SAN CARLOS, Calif., May 20, 2024 (GLOBE NEWSWIRE) -- Presto Automation Inc. ("Presto" or the "Company") (NASDAQ: PRST), one of the largest AI and automation technology providers to the restaurant industry, today announced the pilot program of its Presto Voice™ Spanish Voice AI ordering feature. Presto Voice's new AI feature will allow drive-thru customers to easily place orders in Spanish with the ability to effortlessly transition between English and Spanish when necessary. "We understand the importance of ...

About Presto Automation Presto (Nasdaq: PRST) provides enterprise-grade AI and automation solutions to the restaurant industry. Presto's solutions are designed to decrease labor costs, improve staff productivity, increase revenue, and enhance the guest experience. Presto offers its AI solution, Presto Voice™, to quick-service restaurants (QSR) and has some of the most recognized restaurant names in the United States as its customers. Forward-Looking Statements This press release contains forward-looking sta ...

Company Announcement - Presto Automation Inc. will release its fiscal third quarter 2024 financial results on May 20, 2024, after market close [1] - A conference call to discuss the financial results and business highlights will be held on May 22, 2024, at 5:00 p.m. Eastern Time [2] Company Overview - Presto Automation provides enterprise-grade AI and automation solutions specifically for the restaurant industry [3] - The company's solutions aim to reduce labor costs, enhance staff productivity, increase revenue, and improve the guest experience [3] - Presto's AI solution, Presto Voice™, is targeted at quick-service restaurants (QSR) and is utilized by some of the most recognized restaurant brands in the United States [3]

Group 1 - Presto Automation Inc. will release its fiscal third quarter 2024 financial results on May 20, 2024, after market close [1] - A conference call to discuss the financial results and business highlights is scheduled for May 22, 2024, at 5:00 p.m. Eastern Time [2] - Presto provides AI and automation solutions aimed at reducing labor costs, improving productivity, increasing revenue, and enhancing guest experience in the restaurant industry [3]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to PRESTO AUTOMATION INC. (Exact name of registrant as specified in its charter) | Delaware | 001-39830 | 84-2968594 | | --- | --- | --- | | (State ...

Presto Automation Inc. (NASDAQ:PRST) Q1 2024 Results Conference Call November 20, 2023 5:00 PM ET Conference Call Participants Hello, and welcome to Presto AutomationÂ's First Quarter 2024 Earnings Call. [Operator Instructions] I would now like to hand the conference over to [Gi Luvere] you may begin. These forward-looking statements are subject to known and unknown risks and uncertainties. Presto cautions that these statements are not guarantees of future performance. We encourage you to review our most re ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=10&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presto Automation Inc. reported **$4.9 million** revenue and **$5.4 million** net income for Q1 FY2024, with significant liquidity and going concern issues [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets decreased to **$34.1 million** due to reduced cash, while liabilities decreased and stockholders' deficit improved Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Jun 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,285 | $15,143 | | Total current assets | $18,157 | $31,066 | | Total assets | $34,140 | $46,687 | | Term loans, current | $53,088 | $50,639 | | Warrant liabilities | $4,842 | $25,867 | | Total liabilities | $70,213 | $91,914 | | Total stockholders' deficit | $(36,073) | $(45,227) | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q1 FY2024, total revenue decreased 37% to **$4.9 million**, resulting in a **$13.3 million** operating loss and **$5.4 million** net income Consolidated Statement of Operations (in thousands) | Metric | Q1 FY24 (ended Sep 30, 2023) | Q1 FY23 (ended Sep 30, 2022) | | :--- | :--- | :--- | | Total Revenue | $4,885 | $7,779 | | Gross Profit | $203 | $552 | | Loss from Operations | $(13,265) | $(14,159) | | Change in fair value of warrants | $21,025 | $59,822 | | Net Income | $5,372 | $34,789 | | Diluted EPS | $0.08 | $0.86 | [Condensed Statements of Cash Flows](index=13&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$10.5 million** for Q1 FY2024, resulting in a **$11.9 million** net cash decrease, primarily due to reduced financing Summary of Cash Flows (in thousands) | Cash Flow Activity | Q1 FY24 (ended Sep 30, 2023) | Q1 FY23 (ended Sep 30, 2022) | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,525) | $(11,156) | | Net cash used in investing activities | $(1,281) | $(1,374) | | Net cash (used in) provided by financing activities | $(52) | $68,762 | | Net (decrease) increase in cash | $(11,858) | $56,232 | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes disclose a going concern warning, strategic review of Presto Touch, significant customer concentration, and ongoing SEC/DOJ investigation - The company's financial statements have been prepared on a going concern basis, but substantial doubt exists about its ability to continue as a going concern due to recurring operating losses and the need for additional capital[38](index=38&type=chunk)[41](index=41&type=chunk) - The company is considering strategic alternatives for its Presto Touch solution, which could include a sale, partial sale, or abandonment of the business[46](index=46&type=chunk)[168](index=168&type=chunk) - Three major customers accounted for **90% of revenue** in the quarter, with one customer (Customer C, **23% of revenue**) providing notice of intent not to renew its contract past March 31, 2024[43](index=43&type=chunk)[44](index=44&type=chunk) - The company was not in compliance with its maximum net leverage ratio covenant as of September 30, 2023, but received a waiver subsequent to the quarter's end as part of the Third Amendment to its Credit Agreement[117](index=117&type=chunk)[173](index=173&type=chunk) - In July 2023, the company received subpoenas from the SEC and a request for information from the DOJ regarding a formal investigation into disclosures about its AI technology[138](index=138&type=chunk) - Subsequent to the quarter end, the company raised approximately **$7.0 million** in a registered offering in November 2023 and **$3.0 million** in a private placement in October 2023[164](index=164&type=chunk)[182](index=182&type=chunk) - On November 15, 2023, the company implemented a reduction in force affecting approximately **17%** of its global personnel as part of a cost savings initiative[169](index=169&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift to Presto Voice, a 37% revenue decrease to **$4.9 million**, liquidity challenges, and mitigating actions including capital raises and cost reductions - The company's strategic focus is on its proprietary AI technology platform, Presto Voice, while it is considering strategic alternatives for its legacy Presto Touch solution, including a potential sale, partial sale, or abandonment[188](index=188&type=chunk)[192](index=192&type=chunk) Revenue by Type (in thousands) | Revenue Type | Q1 FY24 (ended Sep 30, 2023) | Q1 FY23 (ended Sep 30, 2022) | Change (%) | | :--- | :--- | :--- | :--- | | Platform | $2,066 | $4,820 | (57)% | | Transaction | $2,819 | $2,959 | (5)% | | **Total Revenue** | **$4,885** | **$7,779** | **(37)%** | - The **57%** decrease in Platform revenue is primarily attributed to the amortization and roll-off of deferred revenue related to legacy Touch contracts[234](index=234&type=chunk) - General and Administrative expenses increased **19%** to **$7.1 million**, primarily due to a **$1.5 million** increase in professional fees for legal, audit, and public company compliance[244](index=244&type=chunk) - The company has implemented a cost reduction plan, including a **17%** reduction in force, which is expected to yield cumulative monthly cost savings of up to **$1.2 million** within 8 months[203](index=203&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 FY24 (ended Sep 30, 2023) | Q1 FY23 (ended Sep 30, 2022) | | :--- | :--- | :--- | | Net income | $5,372 | $34,789 | | Adjustments | (14,171) | (43,680) | | **Adjusted EBITDA** | **$(8,799)** | **$(8,891)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=93&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces significant market risks including high customer concentration, vendor concentration, and financial institution risk from uninsured cash deposits - The company has significant credit risk due to customer concentration, with three customers representing **90% of revenue** for the quarter ended September 30, 2023[337](index=337&type=chunk) - Customer C, which accounted for **23% of revenue** in the quarter, provided notice of its intent not to renew its contract, with a transition period extending to March 31, 2024[338](index=338&type=chunk) - The company is exposed to vendor concentration risk by purchasing its next-generation Presto Touch tablets from a single supplier[339](index=339&type=chunk) - As of September 30, 2023, the company had **$12.8 million** in cash deposits that exceeded FDIC insurance limits, posing a risk in the event of a financial institution failure[342](index=342&type=chunk) [Item 4. Controls and Procedures](index=96&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective as of September 30, 2023, due to four material weaknesses in internal control over financial reporting, with remediation underway - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of September 30, 2023[343](index=343&type=chunk) - The ineffectiveness is due to four material weaknesses: (1) ineffective control environment and risk assessment, (2) inadequate controls for complex accounting, (3) ineffective controls over the financial closing process, and (4) inadequate internal accounting records[347](index=347&type=chunk) - Management is in the early stages of remediation, which includes hiring additional accounting resources, engaging a third-party consulting firm, and designing and implementing new control processes[349](index=349&type=chunk)[351](index=351&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=99&type=section&id=Item%201.%20Legal%20Proceedings) Key legal matters include a patent lawsuit dismissal, a pending arbitration appeal, a legal demand from former employees, and an ongoing SEC/DOJ investigation - A patent infringement lawsuit brought by Valyant AI, Inc. against the company and Hi Auto, Inc. was dismissed on October 23, 2023[134](index=134&type=chunk) - The company is cooperating with an ongoing formal investigation by the SEC and a preliminary inquiry from the DOJ regarding disclosures about its AI technology[138](index=138&type=chunk) [Item 1A. Risk Factors](index=99&type=section&id=Item%201A.%20Risk%20Factors) Material risk factors include the inability to realize benefits from Presto Touch wind-down, Nasdaq delisting risk, and significant future stockholder dilution - The company may be unable to realize the expected benefits from its strategic evaluation of the Presto Touch business, which could involve a sale, partial sale, or abandonment[354](index=354&type=chunk) - The company faces a risk of its common stock being delisted from Nasdaq for failing to meet the minimum **$1.00** bid price requirement, which could adversely affect stock price and liquidity[355](index=355&type=chunk) - Anti-dilution protections granted to investors in recent capital raises have been triggered, requiring the issuance of additional shares and creating a risk of significant future dilution for other stockholders[357](index=357&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=101&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[362](index=362&type=chunk) [Item 6. Exhibits](index=103&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL data files

Financial Data and Key Metrics Changes - For the fiscal fourth quarter of 2023, operating expenses (OpEx) increased to $13.7 million from $9.6 million in the same quarter of 2022, primarily due to costs associated with being a newly public company [5][6] - Full-year 2023 OpEx was $56.9 million, compared to $33.8 million in full-year 2022 [5] - Adjusted EBITDA for the fiscal fourth quarter of 2023 was a loss of $9.1 million, an improvement from a loss of $10.8 million in the same quarter of 2022 [8] - Full-year 2023 adjusted EBITDA was a loss of $39.1 million, compared to a loss of $27.9 million in full-year 2022 [8] - Full-year 2023 revenue was $26.1 million, down 14.1% from $30.4 million in full-year 2022 [64] Business Line Data and Key Metrics Changes - Transaction revenue for the fiscal fourth quarter increased by 23.4% to $3.2 million, attributed to a successful increase in pricing for gaming fees [63] - Presto Voice has been rolled out to 373 locations, with an additional 95 under contract for installation [48] - Presto Touch has installed over 277,000 tablets at major casual dining restaurants [55] Market Data and Key Metrics Changes - The restaurant technology market is evolving, with 58% of U.S. restaurant operators indicating they will use technology-enabled solutions to improve efficiency and revenue growth [43] - The upcoming California law enforcing a $20 minimum wage for fast food workers is expected to increase operational costs for restaurants, potentially benefiting Presto's solutions [22][40] Company Strategy and Development Direction - The company aims to scale up the Presto Voice business sustainably while engaging with leading restaurant brands and delivering shareholder value [36] - Focus on reducing operating expenses and cash burn through streamlining operations and enhancing efficiencies across various functions [37][15] - The company is committed to developing its technology solutions to address the challenges faced by restaurant operators, particularly in a high inflation environment [39] Management's Comments on Operating Environment and Future Outlook - Management highlighted the significant opportunity in the restaurant technology sector, particularly in addressing labor cost pressures and improving operational efficiencies [38] - The company is optimistic about the future growth of Presto Voice, expecting it to contribute a larger proportion of revenue as the QSR drive-thru market expands [51] Other Important Information - Cleveland Avenue, a major shareholder, has committed to increasing its ownership with a $3 million investment [58] - The company has revised its credit agreement with Metropolitan Partners Group, increasing the size of its facility by $3 million [59] - Nathan Cook has joined as interim CFO, bringing expertise critical for the company's growth phase [60] Q&A Session Summary Question: Can you elaborate on your outlook for potential restaurant additions and the shift toward automation? - Management indicated a strong pipeline for Presto Voice, with several brands piloting or signing agreements, and is actively seeking renewals for Presto Touch [10] Question: What margin enhancement can restaurants expect from implementing your AI product? - The AI product is expected to provide labor savings and improve upsell acceptance rates, enhancing overall profitability for restaurants [13][14] Question: What are the catalysts to realize the $70 million pipeline in the Voice business? - The pipeline represents expected revenue from franchisees that have signed agreements, with various steps needed for full rollout [19][20] Question: How consistent has the pricing for voice AI technology been? - Pricing has remained consistent, but the market is still developing, with varying needs based on operational hours [21] Question: What unique technology needs do QSRs have compared to standard call centers? - QSRs require high accuracy and speed in order processing, with expectations for performance being significantly higher than in other sectors [24]

Revenue Performance - For the year ended June 30, 2023, net revenue retention was 85%, down from 102% in the prior year, primarily due to contract terminations and renewals at lower rates [232]. - Total revenue decreased 14% to $26.1 million for the year ended June 30, 2023, compared to $30.4 million for the year ended June 30, 2022 [274]. - Platform revenue decreased 34% to $13.2 million for the year ended June 30, 2023, primarily due to contract terminations by certain franchisee customers and lower pricing renewals from large customers [275]. - Transaction revenue increased 25% to $12.9 million for the year ended June 30, 2023, driven by increases in pricing for gaming fees [276]. - The three largest restaurant customers generated approximately 94% of revenue for the year ended June 30, 2023, compared to 93% in the prior year, with contracts up for renewal between December 31, 2023, and June 30, 2024 [236]. Cost and Expenses - Total cost of revenue decreased 14% to $25.6 million for the year ended June 30, 2023, compared to $29.7 million for the year ended June 30, 2022 [277]. - Platform cost of revenue decreased 30% to $13.1 million for the year ended June 30, 2023, in line with the decrease in Platform revenue [278]. - Operating expenses increased significantly, totaling $56.9 million for the year ended June 30, 2023, compared to $33.8 million for the year ended June 30, 2022 [273]. - Research and development expenses rose to $21.3 million for the year ended June 30, 2023, compared to $16.8 million for the year ended June 30, 2022 [273]. - General and administrative expenses surged to $26.8 million for the year ended June 30, 2023, compared to $9.8 million for the year ended June 30, 2022 [273]. - Sales and marketing expenses increased 33% to $8.8 million for the year ended June 30, 2023, compared to $6.6 million for the year ended June 30, 2022 [283]. Losses and Financial Position - Loss from operations was $56.4 million for the year ended June 30, 2023, compared to a loss of $33.2 million for the year ended June 30, 2022 [273]. - Net loss and comprehensive loss was $34.5 million for the year ended June 30, 2023, compared to a loss of $56.3 million for the year ended June 30, 2022 [273]. - The company reported a net loss of $34.5 million for the year ended June 30, 2023, compared to a net loss of $56.3 million for the previous year, representing a 39% improvement [305]. - The accumulated deficit increased to $235.3 million as of June 30, 2023, up from $200.8 million in the prior year [307]. - The company expects to continue generating operating losses in the near term due to various risks and uncertainties [307]. Cash Flow and Financing - Cash and cash equivalents as of June 30, 2023, were $15.1 million, up from $3.0 million as of June 30, 2022 [304]. - Net cash used in operating activities decreased by 6% to $44.5 million in 2023 from $47.3 million in 2022 [311]. - Cash provided by financing activities surged to $74.6 million in 2023, a 377% increase from $15.6 million in 2022 [317]. - The company incurred interest expenses of $12.8 million in 2023, significantly higher than $5.4 million in 2022 [305]. - The company received $49.8 million from the completion of a merger and $9.5 million from a private placement in May 2023 [308]. Debt and Obligations - Total debt as of June 30, 2023, was $50.6 million, down from $117.1 million in 2022, with convertible promissory notes eliminated [330]. - The company entered into a Credit Agreement on September 21, 2022, with an aggregate original principal amount of $55.0 million for term loans, which was later extended by $3.0 million [331]. - As of June 30, 2023, the term loans had a noncurrent balance of $50.6 million, reflecting $55.0 million of principal and $5.4 million of PIK interest accrual [346]. - The company recorded PIK interest expense of $5.4 million during the year ended June 30, 2023, which increased the outstanding debt balance [346]. - The company repaid all outstanding loans totaling $22.4 million, including $17.8 million in principal repayment and $4.4 million in prepayment penalties [359]. Customer and Vendor Concentration - Customer A accounted for 59% of revenues in 2023, up from 53% in 2022, while Customer B and Customer C accounted for 19% and 16% respectively [394]. - As of June 30, 2023, Customer A represented 43% of accounts receivable, an increase from 31% in 2022, and Customer D accounted for 37% [394]. - Vendor concentration risk exists as the company relies on a single supplier for its next generation Presto Touch tablets, which could adversely affect operating results if prices increase or supply is disrupted [395]. Market and Technology - The company aims to expand the adoption of Presto Voice among franchisee customers as a key revenue driver in the near term [235]. - The company is focused on enhancing its AI technology platform, Presto Voice, to meet customer needs and expects increased demand as the restaurant technology market grows [227]. - The restaurant technology market is evolving rapidly, with increasing labor costs and a higher percentage of orders being placed via drive-thru, necessitating solutions that lower costs and increase revenue [226]. Other Financial Information - The company has substantial doubt about its ability to continue as a going concern within one year after the financial statements are issued [309]. - The company received forgiveness for the first Paycheck Protection Program (PPP) loan of $2.6 million and the second loan of approximately $2.0 million, recognized as other income [361]. - The company has $24.6 million in deposits exceeding federally insured limits as of June 30, 2023, exposing it to credit risk if financial institutions face receivership [397]. - The impact of inflation on the company's operations and financial condition has been deemed immaterial, although future effects cannot be assured [396].

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2023 financials show improved liquidity and reduced deficit post-merger, with a widened net loss and going concern doubt [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2023, shows improved cash and stockholders' deficit, driven by reduced liabilities post-merger Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $26,978 | $3,017 | | Total current assets | $35,203 | $14,554 | | Total assets | $48,610 | $30,536 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $66,669 | $146,609 | | Total liabilities | $70,842 | $152,995 | | Total stockholders' deficit | ($22,232) | ($122,459) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Q1 2023 operations show decreased revenue to **$6.6 million** and a widened operating loss of **($14.5) million**, driven by increased expenses Statement of Operations Summary (in thousands) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Total revenue | $6,607 | $7,534 | | Gross profit | $489 | $1,013 | | Loss from operations | ($14,542) | ($7,977) | | Net income (loss) | ($15,680) | $8,954 | | Net loss per share, basic | ($0.30) | $0.33 | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the nine months ended March 31, 2023, operating activities used **$35.7 million**, while financing provided **$65.5 million**, leading to a **$24.0 million** net cash increase Cash Flow Summary for Nine Months Ended March 31 (in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($35,719) | ($38,415) | | Net cash used in investing activities | ($5,813) | ($1,463) | | Net cash provided by financing activities | $65,493 | $13,367 | | **Net increase (decrease) in cash** | **$23,961** | **($26,511)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the September 2022 merger, going concern doubt, significant customer concentration, new debt, and legal proceedings - The merger with Ventoux CCM Acquisition Corp. on September 21, 2022, is accounted for as a reverse recapitalization, with Legacy Presto as the accounting acquirer. The transaction provided net proceeds of approximately **$49.8 million** from the Trust and PIPE investment[22](index=22&type=chunk)[25](index=25&type=chunk)[34](index=34&type=chunk) - Management has concluded that substantial doubt exists about the Company's ability to continue as a going concern due to recurring operating losses and the need for additional capital to fund operations and meet obligations[55](index=55&type=chunk) - The company has significant customer concentration risk. For the nine months ended March 31, 2023, three customers (Customer A, B, and C) accounted for **61%**, **21%**, and **15%** of revenues, respectively, totaling **97%**[57](index=57&type=chunk) - In connection with the merger, the company entered into a new Credit Agreement for **$55.0 million** in term loans and repaid prior term loans from Horizon and Lago[129](index=129&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk) - The company received a favorable arbitration ruling in June 2022, affirmed in March 2023, awarding approximately **$11.3 million** in damages from a third-party subcontractor. However, no gain has been recognized as the award has not yet met the criteria to be considered realizable[160](index=160&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business, Q3 2023 revenue decline, increased operating loss, going concern doubt, and key performance indicators [Results of Operations](index=80&type=section&id=Results%20of%20Operations) For the nine months ended March 31, 2023, total revenue decreased **5%** to **$21.3 million**, while operating expenses surged **79%** to **$43.2 million** Revenue Comparison for Nine Months Ended March 31 (in thousands) | Revenue Stream | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Platform | $11,617 | $14,754 | $(3,137) | (21)% | | Transaction | $9,699 | $7,705 | $1,994 | 26% | | **Total revenue** | **$21,316** | **$22,459** | **$(1,143)** | **(5)%** | Operating Expenses Comparison for Nine Months Ended March 31 (in thousands) | Expense Category | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $16,877 | $11,733 | $5,144 | 44% | | Sales and marketing | $6,753 | $4,791 | $1,962 | 41% | | General and administrative | $19,608 | $7,110 | $12,498 | 176% | | **Total operating expenses** | **$43,238** | **$24,216** | **$19,022** | **79%** | - The decrease in Platform revenue was primarily due to contract terminations by a limited number of franchisees of existing enterprise customers[275](index=275&type=chunk) - The increase in G&A expenses was driven by higher stock-based compensation (**$6.0M**), increased legal and accounting fees (**$4.4M**) partly related to the merger, and higher salary expenses (**$1.2M**)[294](index=294&type=chunk) [Liquidity and Capital Resources](index=90&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had **$27.0 million** in cash, but recurring losses and an accumulated deficit raise substantial doubt about its going concern - The company's financial condition raises substantial doubt about its ability to continue as a going concern within one year, as it requires additional funding to sustain operations[309](index=309&type=chunk) Key Liquidity Metrics (in millions) | Metric | March 31, 2023 | | :--- | :--- | | Cash and cash equivalents | $27.0 | | Accumulated deficit | ($198.7) | | Operating loss (9 months) | ($42.3) | | Net cash from financing (9 months) | $65.5 | [Key Performance Indicator](index=70&type=section&id=Key%20Performance%20Indicator) Net revenue retention is the primary KPI, measuring the company's ability to retain and grow revenue from existing customers - Net revenue retention was **94%** for the nine months ended March 31, 2023, down from **102%** for the same period in 2022, primarily due to contract terminations[231](index=231&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=109&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including significant customer concentration, financial institution risk from uninsured cash, and low interest rate risk - The company faces significant credit risk from customer concentration, with three customers accounting for **96%** of revenue in Q3 2023 and **97%** for the nine-month period[395](index=395&type=chunk) - The company has **$26.5 million** in cash deposits that exceed FDIC insurance limits, posing a risk in the event of a financial institution failure[399](index=399&type=chunk) - Interest rate risk is limited as the company's main borrowings under the Credit Agreement are at a fixed rate[393](index=393&type=chunk) [Item 4. Controls and Procedures](index=111&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2023, disclosure controls were ineffective due to material weaknesses in internal control over financial reporting, with remediation ongoing - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to material weaknesses in internal control[400](index=400&type=chunk) - Material weaknesses identified include deficiencies in the control environment, accounting for complex transactions, the financial closing process, and maintenance of accounting records[402](index=402&type=chunk)[407](index=407&type=chunk) - Remediation initiatives are in the early stages and include designing a risk assessment process, hiring experienced personnel, and implementing enhanced review controls[406](index=406&type=chunk)[408](index=408&type=chunk) [PART II. OTHER INFORMATION](index=114&type=section&id=PART%20II%20.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) The company is a co-defendant in a patent infringement lawsuit and awaits an appeal outcome on a favorable **$11.3 million** arbitration ruling - The company is a co-defendant in a patent infringement lawsuit brought by Valyant AI, Inc. regarding a speech-based ordering system. The case is currently stayed pending a validity challenge of the patent[159](index=159&type=chunk) [Item 1A. Risk Factors](index=114&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported during the quarter ended March 31, 2023 - During the quarter ended March 31, 2023, there were no material changes in the company's risk factors as previously disclosed[411](index=411&type=chunk) [Other Part II Items](index=114&type=section&id=Other%20Part%20II%20Items) No unregistered sales of equity securities, defaults upon senior securities, or other material information were reported under relevant Part II items - The company reported no activity for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information). Item 4 (Mine Safety Disclosures) was not applicable[412](index=412&type=chunk)[413](index=413&type=chunk)[415](index=415&type=chunk)