QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | o | Accelerated filer | o | ||||||||
x | Smaller reporting company | ||||||||||
Emerging growth company |
November 30, 2021 | August 31, 2021 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash | $ | $ | |||||||||
Accounts receivable | |||||||||||
Unbilled accounts receivable | |||||||||||
Deposit – workers’ compensation | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Current assets of discontinued operations | |||||||||||
Total current assets | |||||||||||
Cash and marketable securities held in Trust Account (See Note 2 and 5) | |||||||||||
Fixed assets, net | |||||||||||
Note receivable, net | |||||||||||
Deposits – workers’ compensation | |||||||||||
Deposits and other assets | |||||||||||
Deferred offering costs – SPACs (See Note 5) | |||||||||||
Non-current assets of discontinued operations | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||
Current liabilities | |||||||||||
Accounts payable and other accrued liabilities | $ | $ | |||||||||
Payroll related liabilities | |||||||||||
Accrued workers’ compensation costs | |||||||||||
Current liabilities of discontinued operations | |||||||||||
Total current liabilities | |||||||||||
Non-current liabilities | |||||||||||
Accrued workers’ compensation costs | |||||||||||
Non-current liabilities of discontinued operations | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Class A common shares subject to possible redemption | $ | ||||||||||
Stockholders’ equity (deficit) | |||||||||||
Preferred stock, | |||||||||||
Common stock, | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total ShiftPixy, Inc Stockholders' deficit | ( | ( | |||||||||
Non-controlling interest in consolidated subsidiaries (See note 5) | $ | $ | |||||||||
Total Equity (Deficit) | $ | $ | |||||||||
Total liabilities and equity deficit | $ | $ |
For the Three Months Ended | |||||||||||
November 30, 2021 | November 30, 2020 | ||||||||||
Revenues (gross billings of $ | $ | $ | |||||||||
Cost of revenue | |||||||||||
Gross profit (loss) | |||||||||||
Operating expenses: | |||||||||||
Salaries, wages, and payroll taxes | |||||||||||
Stock-based compensation – general and administrative | |||||||||||
Commissions | |||||||||||
Professional fees | |||||||||||
Software development | |||||||||||
Depreciation and amortization | |||||||||||
General and administrative | |||||||||||
Total operating expenses | |||||||||||
Operating Loss | ( | ( | |||||||||
Other (expense) income: | |||||||||||
Interest expense | ( | ( | |||||||||
Other income | |||||||||||
Total other expense | ( | ||||||||||
Loss from continuing operations | ( | ( | |||||||||
Total (loss) income from discontinued operations, net of tax | ( | ( | |||||||||
Net loss | $ | ( | $ | ( | |||||||
Net loss per share, Basic and diluted | |||||||||||
Continuing operations | $ | ( | $ | ( | |||||||
Discontinued operations | ( | ||||||||||
Net loss per common share – Basic and diluted | $ | ( | $ | ( | |||||||
Weighted average common shares outstanding – Basic and diluted |
Preferred Stock Issued | Common Stock Issued | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit ShiftPixy, Inc | Noncontrolling interest | Total Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 1, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for private placement, net of offering cost | — | — | — | — | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Prefunded warrants from private placement, net of offering costs | — | — | — | — | — | — | $ | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | $ | ||||||||||||||||||||||||||||||||||||||||||||||
Remeasurement of IHC temporary equity | — | — | — | — | ( | — | ( | — | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Balance, November 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ |
Preferred Stock Issued | Common Stock Issued | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
Balance, September 1, 2020 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
Common stock issued for private placement, net of offering costs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance, November 30, 2020 | $ | $ | $ | $ | ( | $ |
For the Three Months Ended | |||||||||||
November 30, 2021 | November 30, 2020 | ||||||||||
OPERATING ACTIVITIES | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Loss from discontinued operations | ( | ( | |||||||||
Net loss from continuing operations | ( | ( | |||||||||
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation | |||||||||||
Changes in operating assets and liabilities | |||||||||||
Accounts receivable | |||||||||||
Unbilled accounts receivable | ( | ||||||||||
Prepaid expenses | ( | ||||||||||
Other current assets | ( | ( | |||||||||
Deposits – workers’ compensation | |||||||||||
Deposits and other assets | ( | ||||||||||
Accounts payable and other accrued liabilities | ( | ||||||||||
Payroll related liabilities | |||||||||||
Accrued workers’ compensation costs | ( | ||||||||||
Total Adjustments | |||||||||||
Net cash used in continuing operating activities | ( | ( | |||||||||
Net cash used in discontinued operating activities | ( | ( | |||||||||
Net cash used in operating activities | ( | ( | |||||||||
INVESTING ACTIVITIES | |||||||||||
Investment of IHC IPO proceeds into Trust Account | ( | ||||||||||
Purchase of fixed assets | ( | ( | |||||||||
Net cash (used in) provided by investing activities | ( | ( | |||||||||
FINANCING ACTIVITIES | |||||||||||
SPAC related offering costs paid | ( | ||||||||||
Proceeds from initial public offering of IHC | |||||||||||
Proceeds from underwritten public offering, net of offering costs | |||||||||||
Proceeds from private placement, net of offering costs | |||||||||||
Proceeds from private placement prefunded warrants, net of offering costs | |||||||||||
Net cash provided by financing activities | |||||||||||
Net increase in cash | |||||||||||
Cash - Beginning of Period | |||||||||||
Cash -End of Period | $ | $ | |||||||||
Supplemental Disclosure of Cash Flows Information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | |||||||||||
Non-cash Investing and Financing Activities: | |||||||||||
Deferred offering costs SPACs | $ | $ |
For the three months ended | ||||||||||||||
Revenue (in millions): | November 30, 2021 | November 30, 2020 | ||||||||||||
HCM1 | $ | $ | ||||||||||||
Staffing | ||||||||||||||
$ | $ | |||||||||||||
Region: | November 30, 2021 | November 30, 2020 | ||||||||||||
California | % | % | ||||||||||||
Washington | % | % | ||||||||||||
Equipment: | |||||
Furnitures & Fixtures: | |||||
Leasehold improvements | Shorter of useful life or the remaining lease term, typically |
Three months ended November 30, 2021 | Three Months Ended November 30, 2020 | |||||||||||||
Options | ||||||||||||||
Warrants (Note 7) | ||||||||||||||
Total potentially dilutive shares |
Gross proceeds | $ | ||||
Cash received at closing – asset sale | ( | ||||
Cash received at closing – working capital | ( | ||||
Gross note receivable | $ | ||||
Less: Transaction reconciliation – estimated working capital adjustments | ( | ||||
Adjusted Note Receivable | |||||
Reserve for estimated potential claims | ( | ||||
Long-term note receivable, estimated net realizable value | $ |
November 30, 2021 | August 31, 2021 | ||||||||||
Cash | $ | $ | |||||||||
Accounts receivable and unbilled account receivable | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Deposits – workers’ compensation | |||||||||||
Total current assets | |||||||||||
Fixed assets, net | |||||||||||
Deposits – workers’ compensation | |||||||||||
Total assets | $ | $ | |||||||||
Accounts payable and other current liabilities | $ | $ | |||||||||
Payroll related liabilities | |||||||||||
Accrued workers’ compensation cost | |||||||||||
Total current liabilities | |||||||||||
Accrued workers’ compensation cost | |||||||||||
Total liabilities | |||||||||||
Net liability | $ | ( | $ | ( |
For the Quarter Ended | |||||||||||
November 30, 2021 | November 30, 2020 | ||||||||||
Revenues | $ | $ | |||||||||
Cost of revenue | |||||||||||
Gross profit | ( | ( | |||||||||
Operating expenses: | |||||||||||
Salaries, wages and payroll taxes | |||||||||||
Commissions | |||||||||||
Total operating expenses | |||||||||||
(Loss) income from discontinued operations | $ | ( | $ | ( |
SPAC | Shares | Value | Offering Cost as of August 31, 20211 | Offering cost paid by sponsor | Total Offering costs as of August 31, 2021 | Recorded to APIC | Balance as of November 30, 2021 | ||||||||||||||||
IHC | ( | ||||||||||||||||||||||
TechStackery | |||||||||||||||||||||||
Vital | |||||||||||||||||||||||
Firemark | |||||||||||||||||||||||
$ | $ | $ | $( | $ | |||||||||||||||||||
Number of shares | Weighted average remaining life (years) | Weighted average exercise price | |||||||||||||||
Warrants outstanding, August 31, 2021 | $ | ||||||||||||||||
Issued | |||||||||||||||||
(Cancelled) | — | — | — | ||||||||||||||
(Exercised) | — | — | — | ||||||||||||||
Warrants outstanding, November 30, 2021 | |||||||||||||||||
Warrants exercisable, November 30, 2021 | $ |
Warrants Outstanding | Weighted average Life of Outstanding Warrants in years | Exercise price | |||||||||||||||
Sep 2021 Common Warrants | $ | ||||||||||||||||
Sep 2021 Prefunded Warrants (1) | |||||||||||||||||
Sep 2021Underwriter Warrants (2) | |||||||||||||||||
May 2021 Common Warrants | |||||||||||||||||
May 2021Underwriter Warrants | |||||||||||||||||
October 2020 Common Warrants | |||||||||||||||||
October 2020 Underwriter Warrants | |||||||||||||||||
November 2020 Common Warrants | |||||||||||||||||
November 2020 Underwriter Warrants | |||||||||||||||||
March 2020 Exchange Warrants | |||||||||||||||||
Amended March 2019 Warrants | |||||||||||||||||
March 2019 Services Warrants | |||||||||||||||||
June 2018 Warrants | |||||||||||||||||
June 2018 Services Warrants | |||||||||||||||||
2017 PIPE Warrants | |||||||||||||||||
$ |
Options Outstanding and Exercisable | |||||||||||||||||
Number of Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||||||
(In years) | |||||||||||||||||
Balance Outstanding, August 31, 2021 | $ | ||||||||||||||||
Granted | |||||||||||||||||
Exercised | — | ||||||||||||||||
Forfeited | ( | ||||||||||||||||
Balance Outstanding at November 30, 2021 | $ | ||||||||||||||||
Balance Exercisable at November 30, 2021 |
Options Vested | Number of Options | Weighted Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||||||||
(In years) | ||||||||||||||||||||
Balance, August 31, 2021 | $ | |||||||||||||||||||
Vested | ||||||||||||||||||||
Exercised | — | — | ||||||||||||||||||
Forfeited | — | |||||||||||||||||||
Balance, November 30, 2021 | $ |
Options Outstanding | Options Vested | |||||||||||||||||||||||||||||||||||||
Exercise Prices | Number of Options Exercisable | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number of Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||
(In Years) | (In Years) | |||||||||||||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||||
$ | $ |
Years ended November 30, | ||||||||
2022 | $ | |||||||
2023 | ||||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
Thereafter | ||||||||
Total minimum payments | $ |
• | our future financial performance, including our revenue, costs of revenue and operating expenses; |
• | our ability to achieve and grow profitability; |
• | the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs; |
• | our predictions about industry and market trends; |
• | our ability to expand successfully internationally; |
• | our ability to manage effectively our growth and future expenses, including our growth and expenses associated with our sponsorship of various special purpose acquisition companies; |
• | our estimated total addressable market; |
• | our ability to maintain, protect and enhance our intellectual property; |
• | our ability to comply with modified or new laws and regulations applying to our business; |
• | the attraction and retention of qualified employees and key personnel; |
• | the effect that the novel coronavirus disease (“COVID-19”) or other public health issues could have on our business and financial condition and the economy in general; and |
• | our ability to be successful in defending litigation brought against us. |
For the Three Months Ended (Unaudited) | |||||||||||||||||
November 30, 2021 | November 30, 2020 | ||||||||||||||||
Revenues (gross billings of $21.2 million less worksite employee payroll cost of $12.3 million and gross billings of $19.8 million less worksite employees payroll cost of $17.3 million, for the three months ended November 30, 2021 and 2020, respectively) | $ | 8,940,000 | $ | 2,503,000 | |||||||||||||
Cost of revenue | 8,245,000 | 1,990,000 | |||||||||||||||
Gross profit (loss) | 695,000 | 513,000 | |||||||||||||||
Operating expenses: | |||||||||||||||||
Salaries, wages, and payroll taxes | 3,890,000 | 2,193,000 | |||||||||||||||
Stock-based compensation – general and administrative | 408,000 | 496,000 | |||||||||||||||
Commissions | 27,000 | 38,000 | |||||||||||||||
Professional fees | 1,737,000 | 707,000 | |||||||||||||||
Software development | 1,161,000 | 877,000 | |||||||||||||||
Depreciation and amortization | 123,000 | 62,000 | |||||||||||||||
General and administrative | 1,932,000 | 1,759,000 | |||||||||||||||
Total operating expenses | 9,278,000 | 6,132,000 | |||||||||||||||
Operating Loss | (8,583,000) | (5,619,000) | |||||||||||||||
Other (expense) income: | |||||||||||||||||
Interest expense | (1,000) | (3,000) | |||||||||||||||
Other Income | 5,000 | ||||||||||||||||
Total other (expense) income | 4,000 | (3,000) | |||||||||||||||
Loss from continuing operations | (8,579,000) | (5,622,000) | |||||||||||||||
(Loss) income from discontinued operations: | |||||||||||||||||
(Loss) income from discontinued operations | (134,000) | (1,314,000) | |||||||||||||||
Total (loss) income from discontinued operations | (134,000) | (1,314,000) | |||||||||||||||
Net loss | $ | (8,713,000) | $ | (6,936,000) |
2021 | 2020 | ||||||||||
Net Revenues (in millions) | $ | 8.9 | $ | 2.5 | |||||||
Increase (Decrease), Quarter over Quarter (in millions) | 6.4 | 0.3 | |||||||||
Percentage Increase (Decrease), Quarter over Quarter | 257.2 | % | 15.4 | % | |||||||
Cost of Revenues (in millions) | $ | 8.2 | $ | 2.0 | |||||||
Increase (Decrease), Quarter over Quarter (in millions) | 6.3 | 0.04 | |||||||||
Percentage Increase (Decrease), Quarter over Quarter | 314.3 | % | 2.2 | % | |||||||
Gross Profit (in millions) | $ | 0.7 | $ | 0.5 | |||||||
Increase (Decrease), Quarter over Quarter (in millions) | 0.2 | 0.3 | |||||||||
Percentage Increase (Decrease), Quarter over Quarter | 35.5 | % | 132.1 | % | |||||||
Gross Profit Percentage of Revenues | 7.8 | % | 20.5 | % |
For the Three Months Ended (Unaudited) | ||||||||||||||
November 30, 2021 | November 30, 2020 | |||||||||||||
Operating expenses: | ||||||||||||||
Salaries, wages, and payroll taxes | $ | 3,890,000 | $ | 2,193,000 | ||||||||||
Stock-based compensation – general and admin | 408,000 | 496,000 | ||||||||||||
Commissions | 27,000 | 38,000 | ||||||||||||
Professional fees | 1,737,000 | 707,000 | ||||||||||||
Software development | 1,161,000 | 877,000 | ||||||||||||
Depreciation and amortization | 123,000 | 62,000 | ||||||||||||
General and administrative | 1,932,000 | 1,759,000 | ||||||||||||
Total operating expenses | $ | 9,278,000 | $ | 6,132,000 |
For the three month period ended November 30, | |||||||||||
2021 | 2020 | ||||||||||
Gross Billings in millions | $ | 21.2 | $ | 19.8 | |||||||
Less: Adjustment to Gross Billings | $ | 12.3 | $ | 17.3 | |||||||
Revenues, in millions | $ | 8.9 | $ | 2.5 |
For the three month period ended November 30, | |||||||||||
2021 | 2020 | ||||||||||
Administrative Fees (in millions) | $ | 0.47 | $ | 0.35 | |||||||
Increase (Decrease), Quarter over Quarter (in millions) | 0.12 | 0.1 | |||||||||
Percentage Increase (Decrease), Quarter over Quarter | 34.3 | % | 18.9 | % | |||||||
Administrative Fee % of Gross Billings | 2.2 | % | 1.8 | % | |||||||
Average WSEs by Quarter (unaudited) | 3,000 | 3,500 | |||||||||
Average Gross Billings per Average WSE | $ | 7,066 | $ | 5,647 | |||||||
November 30, 2021 | August 31, 2021 | November 30, 2020 | |||||||||||||||
Active WSEs (unaudited) | 3,000 | 2,800 | 3,500 |
Exhibit No. | Document Description | |||||||
4.1 | ||||||||
4.2 | ||||||||
10.1 | ||||||||
10.2 | ||||||||
31.1 | CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 | |||||||
31.2 | CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. | |||||||
32.1* | CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002. | |||||||
32.2* | CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002. | |||||||
Exhibit 101 | Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements. | |||||||
101.INS | XBRL Instance Document | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
1. | I have reviewed this report on Form 10-Q of ShiftPixy, Inc.; | ||||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |||||||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
ShiftPixy, Inc. | |||||||||||
DATE: January 14, 2022 | By: | /s/ Scott W. Absher | |||||||||
Scott W. Absher | |||||||||||
Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of ShiftPixy, Inc.; | ||||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |||||||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
DATE: January 14, 2022 | By: | /s/ Domonic J. Carney | |||||||||
Domonic J. Carney | |||||||||||
Chief Financial Officer |
ShiftPixy, Inc. | |||||||||||
DATE: January 14, 2022 | By: | /s/ Scott W. Absher | |||||||||
Scott W. Absher | |||||||||||
Chief Executive Officer |
DATE: January 14, 2022 | By: | /s/ Domonic J. Carney | |||||||||
Domonic J. Carney | |||||||||||
Chief Financial Officer |
ShiftPixy, Inc., a Wyoming corporation | ||||||||
DATE: January 14, 2022 | By: | /s/ Scott W. Absher | ||||||
Scott W. Absher | ||||||||
Principal Executive Officer |
SIGNATURE | NAME | TITLE | DATE | |||||||||||||||||
/s/ Scott W. Absher | Scott W. Absher | Principal Executive Officer and Director | January 14, 2022 | |||||||||||||||||
/s/ Domonic J. Carney | Domonic J. Carney | Principal Financial Officer | January 14, 2022 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Nov. 30, 2021 |
Aug. 31, 2021 |
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LIABILITIES AND EQUITY (DEFICIT) | ||
Temporary equity, shares outstanding (in shares) | 11,500,000 | 0 |
Temporary equity, redemption price per share (in dollars per share) | $ 10.00 | |
Stockholders’ equity (deficit) | ||
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, par or stated value per share (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares issued (in shares) | 28,713,099 | 25,863,099 |
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
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Nov. 30, 2021 |
Nov. 30, 2020 |
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Income Statement [Abstract] | ||
Gross billings | $ 21.2 | $ 19.8 |
Worksite employee payroll cost | $ 12.3 | $ 17.3 |
Nature of Operations |
3 Months Ended |
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Nov. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations ShiftPixy, Inc. was incorporated on June 3, 2015, in the State of Wyoming. The Company is a specialized Human Capital service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant and hospitality service trades. The Company’s historic focus has been on the quick service restaurant industry in Southern California, but has begun to expand into other geographic areas and industries employing temporary or part-time labor sources. The Company functions as an employment administrative services (“EAS”) provider primarily through its wholly-owned subsidiary, ReThink Human Capital Management, Inc. (“HCM”), as well as a staffing provider through another of its wholly-owned subsidiaries, ShiftPixy Staffing, Inc (“Staffing”). These subsidiaries provide a variety of services to our clients, (as a co-employer through HCM and a direct employer through Staffing), including the following: administrative services, payroll processing, human resources consulting, and workers’ compensation administration and coverage (as permitted and/or required by state law). The Company has built a human resources information systems (“HRIS”) platform to assist in customer acquisition that simplifies the onboarding of new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”). This HRIS platform is expected to facilitate additional value-added services in future reporting periods. In January 2020, the Company sold the assets of Shift Human Capital Management Inc. (“SHCM”), a wholly-owned subsidiary of the Company, pursuant to which it assigned the majority of the Company’s billable clients at the time of the sale to a third party for cash. The continuing impact of this transaction on the Company’s financial statements is described below in Note 3, Discontinued Operations. On March 31, 2021, shareholders representing a majority of the Company’s outstanding shares of capital stock approved an amendment to the Company’s Amended and Restated Articles of Incorporation (the “Amendment”) making the federal district courts of the United States the exclusive forum for the resolution of any complaint asserting a cause of action against the Company arising under the Securities Act of 1933, as amended. On May 13, 2021, the Company filed the Amendment with the Wyoming Secretary of State.
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Summary of Significant Accounting Policies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a small reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending August 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021 (“Fiscal 2021”), filed with the SEC on December 3, 2021. Principles of Consolidation The condensed consolidated financial statements include the accounts of ShiftPixy Inc, and its wholly-owned subsidiaries. The condensed consolidated financial statements also include the accounts of (a) Industrial Human Capital, Inc. ("IHC"), which is a special purpose acquisition company, or "SPAC", for which we serve as the financial sponsor (as described below), and which is deemed to be controlled by us as a result of our 15% equity ownership stake, the overlap of three of our executive officers as executive officers of IHC, and significant influence that we currently exercise over the funding and acquisition of new operations for an initial business combination ("IBC"). (see Note 2, Variable Interest Entity). All intercompany balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: •Liability for legal contingencies; •Useful lives of property and equipment; •Deferred income taxes and related valuation allowance; •Valuation of illiquid noncontrolling interest in SPAC shares transferred; •Valuation of long-lived assets including long term notes receivable prior to January 1, 2021; and •Projected development of workers’ compensation claims. Revenue and Direct Cost Recognition For the year ended August 31, 2021 ("Fiscal 2021"), we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Under this method, the guidance is applied only to the most current period presented in the financial statements. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and superseded most of the previous revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Our revenue recognition policies remained substantially unchanged as a result of the adoption of ASU No. 2014-09 and we did not have any significant changes in our business processes or systems. The Company’s revenues are primarily disaggregated into fees for providing staffing solutions and EAS/HCM services. The Company enters into contracts with its clients for Staffing or EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ written notice. The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. Payments for the Company’s services are typically made in advance of, or at the time that the services are provided. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts our performance towards complete satisfaction of the performance obligation. Staffing Solutions The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, we are the principal in this arrangement for revenue recognition purposes. For three months ended November 30, 2020, the Company recognized no revenues that should have been evaluated under a staffing solutions model. EAS Solutions EAS solutions revenue is primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each EAS client concurrently with each periodic payroll of the Company’s WSEs, which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Although the Company assumes responsibility for processing and remitting payroll and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations. As a result, the Company records revenue on a “net” basis in this arrangement for revenue recognition purposes. Revenues that have been recognized but not invoiced for EAS clients are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were $2,700,000 and $2,741,000, as of November 30, 2021 and August 31, 2021, respectively. Consistent with the Company’s revenue recognition policy for EAS clients, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The fees collected from the worksite employers for benefits (i.e. zero-margin benefits pass-through), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses for EAS clients, as the Company does retain risk and acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price. Disaggregation of Revenue The Company’s primary revenue streams include HCM and staffing services. The Company’s disaggregated revenues for the three months ended November 30, 2021 and November 30, 2020 were as follows:
1 HCM revenue is presented net, $14.1 million gross less WSE payroll cost of $12.3 million for the three months ended November 30, 2021 and $19.8 million gross less WSE payroll cost of $17.3 million for the three months ended November 30, 2020. During Fiscal 2021 the Company announced the launch of ShiftPixy Labs and expects to generate revenue from this initiative in Fiscal 2022. We generated no revenue from this initiative during the three months ended November 30, 2021. For the three months ended November 30, 2021 and November 30, 2020, the following geographical regions represented more than 10% of total revenues:
Incremental Cost of Obtaining a Contract Pursuant to the “practical expedients” provided under ASU No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30 days' notice. These costs are recorded in commissions in the Company’s Consolidated Statements of Operations. Segment Reporting Prior to Fiscal 2021, the Company operated as one reportable segment under ASC 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2021, the Company entered into new business lines and geographic areas that, to date, are not material. However, with the migration to Staffing during the fiscal quarter ending May 31, 2021, the Company is beginning to manage the business on a segmented basis and therefore intends to report such information once systems and processes are updated accordingly. Reporting and monitoring activities on a segment basis will allow the chief operating decision maker to evaluate operating performance more effectively. See also Disaggregation of Revenue, above. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of November 30, 2021 or August 31, 2021. Marketable Securities Held in Trust Account At November 30, 2021, substantially all of the assets held in the Trust Account were invested in U.S. Treasury securities with maturities of 180 days or less. These funds are restricted for use and may only be used for purposes of completing an IBC or redemption of the public common shares of the SPACs. Concentration of Credit Risk The Company maintains cash with a commercial bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. As of November 30, 2021, there was $1,266,000 of cash on deposit in excess of the amounts insured by the FDIC. No individual clients represented more than 10% of revenues for the three months ended November 30, 2021. However, three clients represented 98% of total accounts receivable as of November 30, 2021. Fixed Assets Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Leasehold improvements are amortized over the shorter of the useful life or the initial lease term. Fixed assets are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:
The amortization of these assets is included in depreciation expense on the condensed consolidated statements of operations. Internal Use Software Software development costs relate primarily to software coding, systems interfaces and testing of the Company’s proprietary employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development costs are reported under the section fixed assets, net in the condensed consolidated balance sheets. The Company determined that there were no material capitalized internal software development costs for the three months ended November 30, 2021 or as of August 31, 2021. All capitalized software recorded was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally to five years from when the asset is placed in service. During the three months ended November 30, 2021 and November 30, 2020, the Company incurred research and development costs of approximately $2.2 million and $1.4 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS platform and related mobile application. In addition, no software costs were capitalized for the three months ended November 30, 2021 and November 30, 2020, respectively. Impairment and Disposal of Long-Lived Assets The Company periodically evaluates its long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment. ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed not to be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. There were no indicators noted of impairments during the periods ended November 30, 2021 or November 30, 2020. Workers’ Compensation Everest Program Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company is currently engaged in litigation regarding such a demand for additional premium payments, which we believe to be without merit, as discussed at Note 11, Contingencies, Everest Litigation, below. Sunz Program From July 2018 through February 28, 2021, the Company’s workers’ compensation program for its WSEs was provided primarily through an arrangement with United Wisconsin Insurance Company and administered by Sunz Insurance Solutions, LLC (“Sunz”). Under this program, the Company has financial responsibility for the first $0.5 million of claims per occurrence. The Company provides and maintains a loss fund that is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. The Company is currently engaged in litigation regarding demands by Sunz for additional claims loss funds, which we believe to be without merit, as discussed at Note 11, Contingencies, Sunz Litigation, below. Current Program Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program. Under this program, the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria. Under the Everest and Sunz programs, the Company utilized a third party to estimate its loss development rate, which was based primarily upon the nature of WSEs’ job responsibilities, the location of WSEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of November 30, 2021 and August 31, 2021, the Company had $95,000 and $155,000, in Deposit – workers’ compensation classified as a short-term asset and $246,000 and $386,000, classified as a long-term asset, respectively. The Company’s estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of November 30, 2021 and August 31, 2021, the Company had short term accrued workers’ compensation costs of $0.6 million and $663,000, and long term accrued workers’ compensation costs of $1.3 million and $1,646,000, respectively. The Company retained workers’ compensation asset reserves and workers’ compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition, LLC, a wholly-owned subsidiary of Vensure Employer Services, Inc. (“Vensure”), in connection with the Vensure Asset Sale described in Note 3, Discontinued Operations, below. As of November 30, 2021, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of November 30, 2021, the Company had $0.2 million in short term assets and $1.4 million of short term liabilities, and had $0.6 million of long term assets and $3.6 million of long term liabilities. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs that are primarily based upon the WSE’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into the Company’s workers’ compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan. The Company has had very limited and immaterial COVID-19 related claims between March 2020 through the date of this Quarterly Report, although there is a possibility of additional workers’ compensation claims being made by furloughed WSEs as a result of the employment downturn caused by the pandemic. On May 4, 2020, the State of California indicated that workers who become ill with COVID-19 would have a potential claim against workers’ compensation insurance for their illnesses. There is a possibility that additional workers’ compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic, which could have a material impact on our workers’ compensation liability estimates. While the Company has not seen significant additional expenses as a result of any such potential claims to date, which would include claims for reporting periods after November 30, 2021, we continue to monitor closely all workers’ compensation claims made as the COVID-19 pandemic continues. Fair Value of Financial Instruments ASC 820, Fair Value Measurement, requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. ASC 820 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2021 and August 31, 2021, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximated fair value due to the short-term nature of the instruments. Notes Receivable is valued at estimated fair value as described below. The Company measures fair value under a framework that utilizes a hierarchy prioritizing the inputs to relevant valuation techniques. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs used in measuring fair value are: •Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. •Level 2: Inputs to the valuation methodology include: ◦Quoted prices for similar assets or liabilities in active markets; ◦Quoted prices for identical or similar assets or liabilities in inactive markets; ◦Inputs other than quoted prices that are observable for the asset or liability; ◦Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and ◦If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. •Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Funds held in trust represent U.S. treasury bills that were purchased with funds raised through the initial public offering of IHC. The funds raised from SPACs are held in trust accounts that are restricted for use and may only be used for purposes of completing an IBC or redemption of the public shares of common stock of the SPACs as set forth in their respective trust agreements. The funds held in trust are included within Level 1 of the fair value hierarchy and included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheets. The Company did not have other Level 1 or Level 2 assets or liabilities at November 30, 2021 or August 31, 2021. We recorded the fair value of the SPAC founder shares that the Company transferred to the underwriters using non-recurring Level 3 assumptions, including quoted asset prices for SPAC shares and warrants and estimates of the likelihood of the IPOs and IBCs of our sponsored SPACs being consummated. See also Note 5, Deferred Offering Costs – SPACS, below. The valuation of the Note Receivable from the Vensure Asset Sale (as defined below), is a Level 3 fair value measurement as of August 31, 2020 and through December 31, 2020 (end of the earn-out period as defined under the terms of the Note Receivable). The Note Receivable, as described in Note 3, Discontinued Operations, below, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate, and on August 31, 2020 and through December 31, 2020 using a 15% discount rate, which contemplates the risk and probability assessments of the expected future cash flows. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the Vensure Asset Sale, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the Vensure Asset Sale agreement. For Fiscal 2020, the expected cash payments from the Note Receivable were based on estimated gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale as of the measurement date. The Company used the following assumptions to value the Note Receivable as of August 31, 2020: •Discount rate of 15% •Actual monthly wages billed to the extent available to the Company For interim reporting periods after December 31, 2020, including as of November 30, 2021 and August 31, 2021, the Company valued the Note Receivable as discussed in Note 3, Discontinued Operations, below. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 for the three months ended November 30, 2021 and November 30, 2020. Advertising Costs The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $401,000 and $202,000 for the three months ended November 30, 2021 and November 30, 2020, respectively. Income Taxes The Company accounts for income taxes pursuant to ASC 740, Income Taxes. Under ASC 740, deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Earnings (Loss) Per Share The Company utilizes ASC 260, Earnings per Share. Basic Net Income (Net Loss) per common share is computed by dividing Net Income (Net Loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period. Common stock outstanding for purposes of Net Income (Net Loss) per share calculations include unexercised Preferred Options and unexercised prefunded warrants, as described in Note 7, Stockholders' Equity, below. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common stock equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:
For the table above, “Options” represent all options granted under the Company’s 2017 Stock Option/Stock Issuance Plan (the "Plan"), as described in Note 8, below. Stock-Based Compensation At November 30, 2021, the Company had one stock-based compensation plan under which the Company may issue awards, as described in Note 8, Stock Based Compensation, below. The Company accounts for the Plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated statements of operations at their fair values. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, the Company recognizes expense on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected volatility is based on the historical volatility of the Company’s common stock since our initial public offering. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elects to account for forfeitures as they occur. As such, compensation cost previously recognized for an unvested award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. The methods and assumptions used in the determination of the fair value of stock-based awards are consistent with those described in the Company's Annual Report on Form 10-K for Fiscal 2021, filed with the SEC on December 3, 2021, which includes a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service and performance conditions, payout percentages, and process for estimating the fair value of stock options granted. Recent Accounting Standards In February 2016, the FASB issued ASU 2016-2, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification of the lease as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The updated effective date will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally requires a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. The Company will adopt the guidance when it becomes effective. On December 31, 2019, the FASB issued ASC 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes” (“Topic 740”). The amendments in this update simplify the accounting for income taxes by removing certain exceptions. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt the guidance when it becomes effective. In May 2021, the FASB issued ASU 2021-4 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. Variable Interest Entity The Company is involved in the formation of various entities considered to be Variable Interest Entities (“VIEs”). The Company evaluates the consolidation of these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily formed to sponsor the related SPACs. The Company’s determination of whether it is the primary beneficiary of VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically, the Company is entitled to substantially all or portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities. During the three months ended November 30, 2021, our sponsored SPAC, IHC, completed its IPO, selling 11,500,000 units pursuant to a registration statement and prospectus, as described below. The IPO closed on October 22, 2021, raising gross proceeds of $115 million. These proceeds were deposited in a trust account established for the benefit of the IHC public shareholders and, along with an additional $1.675 million deposited in trust by the Company for interest payments for future possible redemptions by IHC stockholders, are included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheet at November 30, 2021. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of IHC. Each unit had an offering price of $10.00 and consisted of one share of IHC common stock and one redeemable warrant. Each warrant entitles the holder thereof to purchase one share of IHC common stock at a price of $11.50 per share. The IHC public stockholders have a right to redeem all or a portion of their shares of IHC common stock upon the completion of its IBC, subject to certain limitations. Under the terms of the registration statement and prospectus, IHC is required to consummate its IBC within 12 months of the completion of the IPO. If IHC is unable to meet this deadline, and no extension is granted, then IHC will redeem 100% of the public shares of common stock outstanding for cash, subject to applicable law and certain conditions. In connection with the IPO, we purchased, through investments, 4,639,102 private placement warrants ("Placement Warrants") at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102, and currently own 2,175,000 Founder Shares of IHC common stock, representing approximately 15% of the issued and outstanding common stock of IHC. Each Placement Warrant is identical to the warrants sold in the IPO, except as described in the IPO registration statement and prospectus. Following the completion of the IHC IPO, we determined that IHC is a Variable Interest Entity ("VIE") in which we have a variable interest because IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that IHC's public stockholders do not have substantive rights, and their equity interest constitutes temporary equity, outside of permanent equity, in accordance with ASC 480-10-S99-3A. As such, we have concluded that we are currently the primary beneficiary of IHC as a VIE, as we have the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impact IHC's economic performance and IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. Since we are the primary beneficiary, IHC is consolidated into our condensed consolidated financial statements. Shares Subject to Possible Redemption The Company accounts for its stockholdings in its sponsored SPACs, (which are consolidated in our condensed consolidated financial statements), that are subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of common stock are classified as shareholders’ equity. Each sponsored SPAC's shares of common stock feature certain redemption rights that are considered to be outside of the SPAC's control and subject to occurrence of uncertain future events. Accordingly, as of November 30, 2021, shares of common stock subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets. The Company recognizes changes in redemption value of these shares immediately as they occur and adjusts the carrying value of redeemable shares of common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. As of November 30, 2021 the carrying amount of the sponsored SPAC shares of common stock subject to redemption was recorded at their redemption value of $116,725,000. The remeasurement of the redemption value of the redeemable shares of common stock is recorded in equity. The remeasurement in equity comprised of offering cost incurred in connection with the sale of public shares of the SPACs was $13 million, consisting of approximately $9.5 million of offering costs related to the founder shares transferred to the SPACs’ underwriter representative as described in Note 5, Deferred Offering Costs, and $3.5 million in other offering costs related to the IPO paid at closing in cash.
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Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations On January 3, 2020, the Company executed an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through the date of the transaction, including 100% of its existing professional employer organization (“PEO”) business effective as of December 31, 2019, and transferring $1.5 million of working capital assets, including cash balances and certain operating assets associated with the assigned client contracts included in the agreement, to a wholly owned subsidiary of Vensure (the “Vensure Asset Sale”). Gross proceeds from the Vensure Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million was scheduled to be paid out in equal monthly payments over the four years following the closing of the transaction (the “Note Receivable”), subject to adjustments for working capital and customer retention, (as measured by a gross wage guarantee included in the governing agreement), over the twelve month period following the Vensure Asset Sale. For Fiscal 2020, the Company estimated the value of the Note Receivable at fair value as discussed in Note 2, Summary of Significant Accounting Policies, above. For the three months ended November 30, 2021, the Company recorded the Note Receivable based on our estimate of expected collections which, in turn, was based on additional information obtained through discussions with Vensure and evaluation of our records. On March 12, 2021, the Company received correspondence from Vensure proposing approximately $10.7 million of working capital adjustments under the terms of the Vensure Asset Sale agreement which, if accepted, would have had the impact of eliminating any sums owed to the Company under the Note Receivable. As indicated in the reconciliation table below, the Company has recorded $2.6 million of working capital adjustments, subject to final review and acceptance, and has provided for an additional reserve of $2.9 million for potential claims. By letter dated April 6, 2021, the Company disputed Vensure’s proposed adjustments.The disputes between the Company and Vensure regarding working capital adjustments under the Vensure Asset Sale agreement are currently the subject of litigation pending in the Delaware Chancery Court, as discussed at Note 11, Contingencies, Vensure Litigation, below. The following is a reconciliation of the gross proceeds to the net proceeds from the Vensure Asset Sale as presented in the balance sheet for the period ended November 30, 2021.
The entire Note Receivable is recorded as a long term note receivable as of November 30, 2021. Any adjustments to the Note Receivable are applied against payments in the order they are due to be paid. As such, the estimates of the working capital and reserves for estimated potential claims would not result in any cash payments due to the Company until later in Fiscal 2022. The Vensure Asset Sale generated a gain of $15.6 million for Fiscal 2020. The Company expected a minimal tax impact from the Vensure Asset Sale as it utilized its net operating losses accumulated since inception to offset the gain resulting from discontinued operations tax provision with a corresponding offset to the valuation allowance. The Vensure Asset Sale met the criteria of discontinued operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented and has excluded the results of its discontinued operations from continuing operations for all periods presented. The terms of the Vensure Asset Sale call for adjustments to the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross wages of the business transferred is less than the required amount. (i) Working capital adjustments: Through November 30, 2021, the Company has identified $2.6 million of likely working capital adjustments, including $88,000 related to lower net assets transferred at closing, and $2.5 million of cash remitted to the Company’s bank accounts, net of cash remitted to Vensure’s bank accounts. Under the terms of the Vensure Asset Sale, a reconciliation of the working capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by the outbreak of COVID-19, Vensure requested a postponement of the working capital reconciliation that was due in Fiscal 2020. Although Vensure provided the Company with its working capital reconciliation on March 12, 2021, it failed to provide adequate documentation to support its calculations. Accordingly, the working capital adjustment recorded as of November 30, 2021, represents the Company’s estimate of the reconciliation adjustment by using Vensure’s claims and the limited supporting information Vensure provided as a starting point, and then making adjustments for amounts in dispute based upon our internal records and best estimates. There is no assurance that the working capital change identified as of November 30, 2021 represents the final working capital adjustment. (ii) Gross billings adjustment: Under the terms of the Vensure Asset Sale, the proceeds of the transaction are reduced if the actual gross wages of customers transferred for Calendar 2020 are less than 90% of those customers’ Calendar 2019 gross wages. The Company has prepared an estimate of the Calendar 2020 gross wages based on a combination of factors including reports of actual transferred client billings in early Calendar 2020, actual gross wages of continuing customers of the Company, publicly available unemployment reports for the Southern California markets and the relevant COVID-19 impacts on employment levels, and other information. Based on the information available, the Company estimated that it would receive additional consideration below the required threshold and reduced the contingent consideration by $1.4 million. Vensure has not identified any such adjustments to date. Based on the information available, the Company reclassified the previously recorded gross wages claim to a general potential claims reserve during Fiscal 2021. No additional adjustment was made during the three months ended November 30, 2021. The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations are as follows:
Reported results for the discontinued operations by period were as follows:
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Special Purpose Acquisition Company ("SPAC") Sponsorship |
3 Months Ended |
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Nov. 30, 2021 | |
Investments in and Advances to Affiliates [Abstract] | |
Special Purpose Acquisition Company ("SPAC") Sponsorship | Special Purpose Acquisition Company ("SPAC") Sponsorship On April 29, 2021, we announced our sponsorship, through our wholly-owned subsidiary, ShiftPixy Investments, Inc. ("Investments"), of four SPACs. Each SPAC that has not yet commenced its IPO is currently seeking to raise approximately $150 million in capital investment, through an IPO, to acquire companies in the healthcare and technology segments of the staffing industry, as well as one or more insurance entities, while IHC has completed its IPO and is seeking to acquire companies in the light industrial segment of the staffing industry, as described below. We anticipate that, through our wholly-owned subsidiary, we will own approximately 15% of the issued and outstanding stock in each entity upon their IPOs being consummated, and that each will operate as a separately managed, publicly traded entity following the completion of their respective IBCs. We anticipate entering into service agreements with each of the staffing entities that will allow them to participate in our HRIS platform. We also expect to facilitate the procurement of workers’ compensation, personal liability, and other similar insurance products for these staffing entities through our anticipated relationship with the insurance SPAC after it completes its IBC. For the period ended November 30, 2021, the sponsorship operations for all of these entities, with the exception of IHC, are consolidated in the accompanying financial statements as they were being conducted under a wholly-owned subsidiary. The operations of IHC have been consolidated in the accompanying financial statements for the reasons set forth above. The registration statement and prospectus covering the IPO of IHC was declared effective by the SEC on October 19, 2021, and IHC units (the “IHC Units”), consisting of one share of common stock and an accompanying warrant to purchase one share of IHC common stock, began trading on the New York Stock Exchange (“NYSE”) on October 20, 2021. The IHC IPO closed on October 22, 2021, raising gross proceeds for IHC of $115 million. In connection with the IHC IPO, we purchased, through our wholly-owned subsidiary, 4,639,102 placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102. Following the closing of the IPO, the sum of $116,725,000 was placed in a trust account (the “Trust Account”), and has been invested in U.S. government securities within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "ICA"), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the ICA, as determined by the Company, until the earlier of: (i) the completion of the IBC and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below. The $116,725,000 consisted of the $115,000,000 of gross proceeds from the sale of the Units in the IPO and $1,725,000 funded by the Company as Sponsor representing guaranteed interest for future redemptions and calculated as one year's interest at 1.5%. With the completion of the IPO, the Company recorded approximately $9.5 million of deferred costs into APIC as of November 30, 2021, and $274,000 of offering costs paid on behalf of IHC. During the quarter ended November 30, 2021 IHC incurred approximately $3.5 million in offering costs. No other offering costs has been incurred during the period for the other SPACs.
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Deferred Offering Costs - SPACs |
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Deferred Offering Costs - SPACs | Deferred Offering Costs - SPACs During Fiscal 2021, the Company incurred professional fees related to the filing of registration statements for the IPOs of four SPACs. The Company also transferred certain Founder Shares of those SPACs to a third party which created a non-controlling interest in those entities. These Founder Shares of common stock were transferred to the SPACs’ underwriter representative (the “Representative”) at below fair market value, resulting in compensation and therefore deferred offering costs for the SPACs, and the creation of a minority interest. The non-controlling interest is recorded as a minority interest on the Balance Sheet and the Statement of Equity. There were no similar transactions for Fiscal 2020. As of August 31, 2021, Deferred offering costs - SPACs totaled $48,261,000, consisting of $789,000 of legal and accounting fees related to the SPACs’ IPOs and $47,472,000 related to the non-controlling interest in consolidated subsidiaries. The non-controlling interest – deferred offering costs represents the estimated value of the portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship, and which we transferred to the Representative on April 22, 2021, at a price below the fair market value of the shares, as follows: (i) 2,000,000 shares of IHC common stock; (ii) 2,000,000 shares of TechStackery, Inc. ("TechStackery") common stock; (iii) 2,000,000 shares of Vital Human Capital, Inc. ("Vital") common stock; and (iv) 4,000,000 shares of Firemark Global Capital, Inc. ("Firemark") common stock. We estimate the total value of the 10,000,000 shares transferred, which represents deferred compensation to the Representative, to be $47,472,000, or $4.7472 per share. We arrived at this valuation by reference to similar SPAC IPO transactions, as set forth below: 1.Consistent with most SPAC IPOs, the market price of units (consisting of some combination of common stock and warrants) sold to the public in a SPAC IPO is $10 per unit. 2.We have valued the warrant portion of each Unit at $0.75. Deducting this value from the Unit yields a value of $9.25 per share of common stock at the time of the IPO, which we have applied to the value of each of the Founder Shares that we issued to the Representative. 3.We have applied a further discount of 48.8%, which is a blended discount designed to reflect the following contingencies and uncertainties: (a) 20% probability that the SPAC IPOs are never consummated; (b) 20% probability that none of our sponsored SPACs successfully complete their IBC; and (c) 21% additional discounts to account for future sponsor and Representative concessions, as well as the possibility of decrease in the value of the common stock of each SPAC. One of the Company's sponsored SPACs, IHC, completed its IPO on October 22, 2021, resulting in the recognition of approximately $13 million of offering costs including $9.8 million that had been deferred as of August 31, 2021. No offering costs were incurred for TechStackery, Vital, or Firemark during the quarter ended November 30, 2021. A reconciliation of the deferred offering costs recorded by the Company as of November 30, 2021 is set forth below:
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Going Concern |
3 Months Ended |
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Nov. 30, 2021 | |
Risks and Uncertainties [Abstract] | |
Going Concern | Going Concern The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. Historically, the Company has funded itself either through cash flow from operations or the raising of capital through equity sales. If the Company is unable to obtain additional capital, it may not be able to make payments in a timely manner or otherwise fund its operations. The COVID-19 pandemic continued to negatively impact worldwide economic activity through most of Fiscal 2021, including within the United States where our operations are based. While these negative impacts began to ameliorate during Fiscal 2021, prolonged workforce disruptions still negatively impacted sales for the majority of the three month period ended November 30, 2021, as well as the Company’s overall liquidity. As of the end of the three months ended November 30, 2021, the Company had cash of $2.1 million and a working capital deficit of $11.9 million. During this same period, the Company used approximately $6.67 million of cash from its continuing operations and incurred recurring losses, resulting in an accumulated deficit of $158.1 million as of November 30, 2021. The recurring losses, negative working capital and cash used in the Company’s operations are indicators of substantial doubt as to the Company’s ability to continue as going concern for at least one year from issuance of these financial statements. The Company’s plans to alleviate this substantial doubt are discussed below. These plans include raising additional capital to fund expansion of its operations, including the continued development and support of its HRIS platform, its SPAC sponsorship activities, and its ShiftPixy Labs growth initiative. The Company believes that IHC has the potential to generate revenues during Fiscal 2022, provided that IHC successfully completes its IBC and the Company is able to enter into one or more client services agreements with IHC on favorable terms. Similarly, the Company believes that its future relationship with Vital and TechStackery will provide us with the potential to generate revenues, provided that each of these SPACs is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into one or more client services agreements with each of these SPACs on favorable terms. The Company also believes that Firemark has the potential to generate additional payroll billings through contractual arrangements by which the Company is able to provide low-cost insurance product offerings to its clients, provided that Firemark is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into a contractual relationship with Firemark on favorable terms. The Company also expects its ShiftPixy Labs growth initiative to generate cash flow once launched, by functioning as an incubator of food service and restaurant concepts through collaboration and partnerships with local innovative chefs. If successful, the Company believes that this initiative will produce sound businesses that provide recurring revenue through direct sales, as well as through utilization of the ShiftPixy Ecosystem, HRIS platform, and other human capital services that the Company provides. To the extent that this business model is successful and can be replicated in other locations, the Company believes that it has the potential to contribute significant revenue to ShiftPixy in the future. The Company may also take equity stakes in various branded restaurants that it develops and operates with its partners through ShiftPixy Labs. Such ownership interests will be held to the extent that it is consistent with the Company’s continued existence as an operating company, and to the extent that the Company believes such ownership interests have the potential to create significant value for its shareholders. Further, on March 27, 2020, Former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry-back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. Pursuant to Section 2302 of the CARES Act, the Company is deferring payment of taxes totaling $318,000 until December 31, 2022. These deferrals will allow the Company to preserve capital for use in its growth initiatives which, in turn, are expected to generate substantial revenue and cash flow if successful. Also, the Company closed a private placement transaction with a large institutional investor on September 3, 2021, (immediately following the close of Fiscal 2021), which yielded proceeds to the Company of approximately $11.9 million net of fees and expenses. The Company expects to engage in additional sales of its securities during Fiscal 2022, either through registered public offerings or private placements, the proceeds of which the Company intends to use to fund its operations and growth initiatives. The Company’s management believes that its current cash position, (including the proceeds of the September 2021 private placement), along with its anticipated revenue growth and proceeds from future sales of its securities, when combined with prudent expense management, will be sufficient to alleviate substantial doubt about its ability to continue as a going concern and to fund its operations for at least one year from the date these financials are available (especially when considering the absence of any funded debt outstanding on its balance sheet). If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, it may need to curtail certain aspects of its operations or expansion activities, consider the sale of additional assets, or consider other means of financing. The Company can give no assurance that it will be successful in implementing its business plan and obtaining financing on advantageous terms, or that any such additional financing will be available. These consolidated financial statements do not include any adjustments for this uncertainty.
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Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Preferred Stock Preferred Stock As previously disclosed, in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company (the “Preferred Options”). The number of Preferred Options granted was based upon the number of shares held at the time of the grant. These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock held by the option holder. Upon the occurrence of certain specified events, such founding shareholders can exercise each Preferred Option to purchase one share of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of the Company’s common stock on a one-for-one basis. Upon consummation of the Vensure Asset Sale in January 2020, a total of 24,634,560 Preferred Options became exercisable and exchangeable into an equal number of shares of our common stock. On June 4, 2020, Scott W. Absher, the Company’s Chief Executive Officer, exercised 12,500,000 Preferred Options to purchase 12,500,000 shares of our preferred stock for an aggregate purchase price of $1,250. Immediately following the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred stock into 12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be traded. Between July 20, 2020 and November 30, 2020, an additional 294,490 Preferred Options were exercised and converted into 294,490 shares of common stock, which were subject to a six-month lock up period at the time they were issued, during which such shares could not be traded on the open market. As of November 30, 2021, the restrictions on all of these shares have been lifted, rendering them freely tradeable. On October 22, 2021, the Company’s board of directors canceled 11,790,000 of these Preferred Options previously issued to its co-founder, J. Stephen Holmes. Accordingly, these Preferred Options are no longer exercisable. A total of 37,570 Preferred Options issued pursuant to the September 2016 grant and triggered by the Vensure Asset Sale remain unexercised. The amount of Preferred Options, and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common stock held by the option holders at the time the Preferred Options were issued in September 2016. Accordingly, in order to confirm the original intent of the granting of up to 25,000,000 Preferred Options to Mr. Absher, it has always been the Company’s intent to adopt a second grant of an additional 12,500,000 Preferred Options to Mr. Absher, whereby each option permits the holder to acquire one share of the Company’s preferred stock for $0.0001 per share. On August 13, 2021, consistent with this intent, the Company granted 12,500,000 Preferred Options to Mr. Absher to purchase shares of Preferred Stock, par value $0.0001 per share, for consideration of $0.0001 per share. Each Preferred Option is exercisable for a period of twenty-four months upon (i) the acquisition of a Controlling Interest (as defined below) in the Company by any single shareholder or group of shareholders acting in concert, (other than Mr. Absher), or (ii) the announcement of (x) any proposed merger, consolidation, or business combination in which the Company’s Common Stock is changed or exchanged, or (y) any sale or distribution of at least 50% of the Company’s assets or earning power, other than through a reincorporation. Each share of Preferred Stock is convertible into Common Stock on a one-for-one basis. “Controlling Interest” means the ownership or control of outstanding voting shares of the Company sufficient to enable the acquiring person, directly or indirectly and individually or in concert with others, to exercise one-fifth or more of all the voting power of the Company in the election of directors or any other business matter on which shareholders have the right to vote under the Wyoming Business Corporation Act. As of November 30, 2021, no events have occurred that would trigger the exercise of the Preferred Options issued to Mr. Absher in August 2021. Common Stock and Warrants During the three months ended November 30, 2021, the Company closed a $12 million private placement transaction, inclusive of $0.9 million of placement agent fees and costs, with a large institutional investor pursuant to which the Company sold to the investor an aggregate of (i) 2,850,000 shares of Common Stock, together with warrants (the “September 2021 Common Warrants”) to purchase up to 2,850,000 shares of Common Stock, with each September 2021 Common Warrant exercisable for one share of Common Stock at a price per share of $1.595, and (ii) 4,673,511 prefunded warrants (the “September 2021 Prefunded Warrants”), together with the September 2021 Common Warrants to purchase up to 4,673,511 shares of Common Stock, with each September 2021 Prefunded Warrant exercisable for one share of Common Stock at a price per share of $0.0001. Each share of Common Stock and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.595 and each September 2021 Prefunded Warrant and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.5949. The September 2021 Prefunded Warrants are immediately exercisable, at a nominal exercise price of $0.0001, and may be exercised at any time until all of the September 2021 Prefunded Warrants are exercised in full. The September 2021 Common Warrants have an exercise price of $1.595 per share, are immediately exercisable, and will expire five years from the date that the registration statement covering the resale of the shares underlying the September 2021 Common Warrants is declared effective (which has not yet occurred). The private placement generated gross proceeds of approximately $12.0 million, prior to deducting $0.9 million of costs consisting of Placement Agent commissions and offering expenses payable by the Company. In addition to the seven percent (7%) of the aggregate gross proceeds cash fee, the Company issued to the Placement Agent 376,176 warrants to purchase an aggregate of up to five percent (5%) of the aggregate number of shares of Common Stock issuable upon exercise of the September 2021 Prefunded Warrants sold in the offering (the “September Placement Agent Warrants”). The September Placement Agent Warrants are exercisable for a period commencing on March 3, 2022 (six months after issuance) and expire four years from the effective date (which has not yet occurred) of a registration statement for the resale of the underlying shares, and have an initial exercise price per share of $1.7545. . The following table summarizes the changes in the Company’s common stock and Prefunded Warrants from August 31, 2021 to November 30, 2021.
The following table summarizes the Company’s warrants outstanding as of November 30, 2021:
(1)The September 2021 Prefunded Warrants were sold as part of a Prefunded Warrant Unit as described above at a nominal price of $0.0001 per share. (2)The September 2021 Placement Agent Warrants become exercisable six months from issuance and expire four years from the effective date (which has not yet occurred) of the registration statement covering the resale of the underlying shares.
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Stock Based Compensation |
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Stock Based Compensation | Stock Based Compensation Employee Stock Option Plan Increase In March 2017, the Company adopted its 2017 Stock Option/Stock Issuance Plan (the “Plan”). The Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options (“ISOs”), non-qualified stock options (“NQs”), (each of which is exercisable into shares of common stock), (collectively, “Options”) or shares of common stock (“Share Grants”). On July 1, 2020, the Company's board of directors unanimously approved an increase in the number of shares of common stock issuable under the Plan from 250,000 to 3,000,000. On March 31, 2021, the Company’s shareholders approved the increase in the number of shares of common stock issuable under the Plan as well as any contingent grant awards under the Plan on or subsequent to July 1, 2020. On June 4, 2021, the Company registered an aggregate of 3,000,000 shares, par value $0.0001 per share, reserved for issuance under the Plan. For all options granted prior to July 1, 2020, each option has a term of service vesting provision over a period of time as follows: 25% vest after a 12-month service period following the award, with the balance vesting in equal monthly installments over the succeeding 36 months. Options granted on or after July 1, 2020 typically vest over four years, with 25% of the grant vesting one year from the grant date, and the remainder in equal quarterly installments over the succeeding 12 quarters. All options granted to date have a stated ten-year term and, as of November 30, 2021, all options granted to date are exercisable. Stock grants are issued at fair value, considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes stock option pricing model. Following its adoption of ASU 2016-9, the Company elected to account for forfeitures under the Plan as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. The Company recognized approximately $408,000 and $496,000 of compensation expense for the three months ended November 30, 2021 and November 30, 2020, respectively. The Company compensates its board members through grants of common stock for services performed. These services have been accrued within the accounts payable and other accrued liabilities on the condensed consolidated balance sheet. The Company has incurred $56,000 and $75,000 for the three months ended November 30, 2021 and November 30, 2020, respectively. The following table summarizes option activity during the three months ended November 30, 2021:
Options outstanding as of November 30, 2021 had aggregate intrinsic value of $0. At November 30, 2021, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 2.77 years for outstanding grants was $3,785,000. Option vesting activity from August 31, 2021, through November 30, 2021 was as follows:
The following table summarizes information about stock options outstanding and vested at November 30, 2021:
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Related Parties |
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Nov. 30, 2021 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties Director Compensation On December 23, 2019, pursuant to the terms of his director agreement, we issued to Whitney White 428 shares of our common stock, valued at $37,500 or $87.62 per share. On February 10, 2020, Amanda Murphy was appointed to our Board. Ms. Murphy was our Director of Operations at the time of her appointment. Ms. Murphy received approximately $264,000 and $240,000 in salaried compensation in Fiscal 2021 and Fiscal 2020, respectively. During Fiscal 2021, in connection with her relocation to Miami, Florida as part of the relocation of our principal executive offices, Ms. Murphy received a one-time incentive payment of approximately $80,000 in addition to reimbursement of her expenses associated with her relocation. On October 22, 2021, as noted above, our Board approved the promotion of Ms. Murphy to the position of Chief Operating Officer, as well as an increase in her annual salary to $500,000, all of which were effective January 1, 2022. Scott W. Absher, our CEO and Chair of our Board, received compensation in the form of salary of approximately $765,000 and $750,000 for Fiscal 2021 and Fiscal 2020, respectively. In addition, Mr. Absher received the following additional payments during Fiscal 2021: (i) a one-time incentive payment of approximately $160,000 in connection with his relocation to Miami, Florida as part of the relocation of our principal executive offices, in addition to reimbursement of his expenses associated with his relocation; and (ii) a one-time bonus payment in the amount of $240,000 in recognition of his efforts on behalf of the Company. Subsequent to the end of Fiscal 2021, our Board approved raising Mr. Absher’s annual salary to $1 million, effective January 1, 2022, and also approved the payment of a $500,000 bonus to Mr. Absher, 50% of which was payable upon Board approval, and the remainder of which was payable on January 1, 2022. These bonuses are recorded in our Accounts payable and other accrued liabilities in the condense consolidated balance sheets. J. Stephen Holmes J. Stephen Holmes formerly served as a non-employee sales manager advisor to and was a significant shareholder of the Company. The Company incurred $750,000 in professional fees for services provided by Mr. Holmes during each of Fiscal 2021 and 2020, respectively. Further, on June 6, 2019, we advanced $325,000 in cash to Mr. Holmes, which he repaid on July 18, 2019 by returning 558,132 shares of common stock to us at a fair value of $0.58 per share. We classified these shares as treasury stock, which were retired during Fiscal 2020. On or about October 22, 2021, we severed all ties with Mr. Holmes, effective immediately, and cancelled Preferred Options that had previously been issued to him but had not been exercised. As a result of these actions, the Company no longer has any financial obligation to Mr. Holmes, and believes that he is no longer a significant shareholder of the Company. See Note 7, Stockholders Equity. Related Persons to Scott Absher Mark Absher, the brother of Scott Absher, was previously employed as our Registered In-House Counsel, Director and Secretary. Mr. Absher resigned from his positions with the Company on February 6, 2019 and received compensation of $276,951 in Fiscal 2019. On November 18, 2021, Mr. Absher rejoined the Company as Deputy General Counsel – Special Projects, for an annual salary of $240,000. Based on his re-hire date, Mr. Absher did not receive any compensation from the Company in Fiscal 2021 or Fiscal 2020. David May, a member of our business development team, is the son-in-law of Scott Absher. Mr. May received compensation of approximately $149,000 and $132,000 in Fiscal 2021 and Fiscal 2020, respectively. In addition, in connection with his relocation to Miami, Florida, as part of the relocation of our principal executive offices, Mr. May received a one-time incentive payment of approximately $80,000 during Fiscal 2021, in addition to reimbursement for expenses associated with his relocation. Jason Absher, a member of our business development team, is the nephew of Scott Absher and the son of Mark Absher. Mr. Absher was hired on February 22, 2021 at an annual salary of $75,000, which was subsequently raised to $120,000, effective August 1, 2021. Mr. Absher did not receive any compensation in Fiscal 2020, but received compensation of approximately $37,700 for Fiscal 2021. Phil Eastvold, the Executive Producer of ShiftPixy Labs, is the son-in-law of Scott Absher. Mr. Eastvold was hired on September 1, 2020 and therefore did not receive any compensation in Fiscal 2020. Mr. Eastvold received compensation for Fiscal 2021 of approximately $224,000. In addition, in connection with his relocation to Miami, Florida as part of the relocation of our principal executive offices, Mr. Eastvold received a one-time incentive payment of approximately $88,000 during Fiscal 2021, in addition to reimbursement for expenses associated with his relocation. Connie Absher, (the spouse of Scott Absher), Elizabeth Eastvold, (the daughter of Scott Absher and spouse of Mr. Eastvold), and Hannah Absher, (the daughter of Scott Absher), are also employed by the Company. These individuals, as a group, received aggregate compensation of $240,000 and $220,000 in Fiscal 2021 and Fiscal 2020, respectively. In addition, in connection with her relocation to Miami, Florida as part of the relocation of our principal executive offices, Hannah Absher received a one-time incentive payment of approximately $18,000 during Fiscal 2021, in addition to reimbursement for expenses associated with her relocation. Connie Absher and Elizabeth Eastvold did not receive any such relocation bonus.
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Commitments |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments | Commitments Operating Leases & License Agreements Effective April 15, 2016, the Company entered into a non-cancelable five-year operating lease for its Irvine facility. On July 25, 2017, the Company entered into a non-cancelable operating lease for expansion space at its Irvine offices with a termination date that coincides with the termination date of the prior lease and extended the terms of the original lease to extend until 2022. The leases for certain facilities contain escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective August 13, 2020, the Company entered into a non-cancelable seven-year lease for 13,246 square feet of office space located in Miami, Florida to house its principal executive offices commencing October 2020, and continuing through September 2027. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective October 1, 2020, the Company entered into a non-cancelable 64-month lease for 23,500 square feet of primarily industrial space located in Miami, Florida, to house ghost kitchens, production facilities, and certain marketing and technical functions, including those associated with ShiftPixy Labs. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective June 7, 2021, the Company entered into a non-cancelable sublease agreement with Verifone, Inc. to sublease premises consisting of approximately 8,000 square feet of office space located in Miami, Florida, that the Company anticipates using for its sales and operations workforce. The lease has a term of three years expiring on May 31, 2024. The base rent is paid monthly and escalates annually pursuant to a schedule set forth in the sublease. Effective June 21, 2021, the Company entered into a non-cancelable 77-month lease, with an anticipated possession date of March 1, 2022, for premises consisting of approximately 13,418 square feet of office space located in Sunrise, Florida, that the Company anticipates using primarily to house its operations personnel and other elements of its workforce. The base rent is paid monthly and escalates annually pursuant to a schedule set forth in the lease. Future minimum lease and licensing payments under non-cancelable operating leases at November 30, 2021, are as follows:
ShiftPixy Labs Ghost Kitchens On March 17, 2021, the Company entered into a master service agreement for the construction of six ghost kitchens to be placed in its ShiftPixy Labs facility in Miami for a total cost of $1,037,000. As of November 30, 2021, the Company has made payments totaling $885,000 pursuant to this agreement, which it has capitalized as construction in progress and included in Fixed Assets on the Condensed Consolidated Balance Sheet. The Company expects to incur additional costs totaling $152,000 under this contract, which it expects to pay by the end of the second quarter of Fiscal 2022. Non-contributory 401(k) Plan The Company has a non-contributory 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers all non-union employees who are at least 21 years of age and have completed 3 months of service. There were no employer contributions to the 401(k) Plan for the three months ended November 30, 2021 and November 30, 2020. Special Purpose Acquisition Company Sponsorship On April 29, 2021, the Company announced its sponsorship, through a wholly-owned subsidiary, of four SPAC IPOs. The Company purchased founder shares in each SPAC (the "Founder Shares"), through its wholly-owned subsidiary, for an aggregate purchase price of $25,000 per SPAC. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 15% of the outstanding shares of each SPAC after its IPO (excluding the private placement warrants described below and their underlying securities). The registration statement and prospectus covering the IPO of one of these SPACs, IHC, was declared effective by the SEC on October 19, 2021, and IHC units (the “IHC Units”), consisting of one share of common stock and an accompanying warrant to purchase one share of IHC common stock, began trading on the NYSE on October 20, 2021. The IHC IPO closed on October 22, 2021, raising gross proceeds for IHC of $115 million. In connection with the IHC IPO, the Company purchased, through its wholly-owned subsidiary, 4,639,102 placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102. The Company also anticipates purchasing private placement warrants in each of the three other SPACs it is sponsoring, at a price of $1.00 per warrant, for an aggregate of $17,531,408 (or up to $18,656,408 if the over-allotment option of each SPAC is exercised in full), which includes the Company’s investment in Founder Shares and assumes that all four SPAC IPOs are consummated and the pricing terms of each other SPAC IPO is identical to the pricing of the IHC IPO. Each private placement warrant is exercisable to purchase one whole share of common stock in each SPAC at $11.50 per share. The private placement warrants of each SPAC will be worthless to the extent that they do not complete an initial business combination. The investment amounts set forth above do not include loans that the Company may extend to each SPAC in an amount not to exceed $500,000 individually (or $2 million in the aggregate), in its role as sponsor. As of November 30, 2021, the Company had advanced, through its wholly owned subsidiary, an aggregate of approximately $820,000 to the SPACs for payment of various expenses in connection with the SPAC IPOs, principally consisting of SEC registration, legal and auditing fees. The Company anticipates that each of the SPACs will repay these advanced expenses from the proceeds of their respective SPAC IPOs.
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Contingencies |
3 Months Ended |
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Nov. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will be resolved only when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. During the ordinary course of business, the Company is subject to various claims and litigation. Management believes that after consulting legal counsel the outcome of such claims or litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flow. Kadima Litigation The Company is in a dispute with its former software developer, Kadima Ventures (“Kadima”), over incomplete but paid for software development work. In May 2016, the Company entered into a contract with Kadima for the development and deployment of user features that were proposed by Kadima for an original build cost of $2.2 million to complete. This proposal was later revised upward to approximately $7.2 million to add certain features to the original proposal. As of the date of this Quarterly Report, the Company has paid approximately $11 million to Kadima, but has never been provided access to the majority of the promised software. Kadima has refused to continue development work, denied access to developed software, and refused to surrender to the Company any software that it has developed unless the Company pays an additional $12.0 million above the $11.0 million already paid. In April 2019, Kadima filed a complaint against the Company in the Superior Court of the State of Arizona, Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust enrichment, and seeking damages in excess of $11.0 million. The Company vigorously disputes and denies each of Kadima’s claims, including that it owes any sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial portion of the sums that it has already paid, along with the release of the software modules currently being withheld. In June 2020, the Company engaged in a mediation with Kadima in an attempt to resolve the matter, which was unsuccessful. On July 14, 2020 the Company filed an answer to Kadima’s complaint, which denied Kadima’s claims and asserted counter-claims for breach of contract and fraud. Discovery is substantially complete, and a trial date has not been set. Splond Litigation On April 8, 2019, claimant, Corey Splond, filed a class action lawsuit, on behalf of himself and other similarly situated individuals in the Eighth Judicial District Court for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations of certain wage and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff ultimately prevails, the potential damages recoverable will depend substantially upon whether the Court determines in the future that this lawsuit may appropriately be maintained as a class action. Further, in the event that the Court ultimately enters a judgment in favor of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client against at least a portion of any damage award. Radaro Litigation On July 9, 2020, the Company was served with a complaint filed by one of its former software vendors, Radaro Inc., in the United States District Court for the Central District of California, alleging damages arising from claims sounding in breach of contract and fraud. By Order filed October 21, 2020, the Court dismissed plaintiff’s claims for fraud and for punitive damages, with leave to replead. The Company denies plaintiff’s claims and is defending the lawsuit vigorously. Discovery is underway, and the Court has set a trial date of September 6, 2022. Everest Litigation On December 18, 2020, the Company was served with a Complaint filed in the United States District Court for the Central District of California by its former workers’ compensation insurance carrier, Everest National Insurance Company. The Complaint asserts claims for breach of contract, alleging that the Company owes certain premium payments to plaintiff under a retrospective rated policy, and seeks damages of approximately $600,000. On February 5, 2021, the Company filed an Answer to Plaintiff’s Complaint denying its claims for relief, and also filed a cross-claim against the third party claims administrator, Gallagher Bassett Services, Inc., for claims sounding in breach of contract and negligence based upon its administration of claims arising under the policy. By order dated April 7, 2021, the Court dismissed the Company’s complaint against Gallagher Bassett without prejudice to re-filing in another forum. On May 17, 2021, the Company refiled its complaint against Gallagher Basset in the Circuit Court of Cook County, Illinois. Discovery is underway in both cases, and the California Court has set a trial date in the Everest case of February 22, 2022, while no trial date has been set in the Illinois case. Sunz Litigation On March 19, 2021, the Company was served with a Complaint filed in the Circuit Court for the 11th Judicial Circuit, Manatee County, Florida, by its former workers’ compensation insurance carrier, Sunz Insurance Solutions, LLC. The Complaint asserts claims for breach of contract, alleging that the Company owes payments for loss reserve funds totaling approximately $10 million. The Company denies plaintiff’s allegations and is defending the lawsuit vigorously. On May 12, 2021, the Company filed a motion to dismiss the complaint, and Sunz filed an amended complaint in response. Discovery is proceeding in the matter and no trial date has been set. Vensure Litigation On September 7, 2021, Shiftable HR Acquisition, LLC, a wholly-owned subsidiary of Vensure, filed a complaint against the Company in the Court of Chancery of the State of Delaware asserting claims arising from the Asset Purchase Agreement (the “APA”) governing the Vensure Asset Sale described above. The APA provided for Vensure to purchase, through its wholly-owned subsidiary, certain of the Company’s assets for total consideration of $19 million in cash, with $9.5 million to be paid at closing, and the remainder to be paid in 48 equal monthly installments (the “Installment Sum”). The Installment Sum was subject to certain adjustments to account for various post-closing payments made by the parties, and the APA provided for the following procedure to determine the final amount of the Installment Sum: (i) Within 90 days of the effective date, Vensure was required to provide the Company with a “Proposed Closing Statement”, which must detail any adjustments; (ii) Within 30 days of its receipt of Vensure’s Proposed Closing Statement, the Company had the right to challenge any of the proposed adjustments contained therein; and (iii) If the Company disputed Vensure’s Proposed Closing Statement, a 30-day period ensued for the parties to attempt to resolve the dispute, with the Company entitled to examine “such Books and Records of [Vensure] as relate to the specific items of dispute . . .” Vensure resisted the Company’s repeated efforts to obtain the Proposed Closing Statement for over one year after the closing of the transaction. Finally, on March 12, 2021, under threat of legal action by the Company, Vensure provided its Proposed Closing Statement, in which it contended for the first time that it owes nothing to the Company, and that the Company actually owes Vensure the sum of $1,519,991. By letter dated April 6, 2021, the Company provided Vensure with its objections to the Proposed Closing Statement, which included Vensure’s gross overstatement of payments it purportedly made on the Company’s behalf, as well as its bad faith actions in obstructing the Company’s efforts to make these payments. From April 2021 through August 2021, Vensure and the Company engaged in the “30-day negotiation period” referred to above, which was extended multiple times at Vensure’s request to provide Vensure an opportunity to provide evidence supporting its assertions. Over the course of these negotiations, Vensure withdrew its claim for approximately $1.5 million from the Company, and acknowledged that Vensure owed ShiftPixy some portion of the Installment Fund. Nevertheless, in early September 2021, without warning and contrary to the dispute resolution provisions of the APA, Vensure filed suit against the Company in Delaware Chancery Court for breach of contract and declaratory judgment, seeking unspecified damages. The Company vigorously disputes and denies each of Vensure’s claims. Accordingly, on November 4, 2021, the Company filed its Answer and Counterclaim to Vensure’s Complaint, in which it not only denied Vensure’s claims, but also asserted counterclaims for breach of contract and tortious interference with contract. The counterclaim seeks damages from Vensure totaling approximately $9.5 million – the full amount due under the APA - plus an award of attorneys’ fees and expenses. Discovery is expected to commence shortly.
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Subsequent Events |
3 Months Ended |
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Nov. 30, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsManagement has evaluated subsequent events through the date which the financial statements are available to be issued. All subsequent events requiring recognition as of November 30, 2021 have been incorporated into these financial statements and there are no subsequent events that required disclose in accordance with FASB ASC Topic 855, " Subsequent Events." |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a small reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending August 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021 (“Fiscal 2021”), filed with the SEC on December 3, 2021.
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of ShiftPixy Inc, and its wholly-owned subsidiaries. The condensed consolidated financial statements also include the accounts of (a) Industrial Human Capital, Inc. ("IHC"), which is a special purpose acquisition company, or "SPAC", for which we serve as the financial sponsor (as described below), and which is deemed to be controlled by us as a result of our 15% equity ownership stake, the overlap of three of our executive officers as executive officers of IHC, and significant influence that we currently exercise over the funding and acquisition of new operations for an initial business combination ("IBC"). (see Note 2, Variable Interest Entity). All intercompany balances have been eliminated in consolidation.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: •Liability for legal contingencies; •Useful lives of property and equipment; •Deferred income taxes and related valuation allowance; •Valuation of illiquid noncontrolling interest in SPAC shares transferred; •Valuation of long-lived assets including long term notes receivable prior to January 1, 2021; and •Projected development of workers’ compensation claims.
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Revenue and Direct Cost Recognition | Revenue and Direct Cost Recognition For the year ended August 31, 2021 ("Fiscal 2021"), we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Under this method, the guidance is applied only to the most current period presented in the financial statements. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and superseded most of the previous revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Our revenue recognition policies remained substantially unchanged as a result of the adoption of ASU No. 2014-09 and we did not have any significant changes in our business processes or systems. The Company’s revenues are primarily disaggregated into fees for providing staffing solutions and EAS/HCM services. The Company enters into contracts with its clients for Staffing or EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ written notice. The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. Payments for the Company’s services are typically made in advance of, or at the time that the services are provided. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts our performance towards complete satisfaction of the performance obligation. Staffing Solutions The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, we are the principal in this arrangement for revenue recognition purposes. For three months ended November 30, 2020, the Company recognized no revenues that should have been evaluated under a staffing solutions model. EAS Solutions EAS solutions revenue is primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each EAS client concurrently with each periodic payroll of the Company’s WSEs, which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Although the Company assumes responsibility for processing and remitting payroll and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations. As a result, the Company records revenue on a “net” basis in this arrangement for revenue recognition purposes. Revenues that have been recognized but not invoiced for EAS clients are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were $2,700,000 and $2,741,000, as of November 30, 2021 and August 31, 2021, respectively. Consistent with the Company’s revenue recognition policy for EAS clients, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The fees collected from the worksite employers for benefits (i.e. zero-margin benefits pass-through), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses for EAS clients, as the Company does retain risk and acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price. Disaggregation of Revenue The Company’s primary revenue streams include HCM and staffing services. The Company’s disaggregated revenues for the three months ended November 30, 2021 and November 30, 2020 were as follows:
1 HCM revenue is presented net, $14.1 million gross less WSE payroll cost of $12.3 million for the three months ended November 30, 2021 and $19.8 million gross less WSE payroll cost of $17.3 million for the three months ended November 30, 2020. During Fiscal 2021 the Company announced the launch of ShiftPixy Labs and expects to generate revenue from this initiative in Fiscal 2022. We generated no revenue from this initiative during the three months ended November 30, 2021. For the three months ended November 30, 2021 and November 30, 2020, the following geographical regions represented more than 10% of total revenues:
Incremental Cost of Obtaining a Contract Pursuant to the “practical expedients” provided under ASU No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30 days' notice. These costs are recorded in commissions in the Company’s Consolidated Statements of Operations.
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Segment Reporting | Segment Reporting Prior to Fiscal 2021, the Company operated as one reportable segment under ASC 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2021, the Company entered into new business lines and geographic areas that, to date, are not material. However, with the migration to Staffing during the fiscal quarter ending May 31, 2021, the Company is beginning to manage the business on a segmented basis and therefore intends to report such information once systems and processes are updated accordingly. Reporting and monitoring activities on a segment basis will allow the chief operating decision maker to evaluate operating performance more effectively. See also Disaggregation of Revenue, above.
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of November 30, 2021 or August 31, 2021. Marketable Securities Held in Trust Account At November 30, 2021, substantially all of the assets held in the Trust Account were invested in U.S. Treasury securities with maturities of 180 days or less. These funds are restricted for use and may only be used for purposes of completing an IBC or redemption of the public common shares of the SPACs.
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Concentration of Credit Risk | Concentration of Credit RiskThe Company maintains cash with a commercial bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Assets | Fixed Assets Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Leasehold improvements are amortized over the shorter of the useful life or the initial lease term. Fixed assets are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:
The amortization of these assets is included in depreciation expense on the condensed consolidated statements of operations.
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Internal Use Software | Internal Use Software Software development costs relate primarily to software coding, systems interfaces and testing of the Company’s proprietary employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development costs are reported under the section fixed assets, net in the condensed consolidated balance sheets. The Company determined that there were no material capitalized internal software development costs for the three months ended November 30, 2021 or as of August 31, 2021. All capitalized software recorded was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally to five years from when the asset is placed in service.
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Impairment and Disposal of Long-Lived Assets | Impairment and Disposal of Long-Lived AssetsThe Company periodically evaluates its long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment. ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed not to be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Workers' Compensation | Workers’ Compensation Everest Program Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company is currently engaged in litigation regarding such a demand for additional premium payments, which we believe to be without merit, as discussed at Note 11, Contingencies, Everest Litigation, below. Sunz Program From July 2018 through February 28, 2021, the Company’s workers’ compensation program for its WSEs was provided primarily through an arrangement with United Wisconsin Insurance Company and administered by Sunz Insurance Solutions, LLC (“Sunz”). Under this program, the Company has financial responsibility for the first $0.5 million of claims per occurrence. The Company provides and maintains a loss fund that is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. The Company is currently engaged in litigation regarding demands by Sunz for additional claims loss funds, which we believe to be without merit, as discussed at Note 11, Contingencies, Sunz Litigation, below. Current Program Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program. Under this program, the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria. Under the Everest and Sunz programs, the Company utilized a third party to estimate its loss development rate, which was based primarily upon the nature of WSEs’ job responsibilities, the location of WSEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of November 30, 2021 and August 31, 2021, the Company had $95,000 and $155,000, in Deposit – workers’ compensation classified as a short-term asset and $246,000 and $386,000, classified as a long-term asset, respectively. The Company’s estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of November 30, 2021 and August 31, 2021, the Company had short term accrued workers’ compensation costs of $0.6 million and $663,000, and long term accrued workers’ compensation costs of $1.3 million and $1,646,000, respectively. The Company retained workers’ compensation asset reserves and workers’ compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition, LLC, a wholly-owned subsidiary of Vensure Employer Services, Inc. (“Vensure”), in connection with the Vensure Asset Sale described in Note 3, Discontinued Operations, below. As of November 30, 2021, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of November 30, 2021, the Company had $0.2 million in short term assets and $1.4 million of short term liabilities, and had $0.6 million of long term assets and $3.6 million of long term liabilities. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs that are primarily based upon the WSE’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into the Company’s workers’ compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan. The Company has had very limited and immaterial COVID-19 related claims between March 2020 through the date of this Quarterly Report, although there is a possibility of additional workers’ compensation claims being made by furloughed WSEs as a result of the employment downturn caused by the pandemic. On May 4, 2020, the State of California indicated that workers who become ill with COVID-19 would have a potential claim against workers’ compensation insurance for their illnesses. There is a possibility that additional workers’ compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic, which could have a material impact on our workers’ compensation liability estimates. While the Company has not seen significant additional expenses as a result of any such potential claims to date, which would include claims for reporting periods after November 30, 2021, we continue to monitor closely all workers’ compensation claims made as the COVID-19 pandemic continues.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments ASC 820, Fair Value Measurement, requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. ASC 820 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2021 and August 31, 2021, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximated fair value due to the short-term nature of the instruments. Notes Receivable is valued at estimated fair value as described below. The Company measures fair value under a framework that utilizes a hierarchy prioritizing the inputs to relevant valuation techniques. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs used in measuring fair value are: •Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. •Level 2: Inputs to the valuation methodology include: ◦Quoted prices for similar assets or liabilities in active markets; ◦Quoted prices for identical or similar assets or liabilities in inactive markets; ◦Inputs other than quoted prices that are observable for the asset or liability; ◦Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and ◦If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. •Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Funds held in trust represent U.S. treasury bills that were purchased with funds raised through the initial public offering of IHC. The funds raised from SPACs are held in trust accounts that are restricted for use and may only be used for purposes of completing an IBC or redemption of the public shares of common stock of the SPACs as set forth in their respective trust agreements. The funds held in trust are included within Level 1 of the fair value hierarchy and included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheets. The Company did not have other Level 1 or Level 2 assets or liabilities at November 30, 2021 or August 31, 2021. We recorded the fair value of the SPAC founder shares that the Company transferred to the underwriters using non-recurring Level 3 assumptions, including quoted asset prices for SPAC shares and warrants and estimates of the likelihood of the IPOs and IBCs of our sponsored SPACs being consummated. See also Note 5, Deferred Offering Costs – SPACS, below. The valuation of the Note Receivable from the Vensure Asset Sale (as defined below), is a Level 3 fair value measurement as of August 31, 2020 and through December 31, 2020 (end of the earn-out period as defined under the terms of the Note Receivable). The Note Receivable, as described in Note 3, Discontinued Operations, below, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate, and on August 31, 2020 and through December 31, 2020 using a 15% discount rate, which contemplates the risk and probability assessments of the expected future cash flows. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the Vensure Asset Sale, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the Vensure Asset Sale agreement. For Fiscal 2020, the expected cash payments from the Note Receivable were based on estimated gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale as of the measurement date. The Company used the following assumptions to value the Note Receivable as of August 31, 2020: •Discount rate of 15% •Actual monthly wages billed to the extent available to the Company For interim reporting periods after December 31, 2020, including as of November 30, 2021 and August 31, 2021, the Company valued the Note Receivable as discussed in Note 3, Discontinued Operations, below. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 for the three months ended November 30, 2021 and November 30, 2020.
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Advertising Costs | Advertising CostsThe Company expenses all advertising as incurred. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The Company accounts for income taxes pursuant to ASC 740, Income Taxes. Under ASC 740, deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.
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Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company utilizes ASC 260, Earnings per Share. Basic Net Income (Net Loss) per common share is computed by dividing Net Income (Net Loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period. Common stock outstanding for purposes of Net Income (Net Loss) per share calculations include unexercised Preferred Options and unexercised prefunded warrants, as described in Note 7, Stockholders' Equity, below. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common stock equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:
For the table above, “Options” represent all options granted under the Company’s 2017 Stock Option/Stock Issuance Plan (the "Plan"), as described in Note 8, below.
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Share-Based Compensation | Stock-Based Compensation At November 30, 2021, the Company had one stock-based compensation plan under which the Company may issue awards, as described in Note 8, Stock Based Compensation, below. The Company accounts for the Plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated statements of operations at their fair values. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, the Company recognizes expense on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected volatility is based on the historical volatility of the Company’s common stock since our initial public offering. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elects to account for forfeitures as they occur. As such, compensation cost previously recognized for an unvested award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. The methods and assumptions used in the determination of the fair value of stock-based awards are consistent with those described in the Company's Annual Report on Form 10-K for Fiscal 2021, filed with the SEC on December 3, 2021, which includes a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service and performance conditions, payout percentages, and process for estimating the fair value of stock options granted.
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Recent Accounting Standards | Recent Accounting Standards In February 2016, the FASB issued ASU 2016-2, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification of the lease as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The updated effective date will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally requires a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. The Company will adopt the guidance when it becomes effective. On December 31, 2019, the FASB issued ASC 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes” (“Topic 740”). The amendments in this update simplify the accounting for income taxes by removing certain exceptions. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt the guidance when it becomes effective. In May 2021, the FASB issued ASU 2021-4 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption.
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Variable Interest Entity | Variable Interest Entity The Company is involved in the formation of various entities considered to be Variable Interest Entities (“VIEs”). The Company evaluates the consolidation of these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily formed to sponsor the related SPACs. The Company’s determination of whether it is the primary beneficiary of VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically, the Company is entitled to substantially all or portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities. During the three months ended November 30, 2021, our sponsored SPAC, IHC, completed its IPO, selling 11,500,000 units pursuant to a registration statement and prospectus, as described below. The IPO closed on October 22, 2021, raising gross proceeds of $115 million. These proceeds were deposited in a trust account established for the benefit of the IHC public shareholders and, along with an additional $1.675 million deposited in trust by the Company for interest payments for future possible redemptions by IHC stockholders, are included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheet at November 30, 2021. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of IHC. Each unit had an offering price of $10.00 and consisted of one share of IHC common stock and one redeemable warrant. Each warrant entitles the holder thereof to purchase one share of IHC common stock at a price of $11.50 per share. The IHC public stockholders have a right to redeem all or a portion of their shares of IHC common stock upon the completion of its IBC, subject to certain limitations. Under the terms of the registration statement and prospectus, IHC is required to consummate its IBC within 12 months of the completion of the IPO. If IHC is unable to meet this deadline, and no extension is granted, then IHC will redeem 100% of the public shares of common stock outstanding for cash, subject to applicable law and certain conditions. In connection with the IPO, we purchased, through investments, 4,639,102 private placement warrants ("Placement Warrants") at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102, and currently own 2,175,000 Founder Shares of IHC common stock, representing approximately 15% of the issued and outstanding common stock of IHC. Each Placement Warrant is identical to the warrants sold in the IPO, except as described in the IPO registration statement and prospectus. Following the completion of the IHC IPO, we determined that IHC is a Variable Interest Entity ("VIE") in which we have a variable interest because IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that IHC's public stockholders do not have substantive rights, and their equity interest constitutes temporary equity, outside of permanent equity, in accordance with ASC 480-10-S99-3A. As such, we have concluded that we are currently the primary beneficiary of IHC as a VIE, as we have the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impact IHC's economic performance and IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. Since we are the primary beneficiary, IHC is consolidated into our condensed consolidated financial statements.
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Ordinary Shares Subject to Possible Redemption | Shares Subject to Possible Redemption The Company accounts for its stockholdings in its sponsored SPACs, (which are consolidated in our condensed consolidated financial statements), that are subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of common stock are classified as shareholders’ equity. Each sponsored SPAC's shares of common stock feature certain redemption rights that are considered to be outside of the SPAC's control and subject to occurrence of uncertain future events. Accordingly, as of November 30, 2021, shares of common stock subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets. The Company recognizes changes in redemption value of these shares immediately as they occur and adjusts the carrying value of redeemable shares of common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. As of November 30, 2021 the carrying amount of the sponsored SPAC shares of common stock subject to redemption was recorded at their redemption value of $116,725,000. The remeasurement of the redemption value of the redeemable shares of common stock is recorded in equity. The remeasurement in equity comprised of offering cost incurred in connection with the sale of public shares of the SPACs was $13 million, consisting of approximately $9.5 million of offering costs related to the founder shares transferred to the SPACs’ underwriter representative as described in Note 5, Deferred Offering Costs, and $3.5 million in other offering costs related to the IPO paid at closing in cash.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The Company’s disaggregated revenues for the three months ended November 30, 2021 and November 30, 2020 were as follows:
1 HCM revenue is presented net, $14.1 million gross less WSE payroll cost of $12.3 million for the three months ended November 30, 2021 and $19.8 million gross less WSE payroll cost of $17.3 million for the three months ended November 30, 2020.
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Revenue from External Customers by Geographic Areas | For the three months ended November 30, 2021 and November 30, 2020, the following geographical regions represented more than 10% of total revenues:
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Schedule of Estimated Useful Lives of Property and Equipment | The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:
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Discontinued Operations (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disposal Groups Including Discontinued Operations, Reconciliation of Gross Proceeds to Net Proceeds as Presented in Cash Flow Statement | The following is a reconciliation of the gross proceeds to the net proceeds from the Vensure Asset Sale as presented in the balance sheet for the period ended November 30, 2021.
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Disposal Groups, Including Discontinued Operations | The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations are as follows:
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Schedule of Disposal Groups Including Discontinued Operations Income Statement | Reported results for the discontinued operations by period were as follows:
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Deferred Offering Costs - SPACs (Tables) |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Offering Cost | A reconciliation of the deferred offering costs recorded by the Company as of November 30, 2021 is set forth below:
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Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders' Equity Note, Warrants or Rights | The following table summarizes the changes in the Company’s common stock and Prefunded Warrants from August 31, 2021 to November 30, 2021.
The following table summarizes the Company’s warrants outstanding as of November 30, 2021:
(1)The September 2021 Prefunded Warrants were sold as part of a Prefunded Warrant Unit as described above at a nominal price of $0.0001 per share. (2)The September 2021 Placement Agent Warrants become exercisable six months from issuance and expire four years from the effective date (which has not yet occurred) of the registration statement covering the resale of the underlying shares.
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Stock Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Option, Activity | The following table summarizes option activity during the three months ended November 30, 2021:
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Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable | Option vesting activity from August 31, 2021, through November 30, 2021 was as follows:
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Summarizes of Stock Options Outstanding | The following table summarizes information about stock options outstanding and vested at November 30, 2021:
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Commitments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease and licensing payments under non-cancelable operating leases at November 30, 2021, are as follows:
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Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Nov. 30, 2021 |
Nov. 30, 2020 |
|
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 8,940 | $ 2,503 |
Gross billings | 21,200 | 19,800 |
Worksite employee payroll cost | 12,300 | 17,300 |
HCM Services | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 1,800 | 2,500 |
Gross billings | 14,100 | |
Worksite employee payroll cost | 12,300 | |
Staffing Services | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 7,100 | $ 0 |
Summary of Significant Accounting Policies - Revenue from External Customers by Geographical Areas (Details) - Revenue from Contract with Customer Benchmark - Geographic Concentration Risk |
3 Months Ended | |
---|---|---|
Nov. 30, 2021 |
Nov. 30, 2020 |
|
California | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 53.70% | 78.20% |
Washington | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 13.30% | 11.60% |
Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment (Details) |
3 Months Ended |
---|---|
Nov. 30, 2021 | |
Equipment | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Furniture & Fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Furniture & Fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 7 years |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Summary of Significant Accounting Policies - Weighted Average Dilutive Common Shares (Details) - shares |
3 Months Ended | |
---|---|---|
Nov. 30, 2021 |
Nov. 30, 2020 |
|
Total potentially dilutive shares | 17,894,030 | 5,913,398 |
Options | ||
Total potentially dilutive shares | 402,258 | 1,517,189 |
Warrants | ||
Total potentially dilutive shares | 17,491,772 | 4,396,209 |
Discontinued Operations - Reconciliation of Gross Proceeds to Net Proceeds From Sale Transaction (Details) - USD ($) $ in Thousands |
Nov. 30, 2021 |
Aug. 31, 2021 |
Mar. 12, 2021 |
Jan. 03, 2020 |
---|---|---|---|---|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Long-term note receivable, estimated net realizable value | $ 4,004 | $ 4,004 | ||
Overall business | Disposal by sale | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Gross proceeds | 19,166 | $ 19,200 | ||
Cash received at closing – asset sale | (9,500) | |||
Cash received at closing – working capital | (166) | |||
Gross note receivable | 9,500 | $ 9,500 | ||
Less: Transaction reconciliation – estimated working capital adjustments | (2,604) | $ (10,700) | ||
Adjusted Note Receivable | 6,896 | |||
Reserve for estimated potential claims | (2,892) | |||
Long-term note receivable, estimated net realizable value | $ 4,004 |
Discontinued Operations - Reported Results for the Discontinued Operations (Details) - Disposal by sale - Overall business - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Nov. 30, 2021 |
Nov. 30, 2020 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Revenues | $ 0 | $ 0 |
Cost of revenue | 133 | 1,314 |
Gross profit | (133) | (1,314) |
Operating expenses: | ||
Salaries, wages and payroll taxes | 0 | 0 |
Commissions | 0 | 0 |
Total operating expenses | 0 | 0 |
(Loss) income from discontinued operations | $ (133) | $ (1,314) |
Going Concern - (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Sep. 03, 2021 |
Nov. 30, 2021 |
Nov. 30, 2020 |
Aug. 31, 2021 |
|
Going Concern [Line Items] | ||||
Cash | $ 2,100 | |||
Working capital deficit | 11,900 | |||
Net cash provided by (used in) operating activities | (6,674) | $ (5,352) | ||
Retained earnings (accumulated deficit) | (158,051) | $ (149,338) | ||
Private Placement | ||||
Going Concern [Line Items] | ||||
Proceeds from issuance of sale of equity net of issuance costs | $ 11,900 | |||
COVID-19, CARES Act | ||||
Going Concern [Line Items] | ||||
Payroll tax, employer, deferral, CARES Act | $ 318 |
Stockholders' Equity - Summary of Warrants Outstanding (Details) |
3 Months Ended |
---|---|
Nov. 30, 2021
$ / shares
shares
| |
Number of shares | |
Number of shares outstanding, beginning balance (in shares) | shares | 9,592,085 |
Issued (in shares) | shares | 7,899,687 |
Number of shares outstanding, ending balance (in shares) | shares | 17,491,772 |
Number of shares exercisable (in shares) | shares | 17,115,596 |
Weighted average remaining life (years) | |
Weighted remaining life (years), beginning | 4 years 8 months 12 days |
Issued | 4 years 8 months 12 days |
Weighted remaining life (years), ending | 4 years 8 months 12 days |
Weighted remaining life (years) exercisable | 4 years 8 months 12 days |
Weighted average exercise price | |
Weighted average exercise prices, beginning (in dollars per share) | $ / shares | $ 3.87 |
Issued (in dollars per share) | $ / shares | 1.60 |
Weighted average exercise prices, ending (in dollars per share) | $ / shares | 2.83 |
Weighted average exercise price exercisable (in dollars per share) | $ / shares | $ 2.85 |
Stock Based Compensation - Summary of Option Activity (Details) - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Nov. 30, 2021 |
Aug. 31, 2021 |
|
Number of Options | ||
Beginning balance (in shares) | 1,776,115 | |
Granted (in shares) | 105,000 | |
Exercised (in shares) | 0 | |
Forfeited (in shares) | (58,125) | |
Ending balance (in shares) | 1,822,990 | 1,776,115 |
Weighted Average Remaining Contractual Life | ||
Outstanding | 8 years 9 months 29 days | 8 years 10 months 24 days |
Granted | 9 years 10 months 13 days | |
Forfeited | 3 years 2 months 8 days | |
Weighted Average Exercise Price | ||
Outstanding (in dollars per share) | $ 6.41 | $ 6.80 |
Granted (in dollars per share) | 1.18 | |
Exercised (in dollars per share) | 0 | |
Forfeited (in dollars per share) | $ 3.89 |
Stock Based Compensation - Schedule of Option Vesting Activity (Details) - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Nov. 30, 2021 |
Aug. 31, 2021 |
|
Number of Options | ||
Options vested, beginning balance (in shares) | 309,257 | |
Vested (in shares) | 93,001 | |
Exercised (in shares) | 0 | |
Forfeited (in shares) | 0 | |
Options vested, ending balance (in shares) | 402,258 | 309,257 |
Weighted Remaining Contractual Life | ||
Outstanding | 8 years 8 months 12 days | 8 years 7 months 17 days |
Vested | 8 years 10 months 6 days | |
Exercised | 0 years | |
Forfeited | 0 years | |
Weighted Average Exercise Price | ||
Outstanding (in dollars per share) | $ 14.31 | $ 16.92 |
Vested (in dollars per share) | 5.65 | |
Forfeited (in dollars per share) | $ 0 |
Commitments - Schedule of Future Minimum Rental Payments for Operating Leases (Details) $ in Thousands |
Nov. 30, 2021
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 945 |
2023 | 1,068 |
2024 | 1,131 |
2025 | 1,165 |
2026 | 897 |
Thereafter | 838 |
Total minimum payments | $ 6,044 |
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