After notifying the SEC it would not file its quarterly report on time, Presto Automation (PRST), a maker of restaurant drive through automation and point-of-sale solutions, revealed it had overstated sales by nearly a half million dollars in the quarter ended September 30, 2022.

The company should have recognized the revenue on a net rather than gross basis.

Separately, by wrongly classifying $119,000 as R&D expense rather than cost of sales, Presto overstated gross margin 27.48%.

In 2021, Presto’s drive through automation hardware failed due to disinfectants used to sanitize against COVID-19. The company replaced the hardware free of charge, totaling nearly a half million dollars over six months.

The company touts its AI powered drive through technology as a labor shortage solution and ROI generator. Yet AI platform product revenue, according to Presto, is not material. Notably, Presto relies on a vendor for the necessary hardware and software and keeps only about a third of sales generated:

“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.”

Presto trades at nearly 5x 2023 estimated sales and is down 62.6% since coming public as a SPAC.