0001822145false0001822145us-gaap:CommonStockMember2023-05-182023-05-180001822145prst:WarrantsEachWholeWarrantExercisableForOneShareOfCommonStockMember2023-05-182023-05-1800018221452023-05-182023-05-18

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 18, 2023

Presto Automation Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

001-39830

    

84-2968594

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

985 Industrial Road

San Carlos, CA 94070

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (650) 817-9012

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which
registered

Common stock, par value $0.0001 per share

 

PRST

 

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of common stock

 

PRSTW

 

The Nasdaq Stock Market LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

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 13(a) of the Exchange Act.

Item 2.02 Results of Operations and Financial Condition.

On May 18, 2023, Presto Automation Inc. (the “Company”) issued a press release announcing the Company’s financial results for the quarter ended March 31, 2023.

A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference in this Item 2.02. The information and exhibit contained in this Item 2.02 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
Number

    

Description

99.1

 

Press Release, dated May 18, 2023

104

 

Cover Page Interactive Data File (embedded with the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PRESTO AUTOMATION INC.

By:

/s/ Ashish Gupta

Name:

Ashish Gupta

Title:

Principal Financial Officer

Dated: May 18, 2023

Exhibit 99.1

Presto Announces Fiscal Third Quarter 2023 Financial Results

Continues Momentum of Drive-Thru Voice AI Automation by Adding Hardees and Carl’s Jr. as Customers

SAN CARLOS, CA - May 18, 2023 - Presto Automation Inc. (NASDAQ: PRST), one of the largest drive-thru automation technology providers in the hospitality industry, today announced financial results for the fiscal third quarter ended March 31, 2023.

“We believe this is an inflection point for the drive-thru automation market and we continue to increasingly focus our attention on the Voice segment of our business, including the announcement of our partnership with CKE Restaurants for participating drive-thrus nationwide to use our Presto Voice product,” said Krishna Gupta, interim CEO at Presto. “Our customers are learning about the revenue and efficiency benefits that Presto Voice can provide and that Voice AI in the drive-thru is not a futuristic application of AI, it is immediately actionable. We are the market leader in this segment and are investing meaningfully behind it.”

“The Voice segment builds on our existing focus on labor automation and driving more revenue to our customers using Presto Touch, which is centered around our new Flex product that several of our enterprise partners are in the process of testing,” continued Gupta. “Our revenue decline in the quarter is due to the amortization of legacy contracts, but we are looking to upgrade our customers to our new product and expect to see the financial benefits from our new partnership in the future.”

Fiscal Third Quarter 2023 Financial Highlights

For the fiscal third quarter of 2023, compared to the fiscal third quarter of 2022:

Total revenue was $6.6 million down 12.0% compared to $7.5 million for 2022.
Total ARR was $26.4 million, a decrease of 12.0% year-over-year.
Net loss was $(15.7) million, compared to net income $9.0 million for 2022. Of the $25 million change, $21 million was due to a change in the fair value of warrant liabilities and convertible promissory notes and non-cash stock compensation.
Adjusted EBITDA* was a loss of $(9.3) million for 2023, compared to a loss of $(7.1) million for 2022.

*Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Financial Measures,” and is reconciled to net income, the closest comparable GAAP measure, at the end of this release.

Recent Business Highlights

Expanded partnership with CKE Restaurants Holdings, Inc., the parent company of the iconic Carl's Jr. and Hardee's brands. Presto will be rolling out its AI powered solution, Presto Voice™, to automate voice ordering at participating CKE drive-thrus nationwide.

Announced a collaboration with OpenAI, an AI research and deployment company, to drive greater innovation around Presto’s drive-thru AI voice assistant.

Financial Outlook Update

Presto expects total revenue for the fiscal year 2023 to be in the range of $26 million to $28 million. The revision is due to updated assumptions impacting the accounting treatment of a single customer contract. This non-cash change is not material to commercial operations.

Presto Automation, Inc Fiscal Third Quarter 2023 Conference Call Details

Date:

Thursday, May 18, 2023

Time:

5:00 p.m. Eastern Time (2:00 p.m. Pacific Time)

Telco Registration:

You can register for the conference call at https://investor.presto.com/news-events/events

A live audio webcast of the event will be available on the Presto Investor Relations website, https://investor.presto.com/. An archived replay of the webcast also will be available shortly after the live event on the Presto Investor Relations website.

About Presto Automation Inc.

Presto (NASDAQ: PRST) provides enterprise-grade AI solutions for the nation’s largest hospitality brands. Our industry-leading automation and voice AI technology improves order accuracy, reduces labor costs, and increases revenue for superior drive-thru and dine-in experiences. With over $18 billion in payments processed, Presto is one of the largest labor automation technology providers in the industry. Presto is headquartered in Silicon Valley in San Carlos, California and counts among its customers some of the top 20 restaurant chains in the United States.

Non-GAAP Financial Measures and Performance Measures

This press release includes Adjusted EBITDA, which is a financial measure that is not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States. We believe Adjusted EBITDA is useful for comparing our financial performance to other companies and from period to period by excluding 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. Adjusted EBITDA is defined as net loss, adjusted to exclude interest, other income (expense), net loss on debt extinguishment, income taxes, depreciation and amortization expense, stock-based compensation expense, fair value adjustments on warrant liabilities and convertible promissory notes, merger related ancillary costs, and hardware repair expenses related to COVID and COVID-related expenses due to damage from liquid ingress and contra-revenue associated with warrants issued in a sales transaction. We include this non-GAAP measure because it used by management to evaluate our core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. A reconciliation of Adjusted EBITDA to its most comparable GAAP financial measure is included below under “Reconciliation from GAAP to Non-GAAP Results” at the end of this


release.In addition, we use Annual Revenue Run-Rate, or ARR, as a key business metric to evaluate our business, identify trends, formulate business plans and make strategic decisions. We calculate ARR by annualizing quarterly revenue at the end of the fiscal quarter. Our calculation of ARR may differ from similarly titled metrics presented by other companies, and the amount of revenue we recognize over any 12-month period may differ significantly from the ARR at the beginning of that period.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that refer to 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 management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. The forward-looking statements speak only as of the date of this press release or as of the date they are made. Except as otherwise required by applicable law, Presto disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Presto cautions you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Presto. In addition, Presto cautions you that the forward-looking statements contained in this press release are subject to the following risks and uncertainties: our ability to manage our growth effectively, to sustain our recent revenue growth or attract new customers; the limited operating history with our new Vision and Voice products in a new and developing market; our ability to achieve revenue growth while our expenses increase; continued adverse impacts from COVID-19  (including as a result of global supply chain shortages); the loss of any of our three largest customers or a reduction in their business with us; our ability to improve and enhance the functionality, performance, reliability, design, security, or scalability of our platform to respond to customers’ evolving needs; our ability to protect the security of our customers’’ information; changing privacy laws, regulations and standards, and our ability to comply with contractual obligations and laws related to data privacy and security; unfavorable conditions in the restaurant industry or the global economy, including with respect to food, labor, and occupancy costs; the availability of capital or financing on acceptable terms, if at all; financial covenants and other restrictions on our actions contained in our financing agreements that may limit our operational flexibility; the length and unpredictability of our sales cycles and the amount of investments required in sales efforts; material weaknesses in our internal control over financial reporting and, our ability to remediate these deficiencies; our ability to continue as a going concern; our ability to receive additional financing in a timely manner; shortages, price increases, changes, delays or discontinuations of hardware; our ability to maintain relationships with our payment processors; our relies on computer hardware, licensed


software and services rendered by third parties; U.S. laws and regulations (including with respect to payment transaction processing), many of which are unsettled and still developing, and our or our customers’ ability to comply with such laws and regulations; significant changes in U.S. and international trade policies that restrict imports or increase tariffs; any requirements to collect additional sales taxes or be subject to other tax liabilities that may increase the costs to our customers; our ability to adequately protect our intellectual property rights; claims by third parties of intellectual property infringement; our use of open-source software in our platform; and other economic, business, competitive and/or regulatory factors affecting Presto’s business generally as set forth in our filings with the Securities and Exchange Commission.

Contact

Investors:

Adam Rogers

VP Investor Relations

investor@presto.com

Media:

Justin Foster & Brian Ruby

media@presto.com


PRESTO AUTOMATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands, except share and per share amounts)

Three months ended

Nine months ended

March 31, 

March 31, 

    

2023

    

2022

    

2023

    

2022

Revenue

Platform

$

3,088

$

5,083

$

11,617

$

14,754

Transaction

3,519

2,451

9,699

7,705

Total revenue

6,607

7,534

21,316

22,459

Cost of revenue

Platform

2,743

4,057

10,951

11,872

Transaction

3,084

2,185

8,561

6,749

Depreciation and impairment

291

279

873

1,206

Total cost of revenue

6,118

6,521

20,385

19,827

Gross profit

489

1,013

931

2,632

Operating expenses:

Research and development

5,496

3,927

16,877

11,733

Sales and marketing

2,127

1,966

6,753

4,791

General and administrative

7,408

2,978

19,608

7,110

Loss on infrequent product repairs

119

582

Total operating expenses

15,031

8,990

43,238

24,216

Loss from operations

(14,542)

(7,977)

(42,307)

(21,584)

Change in fair value of warrants and convertible promissory notes

1,599

18,102

61,043

(11,668)

Interest expense

(2,991)

(1,162)

(9,397)

(3,418)

Loss on extinguishment of debt and financing obligations

(8,095)

Other financing and financial instrument expenses, net

(1,768)

Other income (expense), net

257

(12)

2,612

2,629

Total other income (expense), net

(1,135)

16,928

44,395

(12,457)

Income (loss) before provision for income taxes

(15,677)

8,951

2,088

(34,041)

Provision (benefit) for income taxes

3

(3)

8

21

Net income (loss) and comprehensive income (loss)

$

(15,680)

$

8,954

$

2,080

$

(34,062)

Numerator adjustments for diluted earnings per share:

Less: Change in fair value of convertible notes

(16,307)

Net income (loss) attributable to common stockholders, diluted

$

(15,680)

$

(7,353)

$

2,080

$

(34,062)

Net income (loss) per share attributable to common stockholders, basic

$

(0.30)

$

0.33

$

0.05

$

(1.25)

Net income (loss) per share attributable to common stockholders, diluted

(0.30)

(0.23)

0.04

(1.25)

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic

51,453,368

27,316,602

44,173,570

27,213,403

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted

51,453,368

31,838,707

54,539,795

27,213,403

(1)

Includes stock-based compensation expense as follows (in thousands)

Three Months Ended

Nine Months Ended

March 31,

March 31,

    

2023

    

2022

    

2023

    

2022

Research and development

$

1,154

$

99

$

1,886

$

349

Sales and marketing

245

110

581

323

General and administrative

2,997

221

6,805

706

Total*

$

4,396

$

430

$

9,272

$

1,378

*

For the three and nine months ended March 31, 2023, such amount reflects $1,604 and $3,478, respectively, of stock-based compensation expense related to earn out shares.


PRESTO AUTOMATION INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)

As of

As of

March 31, 

June 30

    

2023

    

2022

Assets

Current assets:

Cash and cash equivalents

$

26,978

$

3,017

Accounts receivable, net of allowance for doubtful accounts of $135 and $353, respectively

2,207

1,518

Inventories

395

869

Deferred costs, current

3,772

8,443

Prepaid expenses and other current assets

1,851

707

Total current assets

35,203

14,554

Deferred costs, net of current portion

22

2,842

Investment in non-affiliate

2,000

Deferred transaction costs

5,765

Property and equipment, net

1,215

1,975

Intangible assets, net

8,436

4,226

Goodwill

1,156

1,156

Other long-term assets

578

18

Total assets

$

48,610

$

30,536

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

$

3,267

$

5,916

Accrued liabilities

4,152

6,215

Financing obligations, current

3,720

8,840

Term loans, current

53,979

25,443

Convertible promissory notes and embedded warrants, current

89,663

Deferred revenue, current

1,551

10,532

Total current liabilities

66,669

146,609

Financing obligations, net of current

1,860

PPP loans

2,000

Warrant liabilities

1,623

4,149

Deferred revenue, net of current portion

264

237

Other long-term liabilities

426

Total liabilities

70,842

152,995

Commitments and Contingencies

Stockholders’ deficit:

Preferred stock, $0.0001 par value–1,500,000 shares authorized as of March 31, 2023 and June 30, 2022, respectively; no shares issued and outstanding as of March 31, 2023 and June 30, 2022 respectively

Common stock, $0.0001 par value–180,000,000 shares authorized as of March 31, 2023 and June 30, 2022, and 51,921,941 and 27,974,439 shares issued and outstanding as of March 31, 2023 and June 30, 2022, respectively

5

3

Additional paid-in capital

176,466

78,321

Accumulated deficit

(198,703)

(200,783)

Total stockholders’ deficit

(22,232)

(122,459)

Total liabilities and stockholders’ deficit

$

48,610

$

30,536


PRESTO AUTOMATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine months ended

March 31, 

    

2023

    

2022

Cash Flows from Operating Activities

Net income (loss)

$

2,080

$

(34,062)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation, amortization and impairment

1,262

1,524

Stock-based compensation

5,794

1,384

Earnout share stock-based compensation

3,479

Contra-revenue associated with warrant agreement (Refer to Note 2)

1,073

Noncash expense attributable to fair value liabilities assumed in Merger

34

Change in fair value of liability classified warrants

(12,555)

1,066

Change in fair value of warrants and convertible promissory notes

(48,271)

10,602

Amortization of debt discount and debt issuance costs

2,433

405

Loss on extinguishment of debt and financing obligations

8,095

Paid-in-kind interest expense

4,604

15

Share and warrant cost on termination of convertible note agreement

2,412

Forgiveness of PPP Loan

(2,000)

(2,599)

Change in fair value of unvested founder shares liability

(1,392)

Noncash lease expense

264

Loss on disposal off property and equipment

16

Changes in operating assets and liabilities:

Accounts receivable, net

(689)

(524)

Inventories

474

(905)

Deferred costs

7,769

8,978

Prepaid expenses and other current assets

(742)

538

Other long-term assets

(80)

Accounts payable

1,480

(4,297)

Vendor financing facility

(6,792)

Accrued liabilities

(2,138)

(2,551)

Deferred revenue

(8,954)

(10,917)

Other long-term liabilities

(247)

(200)

Net cash used in operating activities

(35,719)

(38,415)

Cash Flows from Investing Activities

Purchase of property and equipment

(229)

(214)

Payments relating to capitalized software

(3,584)

(1,249)

Investment in non-affiliate

(2,000)

Net cash used in investing activities

(5,813)

(1,463)

Cash Flows from Financing Activities

Proceeds from the exercise of common stock options

280

104

Proceeds from the issuance of term loans

60,250

12,600

Payment of debt issuance costs

(1,294)

(1,287)

Repayment of term loans

(32,980)

Payment of penalties and other costs on extinguishment of debt

(6,144)

Proceeds from issuance of convertible promissory notes and embedded warrants

5,500

Proceeds from issuance of financing obligations

Principal payments of financing obligations

(3,669)

(2,009)

Proceeds from the issuance of common stock

1,100

Contributions from Merger and PIPE financing, net of transaction costs and other payments

49,840

Payments of deferred transaction costs

(1,890)

(1,541)

Net cash provided by financing activities

65,493

13,367

Net increase (decrease) in cash and cash equivalents

23,961

(26,511)

Cash and cash equivalents at beginning of period

3,017

36,909

Cash and cash equivalents at end of period

$

26,978

$

10,398

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Capitalization of stock-based compensation expense to capitalized software

$

915

$

9

Issuance of warrants (Refer to Note 2)

1,352

1,466

Capital contribution from shareholder in conjunction with Credit Agreement

2,779

Issuance of warrants in conjunction with Credit Agreement

2,705

Issuance of warrants in conjunction with Lago Term Loan

843

Convertible note conversion to common stock

41,392

Reclassification of warrants from liabilities to equity

830

Recognition of liability classified warrants upon Merger

9,388

Recognition of Unvested Founder Shares liability

1,588

Forgiveness of PPP Loan

2,000

2,599

Transaction costs recorded in accounts payable and accrued liabilities

5,584

Right of use asset in exchange for operating lease liability

308

Cancellation of June 2021 Note and related accrued interest, with issuance of February 2022 Note

20,663


PRESTO AUTOMATION INC.

RECONCILIATION FROM GAAP TO NON-GAAP RESULTS

(unaudited)

(in thousands, except per share amounts)

    

Three months ended March 31, 

    

Nine months ended March 31, 

(in thousands)

2023

    

2022

2023

    

2022

Net income (loss)

$

(15,680)

$

8,954

$

2,080

$

(34,062)

Provision for income taxes

3

(3)

8

21

Interest expense

 

2,991

 

1,162

 

9,397

 

3,418

Other income, net

 

(257)

 

12

 

(2,612)

 

(2,629)

Depreciation and amortization

 

418

 

338

 

1,262

 

1,391

Stock-based compensation expense

 

2,792

 

430

 

5,794

 

1,384

Earnout stock-based compensation expense

 

1,604

 

 

3,478

 

Change in fair value of warrants and convertible promissory notes

 

(1,599)

 

(18,102)

 

(61,043)

 

11,668

Loss on extinguishment of debt and financial obligations

 

 

 

8,095

 

Other financing and financial instrument (costs) income, net

 

 

 

1,768

 

Deferred compensation and bonuses earned upon closing of the Merger

 

 

 

2,232

 

Public relations fee due upon closing of the Merger

 

 

 

250

 

Loss on infrequent product repairs(1)

 

 

119

 

 

582

Contra-revenue associated with warrant agreement

458

 

 

1,073

 

Hardware repair expense related to COVID(1)

 

 

 

 

1,110

Adjusted EBITDA

$

(9,270)

$

(7,090)

$

(28,218)

$

(17,117)

(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. This arbitration ruling was affirmed by the appellate court in the country of the arbitration ruling on March 6, 2023. On May 2, 2023, the vendor appealed the ruling to the highest court there. The award has not met the criteria to be considered realizable as of March 31, 2023. As a result, the Company has not recognized any gain related to this settlement in its condensed consolidated statement of operations and comprehensive loss.