $2,557
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 $3,919 thousand, deferred tax asset of $518 thousand and current operating lease liabilities
of $108 thousand, partially offset by decreases in inventory of $551 thousand, right-of-use asset of $67 thousand and increase in accounts
payable and tax payable of $951thousand and $344 thousand, respectively. For the increase in accounts receivable of $3,919 thousand, we
have collected majority of this amount as of the report date.

Investing Activities

Net cash used for investing
activities was $22,731 thousand net cash used for investing activities for year ended September 30, 2024, primarily driven by $15,940
thousand on purchase of short-term investments, $5,470 thousand on purchase of intangible assets, $730 thousand on purchase of long-term
investments and $725 thousand on purchase of equipment.

Net cash used for investing
activities was $26 thousand net cash used for investing activities for year ended September 30, 2023, primarily consisted of cash used
for lending to related parties, and cash collected from loan to related parties

Financing Activities

Net cash provided by financing
activities totaled $41,925 thousand for the year ended September 30, 2024. We received $33,566 thousand from issuance of common stock,
raised approximately $9,286 thousand from issuance of ordinary shares, received loans with a net balance of $3,102 from third parties,
offset by $238 thousand payment of related party debt.

Net cash provided by financing
activities totaled $3,028 thousand for the year ended September 30, 2023. We raised $2,230 thousand from issuance of ordinary shares,
received proceeds of $200 thousand from related party debt, and obtained loans with a net balance of $845 from third parties as of September
30, 2023, offset by $247 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, 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.

47

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 audited
financial statements included elsewhere in this Form 10-K 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-K 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:

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.

ITEM 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations

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 Securities and Exchange Commission filings. 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” 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:

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Results of Operations

Comparison of the years ended September 30,
2023 and 2022

The following table summarizes
our results of operations (in thousands) for the years ended September 30, 2023 and 2022, together with the dollar change in
those items from period to period:

Revenue

The
total revenue for the fiscal years ended September 30, 2023, and 2022, was $8,759 thousand and $6,049 thousand, respectively.
The $2,710 thousand increase, or 45%, increase in revenue in 2023 was a result of the continuous expansion of our customer base and increased
revenue from existing customers. Our revenue (in thousands) by product for the fiscal years ended September 30 is shown below:

Notes:

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For
the fiscal years ended September 30, 2023 and 2022, our overall robotics revenue was $8,464 thousand and $5,298 thousand, respectively.
The $3,166 thousand increase, or 60%, was brought on by the official launch of our ADAM robot,
the culmination of several enterprise deals, and the generally increased adoption rate among medium to small business.

Cost of Revenue, Net

Cost
of revenue, net was $2,744 thousand and $2,098 thousand for the years ended September 30, 2023 and 2022, respectively. The
$646 thousand increase, or 31%, was due primarily to the increase of our robotics revenue in 2023.

Gross Profit

Gross profit as a percentage
of total revenue was 69% for the year ended September 30, 2023 compared to 65% for the year ended September 30, 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 $1,979 thousand and $1,772 thousand for the years ended September 30, 2023 and 2022, respectively. The $207 thousand increase, or
12%, from 2022 to 2023 was due primarily to our increased expenditure in developing new products.

Sales and Marketing Expenses

Sales and marketing expenses
were $238 thousand and $297 thousand for the years ended September 30, 2023 and 2022, respectively. This reduction of $59, or
20%, in marketing costs was primarily due to better efficiency in our ability to target ideal customers by concentrating marketing efforts
on the highest return on investment (ROI) activities. In addition, the success of our marketing efforts in 2022 had already put us at
capacity in terms of manufacturing and installations for 2023.

General and Administrative Expenses

General and administrative
expenses were $3,509 thousand and $2,258 thousand for the years ended September 30, 2023 and 2022, respectively. The $1,251
thousand increase, or 55%, from 2022 to 2023 was due primarily to an increase in professional service fees related to prepare for the
initial public offering, and an increase in commission expenses caused by the higher sales.

Other Income (Expense)

Total other expense was
$734 thousand and $18 thousand for the years ended September 30, 2023 and 2022, respectively. The $716 thousand, or
3,978%, net increase in total other expense was primarily due to the interest expense occurred incurred within the twelve months
ended September 30, 2023. During 2023, we entered into ten short-term loan agreements with different financial entities for the
total principal amount of $1,853. As of September 30, 2023, the short-term loan balance was $845. The majority of these loans have
been paid off, and the remaining balance was $55 as of the reporting date.

Income Tax Benefit/(Expense)

There was an income tax benefit
of $106 thousand for the year ended September 30, 2023, and there was an income tax expense of $113 thousand, for the years
ended September 30, 2022. The $219 thousand difference was primarily due to the loss before income tax generated in 2023. The income
tax benefit and/or expenses recorded for both of the year ended September 30, 2023 and 2022 differ from the U.S. federal statutory
tax rate of 21% due primarily to the tax impact of state income taxes, non-deductible officers’ compensation, and transportation
fringe benefits.

42

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 $2,909 thousand for the year ended September 30, 2023 and $2,646 thousand for the
year ended September 30, 2022, our working capital is in net asset position with $4,092 thousand as of September 30, 2023 and 2,764 thousand
as of September 30, 2022. We launched a new line of robotics products at the end of 2021, which increased our accounts receivable to $5,576
thousand as of September 30, 2023 and $1,656 thousand as of September 30, 2022. We expect to collect the majority of these cash payments
within the next twelve months from the date of this Report. 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.

We will continue seeking
additional capital to expand our operations, advance our products and scale our sales and marketing
capabilities. We will continue seeking additional financing sources to meet our working capital requirements, make investment in
research and development and make capital expenditures needed to maintain and expand our business. 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 years ended September 30,
2023 and 2022

The following table summarizes
our cashflow information (in thousands) for the years ended September 30, 2023 and 2022, together with the dollar change in
those items from period to period:

Operating Activities

Net cash used in operating
activities for the year ended September 30, 2023 was $2,909 thousand, primarily due to a net loss of $339 thousand and a decrease
of $2,570 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 $3,919 thousand, deferred tax asset of $518 thousand and current operating
lease liabilities of $108 thousand, partially offset by decreases in inventory of $551 thousand, right-of-use asset of $67 thousand and
increase in accounts payable and tax payable of $951 thousand and $344 thousand, respectively. For the increase in accounts receivable of $3,919 thousand, we have collected majority of this amount as of the
report date.

43

Net cash used in operating
activities for the year ended September 30, 2022 was $2,646 thousand, primarily due to a net loss of $507 thousand and a decrease
of $2,196 thousand in net operating assets and liabilities, partially offset by a non-cash item of $57 thousand. The cash flow impact
from changes in net operating assets and liabilities was primarily driven by increases in accounts receivable of $1,612 thousand, inventories
of $389 thousand, Right-of-use asset of $382 thousand and a decrease in accounts payable of $305 thousand, partially offset by increases
in current and non-current operating lease liabilities of $387 thousand and tax payable of $108 thousand. The non-cash adjustments to
net loss was an increase of $57 thousand of non-controlling interest.

Investing Activities

Net cash position for investing
activities were $13 thousand and $44 thousand net cash used for investing activities for year ended September 30, 2023 and 2022,
respectively. These amounts primarily consisted of payments made for purchase of property and equipment, sale of property and equipment,
cash used for lending to related parties, and cash collected from loan to related parties for both years.

Financing Activities

Net
cash provided by financing activities totaled $3,028 thousand for the year ended September 30, 2023. We raised $2,230 thousand from
issuance of ordinary shares, received proceeds of $200 thousand from related party debt, and obtained short-term loans with a net balance
of $845 from third parties as of September 30, 2023, offset by $247 thousand payment of related party debt.

Net cash provided by financing
activities totaled $1,664 thousand for the year ended September 30, 2022. We received $1,500 thousand from stockholder capital injection
and $190 thousand from related party debt. These sources of cash were offset by $26 thousand of payments for long-term loans.

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

K

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 audited
financial statements included elsewhere in this Form 10-K 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-K for more information.

44

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:

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.