Presto Automation Inc. (OTC Pink: PRST), a software services company, has reported a liquidity crisis and changes in its executive team, according to a recent 8-K filing with the Securities and Exchange Commission. The company disclosed that as of last Thursday, it had virtually no cash on hand, which has forced it to issue a convertible note to raise immediate funds.
On Monday, Presto Automation announced the issuance of a subordinated convertible note to Remus Capital Series B II, L.P., an entity affiliated with board member Krishna Gupta, for $650,000.
The note is convertible into shares of common stock at a conversion price of $0.00672 per share, a 20% premium to the closing price on August 9, 2024. The company expects to receive the funds today, which will be partially utilized to cover immediate obligations such as payroll.
The company's financial strain is further compounded by defaults under its Loan Agreements, which required it to raise $2.0 million by August 1, 2024. Despite securing a deferral to August 15, Presto Automation failed to meet the conditions, leading to current uncured defaults.
The lenders have indicated they may exercise remedies, including foreclosure, as early as August 16, 2024, potentially resulting in total investment loss for investors.
Additionally, the Nasdaq Stock Market LLC has suspended trading of Presto Automation’s common stock and warrants and will proceed to delist them. The securities currently trade on the OTC Pink Marketplace under the symbols "PRST" and "PRSTW," respectively.
In terms of leadership changes, Stephen Herbert resigned from the board of directors effective immediately on August 9, 2024, with no reason provided for his departure.
On the same day, the company's Chief Financial Officer, Stanley Mbugua, agreed to step down, with Lillian Meyer set to take over the role on August 26, 2024.
Meyer’s compensation package includes an annual base salary of $350,000, eligibility for a 50% performance bonus, and an equity grant to be determined in the future.
The company is attempting to raise additional funds through an agreement with Triton Funds LP, but the lenders have expressed unwillingness to provide further forbearance for the company's defaults.
The company has not identified any third-party investor interest and is facing a longer-term liquidity requirement to raise an additional $32.0 million by the Forbearance Date to facilitate loan restructuring negotiations.
The information in this article is based on a press release statement.
In other recent news, Presto Automation Inc. is set to be delisted from Nasdaq due to non-compliance with the exchange's listing standards. The company also faces liquidity challenges, including the need to secure additional funding of $6.0 million by August 29, 2024. To address these issues, Presto Automation has entered into a Common Stock Purchase Agreement with Triton Funds LP, enabling the sale of up to $25 million in shares.
Furthermore, the company issued a subordinated convertible note to Remus Capital Series B II, L.P., and extended its forbearance agreement with Metropolitan Partners Group Administration, LLC. In terms of financial results, Presto reported Q3 2024 revenue of $4.5 million and an adjusted EBITDA loss of $12.2 million.
The company is undergoing a strategic shift towards Voice AI technology and discontinuing its Touch pay-at-table business. For Q4 2024, Presto projects its revenue to be between $1.6 million and $1.9 million. These are recent developments for Presto Automation Inc.
InvestingPro Insights
Presto Automation Inc.'s recent financial struggles are reflected in the real-time data and insights from InvestingPro. With a market capitalization of a mere 1.16 million USD, the company's financial health is precarious. The significant revenue decline over the last twelve months, at -34.78%, and a staggering operating income margin of -301.67%, underscore the urgency of the company's need to secure funding. The severe price drop over various time frames, including a -99.83% return over the last year, signals a lack of investor confidence.
From the perspective of InvestingPro Tips, two critical points stand out. First, Presto Automation operates with a significant debt burden, which aligns with the company's default under its loan agreements and the urgency in issuing a convertible note. Secondly, the stock's high volatility is evident, with the price having taken a considerable hit over the last week, month, and six months, further evidenced by a -79.49% one-week total price return. For readers interested in a deeper analysis, additional InvestingPro Tips are available, providing a comprehensive view of the company's financial situation and market performance.
Investors and potential stakeholders can find a total of 17 additional InvestingPro Tips for Presto Automation, which offer a detailed understanding of the company's market position and financial health. These insights are crucial for making informed decisions, especially in light of the company's current liquidity crisis and the changes within its executive team.
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