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 First Quarter of Fiscal Year 2025

• Strategic Transition to Robotics-as-a-Service: We have embarked on a strategic transition from a traditional product sales model to a Robotics-as-a-Service (RaaS) model. This shift is aimed at generating a more predictable and recurring revenue stream over the long term, enhancing customer accessibility to our advanced technologies, and aligning with prevailing industry trends.

• Continued Investment in Research and Development: We remain dedicated to innovation and technological advancement, as evidenced by the increase in research and development expenses during fiscal year 2024. These investments are focused on expanding our product portfolio, enhancing existing offerings, and maintaining our competitive edge in the dynamic robotics market.

• Expansion of Sales and Marketing Efforts: To support the RaaS model and drive customer acquisition, we have significantly increased our investment in sales and marketing initiatives. These efforts are crucial for educating potential customers about the benefits of leasing robotics solutions, building brand awareness, and cultivating new customer relationships.

• Innovative Retail Concepts: We have opened our first One Kitchen store within a Walmart location near Chicago, featuring our AI-powered robot, ADAM, as the centerpiece of the customer experience. We also opened our first Clouffee & Tea store, marking our entry into the rapidly growing market for automated coffee and tea service.

Recent Developments

• In October 2024, we received a notice from Nasdaq regarding non-compliance with the minimum bid price requirement. We regained compliance in January 2025.
• In January 2025, we received warrant exercise notices from three investors, resulting in the issuance of 3,814,611 shares of Class B common stock and proceeds of $5,149,724.85.
• In February 2025, we entered into a warrant exercise inducement offer letter with a holder of Existing Warrants, generating gross proceeds of approximately $3,644,726 before deducting financial advisory fees.
• In February 2025, we entered into a Settlement Agreement with ACSS, pursuant to which we agreed to pay ACSS a sum of $430,000.

Factors and Trends Affecting Our Business and Results of Operations

• Increased competition leading to price competition and declining profit margins
• Potential decline in customer demand during a recession
• Supply chain disruptions due to factors affecting our China-based suppliers
• Increasing general and administrative expenses as a public company
• Inflationary pressures affecting component costs and profit margins
• Rising interest rates leading to higher borrowing costs and reduced consumer spending

Results of Operations

Comparison of the three months ended December 31, 2024 and 2023

Metric (in thousands)	Q4 2024	Q4 2023	Change
Revenue, net	$1,257	$1,106	$151
Cost of revenue, net	$123	$497	$(374)
Gross profit	$1,134	$609	$525
Research and development	$484	$834	$(350)
Sales and marketing	$245	$595	$(350)
General and administrative	$4,303	$1,443	$2,860
Loss from operations	$(3,898)	$(2,263)	$(1,635)
Net loss	$(3,548)	$(2,750)	$(798)

Revenue

• Total revenue increased by 14% to $1,257 thousand, primarily due to the strategic expansion of our service and leasing offerings, particularly the RaaS model.
• The RaaS model allows us to provide our advanced robotic solutions to a wider range of customers by reducing the barrier to entry associated with high upfront costs.

Cost of Revenue, Net

• Cost of revenue decreased by 75% to $123 thousand, primarily due to the transition towards the RaaS model and favorable changes in product costs.
• Under the RaaS model, the associated costs are spread out over the lease term, resulting in a lower cost of revenue in the current period.
• We also benefited from lower product costs due to increased robot volume and better pricing negotiations with suppliers.

Gross Profit

• Gross profit increased by 86% to $1,134 thousand, with a gross margin of 90% compared to 55% in the prior year period.
• The strategic shift towards the RaaS model and the decrease in product costs contributed to the significant improvement in gross profit and gross margin.

Sales and Marketing Expenses

• Sales and marketing expenses decreased by 59% to $245 thousand, primarily due to the success of our referral program and other cost-saving measures.
• We have implemented various initiatives to improve the efficiency and effectiveness of our sales and marketing efforts, including leveraging digital marketing channels and investing in new sales and marketing tools and technologies.

General and Administrative Expenses

• General and administrative expenses increased by 198% to $4,301 thousand, primarily due to higher professional and legal fees associated with being a public company, as well as increased payroll expenses from workforce expansion.
• We are committed to managing these expenses effectively and implementing cost optimization measures to align with our overall financial performance.

Other Income (Expense)

• Total other income was $329 thousand, compared to total other expense of $486 thousand in the prior year period.
• The net decrease in total other expense was primarily due to higher interest income from investments and lower interest expenses from debt repayment.

Liquidity and Capital Resources

• As of December 31, 2024, our cash and cash equivalents totaled $19.8 million, representing a $5.2 million increase from the prior fiscal year-end.
• The increase in cash was primarily attributable to $9.2 million in net proceeds from the issuance of new shares, which strengthened our balance sheet and provided financial flexibility for growth initiatives.

Trend Information and Outlook

• 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, profitability, liquidity, or capital resources.
• Seasonality does not materially affect our business or results of operations.
• We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

• The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.
• We have elected to take advantage of the extended transition period for complying with new or revised accounting standards as an “emerging growth company” under the JOBS Act.