Presto, a supplier of AI voice software for chains such as Carl’s Jr. and Taco John’s, appears to be headed for a takeover by its lender and a delisting from the Nasdaq stock exchange as it works to manage its debt and continue operating.
Lender Metropolitan Partners, which has given Presto multiple extensions on its repayment obligations, in May gave Presto the option to either refinance its loan or allow Metropolitan to take control of the situation.
The lender’s refinancing offer entails selling $40 million worth of debt for $20 million and converting the balance to equity in Presto. But it has charged Presto with finding a buyer for the debt.
So far, Presto and its equity partners have received no interest in the debt from investors, and in an SEC filing Thursday said that it is “extremely unlikely” that a buyer will come forward before the Sept. 15 deadline.
That would clear the way for Metropolitan to seek strategic alternatives for the company, including a sale or new investors.
“We thought that was a good deal from a company perspective,” said Presto interim CEO Gee Lefevre in an interview. “You’ve got both options to ensure the company is still here, funded, and moves forward.” He added that a bankruptcy filing is not on the table.
However, the filing warned that under the takeover scenario, holders of common stock in the company are likely to see their shares become worthless.
Lefevre said that all parties would prefer to refinance and that the filing reflects the progress of that effort to date. “It is my obligation to warn investors of that,” he said.
To keep itself funded in the meantime, the publicly traded Presto struck a deal to sell up to $25 million in stock to investment firm Triton Capital Partners between now and Dec. 31.
That type of transaction from a company in Presto’s position will “almost certainly” violate Nasdaq regulations, according to the SEC filing, and Presto expects its stock to be delisted from the exchange around Aug. 8.
This would not be an undesirable outcome for Presto, which is already out of compliance with Nasdaq regulations due to its stock trading below $1 for much of the past year. Last month, Presto shareholders approved a reverse stock split designed to help boost its share price, but Lefevre has not yet pulled the trigger on it.
“On reflection, I don’t think this company is best served on the Nasdaq currently,” he said. “For a company of our size and where we’re at in our cycle, there are a lot of fair requirements of a very professional exchange which actually weighed quite heavily on the business.”
Presto is scheduled to meet with Nasdaq early next month to discuss its status.
The San Carlos, California-based company has been in financial limbo for months amid a major shift in its business model from tabletop ordering tablets to voice AI for drive-thrus. The change amounts to a big bet on the future of AI, but has cost the company its main revenue stream in the near term.
In the current quarter, Presto expects to generate revenue of between $1.6 million and $1.9 million, down from $4.8 million a year ago. As of March 31, it had more than $50 million of debt.
That said, Presto has made some commercial progress under Lefevre, who took the reins in February. In May, it launched an improved version of its AI and last month announced a deal with 400-unit Taco John’s.
But the company still faces a lot of uncertainty. The Thursday filing, for instance, noted that a pair of Carl’s Jr. franchisees in California have paused further installations of Presto’s technology due to a lawsuit alleging that it violates the state’s wiretapping laws. The lawsuit was withdrawn but could be filed again, the filing said.
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