As filed with the Securities and Exchange Commission on May 1, 2023

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

____________________

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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PRESTO AUTOMATION INC.
(Exact name of registrant as specified in its charter)

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985 Industrial Road
San Carlos, CA 94070
Telephone: (650) 817-9012
(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

____________________

Krishna Gupta
Presto Automation Inc.
985 Industrial Road
San Carlos, CA 94070
Telephone: (650) 817-9012
(Name, address, including zip code and telephone number, including area code, of agent for service)

____________________

Copies to:

Colin Diamond
Laura Katherine Mann
White & Case LLP
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 819-8200

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Approximate date of commencement of proposed sale of the securities to the public:    From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the “Securities Act”) check the following box:  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, the Selling Securityholders may sell up to an aggregate of 400,000 shares of Common Stock from time to time through any means described in the section entitled “Plan of Distribution.” More specific terms of any securities that the Selling Securityholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the common stock being offered and the terms of the offering.

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “Where You Can Find More Information.”

Neither we nor the Selling Securityholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We and the Selling Securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

On November 10, 2021, Ventoux CCM Acquisition Corp. (“VTAQ”), Ventoux Merger Sub I Inc. (“Ventoux Merger Sub I”), Ventoux Merger Sub II LLC (“Ventoux Merger Sub II”), and E La Carte, Inc. (“Legacy Presto”) entered into an Agreement and Plan of Merger, as amended on April 1, 2022 and July 25, 2022 (the “Merger Agreement”), pursuant to which, among other transactions, on September 21, 2022 (the “Closing Date”), Ventoux Merger Sub I merged with and into Legacy Presto (the “First Merger”), with Legacy Presto surviving as a wholly-owned subsidiary of VTAQ (the “Surviving Corporation”), and immediately following the First Merger and as part of the same overall transaction as the First Merger, the Surviving Corporation merged with and into Ventoux Merger Sub II (the “Second Merger”), with Ventoux Merger Sub II surviving as a wholly-owned subsidiary of VTAQ (the First Merger and Second Merger, together with the other transactions described in the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination, VTAQ changed its name to “Presto Automation Inc.” (sometimes referred to herein as “New Presto”).

Unless the context indicates otherwise, references to the “Company,” “PRST,” “we,” “us” and “our” refer to Presto Automation Inc., a Delaware corporation, and its consolidated subsidiaries following the Business Combination. References to “Ventoux” refer to Ventoux CCM Acquisition Corp. prior to the Business Combination and references to “Legacy Presto” refer to E La Carte, Inc. prior to the Business Combination.

TRADEMARKS

This document contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.

FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and “Presto” refer to Presto Automation Inc.

In this document:

•        “Aggregate Fully Diluted Company Common Shares” means (A) the fully-diluted number of shares of Presto Common Stock outstanding immediately prior to the Effective Time minus, if any, (B) any shares of Presto Common Stock (1) issued or issuable in connection with certain permitted acquisitions undertaken by the Company prior to the Closing, (2) held in the treasury of the Company or owned by VTAQ, Ventoux Merger Sub, Ventoux Merger Sub II or the Company immediately prior to the Effective Time, and (3) owned by a holder who is entitled to demand and has properly demanded appraisal for such shares in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law;

•        “Amended and Restated Registration Rights Agreement” means the amended and restated registration rights agreement entered into between New Presto, the Sponsors, Cleveland Avenue, VTAQ’s directors and officers, the Note Investor and certain Presto Stockholders in connection with the consummation of the Business Combination;

•        “Amended and Restated Warrant Agreement” means the amended and restated warrant agreement entered into between New Presto, the Sponsors and Continental in connection with the consummation of the Business Combination;

•        “Business Combination” means the business combination pursuant to the Merger Agreement;

•        “Bylaws” means the bylaws of Presto;

•        “Chardan” means Chardan Capital Markets, LLC, a New York limited liability company;

•        “Chardan Investments” means Chardan International Investments, LLC, one of the Sponsors of VTAQ;

•        “Charter” or “Current Charter” means Presto’s current amended and restated certificate of incorporation as filed with the Secretary of State on September 21, 2022;

•        “Closing” means the closing of the Business Combination;

•        “Code” means the Internal Revenue Code of 1986, as amended;

•        “Committee” means a committee of at least two people appointed by the Presto Board to administer the Incentive Plan;

•        “Continental” means Continental Stock Transfer & Trust Company;

•        “Contingent Consideration” means 15,000,000 additional shares of the common stock of New Presto to be issued to the securityholders of Presto, contingent on achievement of certain milestones;

•        “DGCL” means the Delaware General Corporation Law;

•        “Effective Time” means the time at which the Business Combination became effective pursuant to its terms;

•        “Exchange Act” means the Securities Exchange Act of 1934, as amended;

•        “Exchange Ratio” means the quotient obtained by dividing (a) 52,500,000 by (b) the number of Aggregate Fully Diluted Company Common Shares;

•        “Financing Warrants” means 1,500,000 warrants that were newly issued to the lenders party to the Credit Agreement, bearing substantially similar terms to the Private Placement Warrants;

•        “First Merger” means the merger pursuant to which Ventoux Merger Sub will merge with and into Presto;

•        “Founders Shares” means the outstanding shares of our Common Stock held by the Sponsors, current and former directors and affiliates of our management team and certain permitted transferees since December 23, 2020;

•        “Legacy Presto” means E La Carte, Inc., a Delaware corporation, prior to the Business Combination;

•        “Mergers” means the First Merger and Second Merger;

•        “Merger Agreement” means the Agreement and Plan of Merger, dated as of November 10, 2021, as amended by that certain Amendment to Agreement and Plan of Merger, dated as of April 1, 2022, as further amended by that Second Amendment to Agreement and Plan of Merger, dated as of July 25, 2022, by and among VTAQ, Ventoux Merger Sub I, Ventoux Merger Sub II and Presto;

•        “Metropolitan” means Metropolitan Partners Group Administration, LLC, a Delaware limited liability company;

•        “Metropolitan Entities” means Metropolitan Levered Partners Fund VII, LP, a Delaware limited partnership, Metropolitan Partners Fund VII, LP, a Delaware limited partnership, Metropolitan Offshore Partners Fund VII, LP, a Delaware limited partnership and CEOF Holdings LP, a Delaware limited partnership;

•        “Metropolitan Registration Rights Agreement” means the registration rights agreement dated as of March 31, 2023, by and among Presto and the Metropolitan Entities;

•        “New Presto” means VTAQ after the event in which Presto becomes a wholly-owned subsidiary of VTAQ and VTAQ changes its name to Presto Automation Inc.;

•        “PIPE Investment” means the sale of an aggregate of 7,143,687 shares of Common Stock for an aggregate consideration of $55,000,000 in a private placement that closed simultaneously with the consummation of the Business Combination;

•        “Preferred Stock” means 1,000,000 shares of preferred stock, par value $0.0001 per share, of the 51,000,000 total number of authorized shares of all classes of capital stock;

•        “Presto Board” means the board of directors of Presto Automation Inc. following the Business Combination;

•        “Presto Common Stock” means the common stock of New Presto, $0.0001 par value per share;

•        “Presto RSU” means each outstanding restricted stock unit in respect of Presto Common Stock;

•        “Private Placement Warrants” or “Private Warrants” means 6,125,000 warrants that were sold by VTAQ to the Sponsor in a private sale prior to the VTAQ IPO and that remain outstanding as of the date of this prospectus;

•        “Public Warrants” means the warrants issued in the VTAQ IPO, each of which entitles the holder to purchase one-half (1/2) of a share of Common Stock, initially at an exercise price of $11.50 per share and as subsequently adjusted to an exercise price of $8.21 per share as further described herein;

•        “Resale Warrants” means the Warrants to Purchase Common Stock, dated as of March 31, 2023, by and between Presto and each of the Metropolitan Entities;

•        “RSUs” means restricted stock units;

•        “Second Merger” means the merger immediately following the First Merger between the Surviving Corporation and Ventoux Merger Sub II;

•        “Securities Act” means the Securities Act of 1933, as amended;

•        “Sponsors” means Ventoux Acquisition Holdings LLC and Chardan International Investments, LLC;

•        “Surviving Corporation” means the surviving entity following the First Merger and continuing (immediately following the First Merger) as a wholly-owned subsidiary of VTAQ;

•        “Trust Account” means the Trust Account of VTAQ, which holds the net proceeds of the VTAQ IPO and the sale of the private units, together with interest earned thereon, less amounts released to pay franchise and income tax obligations;

•        “Unit” means a unit consisting of one share of Common Stock, one warrant to purchase one-half (1/2) of a share of Common Stock and one right to receive one-twentieth (1/20) of a share of Common Stock;

•        “Ventoux Acquisition” means Ventoux Acquisition Holdings LLC;

•        “Ventoux Merger Sub I” means Ventoux Merger Sub I Inc., a Delaware corporation and a direct, wholly-owned subsidiary of VTAQ;

•        “Ventoux Merger Sub II” means Ventoux Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of VTAQ;

•        “VTAQ” means Ventoux CCM Acquisition Corp;

•        “VTAQ Common Stock” means the common stock of VTAQ, $0.0001 par value per share; and

•        “VTAQ IPO” means VTAQ’s initial public offering.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements about the financial condition, results of operations, earnings outlook and prospects of Presto. In addition, any statements that refer to projections (including EBITDA, adjusted EBITDA, EBITDA margin and revenue projections), forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements are based on projections prepared by, and are the responsibility of Presto’s management teams.

Factors that could cause actual results to differ from those implied by the forward-looking statements in this prospectus are more fully described under the heading “Risk Factors” and elsewhere in this prospectus. The risks described under the heading “Risk Factors” are not exhaustive. Other sections of this prospectus describe additional factors that could adversely affect the business, financial condition or results of operations of Presto. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can Presto assess the impact of all such risk factors on the business of Presto, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to Presto or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. Presto undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

RISK FACTORS

The following risk factors are not exhaustive and investors are encouraged to perform their own investigation with respect to the business, prospects, financial condition and operating results of Presto. You should carefully consider the following risk factors in addition to the other information included in this prospectus, including matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, prospects, financial condition or operating results. The following discussion should be read in conjunction with our financial statements and notes to the financial statements included herein.

Risks Related to Presto’s Business and Business Development

Risks Relating to our Business Plan

If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction, or adequately address competitive challenges.

Our operations have expanded rapidly and we expect that will continue. To manage our current and anticipated future growth effectively, we must continue to maintain and enhance our finance and accounting systems and controls, as well as our information technology (“IT”) and security infrastructure. For example, we expect we will need to invest in and seek to enhance our supply chain, inventory and IT systems and capabilities, including with respect to internal information sharing and interconnectivity between various systems within our infrastructure.

We must also attract, train, and retain a significant number of qualified sales and marketing personnel, client support personnel, professional services personnel, software engineers, technical personnel, and management personnel, without undermining our corporate culture of rapid innovation, teamwork, and attention to customer success that has been central to our growth.

Failure to effectively manage our growth could also lead us to over-invest or under-invest in our development and operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, financial losses, loss of productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees. To support our growth, we expect to make significant sales and marketing expenditures to increase sales of our platform and increase awareness of our brand and significant research and development expenses to increase the functionality of our platform and to introduce additional related products and services. A significant portion of our investments in our sales and marketing and research and development activities will precede the benefits from such investments, and we cannot be sure that we will receive an adequate return on our investments. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue may not increase or may grow more slowly than expected, and we may be unable to implement our business strategy.

Our business may be materially adversely affected if our existing and future products fail to achieve and maintain customer acceptance.

Our platform is made up of our Touch and AI Platform products, of which the AI Platform products are relatively new. It is possible that these products may be difficult to sell and/or it may become evident that these products, or different products that we develop in the future, are not productive uses of our capital or time. This could result in us modifying our business and focus away from these products. There are substantial risks and uncertainties associated with these efforts, and we could invest significant capital and resources.

If we eliminate or phase out a product and are not able to offer and successfully market and sell an alternative product, our revenue may decrease, which could have a material adverse effect on our results of operations. Developing new products also imposes burdens on our internal teams, including management, compliance, product development and marketing. These processes are costly, and our efforts to develop, integrate and enhance our products may not be successful, or our initial timetables for the development, introduction and roll-out of new products and profitability targets may not be met. If we incur significant costs in developing new products, if we are not able to successfully market and sell these new products, or if our customers fail to widely accept these new products, there could be a material adverse effect on our results of operations due to a decrease of our revenues and a reduction of our profitability.

In addition, our revenues, costs, margin, and cash flow may fluctuate because new products generally require startup costs while revenues take time to develop, which may adversely impact our results of operations.

If we do not attract new customers and increase our customers’ use of our platform, our business will suffer.

We derive, and expect to continue to derive, a majority of our revenue and cash inflows from our integrated cloud-based platform, which encompasses software and hardware components. As such, our ability to attract new customers, retain existing customers, and increase the use of our platform by existing customers is critical to our success.

Our future revenue will depend on our success in attracting additional customers to our platform. Our ability to attract additional customers will depend on a number of factors, including the effectiveness of our sales team, the success of our marketing levels, our levels of investment in expanding our sales and marketing teams, referrals by existing customers, and the availability of competitive restaurant technology platforms. We may not experience the same levels of success with respect to our customer acquisition strategies as seen in prior periods, and if the costs associated with acquiring new customers materially rises in the future, our expenses may rise significantly.

In addition to attracting new customers, we will seek to expand the usage of our platform by broadening the adoption by our customers of various products included within our platform. Further, while many of our customers deploy our platform to all of their restaurant locations, some of our customers initially deploy our platform to a subset of locations. For those customers, we seek to expand the use of our platform to additional locations over time. Our ability to increase adoption of our products by our customers and to increase penetration of our existing customers’ locations will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing and our ability to demonstrate the value proposition of our products.

We may not be able to sustain our recent revenue growth in future periods.

We have grown rapidly over the last several years, and our recent revenue growth rate and financial performance should not be considered indicative of our future performance. You should not rely on our revenue or key business metrics for any previous quarterly or annual period as indicative of our revenue, revenue growth, key business metrics, or key business metrics growth in future periods. In particular, our revenue growth rate has fluctuated in prior periods. We expect our revenue growth rate to fluctuate over the short and long term. We may experience declines in our revenue growth rate as a result of a number of factors, including slowing demand for our platform, insufficient growth in the number of customers and their guests that utilize our platform, increasing competition, changing customer and guest behaviors, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, the impact of regulatory requirements, and the maturation of our business, among others.

The COVID-19 pandemic has adversely impacted and may continue to adversely impact our business, financial condition, and results of operations.

The COVID-19 pandemic has adversely affected workforces, consumers, economies, and financial markets globally. The adverse impact of the pandemic has been and may continue to be particularly acute among enterprise restaurant customers, which comprise the majority of our customer base, and many franchisees have been required to cease or substantially diminish business operations for an indeterminate period of time. The pandemic also has disrupted, and may continue to disrupt, our supply chains and relationships with third-party partners. For example, during 2020 and 2021, we experienced difficulties related to equipment availability and spare parts, extended repair times and international shipping delays. These issues resulted in a delay in product expansion and maintenance revenue, as well as increased the time necessary to negotiate customer contracts and for product implementation. While we have seen these difficulties subside during 2022, especially in regards to international shipments, there can be no assurance that these improvements will continue. Furthermore, the pandemic has also had, and may continue to have, a variety of additional effects on our business and operations, including reducing the demand for our platform, restricting our operations and sales and marketing efforts, impeding our ability to conduct product development and other important business activities, and decreasing technology spending.

However, while adversely impacting the restaurant industry and our business, the COVID-19 pandemic has also increased the focus by restaurants on the need for a digital technology platform that can address the need for safe, frictionless, contact-free experiences in restaurants and address off-premise dining. While we believe these

trends may positively impact our business in the longer-term, we cannot predict the extent to which the increased focus on the need for digital solutions such as those offered by our platform will persist. For example, we cannot predict the manner and extent to which the reemergence of on-premise dining and other types of in-person activity will impact our business, including with respect to engaging with our products. Due to the uncertainty of the COVID-19 pandemic, we will continue to assess the situation, including abiding by any government-imposed restrictions, market-by-market. We are unable to accurately predict the ultimate impact that the COVID-19 pandemic will have on our operations going forward due to uncertainties that will be dictated by the length of time that the disruptions resulting from the pandemic continue, which will, in turn, depend on the currently unknowable duration and severity of the COVID-19 pandemic, the impact of governmental regulations that might be imposed in response to the pandemic, the effectiveness and wide-spread availability of the vaccines, the speed and extent to which normal economic and operating conditions will resume, and overall changes in consumer behavior. We also cannot accurately forecast the potential impact of additional outbreaks as government restrictions are relaxed, the impact of further shelter-in-place or other government restrictions that are implemented in response to such outbreaks, or the impact on our customers’ ability to remain in business, each of which could continue to have an adverse impact on our business.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our liquidity, our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

Our limited operating history with our new products in a new and developing market makes it difficult to evaluate our current business and future prospects, and may increase the risk that we will not be successful.

We have a limited operating history with our products, particularly our AI Platform products. As a result, we have less experience with these products and their related pricing models, which makes it difficult to accurately assess our future prospects. You should consider our future prospects in light of the challenges and uncertainties that we face, including:

•        the fact that it may not be possible to fully discern the trends that we are subject to;

•        that we operate in a new and developing market with a rapidly changing competitive landscape;

•        that we may be unable to accurately predict our revenue and operating expenses for new products that we release;

•        our ability to enhance or retain our brand among customers and potential customers;

•        that we may in the future enter into additional new and developing markets that may not develop as we expect or that our platform may not adequately address; and

•        that elements of our business strategy are new and subject to ongoing development

We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not manage these risks successfully, our reputation, business, results of operations, and prospects will be harmed.

We currently generate significant revenue from a small number of large customers, and the loss or decline in revenue from any of these customers could harm our business, results of operations, and financial condition.

For the six months ended December 31, 2022 and 2021 and the years ended June 30, 2022 and 2021, our three largest restaurant logos (including, as applicable, the franchisees of such restaurants aggregated as a single customer for reporting purposes) generated an aggregate of approximately 97%, 94%, 93% and 93% of our revenue, respectively. Although these customers have previously entered into multi-year term contracts with us, they may reduce or terminate their usage of our platform or decide not to renew their agreements with us and we have and may continue to transition certain customer relationships between the enterprise and franchisee levels.

We have in the past, and we may in the future, lose one or more of our largest customers. While no such losses have been material to date, in the event that any other of our largest restaurant customers do not continue to use our platform, use fewer of our products, use our products in a more limited capacity, or not at all, our business, results of operations, and financial condition could be adversely affected in the future.

If we fail to continue to improve and enhance the functionality, performance, reliability, design, security, or scalability of our platform in a manner that responds to our customers’ evolving needs, our business may be adversely affected.

Our industry is characterized by rapid technological change, frequent new product and service introductions, and evolving industry standards. Our success has been based on our ability to identify and anticipate the needs of our customers and design and maintain a platform that provides them with the tools they need to operate their businesses in a manner that is productive and meets or exceeds their expectations. Our ability to attract new customers and increase sales to both new and existing customers will depend in large part on our ability to continue to improve and enhance the functionality, performance, reliability, design, security, and scalability of our platform. Additionally, to achieve and maintain market acceptance for our platform, we must effectively integrate with new or existing software solutions that meet changing customer demands in a timely manner.

As we expand our platform and services, and as the number of our customers with higher volume sales increases, we expect that we will need to offer increased functionality, scalability and support, including to keep our platform, systems, and services secure, which requires us to devote additional resources to such efforts. To the extent we are not able to enhance our platform’s functionality in order to maintain its utility and security, enhance our platform’s scalability in order to maintain its performance and availability, or improve our support functions in order to meet increased customer service demands, our business, operating results, and financial condition could be adversely affected.

We may experience difficulties with software development that could delay or prevent the development, deployment, introduction, or implementation of new products and enhancements. Software development involves a significant amount of time, as it can take our developers months to update, code, and test new and upgraded products and integrate those products into our platform. We must also continually update, test, certify, maintain, and enhance our software platform. We may make significant investments in new products or enhancements that may not achieve expected returns. The continual improvement and enhancement of our platform requires significant investment and we may not have the resources to make such investment. Our improvements and enhancements may not result in our ability to recoup our investments in a timely manner, or at all. The improvement and enhancement of the functionality, performance, reliability, design, security, and scalability of our platform is expensive and complex, and to the extent we are not able to perform it in a manner that responds to our customers’ evolving needs, our business, operating results, and financial condition will be adversely affected.

Our brand is integral to our success. If we fail to effectively maintain, promote, and enhance our brand, our business and competitive advantage may be harmed.

We believe that maintaining, promoting, and enhancing the Presto brand is critical to expanding our business. Maintaining and enhancing our brand will depend largely on our ability to continue to provide high-quality, well-designed, useful, reliable, and innovative products, which we may not do successfully in the future.

Errors, defects, security incidents, disruptions, or other performance problems with our platform, including with third-party applications, services, or partners, including our partners who provide payment processing services, may harm our reputation and brand. We may introduce new products or terms of service that our customers or their consumers do not like, which may negatively affect our brand. Additionally, if our customers or their consumers have a negative experience using our products or third-party solutions integrated within our platform, such an experience may affect our brand, especially as and if we continue to attract multi-location restaurant customers to our platform.

Any unfavorable media coverage or negative publicity about our company, for example, the quality and reliability of our platform, our privacy and security practices or the loss or misuse of our customer data or consumers’ personal information, our platform changes, litigation, or regulatory activity, or regarding the actions of our partners or our customers, could seriously harm our reputation. Such negative publicity could also adversely affect the size, demographics, engagement, and loyalty of our customers, and result in decreased revenue, which could seriously harm our business.

We believe that the importance of brand recognition will increase as competition in our market increases, which we expect to occur. In addition to our ability to provide reliable and useful products at competitive prices, successful promotion of our brand will depend on the effectiveness of our marketing efforts. While we primarily market our platform through direct sales efforts, our platform is also marketed through a number of free traffic sources, including customer referrals and word-of-mouth. Our efforts to market our brand have involved significant expenses, which we intend to increase, and as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive. Our marketing spend may not yield increased revenue, and even if it does, any increased revenue may not offset the expenses we incur in building and maintaining our brand.

We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results, and financial condition. We may also engage the services of third parties who provide consulting services to support our business and the failure to identify and/or retain such third parties could adversely affect our business, operating results and financial condition.

Our future performance depends on the continued services and contributions of our senior management and other key employees to execute on our business plan, keep our platform stable and secure, and to identify and pursue new opportunities and platform innovations. The failure to properly manage succession plans or the loss of services of senior management or other key employees could significantly delay or prevent the achievement of our strategic objectives. From time to time, there may be changes in our senior management team resulting from the hiring or departure of executives, which could disrupt our business. We do not maintain key person life insurance policies on any of our employees. The loss of the services of one or more of our senior management or other key employees for any reason could adversely affect our business, financial condition, and operating results, and require significant amounts of time, training, and resources to find suitable replacements and integrate them within our business, and could affect our corporate culture.

We engage the services of third parties who provide us with certain consulting services to support our business. Any failure to identify and/or retain such third parties could adversely affect our business, operating results and financial condition and could require significant amounts of time and resources to find suitable replacements.

Our ability to recruit, retain, and develop qualified personnel is critical to our success and growth.

Our business functions at the intersection of rapidly changing technological, social, economic, and regulatory environments that require a wide range of expertise and intellectual capital. For us to successfully compete and grow, we must recruit, retain, and develop personnel who can provide the necessary expertise across a broad spectrum of disciplines. In addition, we must develop, maintain and, as necessary, implement appropriate succession plans to ensure we have the necessary human resources capable of maintaining continuity in our business.

The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. The trading price of our Common Stock following the Business Combination has been volatile, has been subject to fluctuations in response to various factors and may not appreciate. If the perceived value of our equity awards declines for these or other reasons, it may adversely affect our ability to attract and retain highly qualified employees. Our employees may receive significant proceeds from sales of our equity in the public markets following the Business Combination, which may reduce their motivation to continue to work for us.

Any future litigation against us could be costly and time-consuming to defend.

We may become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our customers, our partners, or third parties in connection with commercial disputes or our technology or employment claims made by our current or former employees. Litigation might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, financial condition, and results of operations. Insurance might not cover such claims, might not provide sufficient payments to

cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position, and results of operations.

If we are unable to make acquisitions and investments, or successfully integrate them into our business, our business, results of operations and financial condition could be adversely affected.

As part of our growth strategy, we will continue to consider a wide array of potential strategic transactions, including acquisitions of businesses, new technologies, services and other assets and strategic investments that complement our business. We may evaluate target companies and make acquisitions in the future. There is no assurance that such acquired businesses will be successfully integrated into our business or generate substantial growth or revenue.

Acquisitions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations, including:

•        intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;

•        failure or material delay in closing a transaction;

•        a need for additional capital that was not anticipated at the time of the acquisition;

•        transaction-related lawsuits or claims;

•        difficulties in integrating the technologies, operations, existing contracts and personnel of an acquired company;

•        difficulties in retaining key employees or business partners of an acquired company;

•        diversion of financial and management resources from existing operations or alternative acquisition opportunities;

•        failure to realize the anticipated benefits or synergies of a transaction;

•        failure to identify the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, litigation, accounting practices, or employee or user issues;

•        risks that regulatory bodies may enact new laws or promulgate new regulations that are adverse to an acquired company or business;

•        theft of our trade secrets or confidential information that we share with potential acquisition candidates;

•        risk that an acquired company or investment in new offerings cannibalizes a portion of our existing business; and

•        adverse market reaction to an acquisition.

If we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, new technologies, services and other assets and strategic investments, or if we fail to successfully integrate such acquisitions or investments, our business, results of operations and financial condition could be adversely affected.

Businesses we acquire may not have disclosure controls and procedures and internal controls over financial reporting, cybersecurity controls and data privacy compliance programs, or their existing controls and programs may be weaker than or otherwise not in conformity with ours.

Depending upon the nature and scale of any future businesses we acquire, the implementation of our disclosure controls and procedures as well as the implementation of our internal controls over financial reporting, cybersecurity and data privacy at an acquired company may be a lengthy process and may divert our attention from other business

operations. Our integration efforts may periodically expose deficiencies or suspected deficiencies in the controls, procedures and programs of an acquired company that were not identified in our due diligence undertaken prior to consummating the acquisition. Where there exists a risk of deficiencies in controls, procedures or programs, we may not be in a position to comply with our obligations under applicable laws, regulations, rules and listing standards or we may be required to avail ourselves of scope limitations with respect to certifications required thereunder, and, as a result, our business and financial condition may be materially harmed.

Our pricing decisions and pricing models may adversely affect our ability to attract new customers and retain existing customers.

We have limited experience determining the optimal prices for our newest products. We have changed our pricing model from time to time and expect to do so in the future. It may turn out that the new pricing models, or the pricing for any other products we may develop, are not optimal, which may result in our products not being profitable or not gaining market share. As competitors introduce new products that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing models that we have used historically. Pricing decisions and pricing models may also impact the mix of adoption among our products and negatively impact our overall revenue. Moreover, restaurant brands may be sensitive to price increases or to the prices offered by competitors. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenue, profitability, financial position, and cash flows.

If our technical and maintenance support services are not satisfactory to our customers, they may not buy future products, which could materially and adversely affect our future results of operations and financial condition.

Our business relies on our customers’ satisfaction with the technical and maintenance support services we provide to support our products. If we fail to provide technical and maintenance support services that are responsive, satisfy our customers’ expectations, and timely resolve issues that they encounter with our products, then they may not purchase additional products from us in the future.

If we fail to maintain a consistently high level of customer service or if we fail to manage our reputation, our brand, business and financial results may be harmed.

We believe our focus on customer service and support is critical to attract and onboard new customers and grow our business. As a result, we have invested heavily in the quality and training of our support team, along with the tools they use to provide this service.

The number of our customers has grown significantly, which puts additional pressure on our support staff. If we are unable to provide efficient and effective customer support at scale, our ability to grow our operations may be harmed and we may need to hire additional support personnel, which could harm our margins and results of operations.

If we or our third-party service providers are unable to maintain a consistently high level of customer service, we may lose existing customers. In addition, our ability to attract new customers is highly dependent on our reputation and on positive recommendations from our existing customers. Any failure to maintain a consistently high level of customer service and to help our customers quickly resolve issues and provide effective ongoing support could harm our ability to retain existing customers and attract new customers and our reputation with existing or potential customers could suffer. We may experience difficulties maintaining a consistent level of service across our international operations and third-party providers.

If we cannot maintain our corporate culture as we grow, our success and our business and competitive position may be harmed.

We believe that a key contributor to our success to date has been our corporate culture, which is based on an ownership mentality, teamwork, customer focus, integrity, and respect. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. Our anticipated headcount growth and our transition from a private company to a public company may make it difficult to maintain these important aspects of our culture. If we fail to maintain our corporate culture, or if we are unable to retain or hire key personnel, our business and competitive position may be harmed.

Increases in food, labor, and occupancy costs could adversely affect results of operations

Our financial success is dependent, in part, on the ability of our restaurant customers to increase the size and revenue of their business. These customers may experience increased operating costs, including as a result of changes to food, labor, occupancy, insurance, and supply costs, as well as costs of safety equipment related to the COVID-19 pandemic, rising inflation and interest rates, and they may be unable to recover these costs through increased menu prices. Various factors beyond our control, including government regulations relating to independent contractor classifications and minimum wage increases, may affect the total cost of running a restaurant. If our current or future customers are unable to maintain or increase the size and revenue of their business, or maintain profitability, our business, financial condition, and results of operations could be harmed.

Our risk management strategies may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

We operate in a rapidly changing industry. Accordingly, our risk management strategies may not be fully effective to identify, monitor, and manage all risks that our business encounters. In addition, when we introduce new products, focus on expanding relationships with new types of customers, or begin to operate in new markets, we may be less able to forecast risk levels and reserve accurately for potential losses, as a result of fraud or otherwise. If our strategies are not fully effective or we are not successful in identifying and mitigating all risks to which we are or may be exposed, we may suffer uninsured liability or harm to our reputation, or be subject to litigation or regulatory actions, any of which could adversely affect our business, financial condition, and results of operations.

Provisions of our financial instruments may restrict our ability to pursue our business strategies.

We are party to a credit agreement (as amended, restated, supplemented or otherwise modified from time to time, including as amended by the First Amendment (defined below), the “Credit Agreement”) with Metropolitan, as administrative, payment and collateral agent, the lenders and other parties party thereto, pursuant to which such lenders extended us term loans having an aggregate original principal amount of $55 million, which we borrowed in full at the consummation of the Business Combination. On March 31, 2023, we entered into a Waiver and First Amendment to Credit Agreement with Metropolitan, as administrative, payment and collateral agent, the lenders and other parties party thereto, pursuant to which the parties thereto agreed to, among other things, temporarily waive compliance with certain financial covenants and permanently waive certain defaults (the “First Amendment”). The First Amendment temporarily waives compliance with certain financial covenants, including a minimum cash covenant and maximum net leverage ratio of 1.20 to 1.00, as well as amending other affirmative and restrictive covenants. The terms of our outstanding debt may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute business strategies in the manner desired. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy, invest in our growth strategy, and compete against companies who are not subject to such restrictions.

A failure by us to comply with these covenants or the payment requirements specified in our financial instruments could result in an event of default under the agreement, which would give the lenders the right to declare any and all debt outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, the lenders under the Credit Agreement would have the right to proceed against the collateral in which we granted a security interest to them, which consists of all owned goods and equipment, inventory, contract rights and general intangibles (including intellectual property), forms of obligations owing to us, cash and deposit accounts, and personal property. If our debt were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could materially and adversely affect our cash flows, business, results of operations, and financial condition. There can be no assurance that we will remain in compliance with the covenants set forth in the Credit Agreement, and if we do not comply with such covenants, our debt may be accelerated, which could adversely affect us. Further, the terms of any new or additional financing may be on terms that are more restrictive or less desirable to us.

Risks Related to Presto’s Technology and Privacy

We and certain of our third-party partners, service providers, and subprocessors transmit and store personal information of our customers and consumers. If the security of this information is compromised or is otherwise accessed without authorization, our reputation may be harmed and we may be exposed to liability and loss of business.

We transmit and store personal information and other confidential information of our partners, our customers, and consumers. Third-party applications integrated with our platform may also handle or store personal information, credit card information, including cardholder data and sensitive authentication data, or other confidential information. We do not proactively monitor the content that our customers upload and store, or the information provided to us through the applications integrated with our platform, and, therefore, we do not control the substance of the content on our servers, which may include personal information. Additionally, we use third-party service providers and subprocessors to help us deliver services to customers and consumers. These service providers and subprocessors may handle or store personal information, credit card information, or other confidential information. There may in the future be successful attempts by third parties to obtain unauthorized access to the personal information of our partners, our customers, and consumers. This information could also be otherwise exposed through human error, malfeasance, or otherwise. The unauthorized release, unauthorized access, or compromise of this information could have an adverse effect on our business, financial condition, and results of operations. Even if such a data breach did not arise out of our actions or inactions, or if it were to affect one or more of our competitors or our customers’ competitors, the resulting consumer concern could negatively affect our customers and our business.

We integrate with a number of third-party service providers in order to meet our customers’ needs, and although we contractually require our customers to ensure the security of such service providers, a security breach of one of these providers could become negatively associated with our brand, or our assistance in responding to such a breach could tie up our internal resources. By the nature of the integrations, we could also get directly drawn into any resulting lawsuits. We are also subject to federal and state laws regarding cybersecurity and the protection of data. Our agreements with customers and partners require us to notify them in the event of certain security incidents. Additionally, some jurisdictions, as well as our contracts with certain customers, require us to use industry-standard or reasonable measures to safeguard personal information or confidential information. As cardholder data and sensitive authentication data is transmitted through our platform, we may be required by card networks and our contracts with payment processors to adhere to PCI-DSS. We are also subject to the operating rules of the National Automated Clearing House Association (“NACHA”). The NACHA Rules and Operating Guidelines impose obligations on us and our partner financial institutions, such as audit and oversight by the financial institutions and the imposition of mandatory corrective action, including termination, for serious violations.

Our failure to comply with legal, regulatory or contractual requirements, and the rules of payment card networks and self-regulatory organizations, including PCI-DSS and NACHA, around the security of personal information, cardholder data, or sensitive authentication data, could lead to significant fines and penalties imposed by regulators and card networks, as well as claims by our customers, consumers, or other relevant stakeholders. These proceedings or violations could force us to spend money in defense or settlement of these proceedings, result in the imposition of monetary liability or injunctive relief, divert management’s time and attention, increase our costs of doing business, and materially adversely affect our reputation and the demand for our platform. In addition, if our security measures fail to protect credit card information adequately, we could be liable to our partners, our customers and, consumers for their losses. As a result, we could be subject to fines, we could face regulatory or other legal action, and our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that our insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or changes in our insurance policies, including premium increases, or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business and results of operations.

We are subject to stringent and changing privacy laws, regulations and standards, and contractual obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business.

The regulatory framework for privacy and security issues in the United States is rapidly evolving. Laws in all 50 states require us to provide notice to customers when certain sensitive personal information has been disclosed as a result of a data breach. These laws are frequently inconsistent, and compliance in the event of a widespread data breach is costly. Moreover, states regularly enact new laws and regulations, which require us to provide consumers with certain disclosures related to our privacy practices, as well as maintain systems necessary to allow customers to invoke their rights. For example, on January 1, 2020, California adopted the California Consumer Privacy Act of 2018 (“CCPA”), which provides new data privacy rights for consumers and new operational requirements for covered businesses. The CCPA gives California residents more control over their personal information and includes a statutory damages framework and private right of action imposing civil penalties against businesses that fail to comply with certain security practices. Although the CCPA’s implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and exposure to liability. Moreover, additional states that adopt privacy laws that differ from the CCPA may require us to do unanticipated and unbudgeted work in order to comply with additional privacy and data security requirements. The costs associated with compliance may impede our development and could limit the adoption of our services. Finally, any failure by our vendors to comply with applicable law or regulations could result in proceedings against us by governmental entities or others.

We publish privacy policies, self-certifications and documentation. Although we endeavor to comply with our published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so. Such failures can subject us to potential local, state, and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, resulting in reputational or financial harm to the company. Furthermore, if customer concerns regarding data security increase, customers may be hesitant to provide us with the data necessary to provide our service effectively. This could generally limit the adoption of our product and the growth of our company.

Security breaches, denial of service attacks, or other hacking and phishing attacks on our systems or the systems with which our platform integrates could harm our reputation or subject us to significant liability, and adversely affect our business and financial results.

We operate in an industry which is prone to cyber-attacks. In our operation as a private company, our board of directors reviews cybersecurity risks brought to its attention by members of senior management who report up to our board of directors. We have an established in-house security team which is responsible for reviewing and overseeing our cybersecurity program and bringing any cybersecurity risks to the attention of leadership and the board of directors. Failure to prevent or mitigate security breaches and improper access to or disclosure of our data, our customers’ data, or their consumers’ data, could result in the loss or misuse of such data, which could harm our business and reputation. The security measures we have integrated into our systems and processes, which are designed to prevent or minimize security breaches, may not function as expected or may not be sufficient to protect our internal networks and platform against attacks. Further, our platform also integrates with third-party applications and points of sale (“POS”) and management systems over which we exercise no control. Such third-party applications and POS and management systems are also susceptible to security breaches, which could directly or indirectly result in a breach of our platform. The failure of a customer’s third-party front-end provider to adequately protect their systems could result in an attack that we are unable to prevent from the back-end, which could result in a service outage for all customers, and may require us to take the affected customer offline to restore service to the platform for other customers. In addition, techniques used to sabotage or to obtain unauthorized access to data change frequently. As a result, we may be unable to anticipate these techniques or implement adequate measures to prevent an intrusion into our networks directly, or into our platform through the third-party applications or POS and management systems with which our platform integrates.

Our storage and use of our customers’ data concerning their restaurants and consumers is essential to their use of our platform, which stores, transmits and processes our customers’ proprietary information and information relating to them and consumers. If a security breach were to occur, as a result of third-party action, employee error, malfeasance, or otherwise, and the confidentiality, integrity or availability of our customers’ data was disrupted, we could incur significant liability to our customers and their consumers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation. In addition, any loss of customer or individual consumer data could create significant monetary damages for us that may harm our ability to operate the business.

A security vulnerability in our platform or POS integration software could compromise our customers’ in-store networks, which could expose customer or consumer information beyond what we collect through our platform. As a multitenant software-as-a-service (“SaaS”) provider, despite our logical separation of data between customers, we may face an increased risk of accidentally commingling data between customers due to employee error, a software bug, or otherwise, which may result in unauthorized disclosure of data between customers. We may in the future be subject to distributed denial of service (“DDoS”) attacks, a technique used by hackers to take an internet service offline by overloading its servers. A DDoS attack could delay or interrupt service to our customers and their consumers and may deter consumers from ordering or engaging with our customers’ restaurants. Our platform and third-party applications may also be subject to DDoS attacks in the future and we cannot guarantee that applicable recovery systems, security protocols, network protection mechanisms and other procedures are or will be adequate to prevent network and service interruption, system failure, or data loss. In addition, computer malware, viruses, hacking, credential stuffing, social engineering, phishing, physical theft, and other attacks by third parties are prevalent in our industry. We may experience such attacks in the future and, as a result of our increased visibility, we believe that we are increasingly a target for such breaches and attacks.

Moreover, our platform and third-party applications, services, or POS and management systems integrated with our platform, could be breached if vulnerabilities in our platform or third-party applications or POS and management systems are exploited by unauthorized third parties or due to employee error, malfeasance, or otherwise. Further, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords, or other information or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data. Because techniques used to obtain unauthorized access change frequently and the size and severity of DDoS attacks and security breaches are increasing, we may be unable to implement adequate preventative measures or stop DDoS attacks or security breaches while they are occurring. In addition to our own platform and applications, some of the third parties we work with may receive information provided by us, by our customers, or by our customers’ consumers through web or mobile applications integrated with our platform. If these third parties fail to adhere to adequate data security practices, or in the event of a breach of their networks, our own and our customers’ data may be improperly accessed, used, or disclosed.

Any actual or perceived DDoS attack or security breach of our platform, systems, and networks could damage our reputation and brand, expose us to a risk of litigation and possible liability and require us to expend significant capital and other resources to respond to and alleviate problems caused by the DDoS attack or security breach. Our ability to retain adequate cyber-crime and liability insurance may be reduced. Some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data and our agreements with certain customers and partners require us to notify them in the event of a security incident. Such mandatory disclosures are costly, could lead to negative publicity, and may cause our customers to lose confidence in the effectiveness of our data security measures. Moreover, if a high-profile security breach occurs with respect to another SaaS provider or one of the service providers we partner with, customers may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain revenue from existing customers or attract new ones. Any of these events could harm our reputation or subject us to significant liability, and materially and adversely affect our business and financial results.

Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.

Our continued growth depends in part on the ability of our existing and potential customers to access our platform at any time and within an acceptable amount of time. Our platform is proprietary, and we rely on the expertise of members of our engineering, operations, and software development teams for our platform’s continued performance. We have experienced, and may in the future experience, disruptions, outages, and other performance problems related to our platform due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, delays in scaling our technical infrastructure if we do not maintain enough excess capacity and accurately predict our infrastructure requirements, capacity constraints due to an overwhelming number of users accessing our platform simultaneously, denial-of-service attacks, human error, actions or inactions attributable to third parties, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, ransomware, malware, or other events. Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism, including by our own employees. Some of our systems are not fully redundant

and our disaster recovery planning may not be sufficient for all eventualities. Further, our business and/or network interruption insurance may not be sufficient to cover all of our losses that may result from interruptions in our service as a result of systems failures and similar events.

From time to time we may experience limited periods of server downtime due to server failure or other technical difficulties. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our platform becomes more complex and our user traffic increases. If our platform is unavailable or if our users are unable to access our platform within a reasonable amount of time, or at all, our business would be adversely affected and our brand could be harmed. In the event of any of the factors described above, or certain other failures of our infrastructure, customer or guest data may be permanently lost. Moreover, a limited number of our agreements with customers may provide for limited service level commitments from time to time.

If we experience significant periods of service downtime in the future, we may be subject to claims by our customers against these service level commitments. These events have resulted in losses in revenue, though such losses have not been material to date. System failures in the future could result in significant losses of revenue.

To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.

We are dependent upon customers’ continued and unimpeded access to the internet, and upon their willingness to use the internet for commerce.

Our success depends upon the general public’s ability to access the internet, including through mobile devices, and its continued willingness to use the internet to pay for purchases, communicate, access social media, research and conduct commercial transactions. The adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet, including changes to laws or regulations impacting internet neutrality, could decrease the demand for our platforms, increase our operating costs, or otherwise adversely affect our business. Given uncertainty around these rules, we could experience discriminatory or anti-competitive practices that could impede both our and our customers’ growth, increase our costs or adversely affect our business. In the future, providers of internet browsers could introduce new features that would make it difficult for customers to use our platform. In addition, internet browsers for desktop, tablets or mobile devices could introduce new features, or change existing browser specifications, such that they would be incompatible with our platform. If customers become unable, unwilling or less willing to use the internet for commerce for any reason, including lack of access to high-speed communications equipment, congestion of traffic on the internet, internet outages or delays, disruptions or other damage to customers’ computers, increases in the cost of accessing the internet and security and privacy risks or the perception of such risks, our business could be adversely affected.

Defects, errors, or vulnerabilities in our applications, backend systems, hardware, or other technology systems and those of third-party technology providers could harm our reputation and brand and adversely impact our business, financial condition, and results of operations.

The software underlying our platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. Our practice is to effect frequent releases of software updates. Third-party software that we incorporate into our platform and our backend systems, hardware, or other technology systems, or those of third-party technology providers, may also be subject to defects, errors, or vulnerabilities. Any such defects, errors, or vulnerabilities could result in negative publicity, a loss of customers or loss of revenue, and access or other performance issues. Such vulnerabilities could also be exploited by bad actors and result in exposure of customer or guest data, or otherwise result in a security breach or other security incident. We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to address and eliminate vulnerabilities. Any failure to timely and effectively resolve any such errors, defects, or vulnerabilities could adversely affect our business, reputation, brand, financial condition, and results of operations.

Financial Condition and Capital Requirements

We have a history of generating net losses, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not achieve or maintain profitability in the future.

We have incurred a net loss in each year since our inception and have a significant accumulated deficit. We incurred net losses since our inception, including net losses of $27.8 million, $13.6 million, $56.3 million and $49.8 million for the six month periods ended December 31, 2022 and 2021 and the fiscal years ended June 30, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $183 million. Our losses and accumulated deficit are a result of the substantial investments we have made to grow our business. We expect our costs will increase over time and our losses to continue as we expect to continue to invest significant additional funds in expanding our business, sales, and marketing activities, research and development as we continue to build software designed specifically for the restaurant industry, and maintaining high levels of customer support, each of which we consider critical to our continued success. We also expect to incur additional general and administrative expenses as a result of our growth and expect our costs to increase to support our operations as a public company. In addition, to support the continued growth of our business and to meet the demands of continuously changing security and operational requirements, we plan to continue investing in our operations and technology infrastructure. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth. If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses and may not achieve or maintain profitability.

Further, we may make decisions that would adversely affect our short-term operating results if we believe those decisions will improve the experiences of our customers and their guests and if we believe such decisions will improve our operating results over the long term. These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that we expect, in which case our business may be materially and adversely affected.

There is substantial doubt about our ability to continue as a going concern if we do not receive additional financing in a timely manner.

Since inception, we have incurred recurring net losses and negative cash flows from operating activities, and we have financed operations primarily through financing transactions, such as the issuance of convertible promissory notes and loans, and sales of convertible preferred stock. As of December 31, 2022 and June 30, 2022, respectively, we had an accumulated deficit of $183 million and $200.8 million and we expect to continue to generate significant operating losses for the foreseeable future. Therefore, cash and cash equivalents may not be sufficient to fund operating expenses, currently anticipated expenditures and other obligations as they come due, and we may require additional capital infusion to fully fund our ongoing operations. As a result, substantial doubt exists about our ability to continue as a going concern within one year after the issuance date of our financial statements for the three and six month periods ended December 31, 2022 and the fiscal year ended June 30, 2022.

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline.

Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

•        fluctuations in demand for or pricing of our platform, or any of our products;

•        fluctuations in usage of our platform, including due to the potential lack of durability of the growth we have experienced in the near term due to COVID-19 and the associated shelter-in-place orders on consumer preferences for digital ordering and customer adoption of new products as COVID-19 associated restrictions abate;

•        our ability to attract new customers;

•        the timing of customer purchases and deployments;

•        customer expansion rates;

•        the investment in new products relative to investments in our existing infrastructure and platform;

•        fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors;

•        changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;

•        our ability to control costs, including our operating expenses;

•        the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including sales commissions;

•        the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;

•        the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;

•        the effects of acquisitions and their integration;

•        general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;

•        health epidemics or pandemics, such as the COVID-19 pandemic;

•        low levels of consumer and business confidence typically associated with inflationary or recessionary environments;

•        the impact of new accounting pronouncements;

•        changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance;

•        changes in the competitive dynamics of our market, including consolidation among competitors, customers, or our partners;

•        significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our modules and platform capabilities or third-party applications or POS or management systems that our platform integrates with; and

•        other events or factors, including those resulting from hostilities or wars (such as the ongoing invasion of Ukraine by Russia), incidents of terrorism, natural disasters or responses to such events.

Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our Common Stock could decline substantially, and we could face costly lawsuits, including securities class action suits.

Unfavorable conditions in the restaurant industry or the global economy could limit our ability to grow our business and materially impact our financial performance.

Our operating results may vary based on the impact of changes in the restaurant industry or the global economy on us or our customers and their guests. Our revenue growth and potential profitability depend on demand for business management software and platforms serving the restaurant industry. Historically, during economic downturns, there have been reductions in spending on IT as well as pressure for extended billing terms and other financial concessions. If economic conditions deteriorate, our current and prospective customers may elect to decrease their IT budgets, which would limit our ability to grow our business and adversely affect our operating results.

A deterioration in general economic conditions (including distress in financial markets and turmoil in specific economies around the world) may adversely affect our financial performance by causing a reduction in locations through restaurant closures and reduced operating hours. A reduction in the amount of consumer spending or credit card transactions could result in a decrease of our revenue and profits. Adverse economic factors may accelerate the timing, or increase the impact of, risks to our financial performance. These factors could include:

•        declining economies and the pace of economic recovery which can change consumer spending behaviors;

•        low levels of consumer and business confidence typically associated with recessionary environments;

•        high unemployment levels, which may result in decreased spending by consumers;

•        budgetary concerns in the United States and other countries around the world, which could impact consumer confidence and spending;

•        uncertainty and volatility in the performance of our customers’ businesses;

•        customers or consumers decreasing spending for value-added services we market and sell;

•        government actions, including the effect of laws and regulations and any related government stimulus; and

•        disruptions impacting global supply, including those attributable to the ongoing COVID-19 pandemic and those resulting from the ongoing invasion of Ukraine by Russia.

We may require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

We have funded our operations since inception primarily through customer working capital and financing transactions such as the issuance of convertible promissory notes and loans, and sales of convertible preferred stock. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. In particular, the COVID-19 pandemic, the ongoing invasion of Ukraine by Russia and rising inflation and interest rates have caused disruption in the global financial markets, which may reduce our ability to access capital and negatively affect our liquidity in the future. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of Common Stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends to holders of our Common Stock. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our existing common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Common Stock and diluting their interests.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of June 30, 2022, the Company had federal and state NOLs for approximately $134.7 million and $41.6 million, respectively. The state NOLs begin to expire in 2029 if not utilized. It is possible that we will not generate taxable income in time to use NOLs before their expiration, or at all. Under Section 382 and Section 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other tax attributes, including R&D tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5 percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use NOLs and other tax attributes to reduce future taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future, including as a result of the Business Combination.

Under the Tax Cuts and Jobs Act (the “Tax Act”), as amended by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), NOLs arising in taxable years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five taxable years preceding the tax year of such loss, but NOLs arising in taxable years beginning after December 31, 2020 may not be carried back. Additionally, under the Tax Act, as modified by the CARES Act, NOLs from tax years that began after December 31, 2017 may offset no more than 80% of current taxable income annually for taxable years beginning after December 31, 2020, but the 80% limitation on the use of NOLs from tax years that began after December 31, 2017 does not apply for taxable income in tax years beginning before January 1, 2021.

NOLs arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. The balance of our valuation allowance offset our U.S. NOLs at June 30, 2022 such that these changes did not materially impact our balance sheet as of such date. However, in future years, if and when a net deferred tax asset is recognized related to our NOLs, the changes in the carryforward and carryback periods as well as the limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated after December 31, 2020.

There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs and tax credits by certain jurisdictions, including in order to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic, possibly with retroactive effect, or other unforeseen reasons, our existing NOLs and tax credits could expire or otherwise be unavailable to offset future income tax liabilities. A temporary suspension of the use of certain NOLs and tax credits has been enacted in California, and other states may enact suspensions as well. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs and tax credits.

We experience elements of seasonal fluctuations in our financial results, which could cause our stock price to fluctuate.

Our business is highly dependent on the behavior patterns of our customers and their guests. For example, our transaction revenue per location has historically been stronger in the second and third quarters as a result of our customers experiencing greater sales during warmer months, though this effect varies regionally. Seasonality may cause fluctuations in our financial results, and other trends that develop may similarly impact our results of operations.

We rely primarily on third-party insurance policies to insure our operations-related risks. If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition, and results of operations.

We procure third-party insurance policies to cover various operations-related risks including property and general liability, professional liability, directors’ and officers’ liability, workers’ compensation, cybersecurity, technology errors and omissions, ocean/marine cargo, commercial crime and other coverage in amounts and on terms deemed adequate by our management. For certain types of operations-related risks or future risks related to our new and evolving services, we may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate such operations-related risks or risks related to our new and evolving services, and we may have to pay high premiums, self-insured retentions, or deductibles for the coverage we do obtain. Additionally, if any of our insurance providers becomes insolvent, it would be unable to pay any operations-related claims that we make. Further, some of our agreements with customers may require that we procure certain types of insurance, and if we are unable to obtain and maintain such insurance, we would be in violation of the terms of these customer agreements.

If the amount of one or more operations-related claims were to exceed our applicable aggregate coverage limits, we would bear the excess, in addition to amounts already incurred in connection with deductibles, or self-insured retentions. Insurance providers have raised premiums and deductibles for many businesses and may do so in the future. As a result, our insurance and claims expense could increase, or we may decide to raise our deductibles or self-insured retentions when our policies are renewed or replaced. Our business, financial condition, and results of operations could be adversely affected if the cost per claim, premiums, or the number of claims significantly exceeds our historical experience and coverage limits; we experience a claim in excess of our coverage limits; our insurance providers fail to pay on our insurance claims; we experience a claim for which coverage is not provided; or the number of claims under our deductibles or self-insured retentions differs from historical averages.

Recent turmoil in the banking industry may negatively impact our business, results of operations and financial condition.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, the March 2023 failures of Silicon Valley Bank (“SVB”) and Signature Bank (“SNY”), liquidity issues at Credit Suisse, government responses and resulting investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, making it more difficult for us to acquire financing on acceptable terms or at all. Any material decline in available funding

or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, have a material adverse effect on our financial condition, as well as our ability to continue to grow our operations. In addition, the Federal Deposit Insurance Corporation, or FDIC, generally only insures limited amounts per depositor per insured bank. The FDIC insures up to $250,000 per depositor per insured bank account. At December 31, 2022, we had cash and cash equivalents exceeding these federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fail, we may lose our deposits over the federally insured levels. The loss of our deposits would reduce the amount of cash we have available to fund our capital and operating needs.

Risks Related to Presto’s Competition, Sales, and Marketing

Our business is highly competitive. We may not be able to compete successfully against current and future competitors.

We face competition in various aspects of our business and we expect such competition to intensify in the future, as existing and new competitors, including some of our current partners, introduce new products or enhance existing products that are directly competitive with our products. Our platform combines functionality from numerous product categories, and we may compete against providers in each of these categories, including Touch and AI Platform. Our potential new or existing competitors may be able to develop solutions that are better received by customers or may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, regulations, or customer requirements. If competitors, many of which are much better capitalized than we are, are successful in providing our customers with more attractive products or pricing, our business and results of operation may be harmed.

Competition may intensify as current or future competitors enter into business combinations or alliances or raise additional capital, or as established companies in other market segments expand into our market segments. For instance, current or future competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against us in areas where we operate including by integrating additional or competing platforms or features into products they control. In addition, certain customers may choose to partner with our competitors in a specific geographic market, or choose to engage exclusively with our competitors. Further, our current partners could add features to their products, including POS functionality, limit or terminate the availability of their products on our platform, or directly compete with our products by expanding their product offerings. Current and future competitors may also choose to offer a different pricing model or to undercut prices in an effort to increase their market share. If we cannot compete successfully against current and future competitors, our business, results of operations, and financial condition could be negatively impacted.

Mergers of or other strategic transactions by our competitors, our customers, or our partners could weaken our competitive position or reduce our revenue.

If one or more of our competitors partners were to consolidate or partner with another one of our competitors the change in landscape could adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our third party partners, thereby limiting our ability to promote our platform. In addition, we may lose customers that merge with or are acquired by companies using a competitor’s or an internally developed solution. Disruptions in our business caused by these events could adversely affect our revenue growth and results of operations.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.

We have historically incurred significant costs and experienced long sales cycles when selling to customers. In the restaurant brand market segment, the decision to adopt any of our products may require the approval of multiple technical and business decision makers, including security, compliance, operations, finance and treasury, marketing, and IT. In addition, while our customers may more quickly deploy our products on a limited basis, before they will commit to deploying our products at scale, they often require extensive education about our platform and significant customer support time or pilot programs, engage in protracted pricing negotiations and seek to secure development resources. In addition, sales cycles for our customers in general and larger customers in particular, are inherently complex and unpredictable. These complex and resource intensive sales efforts could place additional strain on our development and engineering resources. Further, even after our customers contract to use our platform, they may require extensive integration or deployment resources from us before they become active customers, which have at times extended to multiple quarterly periods following the execution of the agreement. Finally, our customers may choose to develop their own solutions that do not include any or all

of our products. They also may demand reductions in pricing as their usage of our platform increases, which could have an adverse impact on our gross margin. If we are unable to increase the revenue that we derive from these customers, then our business, results of operations and financial condition may be adversely affected.

Risks Related to Presto’s Partners and Other Third Parties

Our products may be affected from time to time by design and manufacturing defects that could adversely affect our business and result in harm to our reputation.

We offer products that can be affected by design and manufacturing defects. Defects may exist in components and products that we source from third parties. Any such defects could make our services and products unsafe, create a risk of property damage and personal injury, and subject us to the hazards and uncertainties of product liability claims and related litigation. In addition, from time to time, we may experience outages, service slowdowns, or errors that affect our products. As a result, our products may not perform as anticipated and may not meet customer expectations. There can be no assurance that we will be able to detect and fix all issues and defects in the hardware in our products. Failure to do so could result in widespread technical and performance issues affecting our products and could lead to claims against us. We maintain general liability insurance; however, design and manufacturing defects, and claims related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance coverage. In addition, we may be exposed to recalls, product replacements or modifications, write-offs of inventory, property and equipment, or intangible assets, and significant warranty and other expenses such as litigation costs and regulatory fines. If we cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms, or maintain adequate coverage against potential claims, our financial results could be adversely impacted.

We are at risk of shortages, price increases, changes, delays or discontinuations of that hardware, particularly in regards to our Touch product, which could disrupt and materially adversely affect our business.

Our Touch product requires the use of third-party hardware that we sell to customers. Due to such reliance, we are subject to the risk of shortages and long lead times in the supply of hardware needed for our Touch product.

We have in the past experienced, and may in the future experience, product shortages or delays or other hardware problems, and the availability of such products may be difficult to predict. Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports, civil unrest, hostilities or wars (such as the ongoing invasion of Ukraine by Russia), disruptions or shutdowns caused by health crises such as the COVID-19 pandemic, or loss of or damage to hardware products while they are in transit or storage, could limit the supply of such products. We are reliant on one supplier for our legacy Touch product device and one supplier for our latest-generation Touch device, and in the event of a shortage or supply interruption from those suppliers, or should those suppliers be otherwise unable to supply products to us in the quantities and on the time frames we require, we may not be able to develop alternate sources quickly, cost-effectively, or at all. For additional information on these suppliers and our agreements with them, see the section entitled “Business — Platform and Product Offering.” Any interruption or delay in product supply, any increases in product costs, or the inability to obtain this hardware from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to provide it to our customers on a timely basis. This could harm our relationships with our customers, prevent us from acquiring new customers, and materially and adversely affect our business.

We rely substantially on one third-party to process payments made by guests of our customers, and if we cannot manage risks related to our relationships with this payment processor or any future third-party payment processors, our business, financial condition, and results of operations could be adversely affected.

We currently substantially rely on Fiserv as our third-party payment processor to process payments made by guests of customers on our platform. While we are seeking to develop payment processing relationships with other payment processors, we expect to continue to rely on a limited number of payment processors for the foreseeable future. In the event that Fiserv or any additional third-party payment processors in the future fail to maintain adequate levels of support, experience interrupted operations, do not provide high quality service, discontinue their lines of business, terminate their contractual arrangements with us, or cease or reduce operations, we may suffer additional burden and be required to pursue new third-party relationships, which could materially disrupt our operations and our ability to provide our products and services, and could divert management’s time and resources. In addition, such incidents could result in periods of time during which our platform cannot function properly, and therefore cannot

collect payments from customers and their guests, which could adversely affect our relationships with our customers and our business, reputation, brand, financial condition, and results of operations. It would be difficult to replace third-party processors, including Fiserv, in a timely manner if they were unwilling or unable to provide us with these services in the future, and our business and operations could be adversely affected. If these services fail or are of poor quality, our business, reputation, and operating results could be harmed.

In the event Fiserv or any additional third-party payment processors in the future are subjected to losses, including any fines for reversals, chargebacks, or fraud assessed by Visa, Mastercard and other payment networks (collectively, the “Payment Networks”), that are caused by us or our customers due to failure to comply with the Payment Network rules or applicable law, our third-party payment processor may impose penalties on our customers or restrict our ability to process transactions through the Payment Networks, and we may lose our ability to process payments through one or more Payment Networks. Thus, in the event of a significant loss by Fiserv or any future third-party payment processor, we may be required to expend a large amount of cash promptly upon notification of the occurrence of such an event. A contractual dispute with our processing partner could adversely affect our business, financial condition, or results of operations.

We rely on computer hardware, purchased or leased, and software licensed from and services rendered by third parties in order to run our business.

We rely on computer hardware, purchased or leased, and software licensed from and services rendered by third parties in order to run our business. Third-party hardware, software and services may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use or any failures of third-party hardware, software or services could result in delays in our ability to run our business until equivalent hardware, software or services are developed by us or, if available, identified, obtained and integrated, which could be costly and time-consuming and may not result in an equivalent solution, any of which could cause an adverse effect on our business and operating results. Further, customers could assert claims against us in connection with service disruptions or cease conducting business with us altogether. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming and costly to defend and could seriously damage our reputation and brand, making it harder for us to sell our solutions.

Payment transactions processed on our platform may subject us to regulatory requirements and the rules of payment card networks, and other risks that could be costly and difficult to comply with or that could harm our business.

The payment card networks require us to comply with payment card network operating rules, including special operating rules that apply to us as a “payment service provider” that provides payment processing-related services to merchants and payment processors. The payment card networks set these network rules and have discretion to interpret them and change them. We are also required by our payment processors to comply with payment card network operating rules and we have agreed to reimburse our payment processors for any fines they are assessed by payment card networks as a result of any rule violations by us or our customers. Any changes to or interpretations of the network rules that are inconsistent with the way we and the payment processors and merchants currently operate may require us to make changes to our business that could be costly or difficult to implement. If we fail to make such changes or otherwise resolve the issue with the payment card networks, the networks could fine us, cancel or suspend our registration as a payment service provider, or prohibit us from processing payment cards, which would have an adverse effect on our business, financial condition, and operating results. In addition, violations of the network rules or any failure to maintain good standing with the payment card networks as a payment service provider could impact our ability to facilitate payment card transactions on our platform, increase our costs, or could otherwise harm our business. If we were unable to facilitate payment card transactions on our platform, or were limited in our ability to do so, our business would be materially and adversely affected.

If we fail to comply with the rules and regulations adopted by the payment card networks, we would be in breach of our contractual obligations to our payment processors, financial institutions, or partners. Such failure to comply may subject us to fines, penalties, damages, higher transaction fees and civil liability, and could eventually prevent us from processing or accepting payment cards or could lead to a loss of payment processor partners, even if there is no compromise of customer or consumer information. In the event that we are found to be in violation of any of these legal or regulatory requirements, our business, financial condition, and results of operations could be harmed.

We believe the licensing requirements of the Financial Crimes Enforcement Network and state agencies that regulate banks, money service businesses, money transmitters, and other providers of electronic commerce services do not apply to us. One or more governmental agencies may conclude that, under its statutes or regulations, we are

engaged in activity requiring licensing or registration. In that event, we may be subject to monetary penalties, adverse publicity, and may be required to cease doing business with residents of those states until we obtain the requisite license or registration.

We rely upon Amazon Web Services and other infrastructure to operate our platform, and any disruption of or interference with our use of these providers would adversely affect our business, results of operations, and financial condition.

We outsource substantial portions of our cloud infrastructure to Amazon Web Services (“AWS”), and other infrastructure providers. Our customers need to be able to access our platform at any time, without interruption or degradation of performance. Their failure to access our platform could make us liable for service credits or, in more severe cases, contractual breaches. We are, therefore, vulnerable to service interruptions at AWS and other infrastructure providers, which could negatively impact our revenue. We have experienced, and expect that in the future we may experience interruptions, delays and outages in service and availability due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, and capacity constraints including those related to the complexity and number of order permutations. Capacity constraints could be due to a number of potential causes, including technical failures, natural disasters, fraud, or security attacks. In addition, if an infrastructure provider’s security is compromised, or our modules or platform are unavailable or our customers or their consumers are unable to use our platform within a reasonable amount of time or at all, then our business, results of operations, and financial condition could be adversely affected. In some instances, we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our customers. It may become increasingly difficult to maintain and improve our platform performance, especially during peak usage times, as our platform become more complex and the usage of our platform increases. To the extent that we do not effectively address capacity constraints, either through AWS or alternative providers of cloud infrastructure, our business, results of operations, and financial condition may be adversely affected. In addition, any changes in service levels from AWS may adversely affect our ability to meet our customers’ requirements.

Any of the above circumstances or events may harm our reputation, cause customers to stop using our platform, impair our ability to increase revenue from existing customers, impair our ability to grow our customer base, subject us to financial penalties and liabilities under our service level agreements and otherwise harm our business, results of operations, and financial condition.

Certain estimates and information contained in this prospectus are based on information from third-party sources, and we do not independently verify the accuracy or completeness of the data contained in such sources or the methodologies for collecting such data. Any real or perceived inaccuracies in such estimates or information may harm our reputation and adversely affect your ability to evaluate our business.

Certain estimates and information contained in this prospectus, including general expectations concerning our industry and the market in which we operate, our market opportunity, and our market size, are based to some extent on information provided by third parties. This information involves a number of assumptions and limitations, and, although we believe the information from such third-party sources is reliable, we have not independently verified the accuracy or completeness of the information contained in such third-party sources or the methodologies for collecting such information or developing such estimates. If there are any limitations or errors with respect to such information, or if such estimates are inaccurate, your ability to evaluate our business and prospects could be impaired and our reputation with investors could suffer.

For example, market opportunity estimates included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Not every customer included in our market opportunity estimates will necessarily purchase any, or all, of the products on our platform, and some or many of those potential customers may choose to use products offered by our competitors. We cannot be certain that any particular number or percentage of the potential customers included in our calculation of our market opportunity will generate any particular level of revenue for us. Even if the market in which we compete meets the size estimates and growth forecasts in this prospectus, our business could fail to grow for a variety of reasons, including competition, customer preferences and the other risks described in this prospectus. Accordingly, the estimates of market opportunity and forecasts of market growth included in this prospectus should not be taken as necessarily indicative of our future growth.

Our growth depends in part on the success of our strategic relationships with third parties and our ability to integrate with third-party applications and software.

The success of our platform depends, in part, on our ability to integrate third-party applications, software, and other offerings into our platform. We anticipate that the growth of our business will continue to depend on third-party relationships including relationships with our POS systems, digital agencies, payment processors, loyalty providers, and other partners. Identifying, negotiating, and documenting relationships with third parties and integrating third-party content and technology requires significant time and resources, and third-party providers may choose to terminate their relationship with us, compete directly against us, enter into exclusive arrangements with our competitors, or make material changes to their businesses, solutions, or services that could be detrimental to our business.

Third-party developers may change the features of their offering of applications and software or alter the terms governing the use of their offerings in a manner that is adverse to us. We may also be unable to maintain our relationships with certain third-parties if we are unable to integrate our platform with their offerings. In addition, third-parties may refuse to partner with us or limit or restrict our access to their offerings. We may not be able to adapt to the data transfer requirements of third party offerings. If third-party applications or software change such that we do not, or cannot, maintain the compatibility of our platform with these applications and software, or if we fail to ensure there are third-party applications and software that our customers desire to add to their ordering or delivery portals, demand for our platform could decline. If we are unable to maintain technical interoperability, our customers may not be able to effectively integrate our platform with other systems and services they use. If we fail to integrate our platform with new third-party offerings that our customers need to operate their businesses, or to provide the proper support or ease of integration our customers require, we may not be able to offer the functionality that our customers and their consumers expect, which would harm our business.

The third party service providers we integrate with may not perform as expected under our agreements or under their agreements with our customers, we or our customers may in the future have disagreements or disputes with such providers, or such providers may experience reduced growth or change their business models in ways that are disadvantageous to us or our customers. If we lose access to solutions or services from a particular partner, or experience a significant reduction or disruption in the supply of services from a current partner, it could have an adverse effect on our business and operating results.

Our transaction revenue is partly dependent on our third-party developer partners to develop and update all entertainment applications. The decisions of developers to remove their applications or change the terms of our commercial relationship could adversely impact our transaction revenue.

We rely on third-party developers to develop the entertainment applications that we host. Accordingly, our business depends on our ability to promote, enter into and maintain successful commercial relationships with such developers. In general, we rely on standard terms of service for third party developers which govern the distribution, operations and fee sharing arrangements for hosting entertainment applications. In some cases, we rely on negotiated agreements with third party developers that modify our standard terms of service. There can be no assurance that the developers that have developed applications will continue to maintain these entertainment applications or be willing to provide new entertainment applications in the future. If we are unable to attract and maintain these third party developer relationships, if the terms and conditions of such commercial relationships become less favorable to us or if a developer decides to remove their entertainment applications, our transaction revenue would suffer.

In addition, we rely on our developer partners to manage and maintain their entertainment applications, including updating their entertainment applications to include the latest version. The failure of our developer partners to provide timely and reliable updates could adversely impact our financial condition and results of operations and prospects.

Finally, a small number of entertainment applications and related developers have accounted for a substantial portion of our transaction revenue. If these entertainment applications were to become less popular or be removed and we are unable to identify suitable replacements, our transaction revenue would be would suffer.

Failure to effectively expand our sales capabilities could harm our ability to increase our subscriber base and achieve broader market acceptance of our platforms.

Increasing our customer base and achieving broader market acceptance of our platform will depend, in part, on our ability to effectively expand our sales and marketing operations and activities. We are substantially dependent on our direct sales force to obtain new customers. We plan to continue to expand our direct sales force and to increase the number of our sales professionals. Our ability to achieve significant revenue growth in the future will depend, in part, on our success in recruiting, training and retaining a sufficient number of experienced sales professionals. New hires require significant training and time before they achieve full productivity, particularly in new sales segments and territories. Our recent and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business. Because we do not have a long history of expanding our sales force, we cannot predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. If our sales expansion efforts do not generate a significant increase in revenue, our business and future growth prospects could be harmed.

Risks Related to Government Regulation and Other Compliance Requirements

Our business is subject to a variety of U.S. laws and regulations, many of which are unsettled and still developing, and our or our customers’ failure to comply with such laws and regulations could subject us to claims or otherwise adversely affect our business, financial condition, or results of operations.

The restaurant technology industry and the offering of products therein is relatively nascent and rapidly evolving. We are subject to a variety of U.S. laws and regulations. Laws, regulations and standards governing issues such as worker classification, labor and employment, anti-discrimination, online credit card payments, payment and payroll processing, financial services, gratuities, pricing and commissions, text messaging, subscription services, intellectual property, data retention, privacy, data security, consumer protection, background checks, website and mobile application accessibility, wages, and tax are often complex and subject to varying interpretations, in many cases due to their lack of specificity. The scope and interpretation of existing and new laws, and whether they are applicable to us, is often uncertain and may be conflicting, including varying standards and interpretations between state and federal law, between individual states, and even at the city and municipality level. As a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as federal, state, and local administrative agencies.

It is also likely that if our business grows and evolves and our services are used in a greater number of geographies, we would become subject to laws and regulations in additional jurisdictions. It is difficult to predict how existing laws would be applied to our business and the new laws to which it may become subject.

We may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned products and/or increase our cost of doing business. While we have and will need to continue to invest in the development of policies and procedures in order to comply with the requirements of the evolving, highly regulated regulatory regimes applicable to our business and those of our customers, our compliance programs are relatively nascent and we cannot assure that our compliance programs will prevent the violation of one or more laws or regulations. If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, including any future laws or obligations that we may not be able to anticipate at this time, we could be adversely affected, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources, discontinue certain services or platform features, limit our customer base, or find ways to limit our offerings in particular jurisdictions, which would adversely affect our business. Any failure to comply with applicable laws and regulations could also subject us to claims and other legal and regulatory proceedings, fines, or other penalties, criminal and civil proceedings, forfeiture of significant assets, and other enforcement actions. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could adversely affect our reputation or otherwise impact the growth of our business.

Further, from time to time, we leverage third parties to help conduct our businesses. We may be held liable for any corrupt or other illegal activities of these third-party partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

Illegal or improper activities of customers or customer noncompliance with laws and regulations governing, among other things, online credit card payments, gratuities, pricing and commissions, data retention, privacy, data security, consumer protection, wages, and tax could expose us to liability and adversely affect our business, brand, financial condition, and results of operations. While we have implemented various measures intended to anticipate, identify, and address the risk of these types of activities, these measures may not adequately address or prevent all illegal or improper activities by these parties from occurring and such conduct could expose us to liability, including through litigation, or adversely affect our brand or reputation.

Significant changes in U.S. and international trade policies that restrict imports or increase tariffs could have a material adverse effect on our results of operations.

We depend on third party manufacturers and suppliers located outside of the United States, including in China, in connection with the manufacture of certain of our products and related components. Accordingly, our business is subject to risks associated with international manufacturing. For example, the former Trump Administration imposed significant increases in tariffs on goods imported into the United States from China and other countries. Increased tariffs, including on goods imported from China, or the institution of additional protectionist trade measures could adversely affect our manufacturing costs, and in turn, our business, financial condition, operating results, and cash flows.

We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our products and adversely affect our results of operations.

An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States ruled in South Dakota v. Wayfair, Inc. et al (“Wayfair”), that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could have a material adverse effect on our business and results of operations.

Government regulation of the internet, mobile devices, and e-commerce is evolving, and unfavorable changes could substantially adversely affect our business, financial condition, and results of operations.

We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the internet, mobile devices, and e-commerce that are constantly evolving. Existing and future laws and regulations, or changes thereto, may impede the growth of the internet, mobile devices, or other online services, increase the cost of providing online services, require us to change our business practices, or raise compliance costs or other costs of doing business. These evolving regulations and laws may cover taxation, tariffs, user privacy, data protection, pricing and commissions, content, copyrights, distribution, social media marketing, advertising practices, sweepstakes, mobile, electronic contracts and other communications, consumer protection, and the characteristics and quality of our services. It is not clear how existing laws governing issues such as property ownership, sales, use, and other taxes, and personal privacy apply to the Internet. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation and brand, a loss in business, and proceedings or actions against us by governmental entities or others, which could adversely affect our business, financial condition, and results of operations.

Risks Related to Presto’s Intellectual Property

If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue and become subject to costly litigation to protect our rights.

As of December 31, 2022 we had eight registered domain names for websites that we use in our business, such as presto.com and other variations, three registered trademarks and no registered patents or copyrights. We rely on trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements with third parties, and other contractual protections, to protect our intellectual property rights, including our proprietary technology, software, know-how, and brand. We require our employees, consultants, and other third parties to enter into confidentiality and proprietary information and invention assignment agreements, and we control and monitor access to our software, documentation, proprietary technology, and other confidential information. Our policy is to require all employees and independent contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, developments, processes, and other intellectual property generated by them on our behalf and under which they agree to protect our confidential information. In addition, we generally enter into confidentiality agreements with our customers and partners.

We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our existing products, impair the functionality of our products, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or harm our reputation or brand. In addition, we may be required to license additional technology from third parties to develop and market new products, and we may not be able to license that technology on commercially reasonable terms or at all. Our inability to license this technology could harm our ability to compete.

We may be subject to claims by third parties of intellectual property infringement.

The software industry is characterized by the existence of a large number of patents, trademarks, copyrights, trade secrets, and other intellectual property rights, and frequent claims and related litigation regarding such intellectual property rights. Third parties have in the past asserted, and may in the future assert, that our platform, technology, methods or practices infringe, misappropriate, or otherwise violate their intellectual property or other proprietary rights. Such claims may be made by our competitors seeking to obtain a competitive advantage or by other parties. Additionally, non-practicing entities purchasing intellectual property assets for the purpose of making claims of infringement may attempt to extract settlements from us. The risk of claims may increase as the number of modules that we offer and competitors in our market increases and overlaps occur. In addition, to the extent that we gain greater visibility and market exposure, we face a higher risk of being the subject of intellectual property infringement claims.

Any such claims, regardless of merit, that results in litigation could result in substantial expenses, divert the attention of management, cause significant delays in introducing new or enhanced services or technology, materially disrupt the conduct of our business and have a material and adverse effect on our brand, business, financial condition, and results of operations. Although we do not believe that our proprietary technology, processes, and methods have been patented by any third party, it is possible that patents have been issued to third parties that cover all or a portion of our business. As a consequence of any patent or other intellectual property claims, we could be required to pay substantial damages, develop non-infringing technology, enter into royalty-bearing licensing agreements, stop selling or marketing some or all of our products, or re-brand our product. We may also be obligated to indemnify our customers against intellectual property claims, and we may have to pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, or modify applications, which could be costly. If it appears necessary, we may seek to secure license rights to intellectual property that we are alleged to infringe at a significant cost, potentially even if we believe such claims to be without merit. If required licenses cannot be obtained,

or if existing licenses are not renewed, litigation could result. Litigation is inherently uncertain and can cause us to expend significant money, time and attention to it, even if we are ultimately successful. Any adverse decision could result in a loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses for alternative technologies from third parties, prevent us from offering all or a portion of our modules and otherwise negatively affect our business and operating results.

We use open source software in our platform, which could negatively affect our ability to sell our services or subject us to litigation or other actions.

We rely on open source software in our proprietary platform and we expect to continue to rely on open source software in our platform in the future. The terms of certain open source licenses to which we are subject have not been interpreted by U.S., and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our platforms. Certain open source projects also include other open source software and there is a risk that those dependent open source libraries may be subject to inconsistent licensing terms. This could create further uncertainties as to the governing terms for the open source software. Moreover, we cannot ensure that we have not incorporated and are currently relying on additional open source software in our platform in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. Although we employ open source software license screening measures, if we were to combine our proprietary software platform with open source software in a certain manner we could, under certain open source licenses, be required to release the source code of our proprietary platform, which could allow our customers and competitors to freely use such software solutions without compensation to us. Additionally, we may from time to time face claims from third parties: claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, required to comply with onerous conditions or restrictions, required to make our proprietary source code for our platform and any modifications and derivative works developed using such open source software generally available at no cost, purchase a costly license or cease offering the implicated services unless and until we can re-engineer them to avoid use of the open source software in dispute, which could disrupt the business dependent on the affected platforms. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. From time to time, there have been claims challenging the ownership rights in open source software against companies that incorporate it into their products and the licensors of such open source software provide no warranties or indemnities with respect to such claims. As a result, we and our customers could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Some open source projects have known vulnerabilities and architectural instabilities and are provided on an ”as-is” basis which, if not properly addressed, could negatively affect the performance of our platform. Any of these risks could be difficult to eliminate or manage, and if not addressed, could have a negative effect on our business, results of operations, and financial condition.

We rely on software licensed from, and services rendered by, third parties in order to provide our products and run our business.

We rely on software licensed from, and services rendered by, third parties in order to provide our products and run our business. Third-party software and services may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use, or any failures of, third-party software or services could result in delays in our ability to provide our modules or run our business until equivalent software or services are developed by us or, if available, identified, obtained and integrated, which could be costly and time-consuming and may not result in an equivalent product, any of which could cause an adverse effect on our business and operating results. Further, customers could assert claims against us in connection with such service disruption or cease conducting business with us altogether. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming and costly to defend and could seriously damage our reputation and brand, making it harder for us to sell our modules.

We may be unable to continue to use the domain names that we use in our business or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand, trademarks, or service marks.

We have registered domain names that we use in, or are related to, our business, most importantly www.presto.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our offerings under a new domain name, which could cause us substantial harm, or to incur significant expense in order to purchase rights to the domain name in question. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks. Protecting, maintaining, and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of resources, which could in turn adversely affect our business, financial condition, and results of operations.

Risks Related to our Operating as Public Company

Our senior management team has limited experience managing a public company, and regulatory compliance obligations may divert its attention from the day-to-day management of our business.

The individuals who constitute our senior management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our senior management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and results of operations.

As a public reporting company, we are subject to filing deadlines for reports that we file pursuant to the Exchange Act, and our failure to timely file such reports may have material adverse consequences on our business.

In the past, we have not been able to, and may continue to be unable to produce timely financial statements, and file these financial statements as part of a periodic report in a timely manner with the SEC. For example, we failed to timely file with the SEC the requisite Form 10-Q periodic reports for the quarters ended September 30, 2022 and December 31, 2022. Consequently, we were not compliant with the periodic reporting requirements under the Exchange Act at such time. We cannot guarantee that in the future our reporting will always be timely. Our failure to timely file future periodic reports with the SEC could subject us to enforcement action by the SEC and shareholder lawsuits and could eventually result in the delisting of our Common Stock from Nasdaq, regulatory sanctions from the SEC, and/or the breach of covenants in our credit facilities or of any preferred equity or debt securities we may issue in the future, any of which could have a material adverse impact on our operations and your investment in our Common Stock, and our ability to register with the SEC public offerings of our securities for our benefit or the benefit of our security holders. Additionally, our failure to file our past periodic reports and future periodic reports has resulted in and could result in investors not receiving adequate information regarding us with which to make investment decisions. As a result, investors may not have access to current or timely financial information about our business.

As a public reporting company, we are subject to rules and regulations established from time to time by the SEC regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner.

As a public reporting company, we are subject to the rules and regulations established from time to time by the SEC. These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel.

In addition, as a public company we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting. While we remain an emerging growth company, our management is not required to make such certification for the annual report for the year ending June 30, 2023, but will be required for the annual report for the year ending June 30, 2024 and thereafter, which will require us to document and make significant changes to our internal control over financial reporting. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting at such time as we cease to be an “emerging growth company,” as defined in the JOBS Act, and we become an accelerated or large accelerated filer. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes and controls.

We expect to incur costs related to implementing an internal audit and compliance function in the upcoming years to further improve our internal control environment. If we identify future deficiencies in our internal control over financial reporting or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected.

Our current controls and any new controls that we develop may also become inadequate because of changes in our business, and weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods, undermine investor confidence in us, and adversely affect the trading price of our Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.

We have identified material weaknesses in our internal control over financial reporting and, if we fail to remediate these material weaknesses, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence and the price of our Common Stock.

We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We previously identified four material weaknesses, as disclosed in our registration statement on Form S-1, filed with the SEC on October 21, 2022. The material weaknesses as of June 30, 2022 that we have identified are listed below.

•        We did not maintain an effective control environment, including not having designed a risk assessment process and not having designed formalized internal controls, including a lack of policies supporting segregation of duties.

•        We did not design and maintain effective controls to address the initial application of complex accounting standards and accounting of non-routine, unusual or complex events and transactions. Further, we did not maintain sufficient accounting resources with appropriate technical knowledge to support our financial reporting requirements.

•        We did not design and maintain effective controls over our financial statement closing process. Specifically, we did not design and maintain effective controls over certain account analyses and account reconciliations.

•        We did not maintain internal accounting records to adequately support the reporting of certain transactions in our financial statements.

These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

We are in the early stages of designing and implementing a plan to remediate the material weaknesses identified. Our plan includes the following actions:

•        Designing and implementing a risk assessment process supporting the identification of risks facing Presto.

•        Implementing controls to enhance our review of significant accounting transactions and other new technical accounting and financial reporting issues and preparing and reviewing accounting memoranda addressing these issues. Hiring additional experienced accounting, financial reporting and internal control personnel and changing roles and responsibilities of our personnel as we transition to being a public company and are required to comply with Section 404 of the Sarbanes Oxley Act of 2002. We have recently hired additional resources and we are engaging with a third-party consulting firm to assist us with our formal internal control plan and provide staff augmentation of our internal audit function.

•        Implementing controls to enable an effective and timely review of account analyses and account reconciliations.

•        Implementing controls to enable an accurate and timely review of accounting records that support our accounting processes and maintain documents for internal accounting reviews.

We cannot assure you that these measures will significantly improve or remediate the material weaknesses described above. The implementation of these remediation measures is in the early stages and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles and, as a result, the timing of when we will be able to fully remediate the material weaknesses is uncertain and we may not fully remediate these material weaknesses during the year ended June 30, 2023. If the steps we take do not remediate the material weaknesses in a timely manner, there could be a reasonable possibility that these control deficiencies or others may result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis. This, in turn, could jeopardize our ability to comply with our reporting obligations, limit our ability to access the capital markets and adversely impact our stock price.

We and our independent registered public accounting firm are not required to perform an evaluation of our internal control over financial reporting for the year ending June 30, 2023, and were not required to perform such evaluation for the years ending June 30, 2022 and 2021 in accordance with the provisions of the Sarbanes-Oxley Act of 2002. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404.

Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our services to new and existing customers.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the adoption dates of recently issued accounting standards not yet adopted for public companies and exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (A) following the

fifth anniversary of the completion of the VTAQ IPO, December 2025, (B) in which we have total annual revenue of at least $1.235 billion, or (C) in which we are deemed to be a large accelerated filer, with at least $700 million of equity securities held by non-affiliates as of the end of our second fiscal quarter that year, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. While we have not made such an irrevocable election, we have not delayed the adoption of any applicable accounting standards.

As a result of the reduced disclosure requirements applicable to us, investor confidence in our company and the market price of our Common Stock may be adversely affected. We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive, there may be a less active trading market for our Common Stock, and our stock price may be more volatile.

We have, and will continue to, incur significant costs as a result of operating as a public company.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq and other applicable securities laws and regulations. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business, financial condition, and results of operations. Compliance with these rules and regulations has increased our legal and financial compliance costs, and increase demand on our systems, particularly after we are no longer an emerging growth company. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management, and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in filings required of a public company, our business and financial condition is more visible, which may result in threatened or actual litigation, including by competitors. These rules and regulations have increased our legal and financial compliance costs and have made some activities more difficult, time-consuming, and costly, although we are currently unable to estimate these costs with any degree of certainty.

We also expect the laws, rules and regulations we are subject to as a public company to make it more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required in the future to accept reduced coverage or incur substantially higher costs to maintain coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Common Stock, fines, sanctions, and other regulatory action and potentially civil litigation. These factors may therefore strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board members and executive officers.

Risks Relating to Our Common Stock and Warrants

Provisions in our Charter and Bylaws may discourage, delay or prevent a merger, acquisition or other change in control in our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.

These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock, thereby depressing the market price of our Common Stock. Such provisions include the following:

•        a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Presto Board;

•        the ability of the Presto Board to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

•        the requirement for the affirmative vote of holders of at least two-thirds of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our Charter or Bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt;

•        the exclusive right of the Presto Board to elect a director to fill a vacancy occurring in the Presto Board for any cause, which prevents stockholders from being able to fill vacancies on the Presto Board; and

•        the requirement that a special meeting of stockholders may be called only by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the Board then in office, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.

These and other provisions in our Charter and Bylaws could make it more difficult for stockholders or potential acquirors to obtain control of the Presto Board of directors or initiate actions that are opposed by the then-current Presto Board, including delay or impede a merger, tender offer or proxy contest involving us. The existence of these provisions could negatively affect the price of our Common Stock and limit opportunities for you to realize value in a corporate transaction.

Our Charter provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our Charter provides that the Court of Chancery of the State of Delaware is the exclusive forum for:

•        any derivative action or proceeding brought on our behalf;

•        any action asserting a breach of fiduciary duty;

•        any action asserting a claim against us arising under the DGCL, our Charter or our Bylaws; and

•        any action asserting a claim against us that is governed by the internal-affairs doctrine.

This exclusive-forum provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Charter provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Alternatively, if a court were to find these provisions of our Charter inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and the Presto Board.

The provisions in our Charter and Bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our Common Stock.

Because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our Common Stock would be your sole source of gain on an investment in such shares for the foreseeable future.

A market for our securities may not continue, which would adversely affect the liquidity and price of its securities.

The price of our securities may continue to fluctuate significantly due to general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market is established and sustained.

Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject us to additional trading restrictions.

Currently, our Common Stock and public warrants are listed on Nasdaq under the symbols “PRST” and “PRSTW.” In order to continue the listing of these securities on Nasdaq, we are required to maintain certain financial, distribution and stock price levels. Generally, we are required to maintain a minimum market capitalization (generally $45,000,000) and a minimum number of holders of our securities (generally 450 public holders). If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

•        a limited availability of market quotations for our securities;

•        reduced liquidity for our securities;

•        a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

•        a limited amount of news and analyst coverage; and

•        a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and public warrants are listed on Nasdaq, they are covered securities. However, if our securities were no longer listed on Nasdaq, they would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

Future offerings of debt or offerings or issuances of equity securities by us may adversely affect the market price of our Common Stock or otherwise dilute all other stockholders.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of Presto Common Stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or shares of preferred stock. We also expect to grant equity awards to employees, directors, and consultants under our stock incentive plans. Future acquisitions could require substantial additional capital in excess of cash from operations. We would expect to obtain the capital required for acquisitions through a combination of additional issuances of equity, corporate indebtedness and/or cash from operations.

Issuing additional shares of Presto Common Stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of Presto Common Stock or both. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of Presto Common Stock. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit

the our ability to pay dividends to the holders of the Presto Common Stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing and nature of our future offerings.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.

The trading market for our securities is influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause its stock price or trading volume to decline.

We may be subject to securities litigation, which is expensive and could divert management’s attention.

The share price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Presto may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on its business, financial condition, results of operations and prospects. Any adverse determination in litigation could also subject us to significant liabilities.

USE OF PROCEEDS

All of the shares of Common Stock offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. Assuming the exercise in full for cash by the Selling Securityholders holding the warrants, or the Resale Warrants, to purchase up to an aggregate of 400,000 shares of our common stock at an exercise price of $0.01 per share, we expect to receive only nominal proceeds from the exercise thereof. We will not receive any proceeds from the resale of the underlying shares of our common stock issued upon exercise of the Resale Warrants. We are registering the Resale Shares pursuant to registration rights granted to the Selling Securityholders.

There is no assurance that the holder of the Resale Warrants will elect to exercise any or all of such warrants. To the extent that the Resale Warrants are exercised fully or partially on a “cashless basis,” we may receive limited or no proceeds from the exercise of the Resale Warrants.

With respect to the registration of the shares of our Common Stock issuable upon exercise of the Resale Warrants, the Selling Securityholders will pay all underwriting discounts and commissions, underwriter marketing costs, brokerage fees and transfer taxes applicable to the securities sold for such Selling Securityholder’s account and all reasonable fees and expenses of any legal counsel representing any such Selling Securityholder. We will bear all other costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including, without limitation, all registration and filing fees, Nasdaq listing fees, and fees of our counsel and our independent registered public accountants.

MARKET PRICE OF OUR COMMON STOCK AND
WARRANTS AND DIVIDEND INFORMATION

Market Price of Our Common Stock and Warrants

Trading of our Common Stock and warrants began on Nasdaq on September 22, 2022, under the ticker symbols “PRST” and “PRSTW,” respectively. Prior to the Business Combination, the Ventoux Common Stock, Ventoux Warrants, Ventoux Rights and Ventoux Units traded under the ticker symbols “VTAQ”, “VTAQW”, “VTAQR” and “VTAQU”, respectively, on Nasdaq. On April 28, 2023, the closing sale price of our Common Stock was $3.33 per share and the closing sale price of our warrants was $0.07 per warrant.

Holders

As of April 25, 2023, there were 163 holders of record of Common Stock. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Common Stock are held of record by banks, brokers and other financial institutions.

Dividend Policy

We have not paid any cash dividends on our Common Stock to date and prior to the Business Combination, Ventoux had not paid any dividends on its ordinary shares. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our board of directors. Our ability to declare dividends are limited by the terms of financing and other agreements.

BUSINESS

Overview

We seek to overlay next-generation digital solutions onto the approximately $3 trillion hospitality industry given its current primarily analog nature and substantial reliance on labor. At present, we are focused on the restaurant industry.

Since our founding in 2008, we have shipped over 250,000 systems of Presto enterprise-grade digital solutions to the restaurant hospitality industry. We have leveraged our deep domain experience to build a technology platform that digitizes on-premise restaurant dining rooms and drive-throughs with the goal of maximizing restaurant profitability and enhancing the guest dining experience.

Our business is underpinned by the guiding principles that our solutions should improve the guest experience and seamlessly and effortlessly increase productivity for staff. These principles ensure that our product focus remains aligned with the objectives of our customers and with our objective of being a leader in the restaurant hospitality technology market.

The restaurant hospitality technology market is rapidly growing. The COVID-19 pandemic created an industry reset, driving restaurants to further embrace technology to solve industry challenges. The restaurant hospitality industry has been racked with labor challenges, including unprecedented shortages and high costs. Customers also have a greater desire for faster service, which increases demand for on-premise technology, across all restaurant segments, viz. casual dining, fast casual, and quick serve ready (QSR).

Process automation is a long-term priority for all physical businesses. As a result, restaurants need reliable and scalable products and technology that easily integrates with old, legacy systems.

Our platform offers a comprehensive set of modular, targeted solutions to increase staff productivity, improve guest experience and deliver actionable insights to restaurants. Our platform enables customers to improve important factors that drive profitability in a low-margin industry. With Presto’s platform, restaurants can benefit from increased table per server ratios, order accuracy, check size, and customer data collection.

Our latest generation Touch product, called Presto Flex, functions as an all-in-one server handheld or tabletop guest ordering, payment, customer personalization and gaming device. Our AI Platform products consists of an AI-powered computer vision software application that delivers unique and real-time insights to operators and uses speech recognition technology in the customer order process and connect with restaurant POS systems to maximize efficiency and minimize costs by automatically transmitting orders to the restaurant’s POS system.

Our Touch product has accounted for the majority of our historical revenue. However, we expect an increasing mix of our future revenue to come from our AI Platform products.

We benefit from a predictable, recurring revenue model from enterprise restaurant chains. We serve a blue-chip customer base with multibillion-dollar gross merchandise volume potential and high net retention rates. In the future, we may take advantage of several acquisition opportunities in customer relationship management and loyalty, POS products, front of house management, online ordering, AI tools, and integration middleware. As a result of the Business Combination, we expect to have the capital to grow organically and inorganically as we scale the Company. We expect that the Business Combination will help accelerate and enhance our ability to acquire and develop products that serve the restaurant hospitality industry.

Industry and Market Overview

According to a survey of over 400 restaurant owner-operators conducted in October 2021, around 50% of U.S. restaurant operators planned to implement technology-enabled solutions to improve efficiency, labor cost management and revenue growth within the next two to three years. We estimate our addressable market includes $101 billion international enterprise restaurant labor spend, $79 billion domestic enterprise restaurant labor spend

and $25 billion global enterprise restaurant technology spend. However, despite the large addressable market and double-digit sales growth in the restaurant and food service industry in 2021 (according to the National Restaurant Association), the restaurant hospitality industry has faced, and continues to face, several challenges.

•        Labor Shortage:    In June 2022, the Department of Labor released a Job Openings and Labor Turnover summary that showed workers were quitting their jobs at a rate of 2.9% or 4.4 million in April 2022. More accommodation and food services workers quit their jobs in April 2022 compared to pre-pandemic levels, and the industry struggles to retain workers and has experienced consistently high quit rates. The restaurant industry consistently has the highest job opening rate relative to other industries and had a total of 1.34 million job openings in April 2022. The U.S. Chamber of Commerce has described the current labor shortage as a national crisis, making it the focus of its “America Works” initiative expanding employer-led workforce and job training programs, advocating for federal and state policy changes and launching efforts to connect employers with talent. Lack of labor leads to operational gaps with fewer staff to manage basic work flows, slower speed of service, lower guest satisfaction and tips, higher turnover, and increases in the overhead in hiring workers.

•        Labor Cost:    For most restaurants, labor has historically been the largest expense category, accounting for approximately 30% of sales on average. High labor costs lead to significantly lower margins and profitability.

•        Lack of Technological Solutions:    Even for some restaurants with enough labor, their operations are still not efficient enough. Employees are not equipped to make good decisions either because managers rely on “gut-feelings” or because they lack data to inform decision-making.

•        Lack of Differentiation:    Restaurants can seem undifferentiated from each other to consumers.

•        Slow and Inconvenient Service:    Many restaurant operations are analog, and customers are looking for speed, personalization and ease of use.

•        Lack of Data:    To make good decisions, leaders need good data. In physical industries like restaurants, it is difficult to measure operations and generate useful data.

Our platform provides restaurant operators with solutions to these challenges. First, we have over a decade of expertise digitizing analog workflow and facilitating automation, thus allowing restaurants to still operate efficiently with fewer staff and lower labor cost. Second, our products provide reliable, scaled solutions to several thousand restaurants with iconic brands. We have built long-term relationships with our customers and established our reputation as we have grown our market share. Third, we integrate with industry incumbents that restaurants use and innovate to meet customers’ changing needs. Fourth, our next-generation solutions unearth data points that were previously impossible to gather. With these solutions, innovations and a comprehensive platform, we seek to reduce significantly the labor requirements for businesses across the restaurant hospitality industry.

Platform and Product Offering

Our products are designed to increase staff productivity, improve guest experiences and deliver actionable insights to managers. We offer a range of Touch and AI Platform products.

Touch

Our Touch products enable self-serve ordering, payment processing, customer personalization, and gaming experiences.

Our latest Touch product, Presto Flex, is an all-in-one tablet that can be deployed for a variety of applications. This tablet can serve as a tabletop device, self-serve kiosk or handheld device. The device offers Wi-Fi and LTE connectivity while weighing 25% less than an iPad with three times the battery capacity of comparable tablets. A.I. technology provides speech recognition that allows automated voice ordering by both guests and staff. The device’s front and rear cameras enable coupon scanning. Presto Flex hosts a wide range of payment options and is PCI-DSS compliant. On average, Presto Flex eliminates 65% of POS trips increasing tables serviced and tips per server.

We believe this product offers tremendous value by allowing restaurants to operate dining rooms with fewer staff, personalizing guest experiences, increasing check sizes with automatic upselling and cross-selling functionality and providing more guest insights to the restaurant’s marketing team. In addition, our Touch products offer:

•        Advanced Security:    We have an array of advanced enterprise grade security features. Our Silicon Valley-based engineering team aims to create a secure pay-at-table experience.

•        Wide Payment Options:    We support the latest EMV and mobile payment technologies as well as the ability to split bills.

•        More Than Payments:    Our tablets have a broad range of functionality beyond payments. We enable guests to order on demand, play games, watch videos, and provide instant feedback — all from the table.

Our business has one principal supplier through which we source the tablets used in the legacy version of our Touch product and one principal supplier through which we source the tablets used in the latest generation of our Touch product, Presto Flex.

With respect to our legacy Touch tablets, on October 23, 2015, we entered into an agreement with XAC Taiwan (“XAC”), a company organized under the laws of the Republic of China (Taiwan) (the “Legacy Tablet Agreement”). The Legacy Tablet Agreement had an original term of three years and, since the expiration of the original term, has automatically renewed for successive one year periods. Either party may terminate the Legacy Tablet Agreement upon 180 days’ notice or upon a material breach of the agreement if such breach is not cured within 30 days.

With respect to our Presto Flex product, on September 11, 2019, we entered into a Master Supply Agreement (the “Flex Tablet Agreement”) with Hong Kong-based tablet computer suppliers Billion Time International, Limited (“Billion Time”) and Hong Kong Linktop Technology, Limited (“Linktop”). Under the Flex Tablet Agreement, Billion Time and Linktop develop and manufacture the tablets used in our Presto Flex product and provide technical and repair services for us. The Flex Tablet Agreement has an initial term of three years with automatic one-year renewal periods. Any party may terminate the Flex Tablet Agreement upon 180 days’ notice or upon a material breach of the agreement if such breach is not cured within 60 days.

We maintain inventory that we believe is sufficient to address a potential interruption in supply. In the event of a shortage or supply interruption from XAC, Billion Time or Linktop, if our inventory estimates are incorrect, we may not be able to develop alternative sources for these tablets quickly, cost-effectively, or at all.

AI Platform

Our AI-powered computer vision application provides real-time error detection, visual order tracking capabilities, and repeat guest identification. The AI Platform products uses strategically located cameras and powerful artificial intelligence algorithms to offer unique real-time insights into restaurant operations and analytics.

Our next generation technology quickly identifies dropouts in drive-through lines, repeat customers, errors during food preparation, and missing items in the packing process. Our AI Platform product’s smart analytics promotes items with short preparation times when queues are long and notifies managers to deploy line-busting tablets when drive-through wait times or abandonment rates are high.

Our AI Platform product also helps boost order accuracy in the restaurant hospitality industry by deploying its technology to kitchens. This allows management to monitor whether orders going out the door are substantially accurate, thereby reducing refunds, labor cost in remaking food and unhappy guests.

We believe this product can create lower drive-through wait times and reduced drive-through abandonment, higher order accuracy, and improved guest service.

Our speech recognition technology offers guests voice-based ordering in the drive-through and other restaurant settings. Our technology takes orders using automated A.I. that frees up staff by automatically transmitting orders to the restaurant’s POS system. We believe that our AI Platform technology can enable faster transactions and improved order accuracy by eliminating human order taking, as well as increasing check sizes with automatic upselling and cross-selling functionality.

Transaction Services

We also offer a range of transaction services geared to enhance the customer dining experience, including premium content (gaming) and other revenue, which includes professional services. We provide the diners at our customers’ restaurants the opportunity to purchase premium content during the dining experience. We control the associated gaming licenses and its accessibility and have influence in establishing the price charged to the diner. In addition, we also generate revenue from professional services, consisting primarily of fees from developing premium content used on the devices and at installation.

Competitive Strengths

We believe that we have a number of competitive strengths that will enable our market leadership to grow. Our competitive strengths include:

•        Industry-Leading Technology Platform:    We have created a hard-to-replicate technology platform that we believe comprehensively addresses the challenges that fast casual and quick service restaurants are facing. This includes multiple back-end integrations, layers of PCI compliance and security, enterprise grade reliability, ability to scale seamlessly and deploy quickly across multiple geographies, and a customer success, support and operations team that understands enterprise challenges.

•        Category-Leading Customer Loyalty:    Customer relationships are core to our business, and we invest to improve our retention. We maintain long-term relationships with our customers that are reflected by our 102% net revenue retention for the fiscal year ended June 30, 2022. Net revenue retention compares our revenue associated with a set of active restaurant logos in a one-year period to the same set of restaurant logos in the prior year period. We calculate net revenue retention by dividing a particular period’s quarterly annual reoccurring revenue, including both Platform and Transaction revenue, by the prior period’s quarterly annual reoccurring revenue using the same set of restaurant logos. Net revenue retention is an indicator of the propensity of our customers to continue working with us and expanding their relationship with us. We assess our net revenue retention quarterly on a rolling basis year-over-year.

•        Business Model That is “Sticky” and High Growth:    Our compelling and differentiated business model has enabled us to grow and expand our business. The “front of the house” or guest facing nature of our technology, as evidenced by the nature of our entertainment apps, and consumer facing voice ordering capabilities, as well as increased adoption by the customer’s staff and customers over the life of a multi-year contract, create a “sticky” relationship and high switching costs.

•        Multiple Channels of Organic Growth:    Both our existing customer base and addressable market offer a compelling opportunity for product cross-sell and upsell. Additionally, continued innovation from our research and development team provides new and innovative use cases for our AI Platform products.

•        Exceptional Management Team to Execute on Strategy:    Our management team has a demonstrated history of delivering strong operational results. Our Interim Chief Executive Officer, Krishna Gupta, founded REMUS Capital as an undergrad at MIT in 2008. Our Chief Accounting Officer, Stanley Mbugua, has been an accounting and finance executive for over 20 years working with large multi-national public technology companies. Our Chief Technology Officer and Chief Operating Officer both bring experience from companies such as Microsoft, Fireclick, Wambo and Liveclicker.

Growth Strategy

We believe that Presto can profitably grow and has tremendous potential based on our total addressable market. Our growth strategies include:

•        A Proven Land & Expand Model:    We initiate a customer relationship in a few test locations where we identify pain points and offer a trial product offering. This allows easy adoption of our products and requires minimal time to value. This also proves out the value proposition of our products. After we complete the land stage, we move to the expand stage where we expand use-cases to additional locations to further demonstrate customer success. With more locations and the opportunity to cross-sell supplemental product offerings, we add value at scale as we eventually expand into potentially all remaining customer locations targeting a 100% penetration rate over time.

•        Strategic & Accretive M&A to Accelerate Growth:    We have identified acquisition opportunities that are from verticals such as customer relationship management and loyalty, POS products, front of house management, online ordering, AI tools, and integration middleware. We have engaged in exploratory conversations with several targets that have expressed an interest in exploring an acquisition by Presto. With this strategy, we can further expand our product, achieve revenue and cost synergies, and increase scale. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are unpredictable.

Go-To-Market

Our products serve various roles in a restaurant’s management, including with respect to franchise owners and chief operating officers (COOs), chief management officers (CMOs), chief information officers (CIOs) and chief financial officers (CFOs).

Franchise Owner:    Maintaining quality service standards and overseeing the finances of a restaurant brand are not nearly as challenging as the labor shortage that franchise owners are dealing with today. Labor shortages, increased minimum wage demands and COVID-19 liability concerns are the defining issues challenging the ongoing viability of a restaurant franchise. Our technology can be a franchise owner’s most reliable new hire by helping them augment their existing workforces, implement tools that reduce unnecessary busywork and improve employee retention.

COO:    The COO is challenged with meeting their restaurant’s operational goals due to the incredible strain of the labor shortage. Retaining existing staff and replacing those who have left is their top priority for short-term survival and long-term growth. Our technology seeks to augment their existing workforce and improves employee retention delivering tangible improvements in productivity, throughput and quality.

CMO:    Having a solid understanding of their guest’s ever-changing behavior and meeting marketing metrics defines the success of today’s restaurant CMO. Struggling with fewer marketing resources, shrinking budgets, and protecting their brand from cautious guests have all become their most significant issues. We expect our technology will provide accurate data to measure customer behavior and improve the guest experience.

CIO:    With an increasing focus on customer-facing technology, upgrading legacy POS systems, and management systems, the CIO is challenged to meet increasingly demanding guest experience expectations. Choosing from all the digital transformation options to effectively future-proof their restaurant is the most complicated issue facing any CIO. Our next generation technology platform is a multipurpose, all-in-one solution that can easily integrate into customers’ existing ecosystem.

CFO:    We believe our next generation technology can help the CFO drive sales and profitability growth by delivering incremental revenue through higher check sizes and reducing operating expenses through labor cost savings, improved order accuracy, and speed of service. The CFO can also optimize free cash flow by freeing up capital expenditures for technology towards restaurant core competencies.

Sales and Marketing

Our sales team focuses on new location growth, our customer community, and sales enablement and operations.

To generate demand we have developed a library of focused marketing materials as well as a robust referral network, including many of our current customers. Once we acquire prospective customers, we work with them to produce pricing, packaging and diner interfaces intended to simplify product adoption and support our customers in growing their sales.

We have also developed and nurtured long-term relationships with our largest customers and maintain an ongoing relationship with them that includes technical support and conducting quarterly business reviews in order to build a pathway to successful renewals and product upgrades.

As of December 31, 2022, we had 13 employees across sales and marketing. We intend to continue to invest in our sales and marketing capabilities to capitalize on our market opportunity.

Customers

Both private and public restaurant brands have chosen our platform, including Applebee’s, BJ’s, Checkers, Chili’s, Famous Dave’s, Outback Steakhouse and Red Lobster. We accommodate service models of all types, including quick service, fast-casual and casual dining. Brands use our platform to strengthen their customer relationships and boost their digital orders. Our typical initial contract length is 12 to 48 months, providing visibility into our forward performance.

For the six months ended December 31, 2022 and 2021 and the years ended June 30, 2022 and 2021, our three largest restaurant customers generated an aggregate of approximately 97%, 94%, 93% and 93% of our revenue, respectively. We present a discussion of each of these customers below.

The purchase and services agreement with our largest customer was executed in June 2019, and provided for the onboarding and initial sale of our Touch product. The purchase and services agreement also provides the terms under which the customer may elect to purchase additional Touch devices, as well as a revenue sharing arrangement for the provision of premium content to the customer’s patrons. The purchase and services agreement has an initial term of three years which can be extended in June 2023. If the customer does not decide to move forward with an extension 180 days before a term lapses, we may send a notice that gives the customer 15 days to decide if it will continue for another term. If the customer does not extend in such timeframe, the agreement expires at the end of the then-active term. The customer can also terminate the purchase and services agreement upon 180 days’ notice.

The services agreement with our second largest customer was executed in calendar 2017 along with a first statement of work (SOW) pursuant thereto. The services agreement and SOW provided for the onboarding and initial sale of the Touch product, along with the terms under which the customer may elect to purchase additional Touch devices and a revenue sharing arrangement for the provision of premium content to the customer’s patrons. The services agreement had an initial term of 12 months and has been renewed since calendar 2018. The services agreement can be terminated by the customer with 30 days prior written notice at any time if there is not an SOW outstanding. If there is no SOW outstanding for 12 months, the services agreement automatically terminates. The SOW has an initial term of 36 months, which may be extended two times, each for a period of 12 months. Our customer account team is currently in preliminary discussions with this customer to enter into a new SOW after the first SOW expires.

The service provider agreement with our third largest customer was executed in calendar 2017 with the customer renewing a previous agreement with Presto made in calendar 2013. The agreement governs the ongoing relationship between Presto and the customer as well as the franchisee agreements executed between Presto and each of the customer’s franchisees. The term of the service provider agreement extends until each of the franchisee agreements has been terminated. In addition to governing the terms of further purchases of the Touch product and a revenue sharing arrangement for the provision of premium content to the franchisees’ patrons, the franchisee agreements required that the franchisees replace certain existing Touch products with upgraded versions by way of purchasing the new equipment or leasing it. The franchisee agreements are currently scheduled to terminate in late calendar 2023 unless they are extended.

Technical Support

Our technical team supports our customers through the onboarding process, including by providing employee training, device installation, procedures for troubleshooting and maintenance and advising on best practices, among other things. We are committed to providing a differentiated customer experience. We are able to provide our customers with the option of choosing between on-site, remote, and self-guided implementation.

Following onboarding, we offer our customers support through multiple channels, including chat, phone, web and in person visits as needed. We are focused on providing our customers best-in-class technical support and will continue to make significant investments in an effort to do so.

As of December 31, 2022, we had 12 employees on our customer success team.

Research and Development

We develop products through research on the restaurant industry that focuses on the challenges its participants face now and will face in the future. For example, our current and planned products are designed to, among other things, assist in mitigating the impact of nation-wide labor shortages faced by the restaurant and hospitality industry, as well as the increased cost of employment for these customers due to increasing minimum wages and higher costs of labor in general. We are dedicated to helping our customers grow their business and, by doing so, creating lasting relationships and happy diners.

We organize our team to develop the full-stack of our products, integrating product management, engineering, analytics, data science, and design. We develop our products in three primary research and development locations: San Carlos, California, Addison, Texas and Toronto, Ontario, Canada. As of December 31, 2022, we had 89 employees in our research and development team.

Competition

The markets in which we compete are competitive and evolving rapidly. Our platform combines functionality from numerous product categories, and we therefore compete in each of these categories:

•        with respect to Touch platforms, we primarily compete with OneDine, Ziosk, and POS-proprietary systems;

•        with respect to AI Platforms, we primarily compete with Agot AI, Precitaste, Dragontail Systems IBM, Synq3, Valyant AI, Converse Now and Open City.

We believe the principal competitive factors in our market are:

•        the ability to provide an end-to-end software platform specifically designed to meet the existing and future technology needs of prospective customers;

•        ease of deployment, use and flexibility;

•        customer relationship, reputation and brand recognition;

•        customer, technology and platform support; and

•        strength of sales and marketing efforts.

We expect the competition to evolve as the market continues to grow, evolve, and attract new market entrants, especially smaller emerging companies. We believe that with our differentiated products, attractive business model, and unique go-to-market strategy we can compete effectively and favorably within the industry.

For information on risks relating to increased competition in our industry, see the section titled “Risk Factors — Risks Related to Presto’s Competition, Sales and Marketing.”

Social Responsibility and Community Initiatives

Our COVID Tech Connect was founded with a mission to connect critically ill COVID-19 patients with their loved ones. From March 2020 through August 2021, we donated 20,000 tablets and 30,000 charge cords to 2,000 hospitals and care facilities in all 50 states across the United States. We scaled beyond hardware with the development of an award-nominated, free video conferencing solution, that connects hospitalized COVID patients with friends and family through virtual visitations. We also expanded beyond our mission with emergency relief for those communities who were disproportionately affected by COVID-19, both domestically and abroad.

Intellectual Property

As of December 31, 2022, we had eight registered domain names for websites that we use in our business, such as presto.com and other variations, three trademarks, and no registered patents or copyrights.

We rely on trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements with third parties, and other contractual protections, to protect our intellectual property rights, including our proprietary technology, software, know-how, and brand.

We require our employees, consultants, and other third parties to enter into confidentiality and proprietary information and invention assignment agreements, and we control and monitor access to our software, documentation, proprietary technology, and other confidential information. Our policy is to require all employees and independent contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, developments, processes, and other intellectual property generated by them on our behalf and under which they agree to protect our confidential information. In addition, we generally enter into confidentiality agreements with our customers and partners.

We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged. See the section entitled “Risk Factors,” including “Risk Factors — Risks Related to Presto’s Intellectual Property” for a description of the risks related to our intellectual property.

Insurance

We maintain insurance, excess coverage, or reinsurance for property and general liability, professional liability, directors’ and officers’ liability, workers’ compensation, cybersecurity, technology errors and omissions, ocean/marine cargo, commercial crime and other coverage in amounts and on terms deemed adequate by management, based on our actual claims experience and expectations for future claims. However, future claims could exceed our applicable insurance coverage.

Our Facilities

Our corporate headquarters are located at 985 Industrial Road, San Carlos, California 94070 and consist of approximately 4,300 square feet of office space under a lease that expires in January 2025. We also maintain additional offices in Addison, Texas and Toronto, Ontario, Canada.

As a result of COVID-19, our workforce has been working remotely since March 2020. We recognized early on in the COVID-19 pandemic that there was likely to be a shift in the workplace and introduced measures to facilitate a flexible work environment for our employees. We have been continually assessing our physical office footprint, including our corporate headquarters and those locations noted above, and our future flexible work environment may allow us to reduce our current physical office footprint. We believe that our facilities are adequate to meet our needs for the immediate future and that we will be able to secure additional space, as needed, to accommodate expansion of our operations.

Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

In June 2022, we received a favorable arbitrator ruling related to a matter with our third-party subcontractor and we were awarded approximately $11,304 in damages related to our loss on infrequent product repairs and to cover our legal expenses. The award has not met the criteria to be considered realizable as of December 31, 2022. As a result, we have not recognized any gain related to this settlement in our consolidated statement of operations and comprehensive loss.

Government Regulation

Various aspects of our business and service areas are subject to U.S. federal, state, and local regulation. As more fully described below, certain of our services also are, or may be in the future, subject to the laws, rules, and regulations that are related to acceptance of credit cards and debit cards. We also are, or may be in the future, subject to rules promulgated and enforced by multiple authorities and governing bodies in the United States, including federal, state and local agencies, payment card networks and other authorities. These descriptions are not exhaustive, and these laws, regulations, and rules frequently change and are increasing in number.

Card Network and NACHA Rules

We rely on our relationships with financial institutions and third-party payment processors to access the payment card networks, such as Visa and Mastercard, which enable our acceptance of credit cards and debit cards. We pay fees to such financial institutions and third-party payment processors for such services. We are required by these third-party payment processors to register with Visa, Mastercard, and other card networks and to comply with the rules and the requirements of these card networks’ self-regulatory organizations. The Payment Networks and their member financial institutions routinely update, generally expand, and modify requirements applicable to our customers, including rules regulating data integrity, third-party relationships, merchant chargeback standards and compliance with PCI-DSS. PCI-DSS is a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data.

We are also subject to the operating rules of the National Automated Clearing House Association (“NACHA”). NACHA is a self-regulatory organization which administers and facilitates private-sector operating rules for ACH payments and defines the roles and responsibilities of financial institutions and other ACH network participants. The NACHA Rules and Operating Guidelines impose obligations on us and our partner financial institutions, such as audit and oversight by the financial institutions and the imposition of mandatory corrective action, including termination, for serious violations.

Privacy and Consumer Information Security

In the ordinary course of our business, we access, collect, store, use, transmit and otherwise process certain types of data, including personally identifiable information (“PII”), which subjects us to certain federal and state privacy and information security laws, rules, industry standards and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft. These laws, some of which are discussed below, impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PII, and, with limited exceptions, give consumers the right to prevent use of their PII and disclosure of it to third parties. Such laws and regulations are subject to ongoing changes, and a number of new proposed or recently passed laws or regulations in this area are expected to be applicable to our business.

In addition, under these laws and regulations, including the federal Gramm-Leach-Bliley Act (“GLBA”) and Regulation P promulgated thereunder, we must disclose our privacy policy and practices, including those policies relating to the sharing of nonpublic personal information with third parties. The GLBA may restrict the purposes for which we may use PII obtained from consumers and third parties. We may also be required to provide an opt-out from certain sharing.

On January 1, 2020, the CCPA took effect, directly impacting our California business operations and indirectly impacting our operations nationwide. While personal information that we process that is subject to the GLBA is exempt from the CCPA, the CCPA regulates other personal information that we collect and process. A new California ballot initiative, the CPRA was passed in November 2020. Effective starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Presto’s interim unaudited condensed consolidated financial statements as and for the three and six months ended December 31, 2022 and 2021, and Presto’s audited consolidated financial statements as of and for the years ended June 30, 2022 and 2021 and the related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements, within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Presto’s actual results could differ materially from such forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company’s disclosures under the heading “Cautionary Statement Regarding Forward-Looking Statements” included in the this report. Additionally, Presto’s historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.

Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refers to the business and operations of E La Carte Inc. (“Legacy Presto”) and its consolidated subsidiary prior to the Business Combination (defined below) and to Presto Automation Inc. (“Presto”) and its subsidiaries following the Business Combination.

Overview

Presto offers a comprehensive set of modular, targeted solutions to the restaurant industry to increase staff productivity, improve guest experience and deliver actionable insights to restaurants. Since our founding in 2008, we have shipped over 250,000 systems of Presto enterprise-grade digital solutions to the restaurant hospitality industry. We have leveraged our deep domain experience to build a technology platform that digitizes on-premise restaurant dining rooms and drive-throughs with the goal of maximizing restaurant profitability and enhancing the guest dining experience.

Our latest generation Presto Touch product, called Presto Flex, functions as an all-in-one server handheld or tabletop guest ordering, payment, customer personalization and gaming device. Our Vision product consists of an AI-powered computer vision software application that delivers unique and real-time insights to operators. Our Voice products use speech recognition technology in the customer order process and connect with restaurant POS systems to maximize efficiency and minimize costs by automatically transmitting orders to the restaurant’s POS system.

Our Presto Touch product has accounted for the majority of our historical revenue. However, we expect an increasing mix of our future revenue to come from our AI Platform (previously Voice and Vision) products.

We benefit from a predictable, recurring revenue model from enterprise restaurant chains.

Strategy

We seek to overlay next-generation digital solutions onto the approximately $3 trillion hospitality industry given its current primarily analog nature and substantial reliance on labor. At present, we are focused on the restaurant industry.

Our business is underpinned by the guiding principles that our solutions should improve the guest experience and seamlessly and effortlessly increase productivity for staff. These principles ensure that our product focus remains aligned with the objectives of our customers and with our objective of being a leader in the restaurant hospitality technology market.

The restaurant hospitality technology market is rapidly growing. The COVID-19 pandemic created an industry reset, driving restaurants to further embrace technology to solve industry challenges. The restaurant hospitality industry has been racked with labor challenges including unprecedented shortages and high costs. Customers also have a greater desire for faster service, which increases demand for on-premise technology.

Process automation is a long-term priority for all physical businesses. As a result, restaurants need reliable and scalable products and technology that easily integrates with old, legacy systems.

Our platform enables customers to improve important factors that drive profitability in a low-margin industry. With Presto’s platform, restaurants can benefit from increased table per server ratios, order accuracy, check size, and customer data collection.

In the future, we may take advantage of several acquisition opportunities in customer relationship management and loyalty, POS products, front of house management, online ordering, AI tools, and integration middleware.

Merger with Ventoux CCM Acquisition Corp.

On November 10, 2021 and as subsequently amended on April 1, 2022 and July 25, 2022, VTAQ, Ventoux Merger Sub I, Ventoux Merger Sub II and Presto entered into the Merger Agreement, pursuant to which (a) Ventoux Merger Sub I merged with and into Presto, with Presto being the Surviving Corporation in the First Merger and continuing (immediately following the First Merger) as a wholly-owned subsidiary of VTAQ and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the Surviving Corporation merged with and into Ventoux Merger Sub II, with Ventoux Merger Sub II being the surviving entity in the Second Merger and continuing (immediately following the Second Merger) as a wholly-owned subsidiary of VTAQ. On September 14, 2022, VTAQ held a special meeting of its stockholders and voted to approve the Proposed Business Combination (“the Business Combination”). Upon the Closing, VTAQ was renamed “Presto Automation Inc.” and the VTAQ Common Stock and the Public Warrants continue to be listed on Nasdaq and trade under the ticker symbols “PRST” and “PRSTW,” respectively.

The Business Combination has been accounted for as a reverse recapitalization in accordance with GAAP. Under the guidance in ASC 805, Business Combinations, VTAQ, who is the legal acquirer, has been treated as the “acquired” company for financial reporting purposes and Presto has been treated as the accounting acquirer. This determination was primarily based on Presto having a majority of the voting power of the post-combination company, Presto’s senior management comprising substantially all of the senior management of the post-combination company, the relative size of Presto compared to VTAQ, and Presto’s operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination has been treated as the equivalent of a capital transaction in which Presto is issuing stock for the net assets of VTAQ. The net assets of VTAQ have been stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Presto, as Presto is considered the predecessor for financial reporting purposes.

Public Company Costs

Subsequent to the Business Combination, New Presto is an SEC-registered and Nasdaq-listed company. Accordingly, we have hired and expect to hire additional staff and implement new processes and procedures to address public company requirements. We also expect to incur substantial additional expenses for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external costs for investor relations, accounting, audit, legal and other functions.

Impact of COVID-19

Presto was and is subject to risks and uncertainties as a result of the outbreak of a novel strain of coronavirus, designated “COVID-19” and declared to be a pandemic in March 2020. Presto began to experience impacts from COVID-19 in March 2020, as federal, state and local governments reacted to the COVID-19 pandemic by encouraging or requiring social distancing, instituting shelter-in-place orders, and requiring, in varying degrees, reduced operating hours, restaurant dine-in and/or indoor dining limitations, capacity limitations or other restrictions that largely limited restaurants to off-premise sales (take-out and delivery) in the early stages of the pandemic. At the same time, COVID-19 has also had a significant impact on the restaurant and hospitality sector in which Presto operates. Many restaurants closed completely due to lockdowns and staff shortages, especially as multiple waves of COVID-19 continued to debilitate the restaurant and hospitality industry.

Presto experienced two impacts from the initial onset of COVID-19 that resulted in significant charges to the statement of operations for the periods presented:

•        Loss on Infrequent Product Repairs.    Social distancing practices resulted in customers implementing a range of extreme cleaning protocols involving Presto’s products. Specifically, customers started to clean Presto’s devices with highly invasive commercial disinfectant solutions, which leaked into the hardware, causing significant damage to the devices and requiring repair or replacement. This resulted in a significant spike in repair and return merchandise authorization (“RMA”) expenses compared to historical expenses. During the six months ended December 31, 2021, the volume of repair charges Presto experienced were higher than usual due to a liquid ingress issue resulting from COVID-19 related actions by its customers. In order to prevent disruption to customers’ businesses, Presto incurred $28 thousand and $0.5 million of loss on infrequent product repairs related to this issue, in the three and six months ended December 31, 2021, respectively, which is presented as a separate line item on Presto’s condensed consolidated statement of operations and comprehensive income (loss). There were no similar expenses incurred during the three and six months ended December 31, 2022 related to the matter. Typically, these issues would be considered to be negligence on the part of the customer and would not be covered by Presto’s standard warranty; however, given the nature of the issues and the fact that the cleaning protocols were a mandatory precaution as a result of COVID-19 and were not expected to cause such widespread damage to the devices, Presto, as a sign of goodwill and for customer satisfaction, incurred the repair and replacement expenses related to the liquid ingress issue. The expenses incurred were not honored by the manufacturer’s warranty under the RMA process. Presto has made a claim to recover the costs from the third-party subcontractor who manufactures the hardware. In June 2022, the Company received a favorable arbitrator ruling related to a matter with its third-party subcontractor and was awarded approximately $11,304 in damages related to the Company’s loss on infrequent product repairs and to cover its legal expenses. The award has not met the criteria to be considered realizable as of December 31, 2022. As a result, the Company has not recognized any gain related to this settlement in its condensed consolidated statement of operations and comprehensive income (loss).

•        Hardware Repair Expenses Related to COVID-19.    As a result of COVID-19, Presto incurred higher than usual repair expenses for one-time, infrequent product repairs that were not covered by Presto’s third-party manufacturer, who typically covers the costs during the six months ended December 31, 2021. The increase in expenses was a result of a higher volume of repair requests due to customer issues arising from COVID-19 related complications and a desire on the part of customers to have Presto reboot and re-certify equipment coming out of COVID-19. During the three and six months ended December 31, 2021, Presto incurred $0.7 million and $1.1 million of hardware repair expenses related to COVID-19, respectively. The expenses incurred were not honored by the manufacturer’s warranty under the RMA process. The claim that was made to recover the costs from the third-party subcontractor who manufactures the hardware referred to above also included these hardware repair expenses. There were no similar expenses incurred during the three and six months ended December 31, 2022.

Over the course of fiscal year 2022 and the six months ended December 31, 2022, certain COVID-19 restrictions were relaxed as incidents of infection from the initial outbreak declined, but many of the restrictions were reinstituted as incidents of infection surged. The degree and duration of restriction varied by individual geographic area. The extent of the continuing impact of the COVID-19 pandemic on Presto’s business remains highly uncertain and difficult to predict, as the operating status of restaurants remains fluid and subject to change as government authorities modify existing restrictions or implement new restrictions on restaurant operations in response to changes in the number of COVID-19 infections and the availability and acceptance of vaccines in their respective jurisdictions. Additionally, economies worldwide have been negatively impacted by the COVID-19 pandemic, which resulted in a global economic recession.

Presto has taken several actions to mitigate the effects of the COVID-19 pandemic on its operations and franchisees. In April 2020, Presto received a loan of approximately $2.6 million under the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), to assist with the economic hardships caused by the pandemic. In March 2021, Presto received a second loan of $2.0 million under SBA PPP. In August 2021, Presto was granted forgiveness of the first loan in an amount of approximately $2.6 million. In July 2022, Presto was granted forgiveness of the second loan in an amount of approximately $2.0 million.

The severity of the continued impact of the COVID-19 pandemic on Presto’s business will depend on a number of factors, including, but not limited to, how long the pandemic will last, whether/when recurrences of the virus may arise, what restrictions on in-restaurant dining may be enacted or re-enacted, the availability and acceptance of vaccines, the timing and extent of consumer re-engagement with our customers and, in general, what the short- and long-term impact on consumer discretionary spending the COVID-19 pandemic might have on Presto and the restaurant industry as a whole, all of which are uncertain and cannot be predicted. Presto’s future results of operations and liquidity could be impacted adversely by future dine-in restrictions and the failure of any initiatives or programs that Presto may undertake to address financial and operational challenges faced by it and its franchisees. As such, the extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains highly uncertain.

Recent Developments

First Amendment to Credit Agreement

On March 31, 2023, Presto entered into a First Amendment to the Credit Agreement with Metropolitan, the administrative, payment and collateral agent for the lenders, in which the parties amended certain covenants and payment provisions of the Credit Agreement. In consideration for Metropolitan’s entering into the First Amendment, Presto entered into the Fee Letter with Metropolitan, pursuant to which Presto paid an amendment fee equal to $200,000 and granted the Resale Warrants to purchase 400,000 shares of Presto Common Stock to the Metropolitan Entities.

In accordance with the terms of the First Amendment, Presto and Metropolitan entered into the Metropolitan Registration Rights Agreement. Presto is filing this registration statement of which this prospectus forms a part pursuant to the provisions of the Metropolitan Registration Rights Agreement. Pursuant to the terms of the Metropolitan Registration Rights Agreement, Presto agreed to provide customary registration rights to the Metropolitan Entities with respect to the shares of Presto Common Stock issuable upon exercise of the Warrants described above.

Departure of Chief Executive Officer

On March 27, 2023, Presto announced that the Presto Board accepted the resignation of Rajat Suri, Presto’s founder, as Chief Executive Officer and member of the Presto Board, effective as of March 21, 2023. Mr. Suri’s resignation did not result from any disagreement with Presto on any matter relating to its operations, policies or practices. Mr. Suri will serve as a Strategic Advisor to the Presto Board going forward.

On March 23, 2023, the Presto Board appointed Krishna Gupta, Presto’s Chairman, to serve as Interim Chief Executive Officer until a permanent successor to Mr. Suri is appointed.

Departure of Chief Financial Officer

On January 3, 2023, Ashish Gupta, Presto’s Chief Financial Officer, informed Presto that he would be leaving Presto by the end of the quarter. On March 4, 2023, Presto entered into an agreement with Mr. Gupta pursuant to which his employment with presto ended effective as of March 7, 2023, and he agreed to continue to provide services to presto, on a contract basis until May 19, 2023 to ensure a smooth transition for Presto’s finance team and to ensure the successful filing of Presto’s Quarterly Report on Form 10-Q.

Amendments to Purchase and Services Agreements

The purchase and services agreement with our largest customer was amended in March 2023 to extend its term to December 2023, subject to further extension upon mutual agreement of the parties. If the customer does not decide to move forward with an extension 180 days before a term lapses, Presto may send a notice that gives the customer 15 days to decide if it will continue for another term. If the customer does not extend in such timeframe, the agreement expires at the end of the then-active term. The customer can also terminate the purchase and services agreement upon 180 days’ notice.

The services agreement with our second largest customer was amended in March 2023 to extend the services agreement along with a first statement of work (SOW) pursuant thereto. The services agreement and SOW provided for the onboarding and initial sale of the Touch product, along with the terms under which the customer may elect to purchase additional Touch devices and a revenue sharing arrangement for the provision of premium content to the

customer’s patrons. The services agreement had an initial term of 12 months and has been renewed since calendar 2018. The services agreement was renewed on a month-to-month basis up to March 2024. The services agreement can also be terminated by the customer with 30 days prior written notice at any time if there is not an SOW outstanding.

Departure of Director and Appointment of New Director

On February 6, 2023, Kim Lopdrup resigned from the Presto Board. Mr. Lopdrup’s resignation was not the result of any disagreement with Presto or its management with respect to any matter relating to Presto’s operations, policies or practices.

On February 8, 2023, the Presto Board appointed Scott Raskin to the Presto Board. Mr. Raskin serves as a Class III director with a term expiring at Presto’s 2025 annual meeting of stockholders. In addition, Mr. Raskin has been appointed to serve on the Compensation Committee and as its Chair. Mr. Raskin, age 61, has served as President of Quotient Technology Inc., a digital media and promotions technology company, since 2019 and previously served on its board of directors as lead independent director and the chair of the compensation committee from 2017 to 2019. Mr. Raskin served as chairman of the board of Neology Inc., a provider of integrated, end-to-end solutions for tolling, electronic vehicle registration and public safety markets, from 2019 to 2022 and as Chairman of the Board of MariaDB Corporation, a new-generation cloud database company, from 2015 to 2022. Mr. Raskin was previously president and chief executive officer of Spigit, Inc., an innovation management software company, from 2016 to 2019.

Our Revenue Model

Our revenue is driven by our ability to attract new customers, retain existing customers, increase sales from both new and existing customers, and ultimately help our customers grow their businesses. We serve casual dining, quick serve and fast casual restaurants that are made up primarily of named logos with tens to thousands of locations, consisting of both corporates and franchisees.

During the three and six months ended December 31, 2022 and 2021, we derived our revenues from two revenue streams: (1) sales and leases of the Presto Touch and AI Platform products (“platform revenue”), which includes hardware, hardware accessories, software and customer support and maintenance, and (2) Premium Content (gaming) and other revenue, which includes professional services (“transaction revenue”).

•        Platform Revenue:    the platform revenue stream is generated from fees charged to customers for access to our Presto Touch product and is recognized ratably. Part of the total contract value is due upon execution of the contract, and the remainder is due when the customer goes live. Our contracts with customers are generally for a term ranging from 12 to 48 months. Amounts invoiced in excess of revenue recognized are recorded as deferred revenue. Revenue generated from the AI Platform (previously Voice and Vision) was not material for the three and six months ended December 31, 2022 and 2021. Such revenue generated from the AI Platform is inclusive of $0.4 million and $0.6 million of contra-revenue related to the fair value of the warrant treated as a reduction to the transaction price of a customer during the three and six months ended December 31, 2022, respectively.

We also maintain arrangements with a certain legacy customer whereby we lease the Presto Touch product to that customer. Revenue associated with the lease was recognized on a straight-line basis as platform revenue over the lease term in the condensed consolidated statements of operations and comprehensive loss.

•        Transaction Revenue:    transaction revenue consists of a single performance obligation recognized at a point in time when the content is delivered and used. Transaction revenue is recognized on a gross basis as we are the principal in the relationship and the restaurant acts as a sales agent between us and the diner to upsell premium content purchases during the dining experience. We are the principal as we are the primary obligor responsible for fulfillment, we control the gaming license and its accessibility and have influence in establishing the price charged to the diner. The portion of gaming service collections withheld by the restaurant for sales commission is recorded to transaction cost of revenue.

We have historically incurred operating losses and negative cash flows from operating activities. We expect to continue to incur operating losses for the foreseeable future as we work to expand our customer base and the number of locations in which our products are used, increase sales of our AI Platform products, increase our platform revenues and maintain our relationships with current customers.

Our ability to achieve profitability and positive cash flows from operating activities will depend primarily on our ability to increase revenues due to the following factors:

•        Attracting New Customers and Expanding Locations in which Our Products are Used.    Our future growth depends on our ability to attract new customers and expand the locations across which our current and new customers use our products. For fiscal year 2023, we expect the majority of our new customer growth and new customer location expansion to come from sales of our AI Platform products. In an effort to attract new customers and expand our locations served, since the third quarter of fiscal year of 2022, we have signed several AI Platform pilot customers. Certain of these pilot customers have more than a thousand locations each. Our goal is to convert these pilot customers into broader customer relationships in fiscal years 2023 and 2024.

•        Increasing AI Platform Product Sales.    This AI Platform demand is due to the fact that our products mitigate the impact of severe nation-wide labor shortages faced by the restaurant and hospitality industry, as well as the increased cost of employment for these enterprises due to increasing minimum wages and higher costs of labor in general. For example, in January 2022, with collaboration from a third party, we announced the industry’s first enterprise Voice rollout with Checkers, a nation-wide restaurant chain with approximately 840 locations. Our goal is to continue to increase sales of our AI Platform products to capture new customers.

•        Increase Platform Revenues.    As described above, we generate revenue through two main revenue streams: (i) platform revenue and (ii) transaction revenue. We believe our overall growth will be largely driven by platform revenue growth, which we eventually expect to have higher margins than transaction revenues. Platform revenue growth will in turn be driven by an increase in sales of our AI Platform products.

•        Maintain Relationships with Current Customers.    In order to help foster robust contract renewals, our account management and program management teams conduct quarterly business reviews with our top customers which generate the most value to us, in order to build a pathway to a successful renewal and product upgrade in each fiscal year. Successful renewal of our largest customers is critical to our near-term results of operations and is dependent on product execution, key customer relationships, and in part, health of the franchisees for our customers that have a predominantly franchised model.

We have encountered in the past, and may encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. For example, the size and timing of customer rollouts from quarter-to-quarter can vary given our focus on large chain restaurants, which often have different decision-making cycles and levels of internal preparedness. Lastly, another COVID-19 surge could adversely affect the restaurant industry and our customer base by decreasing restaurant demand through a decrease in consumer visits and foot traffic (which we believe ultimately drives our customers’ top line revenues), thereby decreasing demand for our equipment.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, are

presented to enhance investors’ overall understanding of our financial performance and should not be considered as substitutes for, or superior to, the financial information prepared and presented in accordance with GAAP contained in this prospectus.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP metrics to assist investors in seeing our financial performance using a management view. We believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted Gross Profit

Adjusted Gross Profit is calculated as gross profit adjusted to add back depreciation, contra-revenue from warrants granted to a customer, and hardware repair expenses related to COVID.

We use Adjusted Gross Profit to understand and evaluate our core operating performance and trends. We believe this metric is a useful measure to us and to our investors to assist in evaluating our performance because it removes the impact of events that do not reflect our core operating performance, thereby providing consistency and direct comparability with our past financial performance and between fiscal periods.

The following table provides a reconciliation of gross profit to Adjusted Gross Profit for each of the periods indicated:

Adjusted EBITDA

Adjusted EBITDA is defined as net loss, adjusted to exclude interest expense, other income, net, income taxes, depreciation and amortization expense, stock-based compensation expense, earnout stock-based compensation expense, change in fair value of warrant liabilities and convertible promissory notes, loss extinguishment of debt and financing obligations, other financing and financial instrument (costs) income, net, deferred compensation and bonuses earned upon closing of the Business Combination, public relations fee due upon closing of the Business Combination, loss on infrequent product repairs, contra-revenue from warrants granted to a customer, and hardware repair expenses related to COVID.

We believe Adjusted EBITDA is useful for investors to use in comparing our financial performance to other companies and from period to period. Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, and interest income, which can vary substantially from company to company depending on their financing and capital structures and the method by which their assets were acquired. In addition, Adjusted EBITDA eliminates the impact of certain items that do not reflect our core operating performance, thereby providing consistency and direct comparability with our past financial performance and between fiscal periods. We have also excluded COVID-related expenses relating to loss on infrequent product repairs and excessive hardware repair expenses as the expenses are non-recurring as they occurred directly as a result of issues arising from COVID-19 protocols. They were not present in the years prior to the onset of COVID-19 and are not expected to recur. Excluding these COVID-related expenses serves to better reflect our operating performance and provides consistency and comparability with our past financial performance. We have also excluded nonrecurring costs related to the closing of the Business Combination, including a deferred compensation and bonuses earned upon the closing of the Business Combination, and a public relations fee due upon closing of the Business Combination. Excluding these

costs attributable to the Business Combination better reflects our operating performance and provides consistency and comparability with our past financial performance. Adjusted EBITDA also has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. For example, although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new asset acquisitions. In addition, Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs; interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces the cash available to us; or tax payments that may represent a reduction in cash available to us. The expenses and other items we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items that other companies may exclude from Adjusted EBITDA when they report their financial results.

The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the periods presented:

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(1)      In June 2022, the Company received a favorable arbitrator ruling related to a matter with its third-party subcontractor and was awarded approximately $11.3 million in damages related to the Company’s loss on infrequent product repairs and to cover its legal expenses. The award has not met the criteria to be considered realizable as of December 31, 2022. As a result, the Company has not recognized any gain related to this settlement in its condensed consolidated statement of operations and comprehensive loss.

Key Performance Indicator

We use one primary key performance indicator to evaluate our operational and financial performance: net revenue retention.

Our ability to retain and increase revenue from our existing customer base is a key driver of our business growth. We expand within our existing customer base by selling additional products, adding more locations, and helping restaurants generate greater sales per location.

Given the long-term and recurring nature of our customer contracts, we use net revenue retention as a key metric. Net revenue retention compares our revenue associated with a set of active restaurant logos in a one-year period to the same set of restaurant logos in the prior year period. We calculate net revenue retention by dividing a particular period’s recurring revenue, including both platform and transaction revenue, by the prior period’s recurring revenue using the same set of restaurant logos. Net revenue retention is an indicator of the propensity of our customers to continue working with us and expanding their relationship with us. We assess our net revenue retention on a rolling six-month basis comparing year-over-year. For the six months ended December 31, 2022, our net revenue retention was 99%, while for the six months ended December 31, 2021, it was 103%. The slight decrease in the six months ended December 31, 2022 was primarily due to contract terminations by a limited number of franchisees of existing enterprise customers.

We believe net revenue retention is useful for investors by providing a consistent comparison of customer results and growth across comparable periods within our core, established customer base, unaffected by the impact of new customers on our business.

Key Factors Affecting Our Performance

Support of our Customers’ Revenue Growth

We believe our long-term revenue growth is correlated with the growth of our existing customers’ businesses, and we strive to support their success. Our revenue grows with that of our customers — as our customers generate more sales, we generally see higher platform and transaction revenue. We have a demonstrated track record of partnering with restaurants to help grow their revenue and will continue to invest in our customer success team and in new products that help customers thrive.

Adoption of Additional Products

We offer additional products to existing customers through a combination of customer relationship management investments, product-led growth, and the introduction of new products. We believe that we provide the most value when our customers have multiple touchpoints across our platform. We also believe that adoption of additional products will drive labor savings and profitability improvements for our customers, allowing them to reinvest in their success. Decisions by our customers to adopt more of our products will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing, and our ability to demonstrate the value proposition of our products.

Expansion of Locations Per Customer

As our customers grow their businesses and open new locations, we expect to see a corresponding increase in locations on our platform. To that end, we work closely with restaurants across our customer-facing teams to support their expansion efforts. We believe that we are well-positioned to extend our reach to and onboard these new locations based on our customers’ desire to use a single, integrated platform across all locations. This impacts our ability to service individual customers with a dedicated, core team using the appropriate technological resources and personnel, creating operating efficiencies of scale while maintaining growth.

Acquisition of New Locations

We believe there is a substantial opportunity to continue to grow our restaurant locations across the casual dining, quick service and fast casual sectors in the United States. We intend to continue to drive new location growth through our differentiated go-to-market strategy, including an industry advisor network, and enterprise sales representatives who are deeply integrated in the local restaurant and hospitality sector. In addition, we will continue to invest in marketing efforts in key U.S. cities to grow our brand awareness. Our ability to acquire new locations will depend on a number of factors, including the effectiveness and growth of our sales team, the success of our marketing efforts, and the continued satisfaction of, and word-of-mouth referrals generated by, our existing customers. We expect our absolute investment in sales and marketing and other customer acquisition costs related to our hardware and professional services to increase as we continue to grow.

The number of locations is not in itself a key performance indicator utilized by our management because of varying financial arrangements and contribution. Rather, our management uses number of locations as a general measure of scale across our platform.

Innovation and Development of New Products

We have a culture of continuous innovation evidenced by our history of consistent and timely product launches and refinements. We intend to continue to invest in research and development to expand and improve the functionality of our current platform and broaden our capabilities to address new market opportunities. As a result, we expect our total operating expenses will increase over time and, in some cases, have short-term negative impacts on our operating margin. Our ability to successfully develop, market, and sell new products to our customers will affect our competitive posture with our competitors.

Seasonality

We experience seasonality in our transaction revenue, which is largely driven by the level of gross payment volume processed through our platform. For example, customers typically have greater sales during the warmer months, though this effect varies regionally. As a result, our transaction revenue per location has historically been stronger in the second and third quarters. We believe that transaction revenue from both existing and potential future products will continue to represent a material proportion of our overall revenue mix at least in the near term and seasonality will continue to impact our results of operations.

Components of Results of Operations

Revenue

We generate revenue from two main sources that are further described below: (1) platform revenue and (2) transaction revenue.

Platform revenue is generated from fees charged to customers for access to Presto Touch and AI Platform products and is recognized ratably. For Presto Touch, part of the total contract value is due upon execution of the contract, and the remainder is due upon installation of the systems. Our contracts with customers are generally for a term ranging from 12 to 48 months. Amounts invoiced in excess of revenue recognized are recorded as deferred revenue. We also maintained arrangements with a certain legacy customer whereby we leased the Presto Touch product to that customer. Revenue associated with the lease was recognized on a straight-line basis as platform revenue over the lease term in the consolidated statements of operations and comprehensive loss. Pursuant to the primary AI Platform arrangement that we maintained during the three and six months ended December 31, 2022, we remit a revenue share to our hardware and software vendor and accordingly, such revenue share is not recognized in our financial statements. Rather we have determined we are the agent and do not control the AI Platform hardware, software and other services and are not primarily responsible for fulfilling the promise to the customer. The revenue share paid to our hardware and software vendor under our AI Platform revenue share agreement ranged from 64% – 68% of the gross billings to the customer for the three and six months ended December 31, 2022. Revenue, in our role as agent, that was generated from AI Platform products was not material for the three and six months ended December 31, 2022 and 2021. Such revenue generated from AI Platform products is inclusive of $0.4 million and $0.6 million of contra-revenue related to the fair value of the warrant treated as a reduction to the transaction price of a customer for the three and six months ended December 31, 2022, respectively.

Transaction revenue consists of a single performance obligation recognized at a point in time when the content is delivered and used. Transaction revenue is recognized on a gross basis as we are the principal in the relationship and the restaurant acts as a sales agent between us and the diner to upsell premium content purchases during the dining experience. We are the principal as we are the primary obligor responsible for fulfillment, we control the gaming license and its accessibility and have influence in establishing the price charged to the diner. The portion of gaming service collections withheld by the restaurant for sales commission is recorded to transaction cost of revenues. We also

generate revenue from professional services, which primarily consists of fees from developing premium content to be used on the devices and installation. We recognize revenue from professional service engagements that occur over a period of time on a proportional performance basis as labor hours are incurred.

Cost of Revenue

Platform cost of revenue consists of four categories: product costs, shipping/freight costs, installation costs and other costs. Product costs consist primarily of the cost to purchase the hardware and hardware accessories for the Presto Touch products. Shipping/freight costs consist of all costs to transport equipment to customers. Installation costs include the labor cost to install the hardware in each restaurant. Other costs include the amortization of capitalized software and product support costs, as well as certain costs paid to a vendor supporting the development of the vendor’s software and hardware offerings used in the AI Platform.

We also incur costs to refurbish and repair our tablets. These costs are expensed in the period they are incurred, as the costs are expected to be linear and therefore, will match with the timing of revenue recognition over time. In connection with these costs, we also accrue a liability at each reporting period for expected repair costs for customer tablets currently in our Return Merchandize Authorization (“RMA”) process as of the reporting period, which get charged to platform cost of revenue. Our hardware repair expense was higher in the three and six months ended December 31, 2021 due to COVID-related volume, whereby customers sent back tablets either simply to be checked or reset, or for cosmetic reasons or minor repairs.

Transaction cost of revenue consists primarily of the portion of the fees collected from diners that are then paid to the restaurant as part of the revenue share agreement with each restaurant. As we bear the primary responsibility of the product, we are the principal in the premium content transactions and restaurants act as the agent, whereby we collect all of the fees paid as revenue and remit the revenue share to the restaurants as cost of revenue. The commissions paid to restaurants under our gaming revenue share agreements range on average between 83% – 90% and 83% – 92% of premium content revenue by customer logo for the three and six months ended December 31, 2022, respectively. The commissions paid to restaurants under the Company’s gaming revenue share agreements ranged between 81% – 90% and 79% – 96% of premium content revenue by customer logo for the three and six months ended December 31, 2021, respectively.

Depreciation and impairment cost of revenue consists primarily of the costs of leased assets that are included in property and equipment, net in the balance sheet that are amortized to cost of revenue and related impairment charges.

Operating Expenses

Operating expenses consist of sales and marketing, research and development, customer and warehouse operations, and general and administrative expenses. The largest single component of operating expenses is employee-related expenses, which include salaries, commissions and bonuses, stock-based compensation, and employee benefit and payroll costs.

Research and development.    Research and development expenses consist primarily of employee-related costs associated with maintenance of our platform and the evaluation and development of new product offerings, as well as allocated overhead and expenses associated with the use of third-party software directly related to preliminary development and maintenance of our products and services. These costs are expensed as incurred unless they meet the requirements for capitalization.

We plan to continue to hire employees to support our research and development efforts to expand the capabilities and scope of our platform and related products and services. As a result, we expect that research and development expenses will increase on an absolute dollar basis as we continue to invest to support these activities and innovate over the long-term.

Sales and Marketing.    Sales and marketing expenses consist primarily of employee-related costs incurred to acquire new customers and increase product adoption across our existing customer base. Marketing expenses also include fees incurred to generate demand through various advertising channels and allocated overhead costs.

We expect that sales and marketing expenses will increase on an absolute dollar basis as we invest to grow our field-based sales team, increase demand generation, and enhance our brand awareness. We expect sales and marketing expenses as a percentage of revenue will vary from period-to-period over the short-term and decrease over the long-term.

General and administrative.    General and administrative expenses consist primarily of expenses related to facilities, finance, human resources and administrative personnel and systems. General and administrative expenses also include costs related to fees paid for certain professional services, including legal, tax and accounting services and bad debt expenses.

We expect that general and administrative expenses will increase on an absolute dollar basis as we add personnel and enhance our systems, processes, and controls to support the growth of our business as well as our increased compliance and reporting requirements as a public company. We expect general and administrative expenses as a percentage of revenue will vary from period-to-period over the short-term and decrease over the long-term.

Loss on infrequent product repairs.    Loss on infrequent product repairs expenses consist primarily of charges incurred in connection with hardware returned for repair or replacement using an RMA. While we have incurred RMA charges in the past, in the three and six months ended December 31, 2021, the volume of repair charges was extremely unusual and very high due to a liquid ingress issue resulting from COVID-19 related actions by our customers. Our devices failed primarily due to the use of extremely strong commercial disinfectant solutions by our customers to clean the hardware devices as a mandatory precaution protocol due to COVID-19. Due to use of commercial cleaning products, the solution leaked into the hardware causing significant damage to the devices and requiring replacement of such devices.

The standard warranty that we provide covers regular wear and tear and does not cover any damage caused by mishandling of the product. However, given the nature of issues, in order to prevent disruption to our customers’ businesses, we incurred approximately $28 thousand and $0.5 million of repair and replacement expenses related to this issue during the three and six months ended December 31, 2021. There were no similar expenses incurred during the three and six months ended December 31, 2022. We have also made a claim to recover the costs from our third-party subcontractor who manufactures the hardware. In June 2022, the Company received a favorable arbitrator ruling related to a matter with its third-party subcontractor and was awarded approximately $11.3 million in damages related to the Company’s loss on infrequent product repairs and to cover its legal expenses. The award has not met the criteria to be considered realizable as of December 31, 2022. As a result, the Company has not recognized any gain related to this settlement in its condensed consolidated statement of operations and comprehensive income (loss).

Change in Fair Value of Warrants and Convertible Promissory Notes

We account for our warrants in accordance with ASC 815-40 as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Warrants are classified as liabilities when there is variability in the number of shares, and when the variability is not related to an input in the Black-Scholes valuation model. Liability-classified warrants are remeasured at each reporting date until settlement, with changes in the fair value recognized in the change in fair value of warrants and convertible promissory notes in the condensed consolidated statement of operations and comprehensive income (loss). Warrants that meet the fixed-for-fixed criteria or contain variability related to an input in the Black-Scholes valuation model are classified as equity instruments. Warrants classified as equity instruments are initially recognized at fair value and are not subsequently remeasured.

We elected the fair value option to account for the convertible promissory notes and embedded warrants because we believe it more accurately reflects the value of the debt in our financial statements. The principal amount of the convertible promissory notes is measured at fair value using the Monte Carlo valuation model. The valuation model utilized various key assumptions, such as enterprise value and the probability of expected future events.

Other Income, Net

Other income, net includes income of $2.0 million and $2.6 million due to the forgiveness of our PPP loans in the six months ended December 31, 2022 and 2021, respectively. During the three months ended December 31, 2022, the Company made an investment in a non-affiliated entity in the amount $2.0 million. The Company has determined that the investment does not have a readily determinable fair value and therefore accounts for the investment at cost, as adjusted for impairments and observable price changes. There were no adjustments recorded for impairments and observable price changes during the three and six months ended December 31, 2022.

Interest Expense

Interest expense primarily consists of interest incurred on our financing obligations and outstanding loans.

Loss on Extinguishment of Debt and Financial Obligations

Loss on extinguishment of debt and financial obligations consists of losses incurred related to the extinguishment of our term loans outstanding prior to the Business Combination during the six months ended December 31, 2022 and the extinguishment of our financial obligation with third party financiers during the three months ended December 31, 2022.

Other Financing and Financial Instrument (Costs) Income, Net

Other financing and financial instrument (costs) income, net primarily consists of expense recognized related to the issuance of shares and the transfer of warrants upon termination of a convertible note agreement and associated legal fees, offset by the remeasurement of the liability related to the unvested founder shares.

We account for the arrangement related to the unvested founder shares in accordance with ASC 815-40 as equity-linked instruments and are not indexed to the entity’s own stock and accordingly such instruments are liability classified.

Provision for Income Taxes

We account for income taxes using the asset and liability method whereby deferred tax asset and liability account balances are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when management estimates that it is more likely than not that deferred tax assets will not be realized. Realization of deferred tax assets is dependent upon future pretax earnings, the reversal of temporary differences between book and tax income, and the expected tax rates in future periods.

We are required to evaluate whether tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount that is initially recognized.

We record interest and penalties related to income tax matters in income tax expense.

Results of Operations

Comparison of the Three and Six Months Ended December 31, 2022 and 2021

The following table summarizes our results of operations:

Revenue

Total revenue decreased 4% to $7.4 million for the three months ended December 31, 2022, as compared to $7.7 million for the three months ended December 31, 2021.

Platform revenue decreased 20% to $4.1 million for the three months ended December 31, 2022, as compared to $5.1 million for the three months ended December 31, 2021. The decrease is primarily attributable to contract terminations by a limited number of franchisees of existing enterprise customers.

Transaction revenue increased 26% to $3.2 million for the three months ended December 31, 2022, as compared to $2.6 million for the three months ended December 31, 2021. This is due to increases in pricing for the Company’s gaming fees in the first quarter of fiscal year 2023.

Total revenue decreased 1% to $14.7 million for the six months ended December 31, 2022, as compared to $14.9 million for the six months ended December 31, 2021.

Platform revenue decreased 12% to $8.5 million for the six months ended December 31, 2022, as compared to $9.7 million for the six months ended December 31, 2021. The decrease was attributable to contract terminations by a limited number of franchisees of existing enterprise customers.

Transaction revenue increased 18% to $6.2 million for the six months ended December 31, 2022, as compared to $5.3 million for the six months ended December 31, 2021. This is due to increases in pricing for the Company’s gaming fees in the first quarter of fiscal year 2023.

At present, the substantial majority of our revenue is generated from our three largest customers (including, as applicable, the franchisees of such restaurants aggregated as a single customer for reporting purposes), which in the three and six months ended December 31, 2022 generated an aggregate of approximately, 96% and 97% of our revenue, respectively, while for the three and six months ended December 31, 2021, they generated an aggregate of approximately, 89% and 94%. The successful renewal of our agreements with those customers is critical to our near-term results of operations and is dependent on product execution, key customer relationships, and in part, the health of the franchisees of some of our customers that have a predominantly franchised model. Although we experienced customer relationship cancellations with the enterprise and certain associated franchisees, the most significant franchisee relationships are still in business and have renewed with us with existing equipment. Some of these agreements are subject to renewal in calendar year 2023.

Cost of Revenue

Cost of revenue increased 13% to $7.3 million for the three months ended December 31, 2022, as compared to $6.5 million for the three months ended December 31, 2021.

Our platform cost of revenue increased 11% to $4.2 million for the three months ended December 31, 2022, as compared to $3.8 million for the three months ended December 31, 2021. The increase was primarily attributable to increases in installation and shipping costs during the three months ended December 31, 2022, relative to the three months ended December 31, 2021.

Our transaction cost of revenue increased 27% to $2.8 million for the three months ended December 31, 2022, as compared to $2.2 million for the three months ended December 31, 2021. The increase was primarily attributable to increases in the revenue share owed to restaurants as a result of increases in pricing for the Company’s gaming fees.

Cost of revenue increased 7% to $14.3 million for the six months ended December 31, 2022, as compared to $13.3 million for the six months ended December 31, 2021.

Our platform cost of revenue increased 5% to $8.2 million for the six months ended December 31, 2022, as compared to $7.8 million for the six months ended December 31, 2021. The increase was primarily attributable to increases in installation and shipping costs during the six months ended December 31, 2022, relative to the six months ended December 31, 2021.

Our transaction cost of revenue increased 20% to $5.5 million for the six months ended December 31, 2022, as compared to $4.6 million for the six months ended December 31, 2021. The increase was primarily attributable to increases in the revenue share owed to restaurants as a result of increases in pricing for the Company’s gaming fees.

Cost of Revenue — Depreciation and Impairment

Our depreciation and impairment cost of revenue decreased 37% for the three and six months ended December 31, 2022, respectively, to $0.3 million and $0.6 million from $0.5 million and $0.9 million during the three and six months ended December 31, 2021, respectively. The decreases were primarily attributable to the return of leased tablets in fiscal year 2022, which resulted in a lower amount of tablets in use and being depreciated.

Operating Expenses

Operating expenses increased by 78% to $13.6 million for the three months ended December 31, 2022, as compared to $7.6 million for the three months ended December 31, 2021.

Operating expenses increased by 85% to $28.2 million for the six months ended December 31, 2022, as compared to $15.2 million for the six months ended December 31, 2021.

Research and Development

Research and development expenses increased 34% to $5.1 million for the three months ended December 31, 2022, as compared to $3.8 million for the three months ended December 31, 2021. The increase resulted primarily from an increase in salaries and employee benefits expense of $0.7 million as a result of an increase in headcount and an increase of $0.4 million of stock-based compensation expense.

Research and development expenses increased 46% to $11.4 million for the six months ended December 31, 2022, as compared to $7.8 million for the six months ended December 31, 2021. The increase resulted primarily from an increase in salaries and employee benefits expense of $2.6 million and an increase to stock-based compensation expense of $0.5 million, both as a result of an increase in our headcount.

Sales and Marketing

Sales and marketing expenses increased 35% to $2.2 million for the three months ended December 31, 2022, as compared to $1.7 million for the three months ended December 31, 2021. The increase resulted primarily from an increase in salaries and employee benefits expense of $0.4 million as a result of an increase in headcount.

Sales and marketing expenses increased 64% to $4.6 million for the six months ended December 31, 2022, as compared to $2.8 million for the six months ended December 31, 2021. The increase resulted primarily from an increase in salaries and employee benefits expense of $1.1 million, as a result of an increase in headcount, and a public relations fee paid upon the completion of the Business Combination of $0.3 million in the six months ended December 31, 2022.

General and Administrative

General and administrative expenses increased 191% to $6.3 million for the three months ended December 31, 2022, as compared to $2.2 million for the three months ended December 31, 2021. The increase resulted primarily from an increase in legal expense, accounting services expense and temporary services expenses of $1.7 million, an increase in stock-based compensation expense of $1.5 million and an increase of salaries and employee benefits expense of $0.4 million.

General and administrative expenses increased 195% to $12.2 million for the six months ended December 31, 2022, as compared to $4.1 million for the six months ended December 31, 2021. The increase resulted primarily from an increase in stock- based compensation expense of $3.3 million, and an increase in legal expense, accounting services expense and temporary services expenses of $2.8 million, $0.8 million of which are ancillary professional services fees in preparation for the Business Combination, an increase in salaries and employee benefits expense of $1.4 million as a result of increased headcount, and an increase in insurance expense of $0.4 million.

Loss on Infrequent Product Repairs

We had no loss on infrequent product repairs for the three and six months ended December 31, 2022, as compared to $28 thousand and $0.5 million for the three and six months ended December 31, 2021, respectively. The decrease is due to the decrease in the repair and replacement expenses related to damage caused to hardware caused by our customers’ use of extremely strong commercial disinfectant solutions to clean the hardware devices as a mandatory precaution protocol due to COVID-19 in the six months ended December 31, 2022 and compared to the six months ended December 31, 2021.

Change in Fair Value of Warrants and Convertible Promissory Notes

During the three months ended December 31, 2022, the change in fair value of warrants and convertible promissory notes was a loss of $0.4 million, as compared to a loss of $16.2 million during the three months ended December 31, 2021, primarily due to the fact that all of the convertible promissory notes converted due to the consummation of the Business Combination on September 21, 2022. During the three months ended December 31, 2021, all of the Company’s outstanding convertible promissory notes and liability classified warrants were subject to remeasurement as such instruments were accounted for at fair value.

In the six months ended December 31, 2022, the change in fair value of warrants and convertible promissory notes changed due to a gain of $59.4 million, as compared to a loss of $29.8 million in the six months ended December 31, 2021.

The remeasurement gain recorded during the six months ended December 31, 2022, was primarily driven by two factors. First, immediately prior to the closing of the Business Combination, the convertible notes and embedded warrants were remeasured to their then fair value of $41.4 million, resulting in a gain on remeasurement of $48.3 million. Second, with the close of the Business Combination, the Company assumed $9.4 million of warrant liabilities associated with the Private Warrants of VTAQ and issued additional warrants with a fair value of $0.8 million. As of December 31, 2022, all of the Company’s liability classified warrants were remeasured to fair value based on the December 31, 2022 stock price, resulting in an $11.2 million gain on remeasurement for the six months ended December 31, 2022. The primary factor affecting the change in fair value of the warrants was the assumption of the Private Warrants, the issuance of additional warrant shares, and the decrease in the Company’s stock price during the six months ended December 31, 2022.

During the six months ended December 31, 2021, the convertible notes and embedded warrants had a change in fair value resulting in a loss of $29.8 million, reflecting the increased stock price of the then privately held entity. Such increases to the stock price were in contemplation of the anticipated Merger.

Interest Expense

Interest expense increased 249% to $3.0 million for the three months ended December 31, 2022, as compared to $0.9 million for the three months ended December 31, 2021, while interest expense increased 184% to $6.4 million for the six months ended December 31, 2022, as compared to $2.3 million for the six months ended December 31, 2021. The increase was due to the Company having higher interest-bearing term loan debt outstanding during the three and six months ended December 31, 2022 as compared to the three and six months ended December 31, 2021.

Loss on Extinguishment of Debt and Financial Obligations

Loss on extinguishment of debt and financial obligations was $0.3 and $8.1 million for the three and six months ended December 31, 2022, as compared to zero for the three and six months ended December 31, 2021. The increase is due to the Company’s loss on the extinguishment of its term loans outstanding prior to the Business Combination during six months ended December 31, 2022 in the amount of $7.8 million. Further during the three and six months ended December 31, 2022, the Company recorded a loss of $0.3 million related to the extinguishment of certain financing obligations.

Other Financing and Financial Instrument (Costs) Income, Net

Other financing and financial instrument costs, net were $1.8 million for the six months ended December 31, 2022 due to the Company’s expense related to the $2.4 million of expense related to the issuance of shares and transfer of warrants upon termination of a convertible note agreement and $0.5 million of associated legal fees, partially offset by $1.2 million of income from the remeasurement of the unvested founder shares liability.

Other Income, Net

Other income, net increased to $0.3 million for the three months ended December 31, 2022, as compared to $11 thousand for the three months ended December 31, 2021. The increase was primarily due to interest earned on proceeds received from the Business Combination which were held in money market accounts during the three months ended December 31, 2022.

Other income, net decreased to $2.4 million for the six months ended December 31, 2022, as compared to $2.6 million for the six months ended December 31, 2021. The gains were primarily due to the forgiveness of our PPP loans during the six months ended December 31, 2022 and 2021, respectively.

Provision for Income Taxes

Provision for income taxes was not material in the three and six months ended December 31, 2022 and 2021.

Liquidity and Capital Resources

As of December 31, 2022 and June 30, 2022, our principal sources of liquidity were cash and cash equivalents of $38.2 million and $3.0 million, respectively, which were held for working capital purposes.

Since inception, we have financed our operations primarily through financing transactions such as the issuance of convertible promissory notes and loans, and sales of convertible preferred stock. We have incurred recurring operating losses since our inception, including operating losses of $27.8 million and $13.6 million for the six months ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and June 30, 2022, we had an accumulated deficit of $183.0 million and $200.8 million, respectively, and we expect to continue to generate operating losses for the near term. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, including timing of cash collections from customers and other risks. While we received cash of $49.8 million from the completion of the Business Combination and net cash of $13.7 million from the issuance of the Credit Agreement and concurrent repayment of other debt obligations, additional capital infusion will be necessary in order to fund currently anticipated expenditures, and to meet our obligations as they come due. Our future capital requirements will depend on many factors, including the revenue growth rate, subscription renewal activity, billing frequency, the success of future product development, and the timing and extent of spending to support further sales and marketing and research and development efforts.

While the Business Combination and concurrent debt financing improved our financial position, in the future we expect to require additional funding from either public or private financing sources. These plans for additional financings are intended to mitigate the conditions or events that raise substantial doubt about our ability to continue as a going concern, however, as the plan are outside of our control, we cannot ensure they will be effectively implemented. In the event that additional financing is required from outside sources, we cannot be sure that any additional financing will be available to us on acceptable terms if at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition could be materially and adversely affected. As a result, substantial doubt exists about our ability to continue as a going concern within one year after the date that the financial statements are available to be issued. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Summary of Cash Flows

The following table summarizes our cash flows for the periods indicated:

Operating Activities

For the six months ended December 31, 2022, net cash used in operating activities decreased by 12%, from $26.6 million for the six months ended December 31, 2022, as compared to $30.3 million for the six months ended December 31, 2021.

For the six months ended December 31, 2022, net cash used in operating activities was $26.6 million. This consisted of our net income of $17.8 million and a net use of cash from changes in operating assets and liabilities of $3.0 million partially offset by adjustments for non-cash gains, net of $41.3 million. The net use of cash from changes in operating assets and liabilities primarily relate to a increase in accounts receivable of $1.1 million, an increase in prepaids and other current assets of $1.2 million, a decrease in accrued liabilities of $2.1 million and a decrease in deferred revenue of $6.6 million. Such uses of cash were partially offset by a decrease in deferred costs of $6.3 million and a decrease in accounts payable of $1.4 million. The non-cash adjustments primarily relate to gains associated with changes in fair value of warrants and convertible promissory notes of $48.3 million and change in fair value of our liability-classified warrants of $11.2 million, forgiveness of our outstanding PPP loan of $2.0 million, and change in fair value of unvested founder shares liability of $1.2 million, partially offset by loss on debt extinguishment of debt and financing obligations of $8.1 million, stock-based compensation expense of $3.0 million, paid in-kind interest expense of $2.4 million, share and warrant cost on termination of convertible note agreement of $2.4 million, earnout share stock-based compensation expense of $1.9 million, amortization of debt discount and debt issuance costs of $1.9 million, and depreciation, amortization and impairment of $0.8 million,.

For the six months ended December 31, 2021, net cash used in operating activities was $30.3 million. This consisted of our net loss of $43.0 million and a net use of cash from changes in operating assets and liabilities of $16.5 million partially offset by adjustments for non-cash charges of $29.2 million. The net use of cash from changes in operating assets and liabilities primarily relate to decreases in deferred revenue of $7.3 million, vendor financing facility of $6.8 million, accounts payable of $4.8 million and accrued liabilities of $2.7 million, partially offset by decreases in deferred costs of $6.0 million. The non-cash adjustments primarily relate to change in fair value of convertible promissory notes of $26.9 million, change in fair value of our liability-classified warrants of $2.8 million, depreciation and amortization of $1.1 million and stock-based compensation expense of $1.0 million, partially offset by forgiveness of one of our PPP loans of $2.6 million.

Investing Activities

For the six months ended December 31, 2022, net cash used in investing activities increased from $4.6 million for the six months ended December 31, 2022, as compared to $0.9 million for the six months ended December 31, 2021.

For the six months ended December 31, 2022, cash used in investing activities was $4.6 million which primarily consisted of cash outflows for capitalized software of $2.5 million and a cash outflow for an investment in non-affiliate of $2.0 million.

For the six months ended December 31, 2021, cash used in investing activities was $0.9 million which primarily consisted of cash outflows for capitalized software of $0.8 million.

Financing Activities

For the six months ended December 31, 2022, net cash provided by financing activities increased $66.5 million, to $66.4 million of cash provided by financing activities for the six months ended December 31, 2022, as compared to $0.1 million cash used in financing activities for the six months ended December 31, 2021.

For the six months ended December 31, 2022, cash provided by financing activities was $66.4 million, which consisted primarily of proceeds from the issuance of term loans of $60.3 million, contributions from the Business Combination and PIPE financing, net of transaction costs, of $49.8 million, proceeds from the issuance of common stock of $1.0 million, partially offset by repayment of term loans of $33.0 million, penalties and other costs on extinguishment of debt of $6.1 million, payment of deferred transactions costs of $1.9 million, principal payments of financing obligations of $2.7 million, and payment of debt issuance costs of $1.1 million.

For the six months ended December 31, 2021, cash used in financing activities was $0.1 million, which consisted primarily of payments of financing obligations of $1.0 million and payments of deferred transaction costs of $0.1 million, partially offset by proceeds from the issuance of convertible promissory notes of $0.5 million and from the issuance of financing obligations of $0.5 million.

Financing Obligations

As of December 31, 2022 and June 30, 2022, the Company’s financing obligations consisted of the following:

Receivable Financing Facility

On April 27, 2021, we entered into an investment arrangement in which we provide future receivables available to an outside investor to invest in exchange for an upfront payment. Through this arrangement, we obtain financing in the form of a large upfront payment, which we account for as a borrowing by recording the proceeds received as a financing obligation, which will be repaid through payments collected from accounts receivable debtors relating to future receivables. The financing obligation is non-recourse; however, we are responsible for collections as we must first collect payments from the debtors and remit them to the investor. We recognize interest on the financed amount using the effective interest method. The effective interest rate is the interest rate that equates the present value of the cash amounts to be received by the investor with the present value of the cash amounts paid by the investor to us. The receivable financing facility has a term of 5 years and the arrangement allows us and the financier to mutually agree to roll forward our borrowings as they come due.

On August 15, 2021, November 16, 2021, February 22, 2022, May 31, 2022, and August 18, 2022, in accordance with the terms of the receivable financing facility, we rolled forward the receivable financing facility, enabling us to continue our quarterly borrowings for a minimum of twelve-months. Subject to the approval of the financier, we may continue rolling forward the receivable financing facility.

Equipment Financing Facility

Beginning in 2019, we entered into arrangements with third party financiers to secure payments of certain tablet purchases. Such arrangements generally have terms ranging from 3 to 5 years and interest rates ranging from 8% to 14%. We then lease the tablets monetized by the financiers to our customers through operating leases that have 4-year terms.

In fiscal year 2023, due to our liquidity position and other commitments, we postponed certain payments on certain arrangements with third party financiers, which resulted in us defaulting on said arrangements. We have remedied the matter via repayment agreements with our third party financiers, as discussed below.

On November 4, 2022, the Company executed an amendment with one of its third-party financiers to defer non-payments, which increased the monthly payments due for the remaining term of the arrangement.

On November 21, 2022, the Company executed an amendment with one of its third-party financiers. The Company repaid one of the arrangements by making a cash disbursement of $0.4 million, of which extinguished all obligations and resulted in $0.3 million being recorded as a loss on extinguishment of debt and financial obligations on the condensed consolidated statement of operations and comprehensive income (loss).

As a result of the amendment executed on November 4, 2022 and early termination executed on November 21, 2022, the default on payments due as described above has been waived and the Company is in compliance as of December 31, 2022. We have classified all of our obligations under these arrangements as short-term within financing obligations, current as of December 31, 2022 and June 30, 2022.

Debt Arrangements

As of December 31, 2022 and June 30, 2022, our outstanding debt, net of debt discounts, consisted of the following:

Convertible Promissory Notes

As of June 30, 2022, we had convertible notes outstanding to various investors, all of which were accounted for under the fair value option. As of June 30, 2022, the fair value of such convertible promissory notes was $89.7 million. In conjunction with the Business Combination, all convertible promissory notes converted into shares of common stock. Further certain convertible notes which were together with warrants also had the related warrants converted into shares of common stock. As a consequence of the note and warrant conversion, 8,147,938 shares of common stock were issued. Immediately prior to conversion, the convertible promissory notes were remeasured to the then fair value of $41.4 million, resulting in a gain on remeasurement of $48.3 million which was recorded within change in fair value of warrants and convertible promissory notes on the condensed consolidated statement of operations and comprehensive income (loss) for the six months ended December 31, 2022.

Term Loans

Horizon Loan

On March 4, 2021, we entered into a loan agreement (the “Horizon Loan”) with Horizon Technology Finance Corporation (“Horizon”), which provided us with $15.0 million, bears interest at prime rate plus 6.5% per annum, and has a term of 54 months from each loan funding date. The Horizon Loan payment terms require repayment of accrued interest only on the outstanding principal amount over the first 24 payment dates and an equal payment of principal plus accrued interest on the next 30 payment dates identified in the notes applicable to the loan. We pledged certain assets against the Horizon Loan. The Horizon Loan contains financial covenants that require the maintenance of an unrestricted cash plus accounts receivable balance and achievement of quarterly bookings targets. On March 11, 2022, we amended the Horizon Loan to shorten the total term to 24 months with a maturity date of March 20, 2023.

In connection with the entry into the Credit Agreement, (defined below), on September 21, 2022, we repaid the Horizon Loan making a cash disbursement of $17.0 million, of which $15.0 million was repayment of principal and $0.6 million was payment of interest expense and accrued interest. Further, $1.7 million was recorded as a loss on extinguishment of debt and financial obligations on our condensed consolidated statement of operations and comprehensive income (loss).

Lago Loans

On March 11, 2022, we entered into a loan agreement (the “Lago Loan”) with Lago Innovation Fund I & II, LLC, which provided us with $12.6 million, bears interest at the greater of 12% plus the greater of 1% or 30 day LIBOR, bears 2% payable in kind interest, and matures on April 1, 2023. We pledged certain assets against the Lago Loan. The Lago Loan payment terms require repayment of accrued interest only on the outstanding principal over the first 12 payment dates and payment of principal plus remaining accrued interest on the last payment date identified in the notes applicable to the loan. We may prepay at any time for a fee, dependent on the time of prepayment. The Lago Loan contains financial covenants that require the maintenance of unrestricted cash plus accounts receivable balance and achievement of quarterly bookings targets. We issued 205,602 warrants to purchase common stock with the Lago Loan. Refer to Note 10 of the interim unaudited condensed consolidated financial statements as of and for the three and six months ended December 31, 2022 for further details.

On August 4, 2022, we received an additional tranche of term loan in the amount of $5.3 million via an amendment to the Lago Loan. Further, we issued an additional 169,310 warrants to purchase common stock with the additional tranche. We determined that the amendment with the lender should be accounted for as an extinguishment and recorded a loss on extinguishment of debt and financial obligations of $6.0 million on our condensed consolidated statement of operations and comprehensive income (loss).

In connection with the entry into the Credit Agreement (defined below) on September 21, 2022, we repaid all outstanding loans by making a cash disbursement of $22.4 million, of which $17.8 million was repayment of principal and $0.1 million was payment of payable in kind interest. Further $4.4 million of cash was paid related to prepayment and other penalties.

Credit Agreement

On September 21, 2022, in connection with the consummation of the Business Combination, we entered into a Credit Agreement (the “Credit Agreement”) with the subsidiary guarantors party thereto, Metropolitan, as administrative, payment and collateral agent (the “Agent”), the lenders (“Lenders”) and other parties party thereto, pursuant to which the Lenders extended term loans having an aggregate original principal amount of $55.0 million (the “Term Loans”).

The Term Loans were borrowed in full at closing. Amounts outstanding under the Credit Agreement will incur interest at the rate of 15% per annum. During the first 18 months following the closing date, we may elect to pay a portion of the accrued and unpaid interest by capitalizing the amount of such interest on a monthly basis and adding the same to the principal balance of the Term Loans, after which such capitalized interest shall accrue interest at the interest rate and otherwise constitute principal under the Term Loan (“PIK Interest”). With respect to interest accruing during the first six months after the closing date, we may elect for 100% of the interest payment to be capitalized as PIK Interest on a monthly basis. With respect to interest accruing after the six month anniversary of the closing date, but before the 18 month anniversary of the closing date, we may elect for 50% of the interest payment to be capitalized as PIK Interest on a monthly basis. The Term Loans mature on March 21, 2025.

The Term Loans may be prepaid by us; however, any voluntary or mandatory prepayment made prior to the 18 month anniversary of the closing date must be accompanied by payment of a make whole premium equal to the interest and fees that would have accrued on the aggregate principal amount of the Term Loans (including any interest that could have been capitalized as PIK Interest during such period) from the date of payment through the 18 month anniversary of the closing date. The Term Loans may not be reborrowed once repaid. We are required to pay the Agent certain upfront fees and administrative fees in connection with the Term Loans. Our obligations under the Credit Agreement are secured by substantially all of our assets.

We must comply with certain financial covenants as set forth in the Credit Agreement, including a minimum cash covenant and maximum net leverage ratio of 1.20 to 1.00 (except for such periods of time that compliance has been temporarily waived pursuant to the First Amendment). The Credit Agreement also contains customary affirmative and restrictive covenants, including covenants regarding the incurrence of additional indebtedness or liens, investments, transactions with affiliates, delivery of financial statements, payment of taxes, maintenance of insurance, dispositions of property, mergers or acquisitions, among other customary covenants. We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. The Credit Agreement also includes customary representations and warranties, events of default and termination provisions, upon which the Term Loans may be accelerated and the interest rate applicable to any outstanding payment obligations will increase by 5%. As of December 31, 2022, we were in compliance with all applicable covenants.

In conjunction with the Credit agreement, we issued 1,500,000 warrants to purchase common stock to the Lenders. Such warrants were determined to be equity classified and we recorded the value associated with such warrants of $2.1 million within additional paid in capital, with an offsetting debt discount being recorded.

As a condition to entering into the Credit Agreement, Ventoux Acquisition Holdings LLC and Chardan International Investments LLC, the co-sponsors of VTAQ (“the Sponsors”) agreed to transfer 600,000 shares to the Lenders to the Credit Agreement. The share transfer by the Sponsor to the Lenders to the Credit Agreement was such that the substance of the transaction was that the Sponsors made a capital contribution to us, and we then made a share-based payment to the Lenders as an incentive for the Lenders to enter into the Credit Agreement. Accordingly, we recorded the transaction as debt issuance costs discount of $2.8 million in our condensed consolidated balance sheet with an offsetting increase to additional paid-in capital for the contribution.

We incurred cash debt issuance costs of $1.0 million in conjunction with the signing of the Credit Agreement which were recorded as a debt discount.

During the three and six months ended December 31, 2022, we recorded PIK interest expense amounts of $2.1 million and $2.3 million, respectively, which has been reflected as an increase to the outstanding debt balance. Further, during the three and six months ended December 31, 2022, we recorded interest expense associated with the amortization of debt discounts in the amount $0.5 million and $0.6 million, respectively. Accordingly at December 31, 2022, the term loans, noncurrent balance of $52.0 million reflects $55.0 million of principal and $2.3 million PIK interest accrual, as reduced by unamortized debt issuance costs of $5.3 million.

Paycheck Protection Program Loan

In April 2020, the Company obtained a Paycheck Protection Program (“PPP”) loan for $2.6 million through the U.S. Small Business Administration. In March 2021, a second PPP loan was obtained in the amount of $2.0 million, for a total of $4.6 million. The loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities, with at least 60% being used for payroll. We used the funds for these expenses and applied for loan forgiveness of the PPP funds. No collateral or personal guarantees were required for the loan. The PPP loans would bear an interest rate of 1% and a maturity of two years for the first loan and five years for the second loan. We account for the loans as debt subject to the accounting guidance in ASC 470, Debt.

During the six months ended December 31, 2021 we received forgiveness for the first PPP loan of $2.6 million and recognized as other income, net. In July 2022, we were granted forgiveness of the second loan in an amount of approximately $2.0 million, which was recognized as other income, net on the condensed consolidated statement of operations and comprehensive income (loss) for the six months ended December 31, 2022.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2022 and June 30, 2022.

Other Recent Developments

In June 2022, we received a favorable arbitrator ruling related to a matter with our third-party subcontractor and were awarded approximately $11.3 million in damages related to our loss on infrequent product repairs and to cover our legal expenses. The award has not met the criteria to be considered realizable as of December 31, 2022. As a result, we have not recognized any gain related to this settlement in our condensed consolidated statement of operations and comprehensive income (loss).

Related Party Transactions

We have certain convertible promissory notes and embedded warrants with entities in which a member of our board of directors is an officer of the entity and has a financial interest in the entity (“affiliated entities”). As of June 30, 2022, $9.6 million of our convertible promissory notes and embedded warrants balance is due to a related party, all of which are due within 12 months. The convertible notes and embedded warrants converted into shares of common stock during the six months ended December 31, 2022. Refer to Note 7 of the interim unaudited condensed consolidated financial statements as of and for the three and six months ended December 31, 2022 for further details.

During the six months ended December 31, 2022, we received an equity investment of $1,000 from an investor in exchange for 133,333 shares of common stock in the Company. Refer to Note 9 of the interim unaudited condensed consolidated financial statements as of and for the three and six months ended December 31, 2022 for further details. In addition, during the six month ended December 31, 2022 we granted 1,200,000 of RSUs to a director of the Company with a grant date fair value of $4.56 per RSU. Refer to Note 11 of the interim unaudited condensed consolidated financial statements as of and for the three and six months ended December 31, 2022 for further details.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, expenses and disclosures. Our most significant estimates and judgments are related to collectability of accounts receivable, the

useful lives of property and equipment and intangible assets, inventory valuation, the fair value of financial instruments, valuation of deferred tax assets and liabilities, valuation assumptions utilized in calculating the estimated value of stock-based compensation, valuation of warrants, earnout and unvested founder shares arrangements, valuation of investments in non-affiliates, valuation of goodwill and intangible assets acquired and impairment of long-lived assets. Actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. For further information, see Note 1 to the audited consolidated financial statements as of and for the years ended June 30, 2022 and 2021 and the related notes contained in exhibit 99.1 of the Current Report on Form 8-K filed with the SEC on December 16, 2022.

Revenue Recognition

Revenue is recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services, net of any taxes collected from customers (e.g., sales and other indirect taxes), which are subsequently remitted to government authorities.

During the three and six months ended December 31, 2022 and 2021, we derived our revenues from two revenue streams: (1) sales and leases of the Presto Touch and AI Platform products (“Platform revenue”), which includes hardware, hardware accessories, software, customer support and maintenance, and (2) Premium Content (gaming) and other revenue, which includes professional services (“Transaction revenue”).

Platform Revenue

The platform revenue stream is generated from fees charged to customers for access to our Presto Touch product and is recognized ratably. Part of the total contract value is due upon execution of the contract, and the remainder is due monthly over the term of the contract. Our contracts with customers are generally for a term ranging from 12 to 48 months. Amounts invoiced in excess of revenue recognized are recorded as deferred revenue. Revenue generated from AI Platform products was not material for the three and six months ended December 31, 2022 and 2021. Such revenue generated from AI Platform products is inclusive of $0.4 million and $0.6 million of contra-revenue related to the fair value of the warrant treated as a reduction to the transaction price of a customer for the three and six months ended December 31, 2022, respectively. Refer to the Components of Results of Operations above for further details. We also maintain arrangements with a certain customer whereby we leased the Presto Touch product to that customer. Revenue associated with the lease was recognized on a straight-line basis as platform revenue over the lease term in the condensed consolidated statements of operations and comprehensive income (loss). Refer to the Components of Results of Operations section above for further details.

Transaction Revenue

Transaction revenue consists of a single performance obligation recognized at a point in time when the content is delivered and used. Transaction revenue is recognized on a gross basis as we are the principal in the relationship and the restaurant acts as a sales agent between us and the diner to upsell premium content purchases during the dining experience. We are the principal as we are the primary obligor responsible for fulfillment, we control the gaming license and its accessibility and have influence in establishing the price charged to the diner. The portion of gaming service collections withheld by the restaurant for sales commission is recorded to transaction cost of revenue.

We determine revenue recognition through the following steps:

1.      Identification of the contract, or contracts, with a customer — We enter into a master sales agreement (“MSA”) with the customer which is signed by both parties. The rights and obligations are outlined in the MSA and payment terms are clearly defined. We then enter into a license agreement, typically with each franchisee, which outlines the specified goods and services to be provided. We also enter into separate gaming agreements with diners, whereby our customer agrees to pay for use of the premium content. Each MSA, in conjunction with a license agreement, and each gaming agreement, has commercial substance, whereby we are to provide products and services in exchange for payment, and collectability is probable.

2.      Identification of the performance obligations in the contract — Our contracts with customers include promises to transfer multiple services. For all arrangements with multiple services, we evaluate whether the individual services qualify as distinct performance obligations. In our assessment of whether a service is a distinct performance obligation, we determine whether the customer can benefit from the service on its own or with other readily available resources and whether the service is separately identifiable from other services in the contract. This evaluation requires us to assess the nature of each individual service offering and how the services are provided in the context of the contract, including whether the services are significantly integrated, highly interrelated, or significantly modify each other, which may require judgment based on the facts and circumstances of the contract.

We identified the following performance obligations: for the MSAs and license agreements, 1) sales or leases of hardware, SaaS and maintenance as one combined performance obligation for the Presto Touch product, and for gaming agreements, 2) premium content, or gaming. Professional services were insignificant during the three and six months ended December 31, 2022 and 2021.

Our Presto Touch is considered to have a single performance obligation because each element of the Presto Touch product is interdependent and cannot function independently. The software and hardware for the Presto Touch product represents one combined output and the customer cannot benefit from the use of one element without the other.

When we enter into gaming agreements, our Presto Touch product includes the capability of providing entertainment services, designed (either on its own or through other subcontractors) and provided by us via internet, that can be purchased by diners. The games are only accessible over the internet, and upon the diner making the decision to pay for the content, the diner receives the right to access the game on the Presto Touch product. Gaming fees are usage based through the diner’s use of the device and stipulated in a separate contract with the diner. Any fees that are incurred are collected by the restaurant as part of the normal payment for the dining check from the diner and remitted back to us, net of commissions paid to the restaurant as the sales. Premium content revenue, or gaming revenue, is therefore one performance obligation.

3.      Determination of the transaction price — our MSAs stipulate the terms and conditions, and separate license agreements dictate the transaction price, and typically outlines as a price per store location or number of Presto Touch product. The transaction price is generally fixed fee, with a portion due upfront upon signing of the contract and the remainder due upon installation of the Presto Touch products. The transaction price for transaction revenue is a fixed fee charged per game. We occasionally provide consideration payable to a customer, which is recorded as a capitalized asset upon payment and included as part of deferred costs and amortized as contra-revenue over the expected customer life.

4.      Allocation of the transaction price to the performance obligations in the contract — The Presto Touch and premium content contracts are each comprised of one performance obligation and do not require reallocation of the contract price.

5.      Recognition of revenue when, or as, we satisfy a performance obligation — As the customer simultaneously receives and consumes the benefits provided by us through continuous access to our SaaS platform, revenue from the Presto Touch and the AI Platform is satisfied ratably over the contract period as the service is provided, commencing when the subscription service is made available to the customer. Transaction revenue does not meet the criteria for ratable recognition and is recognized at a point in time when the gaming service is provided.

Stock-Based Compensation

We have a stock incentive plan under which incentive stock options and restricted stock units (“RSUs”) are granted to employees and non-qualified stock options are granted to employees, investors, directors and consultants. The options and RSU’s granted vest over time with a specified service period, except for performance-based grants. Stock-based compensation expense related to equity awards is recognized based on the fair value of the awards granted. The fair value of our common stock underlying the awards has historically been determined by the board of directors with input from management and third-party valuation specialists, as there was no public market for our common stock. The board of directors determines the fair value of the common stock by considering a number of objective and

subjective factors including: the valuation of comparable companies, our operating and financial performance, the lack of liquidity of common stock, transactions in our preferred or common stock, and general and industry specific economic outlook, amongst other factors.

The fair value of each option award is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock, risk-free interest rates, the expected term of the option, expected volatility, and expected dividend yield. The fair value of each RSU is the fair value of the underlying common stock on the grant date. The related stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards, which is generally four years. For awards with performance conditions, the related cumulative stock-based compensation expense from inception to date is recognized when it is probable that the performance condition will be achieved. We account for forfeitures as they occur.

We estimated the fair values of each option awarded on the date of grant using the Black-Scholes-Merton option pricing model utilizing the assumptions noted below.

•        Risk-free interest rate — The risk-free interest rate was calculated using the average of the published interest rates of U.S. Treasury zero-coupon issues with maturities that approximate the expected term. The dividend yield assumption is zero as we have no history of, nor plans to distribute, dividend payments.

•        Expected term — The expected term of the options is based on the average period the stock options are expected to remain outstanding, calculated as the midpoint of the options vesting term and the contractual expiration period, as we did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

•        Expected volatility — The expected stock price volatility for our stock was determined by examining the historical volatilities of our industry peers as we did not have any trading history of our Common Stock.

•        Expected dividend yield — The dividend yield assumption is zero as we have no history of, nor plans to distribute, dividend payments.

We did not grant options during the three and six months ended December 31, 2022.

The earnout shares are equity classified since they do not meet the liability classification criteria outlined in ASC 480, Distinguishing Liabilities from Equity and are under ASC 815-40 are both (i) indexed to the Company’s own shares and (ii) meet the criteria for equity classification. The fair value of the earnout shares is determined based on “Level 3” inputs, due to a lack of market data over inputs such as the volatility and the time incurred to meet the minimum VWAP as discussed above. At initial recognition, the earnout shares were measured at fair value using the Monte Carlo valuation model. The valuation model utilized various key assumptions, such as volatility, discount rate and time incurred to meet the minimum VWAP.

Inventories

Inventories are valued at the lower of cost or net realizable value using the weighted average cost method, which approximates the first-in first-out inventory method. This method is consistent and valued separately across new inventories and refurbished inventories. Inventories are comprised of finished goods (tablets) and related component parts. We purchase our inventories from a third-party manufacturer as finished goods and store the inventory partially in our own warehouse and partially at a third-party warehouse. We establish provisions for excess and obsolete inventories after an evaluation of historical sales, future demand and market conditions, expected product life cycles, and current inventory levels to reduce such inventories to their estimated net realizable value. Such provisions are made in the normal course of business and are charged to cost of revenue in the consolidated statements of operations and comprehensive loss. The provision for excess and obsolete inventories was immaterial for the three and six months ended December 31, 2022 and 2021.

Fair Value Measurements

Fair value is defined as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure financial assets and liabilities at fair value at each reporting

period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

•        Level 1 — Quoted prices in active markets for identical assets as of the reporting date.

•        Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets, quoted prices for identical or similar assets in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.

•        Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets.

Financial instruments consist of cash equivalents, accounts receivable, accounts payable, convertible promissory notes and embedded warrants, warrant liabilities, and unvested founder shares liability. Accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

We elected the fair value option to account for the convertible promissory notes and embedded warrants because we believe it more accurately reflects the value of the debt in the financial statements. The principal amount of the convertible promissory notes, embedded warrants and accrued interest is measured at fair value using the Monte Carlo valuation model. The valuation model utilized various key assumptions, such as enterprise value and management assessments of the probability of expected future events, including conversion upon next private financing of preferred stock, conversion upon next financing in a public liquidity event, conversion upon a change in control, conversion upon maturity and default. Other inputs included a discount rate of 16.5% for the principal amount of the convertible promissory notes as of June 30, 2022. Changes in the fair value of the convertible promissory notes and embedded warrants were included in change in fair value of warrants and convertible promissory notes in the condensed consolidated statement of operations and comprehensive loss.

The fair value of the unvested founder shares liability was determined using a Monte Carlo valuation model, which requires significant estimates including the expected volatility of our common stock. The expected annual volatility of our common stock was estimated to be 76.2% and 73.3% as of the Business Combination date and December 31, 2022, respectively, based on the historical volatility of comparable publicly traded companies.

Investment in Non-Affiliate

Investments in non-affiliates include equity security investments in third party entities without a readily determinable fair value in which the Company’s influence is deemed nonsignificant. Investments in non-affiliates are recorded using the measurement alternative for investments without readily determinable fair values, whereby the investment is measured at cost less any impairment recorded or observable price changes. Any impairments or observable price changes are reported in other income, net on the condensed consolidated statements of operations and comprehensive income (loss).

Impairment of Long-Lived Assets

We evaluate the carrying value of long-lived assets on an annual basis, or more frequently whenever circumstances indicate a long-lived asset may be impaired. When indicators of impairment exist, we estimate future undiscounted cash flows attributable to such assets. In the event cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair value.

Business Combinations

The Company accounts for acquisitions using the acquisition method of accounting. Assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration transferred in a business combination, including any contingent consideration, is allocated to the assets acquired and liabilities assumed based on their respective fair values. The excess of the consideration transferred over the fair values of the assets acquired and the liabilities assumed is recorded as goodwill.

MANAGEMENT

Board of Directors and Management

The following persons serve as Presto’s executive officers and directors. Each director will hold office until his or her term expires at the next annual meeting of stockholders for such director’s class or until his or her death, resignation, removal or the earlier termination of his or her term of office. The ages of the executive officers and directors of Presto indicated in this section are as of April 25, 2023. In addition, Ashish Gupta previously served as Presto’s Chief Financial Officer until March 7, 2023. Mr. Gupta resigned as an employee of the Company effective as of March 7, 2023, and pursuant to an agreement with the Company is continuing to provide services to the Company to ensure a smooth transition as it conducts its search for a new Chief Financial Officer. Pursuant to the agreement, Mr. Gupta is preforming services similar to those provided by a principal financial officer.

The following is a biographical summary of the experience of our executive officers and directors:

Executive Officers

Krishna K. Gupta has served as the Interim Chief Executive Officer of Presto since March 2023, and has served as a member of the Presto Board since September 2022. Prior to being appointed as Interim CEO, Mr. Gupta also served as Non-Executive Chairman of the Board. Mr. Gupta is the founder of REMUS Capital and Romulus Capital (collectively referred to herein as “REMUS Capital”), technology-focused venture capital firms he initially founded in 2008. Mr. Gupta serves as a director on the boards of several privately held companies, including: Allurion Technologies, a weight loss technology platform; Ceres Imaging, which provides computer vision-analytics in agriculture; Cogito, which provides voice AI for large enterprises; Cohealo, Inc., which provides equipment sharing service for health systems; Spotta, which develops smart insect and pest monitoring solutions; and ZeroCater, which provides catering technology for enterprises. Prior to REMUS Capital, Mr. Gupta held roles at McKinsey & Company, a management consulting firm, and JPMorgan, an investment banking firm, where he advised several Fortune 100 clients on tech M&A deals. Mr. Gupta holds B.S. degrees in materials science and engineering, as well as in management sciences, both from the Massachusetts Institute of Technology.

Dan Mosher has served as the President of Presto since March 2023. He also serves as Chief Revenue Officer of Presto since March 2021. Prior to joining Presto, Mr. Mosher served as Chief Operating Officer at VuMedi, Inc., a video education platform for doctors, from March 2020 to January 2021. From June 2017 to March 2020, Mr. Mosher was Senior Vice President and Merchant Lead at Postmates Inc., an on-demand delivery platform, where he built and led the team responsible for acquiring new merchants for the platform. From 2011 to June 2017, Mr. Mosher managed BrightRoll, Inc.’s exchange, BRX, an online advertising marketplace, serving first as Senior Vice President and General Manager at BrightRoll, Inc. and, following BrightRoll, Inc.’s 2014 acquisition by Yahoo Inc., as Vice President and General Manager, BrightRoll Exchange at Yahoo Inc. Mr. Mosher also currently serves on the board of directors of Czinger Vehicles, Inc., a manufacturer of hybrid sports cars. Mr. Mosher holds a B.S. in finance from University of California, Berkeley — Walter A. Haas School of Business.

William (Bill) Healey has served as Chief Technology Officer of Presto since September 2014, having previously served as Lead Software Architect from August 2013 to September 2014 and as Engineering Lead from October 2011 to August 2013. Prior to joining Presto, Mr. Healey worked on P2P protocols and wireless WAN as a Software Development Engineer at Microsoft Corporation. Mr. Healey holds an M.S. in computer engineering and computer science from University of Illinois Urbana-Champaign.

Stanley Mbugua has served as the Chief Accounting Officer of Presto since March 2023. Prior to joining Presto, Mr. Mbugua served as Chief Accounting Officer at Skillz Inc., a mobile eSports platform, a position he held since 2021. Mr. Mbugua served as Group Vice President and Chief Accounting Officer of Rimini Street, a software company delivering third-party enterprise software support for Oracle, SAP, JD Edwards, PeopleSoft, Siebel, and other applications, from 2017 to 2021. From 2015 to 2017, Mr. Mbugua served as Senior Director and Corporate Controller at Lattice Semiconductor, a manufacturer of high-performance programmable logic devices. Mr. Mbugua is a Certified Public Accountant and has a Bachelor’s degree from the University of Nairobi.

Xavier Casanova has served as Chief Operating Officer of Presto since March 2023. He previously served as Chief Product Officer of Presto since July 2022. Prior to joining Presto, Mr. Casanova was Founder and Chief Executive Officer of Liveclicker, a provider of real-time personalization solutions for business to consumer marketers, from January 2008 until the company’s acquisition by the Campaign Monitor (the CM Group) in July 2018. He continued to serve as the General Manager of the Liveclicker business segment until October 2019. Mr. Casanova has founded other technology driven start-up companies, such as Wambo and Everystep. Mr. Casanova holds a B.S. in Math and Computer Science from École Polytechnique and a Master of Science in Electrical Engineering from Stanford University.

Non-Executive Directors

Ilya Golubovich has served as a member of the Presto Board since September 2022. Mr. Golubovich has been Founding Partner and Managing Director of I2BF Global Ventures, a venture fund facilitating the advancement of the second wave of digital transformation, headquartered in New York City, since 2007. Mr. Golubovich serves as a director on the boards of OctiTV (SuperMediaFuture Corp.), an augmented reality social networking company, Enki Labs, Inc., a developer of business learning solutions and Buzzoola Group, Inc., a leading native advertising platform in Russia and the Commonwealth of Independent States. His investment portfolio includes companies in vertical SaaS, deep tech, and new media. In 2014, Mr. Golubovich co-founded Aeroxo, a long-range aerial robotics and data gathering company, where he also serves as Chief Strategist. Since 2015, Mr. Golubovich has also served as a member of the Advisory Council of the Physics and Astronomy Department of Johns Hopkins University. Mr. Golubovich holds a B.S. in management science and engineering from Stanford University.

Keith Kravcik has served as a member of the Presto Board since September 2022. Mr. Kravcik is currently the Chief Financial Officer and Chief Investment Officer of all of Cleveland Avenue’s various Investment Funds. He has been at Cleveland Avenue since its inception in September 2015. Prior to Cleveland Avenue, he served as the Chief Financial Officer of Ovation Brands (d/b/a Buffet Inc.), an operator of a number of American national buffet chain restaurants, from July 2013 to August 2015. He previously served as Group Vice President, Controller and Corporate Officer of SUPERVALU Inc., an American wholesaler and retailer of grocery products, between April 2011 and June 2013 where he was the key strategic partner in developing financial and operational strategies to turnaround results and create shareholder value. This effort culminated in him becoming the strategy and financial resource lead during the completion of the $3.3B sale of underperforming retail grocery chains to the Cerberus Capital consortium. Prior to SUPERVALU Inc, Keith spent 16 years at McDonald’s, where he held four progressive executive management positions including being responsible for all of Worldwide Financial Reporting as well as Strategy and Corporate Development when McDonald’s acquired Chipotle. He also became the CFO of Latin America where his strategies reversed losses by increasing sales over 100% in a three-year period, and ultimately the Corporate Vice President and Controller for McDonald’s USA, LLC., in which during his tenure, he developed company operated restaurant ownership and profit optimization plans which significantly improved operating margins and increased operating profits by $198mm in a three-year period. Keith began his career at Ernst & Young where he worked his way up the audit ranks in the Chicago office during his eleven-year tenure. He studied at DePaul University, where he has a Bachelor of Science in Accounting degree and is a Certified Public Accountant. Keith maintains several board positions on businesses within the Cleveland Avenue investment portfolio and advises several founders of entrepreneurial food and technology concepts. He has also served as a Board member of the Illinois CPA Society Technical Accounting Committee as well as having served on the Board of Directors of other not for profit organizations.

Scott Raskin has served as a member of the Presto Board since February 2023 and as Non-Executive Chairman since February 2023. Mr. Raskin has served as the Lead Independent Director of Presto since March 2023. Mr. Raskin has served as President of Quotient Technology Inc., a digital media and promotions technology company, since 2019 and previously served on its Board of Directors as Lead Independent Director and the Chair of the Compensation Committee from 2017 to 2019. Mr. Raskin served as Chairman of the Board of Neology Inc., a provider of integrated, end-to-end solutions for tolling, electronic vehicle registration and public safety markets, from 2019 to 2022 and as Chairman of the Board of MariaDB Corporation, a new-generation cloud database company, from 2015 to 2022. Mr. Raskin was previously President and Chief Executive Officer of Spigit, Inc., an innovation management software company, from 2016 to 2019.

Gail Zauder has served as a member of the Presto Board since September 2022. Ms. Zauder has over 35 years of experience as an investment banker specializing in M&A and financings in the consumer products, beauty, luxury goods and retail and apparel sectors. She is also an experienced director and operating executive. Since January 2002, Ms. Zauder has served as Managing Partner of Elixir Advisors LLC, a financial and strategic advisory firm she founded to focus on entrepreneur-led companies in the luxury goods, beauty, retail, apparel and consumer products sectors. Ms. Zauder was the Chief Financial Officer of Urban Zen, Ms. Donna Karan’s luxury lifestyle brand and foundation, from May 2012 to December 2013 and the Chief Executive Officer of Soap & Glory Ltd, a global beauty products company, from July 2011 to February 2012 and from November 2012 until April 2014. Ms. Zauder began her investment banking career in 1985 as a member of the Mergers & Acquisitions Group at The First Boston Corporation, and served in various senior leadership roles at Credit Suisse First Boston, its successor firm, until 2001, including as the Head of M&A for Retail and Apparel Investment Banking and the Worldwide Head of Luxury Goods Investment Banking. Ms. Zauder has served as a director on numerous private company boards, including Kenneth Cole Productions, since December 2017, where she is compensation committee chair, and Siddhi Acquisition Corp., a blank-check company targeting “better-for-you” food and beverage companies which has filed to list on the NYSE, since March 2021, where she serves on the audit and nominating and governance committees. Previously, she was a member of the boards of Altuzarra LLC, a women’s luxury ready-to-wear and accessories company, from September 2013 to February 2021, Edun Apparel Ltd, an ethical apparel brand, from May 2009 to September 2018, and Allurion Technologies, a consumer-facing medical device company disrupting the treatment of obesity, from October 2017 to July 2021, where she served as audit committee chair. She joined the board of Soap & Glory in November 2008 and became Chairman in July 2009, serving in this capacity until November 2014 when the company was acquired by Alliance Boots. She is also currently a director of the Gordon A. Rich Memorial Foundation, 122E82 Owners Corp. and the Smith College Business Advisory Network. Ms. Zauder holds a B.A. in urban environmental studies from Smith College and an M.B.A. from Yale University’s School of Management.

Edward Scheetz has served as a member of the Presto Board since September 2022. Mr. Scheetz has been VTAQ’s Chief Executive Officer and Chairman since August 2020. He is also the co-founder, Chief Executive Officer and Chairman of Ventoux Acquisition Holdings LLC (“Ventoux Acquisition”), VTAQ’s co-sponsor. From November, 2016 until present, Mr. Scheetz has actively pursued a range of projects in the hospitality and real estate sectors. In June 2018, Mr. Scheetz, with partners, acquired a mixed use hotel and condominium project in West Hollywood, CA. In March 2020, he began the redevelopment and expansion of the project. From 2013 until October 2016, Mr. Scheetz was Chief Executive Officer of Chelsea Hotels until the sale of that company. In March, 2011, Mr. Scheetz founded and served as Chief Executive Officer of King & Grove Hotels until 2013 when King & Grove Hotels became Chelsea Hotels. In 2005, Mr. Scheetz became Chief Executive Officer of Morgans Hotel Group Co. In 2006, he took Morgans public (NASDAQ: MHGC). Morgans was the developer, owner and operator of such iconic hotel properties as Delano and Shore Club in Miami, Mondrian in Los Angeles, Morgans, Royalton, Paramount and Hudson in New York, and Sanderson and St. Martin’s Lane in London. In 1997, Mr. Scheetz co-founded NorthStar Capital Investment Corp. (“NCIC”). While at NCIC, Mr. Scheetz co-founded real estate investment trust NorthStar Realty Finance Corp., which went public in 2004 (NYSE: NRF). Mr. Scheetz continued to serve as Executive Chairman of NRF through 2007. From 1993 until 1997, Mr. Scheetz was a partner at Apollo Management where he was the co-head of Apollo Real Estate Advisors and raised, invested and managed their first three real estate funds. Prior to his work at Apollo, Mr. Scheetz was at The Trammell Crow Companies and Crow Family Ventures where he was involved with Wyndham Hotels, assisted the Chief Financial Officer in restructuring The Trammell Crow Companies, and was a Principal at Trammell Crow Ventures. Mr. Scheetz graduated from Princeton University where he earned an A.B. in Economics.

Pursuant to the terms of the Governance Agreement, described below, REMUS Capital designated Mr. Gupta for appointment and Cleveland Avenue designated Keith Kravcik for appointment to the Presto Board

Family Relationships

There are no family relationships among our directors and executive officers.

Corporate Governance

Composition of the Board of Directors

Presto’s business affairs are managed under the direction of the board. The Presto Board currently consists of six members with one vacancy, divided into three classes of staggered three-year terms.

In connection with the Business Combination, the Company entered into a Governance Agreement with Rajat Suri, our former Chief Executive Officer, the REMUS Capital Stockholders, Cleveland Avenue and I2BF Global Investments Ltd. Pursuant to the Governance Agreement, for so long as the REMUS Capital Stockholders and any of their affiliates hold, in the aggregate, not less than 5% of the outstanding voting securities of Presto, the REMUS Capital Stockholders shall be entitled to nominate and require the Presto Board to include one Class I director in the slate of nominees recommended by the Presto Board; for so long as Mr. Suri and his affiliates hold, in the aggregate, not less 5% of the outstanding voting securities of Presto, he shall be entitled to nominate and require the Presto Board to include one Class II director in the slate of nominees recommended by the Presto Board; and for so long as Cleveland Avenue and its affiliates hold, in the aggregate, not less than 75.0% of the shares of Presto Common Stock they held immediately following the Business Combination, Cleveland Avenue shall be entitled to nominate and require the Presto Board to include one Class I director in the slate of nominees recommended by the Presto Board. Such designees are required to comply with the requirements of the Charter for, and related guidelines of, Presto’s nominating and governance committee.

Pursuant to the Governance Agreement, the parties agreed that the initial Presto Board upon the completion of the Business Combination would consist of the following seven individuals: Ilya Golubovich, Krishna K. Gupta, Keith Kravcik, Kim Axel Lopdrup, Rajat Suri, Gail Zauder and Edward Scheetz, with Mr. Gupta serving as the chairman until the earlier of (i) such time as he is no longer a director of Presto and (ii) the next annual meeting of stockholders at which his class of directors is subject to reelection. On February 6, 2023, Mr. Lopdrup resigned from the Presto Board and on February 8, 2023, the Presto Board appointed Scott Raskin. Mr. Raskin serves as a Class III director with a term expiring at Presto’s 2025 annual meeting of stockholders. On March 21, 2023, the Presto Board accepted the resignation of Rajat Suri, Presto’s founder, as Chief Executive Officer and member of the Presto Board.

The Presto Board is divided into three staggered classes of directors. At each annual meeting of its stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring, as follows:

•        the Class I directors, whose terms expire at the annual meeting of stockholders to be held in 2023, are Krishna K. Gupta, Keith Kravcik and Edward Scheetz;

•        the Class II director, whose term expires at the annual meeting of stockholders to be held in 2024, is Ilya Golubovich; and

•        the Class III directors, whose terms expire at the annual meeting of stockholders to be held in 2025, are Scott Raskin and Gail Zauder.

Pursuant to the Company’s Charter and the Governance Agreement, any change to the size of the Presto Board must be authorized by the affirmative vote of a majority of the entire board.

Director Independence

The Presto Board has determined that each of Ilya Golubovich, Scott Raskin, Gail Zauder, Keith Kravcik and Edward Scheetz qualifies as “independent” as defined under the applicable Nasdaq rules. Because he is serving as our Interim CEO, Mr. Gupta is currently not considered to be independent.

Committees of the Board of Directors

The Presto Board directs the management of its business and affairs, as provided by Delaware law, and conducts its business through meetings of the board of directors and standing committees. Presto has a standing audit committee, compensation committee, nominating and governance committee and strategic finance committee, each of which will operate under a written charter.

In addition, from time to time, special committees may be established under the direction of the Presto Board when the board deems it necessary or advisable to address specific issues. Current copies of Presto’s committee charters are posted on its website, www.presto.com, as required by applicable SEC and Nasdaq rules. The information on or available through any of such website is not deemed incorporated in this prospectus and does not form part of this prospectus.

Audit Committee

Presto’s audit committee consists of Keith Kravcik, Ilya Golubovich, Gail Zauder and Edward Scheetz. Mr. Kravcik serves as the chair of the audit committee. Our board of directors has determined that each of these individuals meets the independence requirements of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, Rule 10A-3 under the Exchange Act and the applicable listing standards of Nasdaq. Each member of Presto’s audit committee is able to read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In arriving at this determination, the board examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.

Our board of directors has determined that Ms. Zauder qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq rules. In making this determination, the board considered formal education and previous and current experience in financial and accounting roles. Both Presto’s independent registered public accounting firm and management periodically will meet privately with Presto’s audit committee.

The audit committee’s responsibilities include, among other things:

•        appointing, compensating, retaining, evaluating, terminating and overseeing Presto’s independent registered public accounting firm;

•        discussing with Presto’s independent registered public accounting firm their independence from management;

•        reviewing with Presto’s independent registered public accounting firm the scope and results of their audit;

•        pre-approving all audit and permissible non-audit services to be performed by Presto’s independent registered public accounting firm;

•        overseeing the financial reporting process and discussing with management and Presto’s independent registered public accounting firm the interim and annual financial statements that Presto’s files with the SEC;

•        reviewing and monitoring Presto’s accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; and

•        establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.

Compensation Committee

Presto’s compensation committee consists of Edward Scheetz, Scott Raskin and Gail Zauder. Mr. Raskin serves as the chair of the compensation committee. All members are non-employee directors, as defined in Rule 16b-3 promulgated under the Exchange Act. Our board of directors has determined that each member is

“independent” as defined under the applicable Nasdaq listing standards, including the standards specific to members of a compensation committee. The compensation committee’s responsibilities include, among other things:

•        reviewing and setting or making recommendations to the Presto Board regarding the compensation of Presto’s executive officers;

•        making recommendations to the Presto Board regarding the compensation of Presto’s directors;

•        reviewing and approving or making recommendations to the Presto Board regarding Presto’s incentive compensation and equity-based plans and arrangements; and

•        appointing and overseeing any compensation consultants.

Nominating and Governance Committee

Presto’s nominating and governance committee currently consists of Ilya Golubovich and Keith Kravcik. Mr. Gupta previously served as a member of the nominating and governance committee, but does not serve as such while he is our Interim CEO. Mr. Golubovich serves as the chair of the nominating and governance committee. Our board of directors has determined that each member is “independent” as defined under the applicable Nasdaq listing standards. The nominating and governance committee’s responsibilities include, among other things:

•        identifying, evaluating and selecting, or making recommendations to the Presto Board regarding, nominees for election to the board and its committees;

•        evaluating the performance of the board and of individual directors;

•        considering, and making recommendations to the board regarding the composition of the board and its committees;

•        reviewing developments in corporate governance practices;

•        evaluating the adequacy of the corporate governance practices and reporting;

•        reviewing related person transactions; and

•        developing, and making recommendations to the board regarding, corporate governance guidelines and matters.

The nominating and governance committee consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board. The nominating and governance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating and governance committee will not distinguish among nominees recommended by stockholders and other persons.

Strategic Finance Committee

Presto’s strategic finance committee consists of Scott Raskin, Ed Scheetz and Gail Zauder, with Ms. Zauder serving as the chair. The strategic finance committee’s responsibilities include, among other things, reviewing and evaluating analyses and recommendations of management regarding:

•        the Company’s capital structure, its financial position, balance sheet and cash flows;

•        the Company’s overall cash management and financing requirements including its cash burn analysis, annual budget and long-term financial plan;

•        the Company’s credit facilities, compliance with any financial covenants to which it is subject and negotiations with its lenders;

•        the amounts, timing, types and terms of any equity and equity-related issuances and public or private debt offerings;

•        the Company’s capital allocation, including any organic or inorganic investments that may have a material impact on its capital position; and

•        any of the Company’s proposed acquisition and divestitures that may have a material impact on the Company’s capital position or are not in the ordinary course of business.

Code of Ethics

Presto has a code of ethics that applies to all of its executive officers, directors and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is available on Presto’s website, www.presto.com. The information on or available through any of such website is not deemed incorporated in this prospectus and does not form part of this prospectus. Presto intends to make any legally required disclosures regarding amendments to, or waivers of, provisions of its code of ethics on its website rather than by filing a Current Report on Form 8-K.

Compensation Committee Interlocks and Insider Participation

None of Presto’s executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity, other than Presto, that has one or more executive officers serving as a member of the Presto Board.

EXECUTIVE AND DIRECTOR COMPENSATION

As an emerging growth company under the JOBS Act, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is defined in the rules promulgated under the Securities Act, which permit us to limit reporting of executive compensation to our principal executive officer and our two other most highly compensated executive officers.

Our executive compensation program is designed to attract, motivate and retain high quality leadership and incentivize our executive officers to achieve performance goals over the short-and long-term, which also aligns the interests of our executive officers with those of our stockholders.

Our named executive officers (or “NEOs”) for the fiscal year ended June 30, 2022, which consist of any individual serving as our principal executive officer during such year and our two other most highly compensated executive officers, other than the principal executive officer, serving as executive officers at the end of such year, were:

•        Rajat Suri, who served as our Chief Executive Officer until March 21, 2023;

•        Ashish Gupta, who served as our Chief Financial Officer until March 31, 2023 and is currently serving as the Company’s principal financial officer through May 15, 2023; and

•        Dan Mosher, our President and Chief Revenue Officer since March 2023 and March 2021, respectively.

Summary Compensation Table

The following table presents compensation awarded to, earned by and paid to the NEOs for the fiscal years ended June 30, 2022 and 2021.

____________

(1)      Includes amounts paid to Messrs. Suri and Gupta to restore prior salary reductions implemented in 2020 due to COVID.

(2)      Reflects an annual bonus, with the amount payable determined by our Chief Executive Officer.

(3)      The amounts reported here do not reflect the actual economic value realized by each NEO. In accordance with SEC rules, these amounts represent the grant date fair value of stock options, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“ASC Topic 718”). For additional information, see Note 11. Stock-Based Compensation to the notes accompanying our audited consolidated financial statements located elsewhere in this prospectus. The assumptions used in calculating the grant date fair value of the stock options reported in this table are set forth in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Presto — Critical Accounting Policies and Estimates — Stock Based Compensation.”

(4)      Reflects commission-based annual incentive payments.

(5)      Reflects the prorated portion of Mr. Mosher’s $230,000 annual base salary paid from his start date on March 15, 2021 through June 30, 2021.

Narrative Disclosure to Summary Compensation Table

The following describes the material elements of our compensation program for the fiscal year ended June 30, 2022 as applicable to the NEOs and reflected in the Summary Compensation Table above.

Base Salary

Base salaries for our executive officers were established primarily based on individual negotiations with the executive officers when they joined us. In determining compensation for our executive officers, we considered salaries provided to executive officers of our peer companies, each executive officer’s anticipated role criticality relative to others at the Company and our determination of the essential need to attract and retain these executive officers.

Annual Incentive Awards

Mr. Gupta received an annual cash bonus of $50,000, with the amount payable determined by the Chief Executive Officer, and Mr. Mosher received commission-based annual incentive payments of $152,044.

Employee Benefits and Perquisites

We provide health, dental, vision, life and disability insurance benefits to our named executive officers, on the same terms and conditions as provided to our other senior executives. We generally do not provide perquisites to our NEOs.

Retirement Benefits

401(k) Plan.    We maintain a 401(k) plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation up to certain Code limits, which are updated annually. Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their own contributions. The Company may elect to make matching or other contributions into participant’s individual accounts, but made no such contributions in 2020. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan are deductible by us when made, and contributions and earnings on those amounts are not taxable to the employees until withdrawn or distributed from the 401(k) plan.

Employment Agreements

We entered into offer letters with Messrs. Gupta and Mosher in August 2019 and February 2021, respectively, which provided for at-will employment and set forth each NEO’s initial base salary, certain employee benefits, eligibility (subject to Board approval) to receive a grant of stock options and, in the case of Mr. Gupta, eligibility to participate in the Company’s annual cash bonus program. The offer letters do not provide for any severance in the event of a termination of employment. Mr. Mosher also entered into a restrictive covenant agreement that includes perpetual confidentiality and twelve-month post-termination employee non-solicitation provisions.

In March 2023, we entered into a Consulting Agreement with Mr. Gupta in connection with his determination to leave the Company at the end of the third quarter 2023 to pursue other opportunities. The Consulting Agreement provides that Mr. Gupta’s employment ends as of March 7, 2023, but that he will remain with the Company on a contract basis as its principal financial officer through May 19, 2023. Pursuant to the Consulting Agreement, Mr. Gupta receives $50,000 for his services and an additional $50,000 upon the filing of the Company’s Quarterly Report on Form 10-Q for the third quarter 2023. Additionally, Mr. Gupta’s outstanding equity awards will continue to vest through the end of the term of the Consulting Agreement and the exercisability of any stock options vested as of such date is extended for three years from the end of the term.

Long-Term Incentives

In March 2021, Messrs. Suri and Gupta were granted 1,562,019 and 143,770 stock options, respectively, with an exercise price of $1.44 under our 2018 Equity Incentive Plan. Mr. Suri’s award agreement provided that 961,267 of the stock options would vest in monthly installments over four years, subject to continued employment, and 600,752 would be subject to performance-based vesting conditions, with half of such options vesting in connection with the closing of a financing event and half in connection with a public liquidity event. Mr. Gupta’s award agreement provided that his stock options would vest in equal monthly installments over a two year period, subject to continued employment. Mr. Suri resigned from his roles with the Company on March 21, 2023, and any stock options that were vested as of such date will remain exercisable for 90 days. All unvested stock options were accelerated on March 25, 2023 and any stock options vested as of such date would remain exercisable for three years.

In April 2021, in connection with his hiring, Mr. Mosher was granted 513,358 stock options with an exercise price of $2.23 under our 2018 Plan. The stock options are subject to a four-year vesting schedule, with 25% vesting upon the first anniversary of the vesting commencement date, and the remainder vesting monthly in equal installments, subject to Mr. Mosher’s continued employment. Fifty percent of any unvested stock options will vest in the event Mr. Mosher is terminated without “Cause” within three months following a “Change in Control” (in each case, as defined in his offer letter).

Potential Payments Upon Termination or Change in Control

Generally, our NEOs are not entitled to any payments and benefits upon a termination of employment or a change in control other than certain of Mr. Gupta’s stock options granted in 2019 and 2020 and Mr. Mosher’s options, which would accelerate upon certain terminations in connection with a change in control as described below in the section entitled “— Outstanding Equity Awards at Fiscal Year-End.”

Outstanding Equity Awards at Fiscal Year-End

The following table presents information regarding outstanding equity awards held by the NEOs as of June 30, 2022.

____________

(1)      Reflects time-based stock options that vest in equal monthly installments over four years from the vesting commencement date, subject to the NEO’s continued employment. Mr. Suri resigned from his roles with the Company on March 21, 2023, and any stock options that were vested as of such date will remain exercisable for 90 days. All unvested stock options were accelerated on March 25, 2023 and any stock options vested as of such date would remain exercisable for three years.

(2)      Reflects time-based stock options that vest over four years, with 25% vesting upon the first anniversary of the vesting commencement date, and the remainder vesting monthly in equal installments, subject to the NEO’s continued employment, and will fully vest in the event of a termination by the Company without “Cause” (as defined in the 2018 Plan) or the NEO resigns for “Good Reason” (as defined in the applicable award agreement) 90 days prior to or 12 months following a change in control (within the meaning of the 2018 Plan). The terms of Mr. Gupta’s stock options were amended in connection with the Consulting Agreement entered into in March 2023 to provide for continued vesting through the term of his consulting arrangement and that any stock options vested as of such date would remain exercisable for three years.

(3)      Reflects time-based stock options that vest in equal monthly installments over two years from the vesting commencement date, subject to the NEO’s continued employment. The terms of Mr. Gupta’s stock options were amended in connection with the Consulting Agreement entered into in March 2023 to provide for continued vesting through the term of his consulting arrangement and that any stock options vested as of such date would remain exercisable for three years.

(4)      Reflects time-based stock options that vest over four-years, with 25% vesting upon the first anniversary of the vesting commencement date, and the remainder vesting monthly in equal installments, subject to the NEO’s continued employment. Fifty percent of any unvested stock options will vest in the event of a termination without “Cause” within three months following a “Change in Control” (in each case, as defined in his offer letter).

(5)      Reflects performance based options, with half of such options vesting in connection with the closing of a financing event and half in connection with a public liquidity event, subject to the NEO’s continued employment. Mr. Suri resigned from his roles with the Company on March 21, 2023, half of the performance based options were met and any stock options vested as of such date would remain exercisable for three years.

Equity Plans

2022 Equity Incentive Plan

In connection with the closing of the Business Combination, our shareholders approved and we adopted the 2022 Incentive Award Plan (the “2022 Plan”). The material terms of the 2022 Plan are summarized below.

Administration.    The Compensation Committee of the Presto Board administers the 2022 Plan. The Committee generally has the authority to designate participants, determine the type or types of awards to be granted to a participant, determine the terms and conditions of any agreements evidencing any awards granted under the 2022 Plan, accelerate the vesting or exercisability of, payment for or lapse of restrictions on, awards and to adopt, alter and repeal rules, guidelines and practices relating to the 2022 Plan. The Compensation Committee has full discretion to administer and interpret the 2022 Plan and to make any other determinations and/or take any other action that it deems necessary or desirable for the administration of the 2022 Plan, and any such determinations or actions taken by the Committee shall be final, conclusive and binding upon all persons and entities. The Committee may delegate to one or more officers of Presto or any affiliate the authority to act on behalf of the Committee with respect to any matter, right, obligation or election that is the responsibility of or that is allocated to the Committee in the 2022 Plan and that may be so delegated as a matter of law, except for grants of awards to persons subject to Section 16 of the Exchange Act.

Eligibility.    Certain employees, directors, officers, advisors or consultants of Presto or its affiliates are eligible to participate in the 2022 Plan. Approximately 190 employees, consultants, advisors and service providers and all of our directors are eligible to participate in the 2022 Plan.

Number of Shares Authorized.    The 2022 Plan provides for an aggregate of 4,617,400 shares of Presto Common Stock to be delivered, plus any shares representing Optionholder Earnout Shares (as defined in the Merger Agreement) that are forfeited by reason of a termination of service or employment following the effective date, not to exceed an aggregate of 4,500,000 shares.

The number of shares reserved for issuance under the 2022 Plan will increase automatically on January 1 of each of 2023 through 2032 by the number of shares equal to the lesser of (i) one percent (1%) of the total number of outstanding shares (rounded down to the nearest whole share) of Presto Common Stock as of the immediately preceding December 31, or (ii) a number as may be determined by the Presto Board. Notwithstanding anything to the contrary in the 2022 Plan, no more than 23,087,000 shares of Presto Common Stock may be issued pursuant to the exercise of ISOs under the 2022 Plan.

Shares of Presto Common Stock underlying awards under the 2022 Plan that are forfeited, canceled, expire unexercised or are settled in cash will be available again for new awards under the 2022 Plan. If there is any change in our corporate capitalization, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of Presto Common Stock reserved for issuance under the 2022 Plan, the number of shares of Presto Common Stock covered by awards then outstanding under the 2022 Plan, the limitations on awards under the 2022 Plan, the exercise price of outstanding options and such other equitable substitutions or adjustments as it may determine appropriate.

The 2022 Plan has a term of 10 years from the date it was approved by stockholders, and no further awards may be granted under the 2022 Plan after that date.

Awards Available for Grant.    The Compensation Committee may grant awards of nonqualified stock options, ISOs, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), other stock-based awards, other cash-based awards, dividend equivalents, and/or performance compensation awards or any combination of the foregoing.

Stock Options and Stock Appreciation Rights.    Stock options provide for the purchase of shares of Presto Common Stock in the future at an exercise price set on the grant date. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other

requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The exercise price of a stock option or SAR may not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders).

Restricted Stock.    Restricted stock is an award of nontransferable shares of Presto Common Stock that are subject to certain vesting conditions and other restrictions.

RSUs.    RSUs are contractual promises to deliver shares of Presto Common Stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of Common Stock prior to the delivery of the underlying shares (i.e., dividend equivalent rights). The Compensation Committee may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to RSUs will be determined by the Compensation Committee, subject to the conditions and limitations contained in the 2022 Plan.

Other Stock or Cash-Based Awards.    Other stock or cash based awards are awards of cash, fully vested shares of Presto Common Stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of Presto Common Stock. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled.

Dividend Equivalents.    Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of Presto Common Stock and may be granted alone or in tandem with awards other than stock options or SARs. Dividend equivalents are credited as of the dividend record dates during the period between the date an award is granted and the date such award vests, is exercised, is distributed or expires, as determined by the Committee.

Performance Awards.    Performance awards granted pursuant to the 2022 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of Presto Common Stock, that may be settled in cash, property or by issuance of those shares subject to the satisfaction or achievement of specified performance conditions.

Transferability.    Each award may be exercised during the participant’s lifetime only by the participant or, if permissible under applicable aw, by the participant’s guardian or legal representative and may not be otherwise assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution. The Committee, however, may permit awards (other than ISOs) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the participant and his or her family members or anyone else approved by it.

Amendment and Termination; Repricing.    In general, our Board may amend, alter, suspend, discontinue or terminate the 2022 Plan at any time. However, stockholder approval to amend the 2022 Plan may be necessary if the law or the 2022 Plan so requires. No amendment, alteration, suspension, discontinuance or termination will impair the rights of any participant or recipient of any award without the consent of the participant or recipient. Stockholder approval will not be required for any amendment that reduces the exercise price of any stock option or SAR, or cancels any stock option or SAR that has an exercise price that is greater than the then-current fair market value of Presto Common Stock in exchange for cash, other awards or stock options or SARs with an exercise price per share that is less than the exercise price per share of the original stock options or SARs.

Adjustments; Corporate Transactions.    In the event of certain capitalization events or corporate transactions (as set forth in the 2022 Plan), including the consummation of a merger or consolidation of Presto with another corporation, the Committee may adjust the number of shares of Presto Common Stock or other securities of Presto (or number and kind of other securities or other property) subject to an award, the exercise or strike price of an award, or any applicable performance measure, and may provide for the substitution or assumption of outstanding awards in a manner that substantially preserves the terms of such awards, the acceleration of the exercisability or lapse of restrictions applicable to outstanding awards and the cancellation of outstanding awards in exchange for the consideration received by stockholders of Presto in connection with such transaction.

2018 Equity Incentive Plan and 2008 Stock Incentive Plan

Our 2018 Equity Incentive Plan (the “2018 Plan”) was adopted by our Board in November 2018 and our 2008 Stock Incentive Plan (the “2008 Plan”) was adopted by our Board in 2008. The 2008 Plan terminated in connection with the adoption of the 2018 Plan and the 2018 Plan terminated in connection with the adoption of the 2022 Plan, although outstanding awards under each of the plans continue to be governed by the terms of the respective plans. Both plans provided for the grant of qualified and non-qualified stock options, restricted stock, RSUs and stock appreciation rights.

As of December 31, 2022, stock options to purchase 6,093,781 shares of Presto Common Stock with a weighted-average exercise price of $1.27 per share, and 1,091,731 RSUs were outstanding under the 2018 Plan and stock options to purchase 4,858,210 shares of Presto Common Stock with a weighted-average exercise price of $0.05 per share were outstanding under the 2008 Plan.

Our 2018 Plan provides that it is administered by a committee consisting of at least one member of our Board or, if no such members are designated, our Board, and the 2008 Plan provides that it is administered by our Board. The committee, or Board, as applicable, has the authority to construe and interpret the plans and any award agreements; prescribe and modify the plans, or grant any waiver of any conditions of the plans or any award; approve grantees, and determine the form and terms of, awards; interpret the plans (including correcting any defects or inconsistencies); and make all other determinations and findings necessary or advisable for the administration of the plans. The determinations of the committee or the Board, as applicable, are final and binding. The committee or the Board, as applicable generally may delegate its authority to grant an award to officers of the Company or other committees of our Board to the extent permitted by law.

In the event that the Company’s common stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or other change in the capital structure of the Company affecting shares of Presto Common Stock without consideration, then appropriate adjustments will be made to (a) the number and class of shares reserved for issuance under the plans or subject to outstanding awards and (b) the exercise prices, as applicable, and other terms and conditions of outstanding awards.

In the event of a “change in control” (referred to as an “acquisition or other combination” in the 2018 Plan and a “reorganization event” in the 2008 Plan), the 2018 Plan provides that an award will be subject to the terms of the applicable transaction agreement, which will provide for one or more of the following: (1) continuation by the Company, (2) assumption or substitution, (3) full or partial vesting, (4) cash-out (including the cancelation for no consideration of any underwater stock option) or (5) cancelation of an unvested or unexercised award for no consideration and the 2008 Plan provides that the Presto Board may take one or more of the following actions with respect to outstanding awards on terms determined by the Presto Board: (1) assumption or substitution, (2) termination if unexercised, (3) accelerate vesting or exercisability, (4) cash-out any in-the-money options or (5) cancelation of an unvested or unexercised award for no consideration.

Awards granted under our 2018 Plan and 2008 Plan generally may not be transferred or assigned in any manner other than by will, by the laws of descent and distribution, unless otherwise permitted by the committee or the Board.

The Presto Board may terminate any outstanding award under the 2018 Plan upon a dissolution or liquidation of the Company, followed by payment of the Company’s creditors and distribution of remaining funds to the Company’s stockholders. Further, the Presto Board may amend or terminate any award under the 2008 Plan without a participant’s consent unless such amendment or termination would adversely impact the rights of the participant and may amend or substitute any award, without stockholder approval, to provide an exercise price that is lower than that provided in the applicable award.

Non-Employee Director Compensation

During fiscal 2022, no director received cash, equity or other non-equity compensation for service on Presto’s Board.

In July 2022, each of Kim Lopdrup, who served as a member of the Presto Board until February 2023, and Gail Zauder were granted 60,744 RSUs under the 2018 Plan that vest in monthly increments over a 36 month period beginning October 2021.

In connection with but prior to the Closing of the Business Combination, in September 2022, the Presto Board, upon receipt of the approval of Presto’s disinterested shareholders, granted Krishna K. Gupta approximately 1.2 million Presto RSUs, which are subject to the same terms as the 2018 Plan (although they were granted outside of the 2018 Plan) and the terms of the award agreement governing such RSUs and are subject to a three year service-based vesting schedule.

In March 2023, Presto adopted a director compensation program that is designed to align compensation with its business objectives and the creation of stockholder value, while enabling Presto to attract, retain, incentivize and reward directors who contribute to the long-term success of Presto. Pursuant to the program, upon joining the Board, each non-employee director will receive an initial grant of RSUs having a value equal to $200,000, which vest quarterly over a three-year period. The program provides for an annual cash retainer of $40,000 per year, paid quarterly, and an annual RSU award with a value of $125,000 that vests in full on the earlier of one year from the date of grant, or the day prior to the next annual meeting of stockholders. Additionally, the program provides for the following additional cash compensation, which will be paid quarterly, for service on Board committees and for the Non-Executive Chair role:

The Compensation Committee of Presto’s Board expects to review director compensation periodically to ensure that director compensation remains competitive such that Presto is able to recruit and retain qualified directors.

BENEFICIAL OWNERSHIP OF SECURITIES

The following table sets forth certain information with respect to the beneficial ownership of our capital stock as of April 25, 2023 by:

•        each person who is the beneficial owner of more than 5% of Presto Common Stock;

•        each person who is an executive officer or director of the Company; and

•        all executive officers and directors of the Company, as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of April 25, 2023 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. The percentage of beneficial ownership is based on 51,365,106 shares of our Common Stock outstanding as of April 25, 2023.

Unless otherwise indicated, the Company believes that all persons named below have sole voting and investment power with respect to the voting securities indicated in the table below and the corresponding footnotes as being beneficially owned by them.

____________

*        Less than one percent.

(1)      Unless otherwise noted, the business address of each of Presto’s stockholders is c/o Presto Automation Inc., 985 Industrial Road, San Carlos, CA 94070.

(2)      Consists of (i) 1,479,680 shares of Presto Common Stock owned by KKG Enterprises LLC, for which Krishna K. Gupta is the managing member; (ii) 239,399 shares of Presto Common Stock held of record by Romulus Capital I, L.P. (“Romulus I”), for which Mr. Gupta is one of two members of Palatine Hill Ventures GP LLC, the general partner of Romulus I, through which Mr. Gupta exercises joint voting and dispositive control of the Presto Common Stock held by Romulus I; (iii) 3,608,384 shares of Presto Common Stock held of record by Romulus Capital II, L.P. (“Romulus II”), for which Mr. Gupta is one of two managing members of Romulus Capital II GP, LLC (the “Romulus GP”), the general partner of Romulus II, through which Mr. Gupta exercises joint voting and dispositive control of the Presto Common Stock held by Romulus II; (iv) 8,225,642 shares of Presto Common Stock held of record by Romulus Capital III, L.P. (“Romulus III”), for which Mr. Gupta is one of two managing members of Romulus GP, which is the general partner of Romulus III, through which Mr. Gupta exercises joint voting and dispositive control of the Presto Common Stock held by Romulus III; (v) 159,209 shares of Presto Common Stock held of record by Romulus ELC B3 Special Opportunity, L.P. (“Romulus Special Opportunity”), for which Mr. Gupta is one of two managing members of Romulus GP, which is the general partner of Romulus Special Opportunity, through which

Mr. Gupta exercises joint voting and dispositive control of the Presto Common Stock held by Romulus Special Opportunity; and (vi) 638,076 shares of Presto Common Stock held of record by Zaffran Special Opportunities LLC, for which Mr. Gupta is the sole general partner.

(3)      Consists of 4,394,589 shares of Presto Common Stock held of record by I2BF Global Investments LTD (“I2BF”). Ilya Golubovich is the sole director of I2BF and possesses both voting and dispositive power over the shares. The business address of I2BF is C/O HSM Corporate Services Ltd. 68 Fort Street, PO Box 31726, Grand Cayman KY 1-1297, Cayman Islands.

(4)      Consists of (i) 40,496 shares of Presto Common Stock and (ii) 874,766 options to purchase shares of Presto Common Stock exercisable within 60 days.

(5)      Consists of (i) 21,598 shares of Presto Common Stock and (ii) 278,277 options to purchase shares of Presto Common Stock exercisable within 60 days.

(6)      Includes shares owned by Ventoux Acquisition Holdings LLC, for which Edward Scheetz is a managing member and has voting and/or dispositive powers with respect to such shares.

(7)      Consists of (i) 2,234,703 shares of Presto Common Stock and (ii) 5,298,529 options to purchase shares of Presto Common Stock exercisable within 60 days. Mr. Suri resigned from his roles with the Company on March 21, 2023, and any unvested stock options were accelerated on March 25, 2023 and any stock options vested as of such date would remain exercisable for three years.

(8)      Consists of 659,829 options to purchase shares of Presto Common Stock exercisable within 60 days. The terms of Mr. Gupta’s stock options were amended in connection with the Consulting Agreement entered into in March 2023 to provide for continued vesting through the term of his consulting arrangement and that any stock options vested as of the date of the consulting agreement will remain exercisable for three years.

(9)      Consists of 7,000,000 shares of Presto Common Stock held of record by Presto CA LLC (“Presto CA”). Cleveland Avenue Food and Beverage Fund II, LP (“CAFB Fund II”) is the sole member of Presto CA. Cleveland Avenue GP II, LLC (“Cleveland Avenue GP II”) is the general partner of CAFB Fund II. Cleveland Avenue, LLC (“CA LLC”) is the sole member of Cleveland Avenue GP II. Donald Thompson is the sole manager of CA LLC. Consequently, Mr. Thompson may be deemed to have sole voting and dispositive power over the shares held directly by Presto CA. Mr. Thompson disclaims beneficial ownership of these securities except to the extent of any pecuniary interest therein. The principal business address of Presto CA is c/o Cleveland Avenue, 222 N. Canal St., Chicago, IL 60606.

(10)    Consists of (i) 1,108,171 shares of Presto Common Stock and 1,875,000 private placement warrants held by Chardan International Investments, LLC. 155,575 of the shares of Presto Common Stock held by Chardan International Investments, LLC are subject to vesting based upon achievement of certain stock price thresholds in accordance with the terms of the Merger Agreement. The business address for such entities is c/o Chardan Capital Markets LLC, 17 State Street, 21st Floor, New York, NY 10004.

SELLING SECURITYHOLDERS

This prospectus covers the resale by the Selling Securityholders identified below of an aggregate of 400,000 shares of our common stock. When we refer to the “Selling Securityholders” in this prospectus, we mean the persons listed in the table below, as well as their donees, pledges, assignees, transferees, or other successors in interest.

The following table details, as of the date of this prospectus, the name of each Selling Securityholder, the number of shares of our Common Stock beneficially owned by each Selling Securityholder prior to and following the offering. The (i) percentage of shares of our Common Stock beneficially owned by the Selling Securityholders and (ii) the voting power of the Selling Securityholders, in each case, both prior to and following the offering, is based on 51,365,106 shares of our Common Stock outstanding as of April 25, 2023.

The following table has been prepared on the assumption that all Resale Shares will be sold to parties unaffiliated with the Selling Securityholders.

We cannot advise you as to whether the Selling Securityholders will in fact sell any or all of the Resale Shares. In addition, the Selling Securityholders may sell, transfer or otherwise dispose of, at any time and from time to time, shares of the Resale Shares in transactions exempt from the registration requirements of the Securities Act after the date of this prospectus. For purposes of this table, we have assumed that the Selling Securityholders will have sold all of the securities covered by this prospectus upon the completion of the offering (including all shares of common stock issuable upon exercise of the Resale Warrants).

We have determined beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the tables have sole voting and sole investment power with respect to all securities that they beneficially own, subject to community property laws where applicable.

Information for each additional Selling Securityholder, if any, will be set forth by prospectus supplement to the extent required prior to the time of any offer or sale of such Selling Securityholder’s shares pursuant to this prospectus. Any prospectus supplement may add, update, substitute, or change the information contained in this prospectus, including the identity of each Selling Securityholder and the number of shares registered on its behalf.

____________

*        Represents beneficial ownership of less than 1%.

(1)      MPF VII GP, LLC, an affiliate of Metropolitan Partners Group, is the general partner of Metropolitan Levered Partners Fund VII, LP, Metropolitan Offshore Partners Fund VII, LP and Metropolitan Partners Fund VII, LP. Paul Lisiak, Alice Wang, Miles Peet and Dougal Gold are the Managing Partner and Chief Executive Officer, Chief Operating Officer, Deputy Chief Operating Officer and Chief Accounting Officer, respectively, of MPF VII GP, LLC and direct the voting and investment decisions with respect to the shares held by such entities. The business address of such entities is 850, Third Avenue, 18th Floor, New York, New York 10022.

(2)      Corbin Capital Partners, L.P., is the investment manager of CEOF Holdings LP (“CEOF”). Craig Bergstrom is the Chief Investment Officer of Corbin Capital Partners, L.P. and directs the voting and investment decisions with respect to the shares held by CEOF. The business address of CEOF is 590 Madison Avenue, 31st Floor, New York, New York 10022. Mr. Bergstrom disclaims beneficial ownership of shares held by CEOF.

(3)      Assumes the sale of all shares being offered pursuant to this prospectus.

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

VTAQ Related Person Transactions

On August 20, 2020, VTAQ issued an unsecured promissory note to one of its sponsors, Ventoux Acquisition Holdings LLC. The outstanding balance under the promissory note of $151,812 was repaid in full on December 31, 2020.

In addition, at the closing of the IPO, VTAQ’s stockholders prior to the IPO purchased from the Company an aggregate of 6,000,000 Private Warrants at $1.00 per Private Warrant (for a total purchase price of $6,000,000). In connection with the closing of the issuance sale of the Over-Allotment Option Units, the Company’s stockholders prior to the IPO purchased from VTAQ an aggregate of 675,000 Private Warrants at $1.00 per Private Warrant (for a total purchase price of $675,000). As of December 31, 2020, VTAQ had no loans outstanding, including any loans from its directors or officers.

Jonas Grossman and Alex Weil are affiliated with Chardan Capital Markets, in addition to being directors of the Company. While no direct compensation arrangements regarding such individuals have been entered into regarding such fees, these executives may benefit indirectly from any such amounts payable to Chardan Capital Markets in respect of marketing fees, costs and expenses incurred by Chardan Capital Markets in connection with the identification, review and negotiation and approval of the initial business combination and in respect of fees in connection with VTAQ’s capital raising efforts. Prior to the Closing, VTAQ and Presto intend to take reasonable steps to negotiate with their service providers to reduce their respective transaction expenses to be paid at the consummation of the Business Combination. The results of these negotiations are uncertain since the service providers can discontinue negotiations at any time and require the full amount of their fees payable upon the consummation of the Business Combination.

VTAQ entered into an agreement, commencing on December 23, 2020 through VTAQ’s consummation of a Business Combination or its liquidation, to pay Chardan Capital Markets, LLC a total of $10,000 per month for office space, utilities and secretarial support.

On March 29, 2022, Ventoux Acquisition Holdings LLC and Chardan International Investments, LLC, as the Sponsors, loaned $1,150,000 and $575,000 to VTAQ for the purpose of depositing such amounts into the Trust Account in order to extend the deadline for VTAQ to consummate the Business Combination from March 30, 2022 to June 30, 2022, in accordance with VTAQ’s certificate of incorporation and the trust agreement governing the Trust Account. In consideration for such loans, VTAQ issued two unsecured promissory notes (the “Extension Notes”) in the amounts of $1,150,000 and $575,000 to Ventoux Acquisition Holdings LLC and Chardan International Investments, LLC, respectively. On the same day, VTAQ wired the sum of $1,725,000 to Continental, as Trustee of the Trust Account, for the purpose of extending the deadline for VTAQ to consummate the Business Combination from March 30, 2022 to June 30, 2022.

Also on March 29, 2022, Ventoux Acquisition Holdings LLC and Chardan International Investments, LLC loaned VTAQ $250,000 and $125,000 for additional working capital purposes. In consideration for such loans, VTAQ issued two unsecured promissory notes (the “Working Capital Notes”) in amounts of $250,000 and $125,000 to Ventoux Acquisition Holdings LLC and Chardan International Investments, LLC, respectively.

The Extension Notes and Working Capital Notes were approved by VTAQ’s audit committee and VTAQ’s Board of Directors. The Extension Notes and Working Capital Notes do not bear interest and mature and are payable (subject to the waiver against trust provisions) upon on the earlier of (i) the date on which the Business Combination is consummated and (ii) the date of VTAQ’s liquidation.

VTAQ’s officers and directors are entitled to reimbursement for any out-of-pocket expenses incurred in connection with activities on VTAQ’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. VTAQ’s audit committee reviews on a quarterly basis all payments that were made to our Sponsor, VTAQ’s officers, directors or its or their affiliates.

In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsors or an affiliate of our Sponsors or certain of its officers and directors may, but are not obligated to, loan VTAQ funds as may be required on a non-interest basis. Upon completion of the Business Combination, VTAQ repaid such loaned amounts.

Presto Related Party Transactions

We have certain convertible promissory notes with entities controlled by Krishna K. Gupta and Ilya Golubovich, each of whom is a member of our board of directors. In fiscal year 2021, we issued $1.5 million and $1 million of the July 2020 Notes and embedded warrants to the entities controlled by Mr. Gupta and Mr. Golubovich, respectively, and $2 million of the Q3 2021 Notes and embedded warrants to the entity controlled by Mr. Golubovich.

We have elected the fair value option for our convertible promissory notes. As of June 30, 2022 and June 30, 2021, $9.6 million and $6.4 million of convertible promissory notes and embedded warrants were due to Mr. Gupta and Mr. Golubovich, respectively, of which $9.6 million and $3.6 million, respectively are due within 12 months.

In September 2022, in connection with but prior to the Closing, upon receipt of the approval of Presto’s disinterested shareholders, we granted 1,200,000 RSUs to Krishna K. Gupta, a director and significant stockholder of the Company, for services rendered in connection with the Business Combination. The RSUs, are subject to the same terms as the 2018 Plan (although they were granted outside of the 2018 Plan). The RSUs vest in the following tranches, subject to the continuous service through each applicable vesting date: 33.33% of the RSUs shall vest on September 30, 2022, 56.67% of the RSUs shall vest in equal monthly installments on the last day of each month during the subsequent 23-month period, and the remaining 10% shall vest upon the third anniversary of the vesting commencement date. The RSUs time-based vesting will accelerate upon an acquisition of the Company.

Policies and Procedures for Related Person Transactions

In connection with the Closing of the Business Combination, the Presto Board adopted a written policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions (the “Related Person Transaction Policy”).

A “Related Person Transaction” is a financial transaction, arrangement or relationship or any series of similar transactions, arrangement or relationships, in which Presto or any of its subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest, other than an employment relationship or transaction involving an executive officer and any related compensation. A “Related Person” means:

•        any person who is, or at any time during the applicable period was, one of Presto’s executive officers, a member or a member nominee of the Presto Board;

•        any person who is known by Presto to be the beneficial owner of more than 5% of its voting stock at the time of occurrence or existence of the Related Person Transaction; and

•        any immediate family member of any of the foregoing persons, which includes any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than 5% of Presto’s voting stock, and any person (other than a tenant or employee) sharing the household of such director, director nominee, executive officer or beneficial owner of more than 5% of Presto’s voting stock.

Each of the transactions described above that Presto has entered into since the adoption of the Related Person Transaction Policy was approved in accordance with such policy; the transactions entered into before the Closing were not subject to the policy.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS

The following is a summary of the material U.S. federal income tax consequences applicable to non-U.S. holders (as defined below) of the ownership and disposition of our shares of Common Stock, but does not purport to be a complete analysis of all potential tax considerations related thereto. This discussion applies only to our Common Stock that is held as a capital asset within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion assumes that any distributions made (or deemed made) by us on our Common Stock and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of our Common Stock will be in U.S. dollars.

This discussion does not address the U.S. federal income tax consequences to our founders, sponsors, officers or directors. This discussion is a summary only and does not describe all of the tax consequences that may be relevant to you in light of your particular circumstances, including but not limited to the alternative minimum tax, the Medicare tax on certain net investment income and the different consequences that may apply if you are subject to special rules that apply to certain types of investors, including but not limited to:

•        banks, financial institutions or financial services entities;

•        broker-dealers;

•        traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

•        governments or agencies or instrumentalities thereof;

•        regulated investment companies;

•        real estate investment trusts;

•        expatriates or former long-term residents of the United States;

•        except as specifically provided below, persons that actually or constructively own five percent or more (by vote or value) of our shares;

•        persons that acquired our Common Stock pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation;

•        tax-qualified retirement plans;

•        “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

•        insurance companies;