Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Feb. 29, 2020 | May 08, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | ShiftPixy, Inc. | |
Entity Central Index Key | 0001675634 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Interactive Data Current | Yes | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Feb. 29, 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 | |
Entity Ex Transition Period | false | |
Entity Common Stock Shares Outstanding | 1,520,560 | |
EntityFileNumber | 024-10557 | |
EntityAddressAddressLine1 | 1 VENTURE SUITE 150 | |
EntityAddressPostalZipCode | 92618 | |
EntityTaxIdentificationNumber | 47-4211438 | |
EntityAddressCityOrTown | Irvine | |
LocalPhoneNumber | 7989100 | |
CityAreaCode | 888 | |
EntityAddressStateOrProvince | CA |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Feb. 29, 2020 | Aug. 31, 2019 |
Current assets | ||
Cash | $ 397,000 | $ 1,561,000 |
Accounts receivable, net | 1,197,000 | 86,000 |
Unbilled accounts receivable | 2,093,000 | 1,137,000 |
Note receivable, net | 358,000 | |
Deposit - workers' compensation | 262,000 | 235,000 |
Prepaid expenses | 402,000 | 349,000 |
Other current assets | 163,000 | 244,000 |
Current assets of discontinued operations | 1,924,000 | 10,419,000 |
Total current assets | 6,796,000 | 14,031,000 |
Fixed assets, net | 2,923,000 | 3,320,000 |
Note receivable, net | 5,372,000 | |
Deposits - workers' compensation | 453,000 | 754,000 |
Deposits and other assets | 104,000 | 124,000 |
Non current assets of discontinued operations | 3,324,000 | 5,567,000 |
Total assets | 18,972,000 | 23,796,000 |
Current liabilities | ||
Accounts payable and other accrued liabilities | 2,673,000 | 4,455,000 |
Payroll related liabilities | 5,801,000 | 8,533,000 |
Convertible notes, net | 1,427,000 | 3,351,000 |
Accrued workers' compensation costs | 262,000 | 235,000 |
Default penalties accrual | 1,800,000 | |
Derivative liability | 294,000 | 3,756,000 |
Current liabilities of discontinued operations | 1,924,000 | 10,058,000 |
Total current liabilities | 12,381,000 | 32,188,000 |
Non-current liabilities | ||
Convertible notes, net | 609,000 | |
Accrued workers' compensation costs | 771,000 | 525,000 |
Non-current liabilities of discontinued operations | 5,652,000 | 3,853,000 |
Total liabilities | 19,413,000 | 36,566,000 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Preferred stock, 50,000,000 authorized shares; $0.0001 par value | ||
Additional paid-in capital | 37,620,000 | 32,505,000 |
Treasury stock, at cost-0 and 13,953 shares as of February 29, 2020 and August 31, 2019 | (325,000) | |
Accumulated deficit | (38,061,000) | (44,950,000) |
Total stockholders' deficit | (441,000) | (12,770,000) |
Total liabilities and stockholders' deficit | $ 18,972,000 | $ 23,796,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Feb. 29, 2020 | Aug. 31, 2019 |
Stockholders' deficit | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 750,000,000 | 750,000,000 |
Common stock, shares par value | $ 0.0001 | $ 0.0001 |
Common Stock, Shares, Issued | 1,103,643 | 907,047 |
Treasury stock, shares | 0 | 13,953 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Revenues (gross billings of $15.6m and $8.2m less worksite employee payroll cost of $13.5m and $7.0m, respectively for the three months ended; gross billings of $32.2m and $14.0m less worksite employee payroll cost of $27.9m and $12.0m, respectively for six months ended) | $ 2,583,000 | $ 1,186,000 | $ 4,761,000 | $ 2,020,000 |
Cost of revenue | 2,124,000 | 1,011,000 | 4,178,000 | 1,659,000 |
Gross profit | 459,000 | 175,000 | 583,000 | 361,000 |
Operating expenses: | ||||
Salaries, wages and payroll taxes | 1,802,000 | 1,089,000 | 3,452,000 | 2,030,000 |
Stock-based compensation - general and administrative | 619,000 | 81,000 | 745,000 | 158,000 |
Commissions | 40,000 | 34,000 | 111,000 | 66,000 |
Professional fees | 997,000 | 895,000 | 1,837,000 | 1,519,000 |
Software development | 350,000 | 718,000 | 703,000 | 1,028,000 |
Depreciation and amortization | 239,000 | 191,000 | 480,000 | 379,000 |
General and administrative | 403,000 | 988,000 | 1,564,000 | 2,116,000 |
Total operating expenses | 4,450,000 | 3,996,000 | 8,892,000 | 7,296,000 |
Operating Loss | (3,991,000) | (3,821,000) | (8,309,000) | (6,935,000) |
Other (expense) income: | ||||
Interest expense | (805,000) | (969,000) | (1,966,000) | (1,926,000) |
Expense related to modification of warrants | (22,000) | (22,000) | ||
Loss from debt conversion | (657,000) | (657,000) | ||
Inducement loss | (567,000) | (1,555,000) | (567,000) | (1,555,000) |
Change in fair value derivative and warrant liability | 829,000 | 1,771,000 | ||
Gain on convertible note settlement | 2,611,000 | 2,611,000 | ||
Gain on convertible note penalties accrual | 760,000 | 760,000 | 2,611,000 | |
Total other (expense) income | (462,000) | 87,000 | (681,000) | (870,000) |
Loss from continuing operations | (4,453,000) | (3,734,000) | (8,990,000) | (7,805,000) |
Income (Loss) from discontinued operations | (1,784,000) | 1,594,000 | 197,000 | 3,418,000 |
Gain from asset sale | 15,682,000 | 15,682,000 | ||
Total Income from discontinued operations, net of tax | 13,898,000 | 1,594,000 | 15,879,000 | 3,418,000 |
Net income (loss) | $ 9,445,000 | $ (2,140,000) | $ 6,889,000 | $ (4,387,000) |
Net Income (Loss) gain per share, Basic and diluted | ||||
Continuing operations | $ (0.26) | $ (4.79) | $ (1.01) | $ (10.35) |
Discontinued operations | ||||
Operating income (loss) | (0.10) | 2.04 | 0.02 | 4.53 |
Gain on sale of assets | 0.92 | 1.76 | ||
Total discontinued operations | 0.82 | 2.04 | 1.78 | 4.53 |
Net income (loss) per common share - Basic and diluted | $ 0.56 | $ (2.74) | $ 0.77 | $ (5.82) |
Weighted average common shares outstanding - Basic and diluted | 16,971,339 | 779,634 | 8,932,217 | 753,808 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Gross billings | $ 16.1 | $ 8.2 | $ 32.6 | $ 14 |
Worksite employee payroll cost | $ 13.5 | $ 7 | $ 27.8 | $ 12 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total |
Balance, shares at Aug. 31, 2018 | 721,295 | ||||
Balance, amount at Aug. 31, 2018 | $ 18,468,000 | $ (26,222,000) | $ (7,754,000) | ||
Warrants exercised for cash, amount | 660,000 | 660,000 | |||
Warrants exercised for cash, shares | 6,688 | ||||
Common stock issued for services rendered, amount | 113,000 | 113,000 | |||
Common stock issued for services rendered, shares | 966 | ||||
Stock-based compensation expense | 158,000 | 158,000 | |||
Common shares issued upon conversion of convertible notes and interest, amount | 4,891,000 | 4,891,000 | |||
Common shares issued upon conversion of convertible notes and interest, shares | 49,469 | ||||
Inducement loss from debt conversion, amount | 1,555,000 | 1,555,000 | |||
Inducement loss from debt conversion, shares | 24,517 | ||||
Net Income (Loss) | (4,387,000) | (4,387,000) | |||
Balance, shares at Feb. 28, 2019 | 802,935 | ||||
Balance, amount at Feb. 28, 2019 | 25,845,000 | (30,609,000) | (4,764,000) | ||
Balance, shares at Nov. 30, 2018 | 745,572 | ||||
Balance, amount at Nov. 30, 2018 | 20,963,000 | (28,469,000) | (7,506,000) | ||
Stock-based compensation expense | 81,000 | 81,000 | |||
Common shares issued upon conversion of convertible notes and interest, amount | 3,246,000 | 3,246,000 | |||
Common shares issued upon conversion of convertible notes and interest, shares | 32,846 | ||||
Inducement loss from debt conversion, amount | 1,555,000 | 1,555,000 | |||
Inducement loss from debt conversion, shares | 24,517 | ||||
Net Income (Loss) | (2,140,000) | (2,140,000) | |||
Balance, shares at Feb. 28, 2019 | 802,935 | ||||
Balance, amount at Feb. 28, 2019 | 25,845,000 | (30,609,000) | (4,764,000) | ||
Balance, shares at Aug. 31, 2019 | 909,222 | ||||
Balance, amount at Aug. 31, 2019 | 32,505,000 | (44,950,000) | $ (325,000) | (12,770,000) | |
Treasury Shares retired, amount | (325,000) | 325,000 | |||
Treasury Shares retired, shares | (13,953) | ||||
Common shares issued for note exchange | 200,000 | 200,000 | |||
Shares issued for debt conversion | 21,750 | ||||
Common stock issued for services rendered, amount | 75,000 | 75,000 | |||
Common stock issued for services rendered, shares | 856 | ||||
Stock-based compensation expense | 670,000 | 670,000 | |||
Common shares issued upon conversion of convertible notes and interest, amount | 2,215,000 | 2,215,000 | |||
Common shares issued upon conversion of convertible notes and interest, shares | 148,122 | ||||
Reclassification of derivative liabilities to paid in capital | 1,691,000 | 1,691,000 | |||
Inducement loss on note conversions, amount | 567,000 | 567,000 | |||
Inducement loss on note conversions, shares | 37,646 | ||||
Modification of warrants | 22,000 | 22,000 | |||
Net Income (Loss) | 6,889,000 | 6,889,000 | |||
Balance, shares at Feb. 29, 2020 | 1,103,643 | ||||
Balance, amount at Feb. 29, 2020 | 37,620,000 | (38,061,000) | (441,000) | ||
Balance, shares at Nov. 30, 2019 | 909,222 | ||||
Balance, amount at Nov. 30, 2019 | 32,619,000 | (47,506,000) | (325,000) | (15,212,000) | |
Treasury Shares retired, amount | (325,000) | $ 325,000 | |||
Treasury Shares retired, shares | (13,953) | ||||
Common shares issued for note exchange | 200,000 | 200,000 | |||
Shares issued for debt conversion | 21,750 | ||||
Common stock issued for services rendered, amount | 75,000 | 75,000 | |||
Common stock issued for services rendered, shares | 856 | ||||
Stock-based compensation expense | 556,000 | 556,000 | |||
Common shares issued upon conversion of convertible notes and interest, amount | 2,215,000 | 2,215,000 | |||
Common shares issued upon conversion of convertible notes and interest, shares | 148,122 | ||||
Reclassification of derivative liabilities to paid in capital | 1,691,000 | 1,691,000 | |||
Inducement loss on note conversions, amount | 567,000 | 567,000 | |||
Inducement loss on note conversions, shares | 37,646 | ||||
Modification of warrants | 22,000 | 22,000 | |||
Net Income (Loss) | 9,445,000 | 9,445,000 | |||
Balance, shares at Feb. 29, 2020 | 1,103,643 | ||||
Balance, amount at Feb. 29, 2020 | $ 37,620,000 | $ (38,061,000) | $ (441,000) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | 6 Months Ended | |
Feb. 29, 2020 | Feb. 29, 2020 | Feb. 28, 2019 | |
OPERATING ACTIVITIES | |||
Net Income (Loss) | $ 6,889,000 | $ (4,387,000) | |
Income from discontinued operations | $ 13,898,000 | 15,879,000 | 3,418,000 |
Net loss from continuing operations | (4,453,000) | (8,990,000) | (7,805,000) |
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: | |||
Depreciation and amortization | 239,000 | 480,000 | 379,000 |
Gain on convertible note settlement | (760,000) | (760,000) | (2,611,000) |
Gain on convertible note penalties accrual | (760,000) | ||
Amortization debt discount and debt issuance cost | 2,313,000 | 1,895,000 | |
Stock issued for services | 75,000 | 113,000 | |
Stock-based compensation - general and administrative | 670,000 | 158,000 | |
Expense related to warrant modification | 22,000 | 22,000 | |
Inducement loss on note conversions | 567,000 | 567,000 | 1,555,000 |
Non-cash interest | 298,000 | ||
Change in fair value of derivative and warrant liability | (829,000) | (1,771,000) | |
Changes in operating assets and liabilities | |||
Accounts receivable | (1,111,000) | (55,000) | |
Unbilled accounts receivable | (956,000) | 123,000 | |
Prepaid expenses | (53,000) | 268,000 | |
Other current assets | 81,000 | 39,000 | |
Deposits - workers' compensation | 2,276,000 | (4,197,000) | |
Deposits and other assets | 20,000 | 26,000 | |
Accounts payable | (901,000) | 457,000 | |
Payroll related liabilities | (2,732,000) | 1,353,000 | |
Accrued workers' compensation | 2,273,000 | 2,878,000 | |
Other current liabilities | (1,894,000) | (199,000) | |
Total Adjustments | (1,401,000) | 2,481,000 | |
Net cash used in continuing operating activities | (10,391,000) | (5,324,000) | |
Net cash (used in) provided by discontinued operating activities | (204,000) | 5,310,000 | |
Net cash used in operating activities | (10,595,000) | (14,000) | |
INVESTING ACTIVITIES | |||
Purchase of fixed assets | (77,000) | (497,000) | |
Disposal of fixed assets | 34,000 | ||
Proceeds from working capital adjustment - sale of assets | 1,214,000 | ||
Proceeds from sale of assets | 9,500,000 | ||
Net cash provided by (used in) investing activities | 10,671,000 | (497,000) | |
FINANCING ACTIVITIES | |||
Proceeds from asset sale | (1,240,000) | ||
Proceeds from exercise of warrants | 660,000 | ||
Net cash provided by financing activities | (1,240,000) | 660,000 | |
Net increase (decrease) in cash | (1,164,000) | 149,000 | |
Cash - Beginning of Period | 1,561,000 | 1,650,000 | |
Cash - End of Period | 397,000 | 397,000 | 1,799,000 |
Supplemental Disclosure of Cash Flows Information: | |||
Cash paid for interest | 315,000 | 145,000 | |
Non-cash Investing and Financing Activities: | |||
Conversion of debt and accrued interest into common stock | 2,215,000 | 4,891,000 | |
Additional Principal to settle registration rights penalties | $ 889,000 | ||
Common shares issued for services | 75,000 | ||
Common shares issued for note exchange | $ 200,000 | 200,000 | |
Additional principal issued for note exchange | 267,000 | ||
Discount recorded for asset sale note receivable | 1,818,000 | ||
Reclassification of derivative liabilities to paid in capital | 1,691,000 | ||
Supplemental schedule of cash activities - Asset Sale | |||
Cash received at January 3, 2020 closing | $ 9,500,000 |
Nature of Operations
Nature of Operations | 6 Months Ended |
Feb. 29, 2020 | |
Nature of Operations | |
Nature of Operations | Note 1: Nature of Operations ShiftPixy, Inc. (the “Company”) was incorporated on June 3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant, hospitality and maintenance service trades. The Company’s focus is on the restaurant industry in Southern California. The Company and its wholly-owned subsidiary Rethink, Inc. (“RT”) function as an employment administrative services (“EAS”) providers including services such as administrative and processing services, performing functions in the nature of a payroll processor, human resources consultant, administrator of workers’ compensation coverages and claims and provides workers compensation coverage written in the names of the clients (as may be required by some states). The Company has built a human resources information systems platform to assist in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”) when eligible clients recognize the value of the services provided by the parent Company. This platform is expected to facilitate additional value added services in future reporting periods. In January 2020, the Company sold Shift Human Capital Management Inc. (“SHCM”), previously a wholly-owned subsidiary of the Company, and assigned the majority of the Company’s billable clients to a third party for cash as described below in Note 3 and formed RT. The Company is currently operating in one reportable segment. |
Summary of significant accounti
Summary of significant accounting policies | 6 Months Ended |
Feb. 29, 2020 | |
Summary of significant accounting policies | |
Summary of significant accounting policies | Note 2: 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 smaller reporting company. Accordingly, the Company does 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 and six months ended February 29, 2020, are not necessarily indicative of the results that may be expected for the year ending August 31, 2020. 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 year ended August 31, 2019, filed with the SEC on December 13, 2019. Principles of Consolidation The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. 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; · Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities; · Deferred income taxes and related valuation allowance; · Valuation of long-lived assets including long term notes receivable; and · Projected development of workers’ compensation claims. Revenue and Direct Cost Recognition The Company provides an array of human resources and business solutions designed to help improve business performance. The Company’s revenues are primarily attributable to fees for providing staffing solutions and EAS/ human capital management services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for 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’ notice. Contract performance obligations are satisfied as services are rendered and the term between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. Payments for the Company's services are typically made in advance of, or at the time the services are provided. The Company accounts for its EAS revenues in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 605-45, Revenue Recognition, Principal Agent Considerations . 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 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 client concurrently with each periodic payroll of the Company’s worksite employees 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 worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s condensed consolidated balance sheets and were $280,000 and $170,000 as of February 29, 2020 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years 2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with staffing services. Concentration of Credit Risk The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these deposits. No one individual client represents more than 10% of revenues for the three and six months ended February 29, 2020, and February 28, 2019, respectively. However, four clients represent 40% of total accounts receivable at February 29, 2020. 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 to not 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 exceeded 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 impairments recognized for the periods ended February 29, 2020, and February 28, 2019. Workers’ compensation Everest Program Up to 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 under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of worksite employees’ job responsibilities, the location of worksite employees, 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 February 29, 2020, the Company classified $0.1 million in long term accrued workers’ compensation in the Company’s condensed consolidated balance sheets. Sunz Program Starting in July 2018, the Company’s workers’ compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance Company and administered by the Sunz Insurance Company. 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 will be used to pay claims and claim related expenses. The workers’ compensation insurance carrier established 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 worksite employee 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 deposits- workers’ compensation, a long-term asset in its condensed consolidated balance sheets. As of February 29, 2020, the Company had $0.2 million in deposit – workers’ compensation classified as a short-term asset and $0.5 million classified as a long-term asset. 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 February 29, 2020, the Company had short term accrued workers’ compensation costs of $0.2 million and long term accrued workers’ compensation costs of $0.7 million. The Company retained workers compensation asset reserves and workers compensation related liabilities for former worksite employees of clients transferred to Vensure. As of February 29, 2020, the retained workers compensation assets and liabilities are presented as a discontinued operations net asset or liability. As of February 29, 2020 the Company had $2.0 million in both short term assets and short term liabilities and had $3.3 million of long term assets and $5.6 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 takes 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 which are primarily based upon the worksite employee’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 its 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. We expect additional workers compensation claims to be made by furloughed worksite employees as a result of the employment downturn caused by the COVID-19 pandemic. On May 4, 2020 the State of California indicated that workers who became ill with COVID-19 would have a potential claim against workers compensation insurance for their illnesses. We expect additional workers compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic and which could have a material impact to our workers compensation liability estimates. While we have not seen additional expenses as a result of any such potential claims, and which would be for reporting periods after February 29, 2020, we will continue to closely monitor all workers compensation claims made during the COVID-19 pandemic. Fair Value of Financial Instruments FASB ASC 825, “Financial Instruments,” 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. FASB 825 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 February 29, 2020 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximates fair value due to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the marketplace. The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. 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 which prioritize the 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: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets; o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and o 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. The Company did not have any Level 1 or Level 2 assets and liabilities at February 29, 2020 or August 31, 2019. The valuation of the Note Receivable (as defined below) from the Vensure Asset Sale described below and the derivative liabilities associated with its March 2019 Notes (as defined below) (see Note 4), consisted of conversion feature derivatives and warrants, are Level 3 fair value measurements. Level 3 assets and liabilities: The Note Receivable, as described in Note 3 was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. We valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate which contemplates the risk and probability assessments of the expected future cash flows. The fair value assumptions have not changed as of February 29, 2020 and any impact to the fair value was immaterial. The only impact recorded to the Note Receivable during the quarter related to working capital adjustments of $1.9 million. 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 acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the acquisition agreements. We believe there are risks associated with the value of the Note Receivable due to business impacts of the COVID-19 pandemic. The expected cash payments from the Note Receivable is based on gross profits generated by the clients transferred to Vensure. Those transferred clients may have their business impacted due to the pandemic which in turn would result in lower gross profits. While we believe the current valuation of the Note Receivable is properly recorded as of February 29, 2020, a material change in the business transferred may result in an impairment of this asset . 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. The table below sets forth a summary of the changes in the fair value of the Company’s derivative liabilities classified as Level 3 as of February 29, 2020: March 2019 March 2019 Conversion Warrant Feature Liability Total Balance at August 31, 2019 $ 2,852,000 $ 904,000 $ 3,756,000 Reclassification to APIC due to note settlements, exchanges or conversions (1,652,000) (39,000) (1,691,000) Change in fair value (1,088,000) (683,000) (1,771,000) Balance at February 29, 2020 (unaudited) $ 112,000 $ 182,000 $ 294,000 As of February 29, 2020 and August 31, 2019, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates, and the various estimated reset exercise prices weighted by probability. The Company used the following assumptions to estimate fair value of the derivatives as of February 29, 2020, using the $12.20 per share floor conversion price for the convertible notes and the exercise price of $40 per share for the warrants: March 2019 March 2019 Conversion Warrant Feature Liability (unaudited) (unaudited) Risk free rate 0.66 % 0.89 % Market price per share $ 7.33 $ 7.33 Life of instrument in years 0.54 4.03 Volatility 83 % 102 % Dividend yield - % - % When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended February 29, 2020 and February 28, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels. Research and Development During the three months ended February 29, 2020 and February 28, 2019, the Company incurred research and development costs of approximately $0.8 million and $1.6 million, respectively. During the six months ended February 29, 2020 and February 28, 2019, the Company incurred research and development costs of approximately $2.1 million and $2.5 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s Human Resources Information System (“HRIS”) platform and related mobile application. In addition, $0 and $0.4 million of software costs were capitalized for the three and six months ended February 29, 2020 and February 28, 2019, respectively. Advertising Costs The Company expenses all advertising as incurred. The Company recorded a net costs totaling $179,000 and $183,000 for the three and six months ended February 29, 2020, respectively, and expenses of $503,000 and $582,000 for the three and six months ended February 28, 2019, respectively. Convertible Debt The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features. Reverse Stock Split On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common share equivalents are presented retroactively to reflect the reverse split. Earnings (Loss) Per Share The Company utilizes FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. The number of shares used for the weighted average number of common shares outstanding for the earnings per share for the three and six months ended February 29, 2020 was increased by 24,634,560 shares effective as of January 1, 2020. This increase reflects the inclusion of common shares issuable upon full exercise of options to purchase a similar number of preferred shares and full conversion of those preferred shares to common shares. The preferred share option was deemed to be exercisable into preferred shares on the effective date of the Asset Sale transaction as described in Note 3. The one to one ratio of conversion of preferred shares to common shares was set on March 25, 2020 as described in Note 10. Securities used in, or that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the Three For the Three Months Months Ended Ended February 29, February 28, 2020 2019 Options 43,406 36,896 Senior Secured Convertible Notes (Note 4) 298,954 118,495 Warrants 131,558 87,783 Total potentially dilutive shares 473,918 243,174 Stock-Based Compensation At February 29, 2020, the Company has one stock-based compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation , which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated statements of operations on their fair values. The grant date fair value is determined using the Black-Scholes-Merton pricing model. For all employee stock options, the Company recognizes expense over the requisite service period 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. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. Treasury Stock Treasury stock represents shares of common stock provided to the Company in satisfaction of the related party advance, described in Note 13. Shares of common stock provided are recorded at cost as treasury stock. The Company retired all of its treasury stock outstanding as of August 31, 2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated deficit. Reclassifications Certain reclassifications have been made to prior year’s data to confirm to the current year’s presentation. Such reclassifications had no impact on the Company’s financial condition, operating results, cash flows or stockholder’s equity. Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016‑08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014‑09. The standard has the same effective date as ASU 2014‑09 described above. In April 2016, the FASB issued ASU No. 2016‑10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014‑09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014‑09 described above. In May 2016, the FASB issued ASU 2016‑12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014‑09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014‑09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical correction. The standard has the same effective date as ASU 2014‑09 described above. In December 2016, the FASB issued ASU 2016‑20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect narrow aspects of guidance issued in ASU 2014‑09. The standard has the same effective date as ASU 2014‑09 described above. Topic 606 is effective for the company beginning with the fiscal year ending August 31, 2020. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. For all entities, amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the potential impact this guidance will have on the condensed consolidated financial statements, if any. In February 2016, the FASB issued new accounting guidance on leases ASU 2016-02, 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 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. In April 2020, the FASB voted to defer the effective date for private companies for one year. The updated effective date will be for fiscal years beginning after December 15, 2020, 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. |
Discontinued Operations
Discontinued Operations | 6 Months Ended |
Feb. 29, 2020 | |
Discontinued Operations | |
Discontinued Operations | Note 3 - 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 the transfer of $1.5 million of working capital assets, including cash balances and certain operating assets associated with the assigned client contracts included in the agreement (the “Asset Sale”). Gross proceeds from the sale was $19.2 million of which $9.7 million was received at closing and $9.5 million will be paid out in equal monthly payments over the next four years (the “Note Receivable”), subject to adjustments for working capital and customer retention over the twelve month period following the Asset Sale. The following is a reconciliation of the gross proceeds to the net proceeds from the Asset Sale as presented in the statement of cash flows for the period ending February 29, 2020. Gross proceeds $ 19,166,000 Cash received at closing – asset sale (9,500,000) Cash received at closing – working capital (166,000) Discount recorded (1,818,000) Less: Transaction reconciliation – working capital adjustment (1,943,000) Adjusted Note Receivable 5,739,000 Short-term note receivable 358,000 Long-term note receivable $ 5,381,000 The Asset Sale generated a gain of $15.7 million for the three months ended February 29, 2020. The Company expects a minimal tax impact from the Asset Sale as it intends to utilize its net operating losses accumulated since inception to offset the gain resulting discontinued operations tax provision with a corresponding offset to the valuation allowance. The 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 Company recorded the Note Receivable net of a discount using its estimated cost of capital as a discount rate of (10%). The Asset Sale calls for adjustments to the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross profit of the business transferred is less than the required amount. Through February 29, 2020, the Company has identified $1,943,000 of working capital adjustments including $88,000 related to lower net assets transferred at closing, $201,000 of liabilities paid on behalf of the Company, and $1,664,000 of cash remitted to the Company's bank accounts by former clients. Under the terms of the 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 coronavirus disease 2019 (“COVID-19”), the reconciliation remains unresolved. The working capital adjustment recorded as of February 29, 2020 represents the Company’s estimate of the reconciliation. There is no assurance that the working capital change identified as of February 29, 2020 represents the final working capital adjustment. The carrying amounts of the classes of assets and liabilities from the Asset Sale included in discontinued operations were as follows: February 29, August 31, 2020 2019 Unaudited Unaudited Cash $ - $ - Accounts receivable and unbilled account receivable - 8,526,000 Prepaid expenses and other current assets - 171,000 Deposits – workers’ compensation 1,924,000 1,722,000 Total current assets 1,924,000 10,419,000 Fixed assets, net - 40,000 Deposits - workers' compensation 3,324,000 5,527,000 Total assets $ 5,248,000 $ 15,986,000 Accounts payable and other current liabilities $ - $ 457,000 Payroll related liabilities - 7,879,000 Accrued workers’ compensation cost 1,924,000 1,722,000 Total current liabilities 1,924,000 10,058,000 Accrued workers’ compensation cost 5,652,000 3,853,000 Total liabilities 7,576,000 13,911,000 Net assets/(liability) $ (2,328,000) $ 2,075,000 Reported results for the discontinued operations by period were as follows: For the Three Months Ended For the Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Revenues (gross billings of $26.3 million and $74.4 million less worksite employee payroll cost of $22.8 million and $62.4 million, respectively for the three months ended; gross billings of $120.4 million and $139.4 million less worksite employee payroll cost of $103.3 million and $117.7 million, respectively for six months ended) $ 3,450,000 $ 12,002,000 $ 17,138,000 $ 21,688,000 Cost of revenue 5,038,000 8,956,000 15,535,000 15,442,000 Gross profit (loss) (1,587,000) 3,046,000 1,603,000 6,246,000 Operating expenses: Salaries, wages and payroll taxes 152,000 898,000 658,000 1,752,000 Commissions 45,000 554,000 748,000 1,076,000 Total operating expenses 197,000 1,452,000 1,406,000 2,828,000 (Loss) income from discontinued operations $ (1,784,000) $ 1,594,000 $ 197,000 $ 3,418,000 |
Going Concern
Going Concern | 6 Months Ended |
Feb. 29, 2020 | |
Going Concern | |
Going Concern | Note 4: Going Concern As of February 29, 2020, the Company had cash of $0.4 million and a working capital deficiency of $5.6 million. During the six months ended February 29, 2020, the Company used approximately $10.4 million of cash from its continuing operations and repaid $1.2 million of convertible notes, after receiving $9.5 million of cash from the Asset Sale described below. The Company has incurred recurring losses resulting in an accumulated deficit of $38.1 million as of February 29, 2020. These conditions raise substantial doubt as to its ability to continue as going concern within one year from issuance date of the financial statements. The Company’s plans and expectations for the next 12 months include raising additional capital to help fund expansion of its operations, including the continued development and support of its IT and HR platform and settling its outstanding debt as it comes due. The Company engaged an investment banking firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction. Historically, the Company’s principal source of financing has come through the sale of its common stock and issuance of convertible notes. The Company successfully completed an IPO on The Nasdaq Stock Market LLC (“Nasdaq”) on June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June 2018, the Company completed a private placement of 8% senior secured convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In March 2019, the Company completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3 million net of costs). Between September 1, 2019 and April 15, 2020 all litigation related to the convertible notes was resolved and all June 2018 Notes, all 8% Senior Secured Convertible Notes issued in December 2018 (the “December 2018 Notes”) and $4.0 million of the Convertible Notes issued in March 2019 (the “March 2019 Notes” and, together with the June 2018 Notes and the December 2018 Notes, the “Convertible Notes” or the “Senior Secured Convertible Notes Payable”) were repaid or converted into equity. The remaining $ 1.0 million of March 2019 Notes are due in September 2020 and were amended in March 2020 to a fixed conversion price of $9.20 per share. In January 2020, the Company assigned approximately 88% of its customer contracts in exchange for $9.7 million in cash at closing and received an additional $1.0 million of cash, net of $0.9 million of cash transferred and expects to receive an additional $7.5 million over the four years following the closing of the Asset Sale, subject to certain closing conditions. The Company transferred $1.6 million of working capital including $0.9 million of cash and the business transfer represented approximately $6 million of the Company’s annualized gross profit. The Company continues to experience significant growth in the number of worksite employees, which would generate additional administrative fees that would offset the current level of operational cash burn. The Company retained the high growth business which increased over 100% of billings and revenue growth. The Company also retained the rights to monetize the existing pool of worksite employees and has begun to roll out its delivery and scheduling applications to its customers. The Company has and will be impacted by the Covid-19 pandemic. The current business focus is on providing payroll services for the restaurant and hospitality industries which have seen a significant reduction in payroll and consequently a reduction in payroll processing fees. To date, some of our clients have received Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) benefits to offset this reduction but not at significant levels and our business has been impacted since the Covid-19 lockdown starting in March 2020. If the lockdown continues, our clients delay hiring or rehiring employees, or if our clients shut down operations, our ability to generate operational cash flows may be significantly impaired. The Company’s management believes, but cannot be certain, that the Company’s current cash position, along with its revenue growth and the financing from potential institutional investors will be sufficient to fund its operations for at least a year from the date these financials are available. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months from the date of this Report, the Company 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 terms advantageous to the Company or that any such additional financing would be available to the Company. These condensed consolidated financial statements do not include any adjustments from this uncertainty. |
Senior Secured Convertible Note
Senior Secured Convertible Notes Payable | 6 Months Ended |
Feb. 29, 2020 | |
Senior Secured Convertible Notes Payable | |
Senior Secured Convertible Notes Payable | Note 5: Senior Secured Convertible Notes Payable The Company has issued three series of senior secured convertible notes payable. In general, each series is convertible into common shares of the Company. Senior Secured Convertible Notes Payable consist of the following: February 29 August 31, 2020 2019 (unaudited) Senior Secured Convertible notes, Principal $ 3,647,000 $ 6,808,000 Less: debt discount and deferred financing costs (1,611,000) (3,457,000) Total outstanding convertible notes, net $ 2,036,000 $ 3,351,000 Less: current portion of convertible notes payable (1,427,000) (3,351,000) Long-term convertible notes payable $ 609,000 $ - The following table rolls forward the Convertible Notes Payable balances from August 31, 2019 to February 29, 2020: Deferred Gross Financing Note Principal Costs Discount Net Balance at August 31, 2019 $ 6,808,000 $ (344,000) $ (3,113,000) $ 3,351,000 Repayments in cash (1,240,000) - - (1,240,000) Conversions to common shares (2,188,000) - - (2,188,000) Notes issued for exchange 267,000 267,000 Additional note discount issued - exchange (467,000) (467,000) Acceleration of discount and deferred financing costs - - 62,000 595,000 657,000 Amortization of Interest Expense - 150,000 1,506,000 1,656,000 Balance at February 29, 2020 3,647,000 (132,000) (1,479,000) 2,036,000 Less Current Amount (2,327,000) 132,000 718,000 (1,427,000) Long Term Balance at February 29, 2020 $ 1,320,000 $ - $ (711,000) $ 609,000 The following table outlines the gross principal balance roll forward for each series from August 31, 2019 to February 29, 2020. Each series is described in further detail below. June 2018 December 2018 March 2019 December 2019 Notes Notes Notes Notes Total Gross Balance at August 31, 2019 $ 1,466,000 $ 867,000 $ 4,475,000 $ - $ 6,808,000 Exchanged for December 2019 Notes - (222,000) (2,445,000) 2,934,000 267,000 Conversions to Common Shares (759,000) (422,000) (714,000) (293,000) (2,188,000) Repayments in cash (707,000) (223,000) (310,000) - (1,240,000) Gross Balance - - 1,006,000 2,641,000 3,647,000 Less: Discount and Debt Issuance Costs: - - (400,000) (1,211,000) (1,611,000) Carrying Balance at February 29, 2020 - - 606,000 1,430,000 2,036,000 Less: Current Amount - - (606,000) (821,000) (1,427,000) Long-term Balance at February 29, 2020 $ - $ - $ - $ 609,000 $ 609,000 During the three and six months ended February 29, 2020 the Company amortized $802,000 and $1,656,000, respectively, and for the three and six months ended February 28, 2019 the Company amortized $722,000 and $1,433,000, respectively, to interest expense from the combined amortization of deferred financing costs and note discounts recorded at issuance for the June 2018 Notes, the March 2019 Notes, and the December 2019 Exchange Notes (as defined below). On June 3, 2019, an institutional investor filed a claim in the United States District Court, Southern District of New York seeking preliminary injunctive relief against the Company to immediately deliver one million shares of the Company’s common stock and to honor all future conversion requests duly submitted in accordance with the terms of the notes. On June 7, 2019, and June 10, 2019, the Company received notices from two of its institutional investors that the Company was in default due to missed principal and interest payments under the terms of the Convertible Notes. On June 27, 2019, the Company reported that is has informed its Convertible Note holders that it will cease honoring conversion requests of the 2018 and 2019 Notes forcing a voluntary default of these instruments. During the three months ended February 29, 2020, the Company resolved all litigation related to its outstanding notes and the Convertible Notes are no longer in default. On December 6, 2019, the Company entered into an exchange agreement with the holder of a majority of its March 2019 Notes. The exchange agreement and the related revised March 2019 note agreement revised the conversion price to $40.00 per share, extended the term of the March 2019 Notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020 of 12.5% of the principal balance as of January 31, 2020 payable in cash , and removed certain anti-dilution terms of the related warrants (the “March 2019 Warrants”). The holder also exchanged $222,000 of December 2018 Notes by extending the term to coincide with the revised term of the March 2019 Notes and for the revised amortization schedule. The Company agreed to issue an additional $200,000 of consideration to the holder, payable in common stock, as consideration for this exchange and agreed to increase the principal outstanding on the notes exchanged by 10% from $222,000 for the December 2018 Notes to $244,000 and from $2,445,000 for the March 2019 Notes to $2,690,000 for a combined revised principal balance of $2,934,000. On December 11, 2019, the Company issued 21,750 shares of common stock to the holder in satisfaction of the additional $200,000 of consideration. The Company provided for up to 10% of the revised combined principal of $2,934,000 to be converted at a reduced price of $12.20 per share until January 31, 2020. In January 2020, the investor converted $293,000 into 24,049 shares of common stock. The Company evaluated the exchange under ASC 470 and determined that the exchange should be treated as a debt modification. The Company recorded an additional note discount of $467,000 representing the combined additional shares issued, valued at $200,000 and the additional $267,000 in notes issued in the exchange. See also the section entitled “December 2019 Exchange” below. One investor received a legal judgement for $500,000 plus default interest of $52,000. The judgement was paid in cash in January 2020 which included the repayment of $310,000 principal of the March 2019 Notes. Upon payment of the legal judgement, the litigation was resolved with this investor. The Company settled all legal claims with two investors by entering into settlement agreements and by payment of $2,047,000 in cash and the issuance of 103,593 shares of common stock. The settlements resulted in the elimination of combined default penalties, default interest, and $2,194,000 of principal of the June 2018 Notes, the December 2018 Notes, and the March 2019 Notes. The Company reduced the conversion price of the remaining the June 2018 Notes and the December 2018 Notes payable to $12.20 and $500,000 of the June 2018 Notes and the December 2018 Notes were converted into 41,004 shares of common stock. An additional 4,207 shares of common stock were issued in settlement of default interest of 51,000. One investor converted $130,000 of the March 2019 Note principal and $28,000 of accrued default interest at $12.20 per share into 12,915 shares of common stock. One investor converted $293,000 of the December 2019 Notes into 24,049 shares at a conversion price of $12.20 per share. As a result of these settlements and conversions, the Company recorded $567,000 of additional expense for debt conversion inducement representing the value of the shares issued at market and the $12.20 per share conversion price on the date of issuance. The Company had previously recorded $1,800,000 of accrued interest and penalties as of August 31, 2019. As a result of the settlements and resolution of litigation, the Company recorded a gain of $760,000 for the three months ended February 29, 2020. The Company retained $210,000 of accrued penalties for $210,000 of claims made by note holders which were settled in March 2020. December 2019 Exchange The terms of the December 2019 Exchange Notes are summarized as follows: · Term: April 1, 2022; · Coupon: 0%; · Default interest rate: 18%; · 10% of the revised note balance may be converted at $12.20 per share until January 31, 2020 · Remainder Convertible at the option of the holder at any time at a price of $40 per share but subject to down round price protection; · Amortization payment of 12.5% of January 31, 2020 principal balance payable in cash · Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or default related to missed amortization payment, subject to a floor conversion price of $1.84 per share 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion; · Redemption at the option of the Company at 15% premium at any time. In March 2020, the terms of the December 2019 Exchange Notes were modified to change the conversion price to a fixed conversion price of $9.20 per share. In April 2020, all remaining December 2019 Exchange Notes were converted at the revised conversion price. See also Subsequent Events Note 10. March 2019 Bridge Financing On March 12, 2019, the Company issued the March 2019 Notes in the principal amount of $4,750,000 with an original issue discount of $1 million for a purchase price of $3,750,000 to certain of its existing institutional investors which mature on September 12, 2020. The Company received net cash proceeds of $3.3 million to be used for mobile application development and working capital. The Company incurred approximately $0.5 million of debt issuance costs that are incremental costs directly related to the issuance of the bridge financing senior convertible notes payable. The terms of the March 2019 Notes are summarized as follows: · Term: September 12, 2020; · Coupon: 0%; · Default interest rate: 18%; · Original issue discount: $1,000,000; · Convertible at the option of the holder at any time; · Initial conversion price is set at $66.80 but subject to down round price protection; · Alternate conversion price at the greater of the floor price of $12.20 and the lower of the conversion price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day prior to the applicable conversion date; · Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion; · Redemption at the option of the Company at 15% premium at any time after 45 days from March 12, 2019. In December 2019, the holder of $2,445,000 of March 2019 Notes exchanged these notes for December 2019 Notes as described above. In March 2020, the terms of the March 2019 Notes were modified to change the conversion price to a fixed conversion price of $9.20 per share. See also Subsequent Events Note 10. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Feb. 29, 2020 | |
Stockholders' Equity. | |
Stockholders' Equity | Note 6: Stockholders’ Equity Preferred Stock As previously disclosed by the Company, in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company. The number of options granted were based upon the number of shares held at that time. These options are nontransferable and forfeited upon the sale of the related founding shares of common stock. Upon the occurrence of certain specified events, such founding shareholders could exercise each option to purchase one share of preferred stock of the Company for $0.0001 per share. The preferred stock that is the subject of such options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of common stock on a one-for-one basis.The options became exercisable to purchase shares of preferred stock upon the Asset Sale in January 2020. As of the date of this filing, options exercisable for up to 24,634,560 shares of preferred stock convertible into 24,634,560 shares of common stock are outstanding. The right to exercise the options terminates on December 31, 2023. As stated above, the amount of such 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 such founding shareholders at the time such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000 of such options to two of our founding shareholders, Scott W. Absher and Stephen Holmes, at some point in the future the Company intends to adopt a second grant of options, exercisable upon the occurrence of certain specified events, granting an additional 12,500,000 options to each of Scott W. Absher and Stephen Holmes whereby each option permits the holder to acquire one share of preferred stock of the Company for $0.0001 per share. Each share of preferred stock will be convertible into common stock on a one-for-one basis. Common Stock and Warrants On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common share equivalents are presented retroactively to reflect the reverse split. During the three and six months ended February 29, 2029, the Company issued the following common shares · 185,768 shares of Common Stock were issued for the conversion of 2,187,000 of June 2018 Notes, December 2018 Notes, March 2019 Notes, and December 2019 Notes payable and $79,000 of related default interest payable. · 21,750 shares of Common Stock valued at $200,000 was issued as an inducement to exchange $2.7 million of March 2019 Notes for $2.9 million of December 2019 Exchange Notes. · 856 shares of Common Stock were issued to two directors for services valued at $7,000. During the three and six months ended February 29, 2019 The following tables summarize our warrants outstanding as of February 29, 2020: Weighted average Weighted Number remaining average of life exercise shares (years) price Warrants outstanding, August 31, 2019 107,409 4.3 $ 83.21 Issued 53,273 4.0 40.00 (Cancelled) (29,124) 3.8 $ 40.00 Warrants outstanding, February 28, 2019 131,558 3.8 $ 47.71 Warrants exercisable, February 28, 2019 131,558 3.8 $ 47.71 The following tables summarize our warrants outstanding as of February 29, 2020: Weighted average life of Warrants outstanding Exercise Outstanding warrants in years Price March 2019 Warrants (1) 41,430 4.0 $ 40.00 Amended March 2019 Warrants (2) 66,288 4.0 40.00 March 2019 Services Warrants (3) 3,366 4.0 70.00 June 2018 Warrants (4) 12,552 3.8 40.00 June 2018 Services Warrants (5) 5,422 3.8 99.60 2017 PIPE Warrants 2,500 2.3 $ 276.00 131,558 3.8 $ 47.71 (1) Warrants have full-ratchet price reset provisions. Issuance of certain securities below the then exercise price will result in a reduction of the exercise price and an increase in the warrants outstanding and exercisable. In March 2020 these warrants were exchanged for common shares and are no longer outstanding as of the date of this report. (2) Warrants include 13,015 March 2019 warrants that were amended in December 2019 to modify the exercise price to a fixed exercise price of $40.00 per share from $70 per share and an additional 53,273 warrants issued during the December 2019 Note exchange. (3) Warrants were issued for services rendered in March 2019. (4) Warrants were issued in conjunction with the June 2018 Note series and have price reset protection. The price was reset to $40 per share in December 2019. The difference in fair value of the change in exercise price of the June 2018 Warrants was valued using the binomial method and recorded to other expenses. Issuance of certain securities below the then exercise price will result in a reduction of the exercise price to the price or value of the shares issued or deemed to be issued. (5) Warrants were issued as compensation for services rendered in June 2018. All warrants outstanding and exercise prices have been adjusted to reflect the 1:40 reverse split. |
Share based Compensation
Share based Compensation | 6 Months Ended |
Feb. 29, 2020 | |
Share based Compensation. | |
Stock based Compensation | Note 7: Stock based Compensation The Company granted no options during the six months ended February 29, 2020. The Company recognized approximately $556,000 and $670,000 of compensation expense for the three and six months ended February 29, 2020, respectively. During the three months ended February 29, 2020, the Company fully vested all options granted to personnel who were terminated as a result of the Asset Sale which resulted in the acceleration of 9,737 options and $483,000 of stock based compensation. The Company recognized approximately $81,000 and $158,000 of stock-based compensation in the three and six months ended February 28, 2019, respectively. The total intrinsic value of options as of February 29, 2020, and February 28, 2019, was $0. At February 29, 2020, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 1.1 years for outstanding grants was $0.7 million. A summary of option activity was as follows: Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) Balance, August 31, 2019 50,749 8.95 $ 95.20 Granted - - - Exercised - - - Forfeited (7,343) 8.54 69.85 Balance at February 29, 2020 43,406 8.41 $ 99.55 Options outstanding as of February 29, 2020 had aggregate intrinsic value of $0. Option vesting activity was as follows: Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.04 $ 152.80 Vested 13,199 8.53 108.89 Exercised - - - Forfeited (1,305) 5.15 140.09 Balance at November 30, 2019 22,185 8.05 $ 127.49 The following table summarizes information about stock options outstanding and vested at February 29, 2020: Options Outstanding and Exercisable Options Vested Weighted Average Weighted Weighted Weighted Number Remaining Average Number Remaining Average of Contractual Exercise of Contractual Exercise Exercise Prices Options Life Price Options Life Price (In years) (In years) $18.80‑$40.00 5,375 9.27 $ 24.35 250 9.42 $ 20.00 $40.01–$80.00 13,729 9.09 51.21 4,896 9.09 51.23 $80.01–$120.00 10,553 8.22 102.93 6,394 8.22 102.46 $120.01–$160.00 12,625 7.55 155.28 9,521 7.49 155.12 $160.01‑$391.60 1,124 7.38 391.60 1,124 7.38 391.60 43,406 8.41 $ 99.55 22,185 8.05 $ 127.49 The number of options and exercise prices have been presented retroactively for the 1 for 40 December 17, 2019 reverse split. |
Related Parties
Related Parties | 6 Months Ended |
Feb. 29, 2020 | |
Related Parties. | |
Related Parties | Note 8: Related Parties J. Stephen Holmes, our Sales Manager, is an advisor to and significant shareholder of the Company. The Company incurred $180,000 and $360,000 in professional fees for management consulting services in the three and six months ended February 28, 2019 in the three and six months ended February 29, 2020, respectively. On December 23, 2019, the Company issued 428 shares to each of Messrs. Higgins and White, both Directors of the Company, in settlement of shares promised in December 2018 but not issued. The fair value on the date issued for the combined issuance of 856 shares was $7,000. |
Contingencies
Contingencies | 6 Months Ended |
Feb. 29, 2020 | |
Contingencies. | |
Contingencies | Note 9: 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 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. Convertible Note Related Litigation During 2019, three of the Company’s note holders filed legal complaints. During the three months ended February 29, 2020 all Convertible Note related litigation was resolved as follows: Alpha Capital v. ShiftPixy, Inc. On July 3, 2019, the Company was served with a complaint filing by Alpha Capital Anstalt (“ACA”) in the United States District Court, Southern District of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000 submitted on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 common shares, damages for the claimed breaches, and attorney’s fees. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September 2019. As of November 30, 2019, the Company had convertible notes outstanding with ACA for approximately $1.7 million consisting of $0.3 million of the June 2018 Notes, $0.2 million of the December 2018 Notes and $1.2 million of the March 2019 Notes. In January 2020, Alpha was awarded a judgement for $500,000 consisting of the $310,000 notes and $190,000 of damages and accrued interest of $51,000. On January 16, 2020 Alpha Capital converted all remaining June 2018 Note and December 2018 Note balances at $12.20 per share. On January 20, 2020 the Company paid the damages award including interest in cash and resolved the litigation. Dominion Capital LLC v. ShiftPixy, Inc. On July 18, 2019, the Company was served with a complaint filing by Dominion Capital LLC in the United States District Court, Southern District of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive relief, injunction to prohibit buyback, breach of contract on the June 2018 Notes, the December 2018 Notes, and the March 2019 Notes, and declaratory judgment. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September 2019. On January 22, 2020, the Company settled all claims and repaid all remaining notes and cancelled all related warrants by issuing 83,593 shares of common stock on the date of issuance and paid cash of $1,322,000. MEF I, LP v. ShiftPixy, Inc.; On August 27, 2019, MEF I, LP (“MEF”) filed a complaint in the United States District Court, Southern District of New York. MEF seeks monetary relief of $2.1 million and seeks to appoint themselves as receiver of the Company. As of August 31, 2019, the Company had convertible notes outstanding to MEF at approximately $0.7 million face value consisting of approximately $0.5 million and $0.2 million for the June 2018 Notes and the December 2018 Notes, respectively. In November 2019, the Company filed a motion in response to the receiver request. On January 17, 2020, the Company and MEF I settled all claims and repaid all note principal remaining, accrued damages, and accrued interest and cancelled the June 2018 Warrants with the issuance of 20,000 shares of common stock and payment of $725,000 in cash. See also Note 5 above. Kadima Ventures The Company is in dispute with its 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 $8.5 million to complete. As of the date of this Report, the Company has spent approximately $11 million but has not received the majority of certain software modules. In addition to the non-delivery of the paid for user features, Kadima asserts that it is owed additional funds to turn over the work completed. The Company initiated litigation to force the delivery of the software modules paid for through fiscal 2019 and exit the development engagement. In April 2019, Kadima filed a complaint against ShiftPixy in the County of Maricopa, AZ alleging breach of contract, promissory estoppel and unjust enrichment and has demands for an additional $10 million prior to releasing the remaining features. The parties agreed to a transfer of the matter to an Arizona Commercial Court with the expectation that the matter would be sent to arbitration or mediation. In October 2019, Kadima provided the software code to a third party for technical evaluation of the software in question. The Company expects to enter into mediation once the technical evaluation is completed later in fiscal 2020. . The parties have agreed to a stay on the proceedings until July 2020. Splond Litigation On April 8, 2019, claimant, Corey Splond, filed a class action lawsuit, naming ShiftPixy, Inc. and its client as defendants, claiming that he was scheduled to work for more than 8 hours during 24‑hour periods without being paid overtime, to which he was entitled. In addition, claimant is seeking waiting time penalties for the delay in payment. This lawsuit is in the initial stages; the financial impact to the Company, if any, cannot be estimated. No liability has been recorded for this matter at this time. In the event of an unfavorable outcome the Company’s client is contractually obligated to indemnify the Company for misreported hours and portions of the claim would be covered under the Company’s employment practices liability insurance. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Feb. 29, 2020 | |
Subsequent Events | |
Subsequent Events | Note 10: Subsequent Events In March 2020, our business was impacted by the COVID-19 global pandemic. A significant portion of our business includes restaurants, typically franchise food operators, which were required by the State of California to cease all in-store dining during the COVID-19 shutdown. This has impacted their revenue sources and has resulted in staff layoffs and lower payroll billings processed, beginning in the middle of March 2020, and continuing through the date of this report. In May 2020 the State of California announced that workers who were required to work outside their homes during the lockdown would be potentially eligible for workers compensation if they became ill for a 60 day period announced to be between March 19 until May 19. To date, we have not been notified of any such claims. In March 2020, three investors converted $1,047,000 of the Company’s Convertible Notes and $25,000 of accrued default interest into 135,507 shares of common stock at a conversion price of $9.20 per share. On March 23, 2020, the Company entered into the following Amendment and Exchange Agreements (the “Amendment and Exchange Agreements”) with certain institutional investors, pursuant to which the Company amended and restated certain existing notes (the “Amended and Restated Notes”) and issued (i) convertible notes in an aggregate principal amount of $167,000 convertible into shares of common stock at a conversion price of $9.20 per share of common stock (the “Exchange Notes”), (ii) warrants to purchase an aggregate of 162,950 shares of common stock at an exercise price of $10.17 per share of common stock (the “Exchange Warrants”) and (iii) an aggregate of 82,654 shares of common stock (collectively, the “Exchange Securities”): · On March 23, 2020, the Company entered into an Amendment and Exchange Agreement (the “Alpha Amendment and Exchange Agreement”) with Alpha Capital Anstalt (“Alpha”) pursuant to which the Company (a) issued to Alpha an Amended and Restated Note in an aggregate principal amount of $723,000, and (b) in exchange for outstanding warrants to purchase shares of common stock held by Alpha, issued to Alpha (i) 66,123 shares of common stock, (ii) an Exchange Warrant to purchase 130,360 shares of common stock and (iii) an Exchange Note in an aggregate principal amount of $145,000. · On March 23, 2020, the Company entered into an Amendment and Exchange Agreement (the “Osher Amendment and Exchange Agreement”) with Osher Capital Partners LLC (“Osher”) pursuant to which the Company (a) issued to Osher an Amended and Restated Note in an aggregate principal amount of $108,000, and (b) in exchange for outstanding warrants to purchase shares of common stock held by Osher, issued to Osher (i) 16,531 shares of common stock, (ii) an Exchange Warrant to purchase 32,590 shares of common stock and (iii) an Exchange Note in an aggregate principal amount of $22,000. On March 24, 2020, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with CVI Investments, Inc. (“CVI”) pursuant to which CVI exchanged its outstanding senior convertible note due 2022 for (i) a warrant (the “Exchange Warrant”) to purchase 260,719 shares of common stock and (b) a senior convertible note in an aggregate principal amount of $1,829,000 convertible into shares of common stock at a conversion price of $9.20 per share. On April 15, 2020, CVI converted $1,829,000 of its senior convertible notes into 198,756 shares of common stock. On March 25, 2020, the Company filed Amended and Restated Articles of Incorporation (the “Restated Articles of Incorporation”) with the Wyoming Secretary of State, which were approved by the Company’s board of directors and its shareholders representing a majority of its outstanding shares of capital stock. The Restated Articles of Incorporation, among other things, set conversion rights for the Company’s Class A Preferred Stock, par value $0.0001 per share, to convert into shares of common stock on a one-for-one basis. Management has evaluated subsequent events pursuant to the issuance of the interim unaudited consolidated financial statements and has determined that other than listed above, no other subsequent events exist through the date of this Report. |
Summary of significant accoun_2
Summary of significant accounting policies (Policies) | 6 Months Ended |
Feb. 29, 2020 | |
Summary of significant accounting policies | |
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 smaller reporting company. Accordingly, the Company does 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 and six months ended February 29, 2020, are not necessarily indicative of the results that may be expected for the year ending August 31, 2020. 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 year ended August 31, 2019, filed with the SEC on December 13, 2019. |
Principles of Consolidation | Principles of Consolidation The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have been eliminated in consolidation. |
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; · Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities; · Deferred income taxes and related valuation allowance; · Valuation of long-lived assets including long term notes receivable; and · Projected development of workers’ compensation claims. |
Revenue and Direct Cost Recognition | Revenue and Direct Cost Recognition The Company provides an array of human resources and business solutions designed to help improve business performance. The Company’s revenues are primarily attributable to fees for providing staffing solutions and EAS/ human capital management services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for 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’ notice. Contract performance obligations are satisfied as services are rendered and the term between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. Payments for the Company's services are typically made in advance of, or at the time the services are provided. The Company accounts for its EAS revenues in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 605-45, Revenue Recognition, Principal Agent Considerations . 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 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 client concurrently with each periodic payroll of the Company’s worksite employees 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 worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s condensed consolidated balance sheets and were $280,000 and $170,000 as of February 29, 2020 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years 2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with staffing services. |
Concentration of Credit Risk | Concentration of Credit Risk The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these deposits. No one individual client represents more than 10% of revenues for the three and six months ended February 29, 2020, and February 28, 2019, respectively. However, four clients represent 40% of total accounts receivable at February 29, 2020. |
Impairment and Disposal of Long-Lived Assets | 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 to not 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 exceeded 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 impairments recognized for the periods ended February 29, 2020, and February 28, 2019. |
Workers' compensation | Workers’ compensation Everest Program Up to 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 under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of worksite employees’ job responsibilities, the location of worksite employees, 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 February 29, 2020, the Company classified $0.1 million in long term accrued workers’ compensation in the Company’s condensed consolidated balance sheets. Sunz Program Starting in July 2018, the Company’s workers’ compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance Company and administered by the Sunz Insurance Company. 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 will be used to pay claims and claim related expenses. The workers’ compensation insurance carrier established 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 worksite employee 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 deposits- workers’ compensation, a long-term asset in its condensed consolidated balance sheets. As of February 29, 2020, the Company had $0.2 million in deposit – workers’ compensation classified as a short-term asset and $0.5 million classified as a long-term asset. 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 February 29, 2020, the Company had short term accrued workers’ compensation costs of $0.2 million and long term accrued workers’ compensation costs of $0.7 million. The Company retained workers compensation asset reserves and workers compensation related liabilities for former worksite employees of clients transferred to Vensure. As of February 29, 2020, the retained workers compensation assets and liabilities are presented as a discontinued operations net asset or liability. As of February 29, 2020 the Company had $2.0 million in both short term assets and short term liabilities and had $3.3 million of long term assets and $5.6 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 takes 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 which are primarily based upon the worksite employee’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 its 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments FASB ASC 825, “Financial Instruments,” 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. FASB 825 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 February 29, 2020 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximates fair value due to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the marketplace. The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. 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 which prioritize the 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: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets; o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and o 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. The Company did not have any Level 1 or Level 2 assets and liabilities at February 29, 2020 or August 31, 2019. The valuation of the Note Receivable (as defined below) from the Vensure Asset Sale described below and the derivative liabilities associated with its March 2019 Notes (as defined below) (see Note 4), consisted of conversion feature derivatives and warrants, are Level 3 fair value measurements. Level 3 assets and liabilities: The Note Receivable, as described in Note 3 was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. We valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate which contemplates the risk and probability assessments of the expected future cash flows. The fair value assumptions have not changed as of February 29, 2020 and any impact to the fair value was immaterial. The only impact recorded to the Note Receivable during the quarter related to working capital adjustments of $1.9 million. 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 acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the acquisition agreements. We believe there are risks associated with the value of the Note Receivable due to business impacts of the COVID-19 pandemic. The expected cash payments from the Note Receivable is based on gross profits generated by the clients transferred to Vensure. Those transferred clients may have their business impacted due to the pandemic which in turn would result in lower gross profits. While we believe the current valuation of the Note Receivable is properly recorded as of February 29, 2020, a material change in the business transferred may result in an impairment of this asset . 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. The table below sets forth a summary of the changes in the fair value of the Company’s derivative liabilities classified as Level 3 as of February 29, 2020: March 2019 March 2019 Conversion Warrant Feature Liability Total Balance at August 31, 2019 $ 2,852,000 $ 904,000 $ 3,756,000 Reclassification to APIC due to note settlements, exchanges or conversions (1,652,000) (39,000) (1,691,000) Change in fair value (1,088,000) (683,000) (1,771,000) Balance at February 29, 2020 (unaudited) $ 112,000 $ 182,000 $ 294,000 As of February 29, 2020 and August 31, 2019, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates, and the various estimated reset exercise prices weighted by probability. The Company used the following assumptions to estimate fair value of the derivatives as of February 29, 2020, using the $12.20 per share floor conversion price for the convertible notes and the exercise price of $40 per share for the warrants: March 2019 March 2019 Conversion Warrant Feature Liability (unaudited) (unaudited) Risk free rate 0.66 % 0.89 % Market price per share $ 7.33 $ 7.33 Life of instrument in years 0.54 4.03 Volatility 83 % 102 % Dividend yield - % - % When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended February 29, 2020 and February 28, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels. |
Research and Development | Research and Development During the three months ended February 29, 2020 and February 28, 2019, the Company incurred research and development costs of approximately $0.8 million and $1.6 million, respectively. During the six months ended February 29, 2020 and February 28, 2019, the Company incurred research and development costs of approximately $2.1 million and $2.5 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s Human Resources Information System (“HRIS”) platform and related mobile application. In addition, $0 and $0.4 million of software costs were capitalized for the three and six months ended February 29, 2020 and February 28, 2019, respectively. |
Advertising Costs | Advertising Costs The Company expenses all advertising as incurred. The Company recorded a net costs totaling $179,000 and $183,000 for the three and six months ended February 29, 2020, respectively, and expenses of $503,000 and $582,000 for the three and six months ended February 28, 2019, respectively. |
Convertible Debt | Convertible Debt The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features. |
Reverse Stock Split | Reverse Stock Split On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common share equivalents are presented retroactively to reflect the reverse split. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company utilizes FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. The number of shares used for the weighted average number of common shares outstanding for the earnings per share for the three and six months ended February 29, 2020 was increased by 24,634,560 shares effective as of January 1, 2020. This increase reflects the inclusion of common shares issuable upon full exercise of options to purchase a similar number of preferred shares and full conversion of those preferred shares to common shares. The preferred share option was deemed to be exercisable into preferred shares on the effective date of the Asset Sale transaction as described in Note 3. The one to one ratio of conversion of preferred shares to common shares was set on March 25, 2020 as described in Note 10. Securities used in, or that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the Three For the Three Months Months Ended Ended February 29, February 28, 2020 2019 Options 43,406 36,896 Senior Secured Convertible Notes (Note 4) 298,954 118,495 Warrants 131,558 87,783 Total potentially dilutive shares 473,918 243,174 |
Stock-Based Compensation | Stock-Based Compensation At February 29, 2020, the Company has one stock-based compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation , which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated statements of operations on their fair values. The grant date fair value is determined using the Black-Scholes-Merton pricing model. For all employee stock options, the Company recognizes expense over the requisite service period 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. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. |
Treasury Stock | Treasury Stock Treasury stock represents shares of common stock provided to the Company in satisfaction of the related party advance, described in Note 13. Shares of common stock provided are recorded at cost as treasury stock. The Company retired all of its treasury stock outstanding as of August 31, 2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated deficit. |
Reclassifications | Reclassifications Certain reclassifications have been made to prior year’s data to confirm to the current year’s presentation. Such reclassifications had no impact on the Company’s financial condition, operating results, cash flows or stockholder’s equity. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016‑08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014‑09. The standard has the same effective date as ASU 2014‑09 described above. In April 2016, the FASB issued ASU No. 2016‑10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014‑09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014‑09 described above. In May 2016, the FASB issued ASU 2016‑12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014‑09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014‑09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical correction. The standard has the same effective date as ASU 2014‑09 described above. In December 2016, the FASB issued ASU 2016‑20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect narrow aspects of guidance issued in ASU 2014‑09. The standard has the same effective date as ASU 2014‑09 described above. Topic 606 is effective for the company beginning with the fiscal year ending August 31, 2020. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. For all entities, amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the potential impact this guidance will have on the condensed consolidated financial statements, if any. In February 2016, the FASB issued new accounting guidance on leases ASU 2016-02, 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 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. In April 2020, the FASB voted to defer the effective date for private companies for one year. The updated effective date will be for fiscal years beginning after December 15, 2020, 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. |
Summary of significant accoun_3
Summary of significant accounting policies (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Summary of significant accounting policies | |
Schedule of fair value of the Company's derivative liabilities | March 2019 March 2019 Conversion Warrant Feature Liability Total Balance at August 31, 2019 $ 2,852,000 $ 904,000 $ 3,756,000 Reclassification to APIC due to note settlements, exchanges or conversions (1,652,000) (39,000) (1,691,000) Change in fair value (1,088,000) (683,000) (1,771,000) Balance at February 29, 2020 (unaudited) $ 112,000 $ 182,000 $ 294,000 March 2019 March 2019 Conversion Warrant Feature Liability (unaudited) (unaudited) Risk free rate 0.66 % 0.89 % Market price per share $ 7.33 $ 7.33 Life of instrument in years 0.54 4.03 Volatility 83 % 102 % Dividend yield - % - % |
Schedule of weighted average dilutive common shares | For the Three For the Three Months Months Ended Ended February 29, February 28, 2020 2019 Options 43,406 36,896 Senior Secured Convertible Notes (Note 4) 298,954 118,495 Warrants 131,558 87,783 Total potentially dilutive shares 473,918 243,174 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Discontinued Operations | |
Schedule of a reconciliation of the gross proceeds to the net proceeds from the Asset Sale as presented in the statement of cash flows | Gross proceeds $ 19,166,000 Cash received at closing – asset sale (9,500,000) Cash received at closing – working capital (166,000) Discount recorded (1,818,000) Less: Transaction reconciliation – working capital adjustment (1,943,000) Adjusted Note Receivable 5,739,000 Short-term note receivable 358,000 Long-term note receivable $ 5,381,000 |
Schedule of note receivable on disposal of business | The carrying amounts of the classes of assets and liabilities from the Asset Sale included in discontinued operations were as follows: February 29, August 31, 2020 2019 Unaudited Unaudited Cash $ - $ - Accounts receivable and unbilled account receivable - 8,526,000 Prepaid expenses and other current assets - 171,000 Deposits – workers’ compensation 1,924,000 1,722,000 Total current assets 1,924,000 10,419,000 Fixed assets, net - 40,000 Deposits - workers' compensation 3,324,000 5,527,000 Total assets $ 5,248,000 $ 15,986,000 Accounts payable and other current liabilities $ - $ 457,000 Payroll related liabilities - 7,879,000 Accrued workers’ compensation cost 1,924,000 1,722,000 Total current liabilities 1,924,000 10,058,000 Accrued workers’ compensation cost 5,652,000 3,853,000 Total liabilities 7,576,000 13,911,000 Net assets/(liability) $ (2,328,000) $ 2,075,000 |
Schedule of carrying amounts of the classes of assets and liabilities from the Asset Sale included in discontinued operations | February 29, August 31, 2020 2019 Unaudited Unaudited Cash $ - $ - Accounts receivable and unbilled account receivable - 8,526,000 Prepaid expenses and other current assets - 171,000 Deposits – workers’ compensation 1,924,000 1,722,000 Total current assets 1,924,000 10,419,000 Fixed assets, net - 40,000 Deposits - workers' compensation 3,324,000 5,527,000 Total assets $ 5,248,000 $ 15,986,000 Accounts payable and other current liabilities $ - $ 457,000 Payroll related liabilities - 7,879,000 Accrued workers’ compensation cost 1,924,000 1,722,000 Total current liabilities 1,924,000 10,058,000 Accrued workers’ compensation cost 5,652,000 3,853,000 Total liabilities 7,576,000 13,911,000 Net assets/(liability) $ (2,328,000) $ 2,075,000 |
Schedule of reported results for the discontinued operations by period | For the Three Months Ended For the Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Revenues (gross billings of $26.3 million and $74.4 million less worksite employee payroll cost of $22.8 million and $62.4 million, respectively for the three months ended; gross billings of $120.4 million and $139.4 million less worksite employee payroll cost of $103.3 million and $117.7 million, respectively for six months ended) $ 3,450,000 $ 12,002,000 $ 17,138,000 $ 21,688,000 Cost of revenue 5,038,000 8,956,000 15,535,000 15,442,000 Gross profit (loss) (1,587,000) 3,046,000 1,603,000 6,246,000 Operating expenses: Salaries, wages and payroll taxes 152,000 898,000 658,000 1,752,000 Commissions 45,000 554,000 748,000 1,076,000 Total operating expenses 197,000 1,452,000 1,406,000 2,828,000 (Loss) income from discontinued operations $ (1,784,000) $ 1,594,000 $ 197,000 $ 3,418,000 |
Senior Secured Convertible No_2
Senior Secured Convertible Notes Payable (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Senior Secured Convertible Notes Payable | |
Schedule of senior secured convertible notes payable | February 29 August 31, 2020 2019 (unaudited) Senior Secured Convertible notes, Principal $ 3,647,000 $ 6,808,000 Less: debt discount and deferred financing costs (1,611,000) (3,457,000) Total outstanding convertible notes, net $ 2,036,000 $ 3,351,000 Less: current portion of convertible notes payable (1,427,000) (3,351,000) Long-term convertible notes payable $ 609,000 $ - |
Schedule of rolls forward the convertible notes payable balances | Deferred Gross Financing Note Principal Costs Discount Net Balance at August 31, 2019 $ 6,808,000 $ (344,000) $ (3,113,000) $ 3,351,000 Repayments in cash (1,240,000) - - (1,240,000) Conversions to common shares (2,188,000) - - (2,188,000) Notes issued for exchange 267,000 267,000 Additional note discount issued - exchange (467,000) (467,000) Acceleration of discount and deferred financing costs - - 62,000 595,000 657,000 Amortization of Interest Expense - 150,000 1,506,000 1,656,000 Balance at February 29, 2020 3,647,000 (132,000) (1,479,000) 2,036,000 Less Current Amount (2,327,000) 132,000 718,000 (1,427,000) Long Term Balance at February 29, 2020 $ 1,320,000 $ - $ (711,000) $ 609,000 |
Schedule of gross principal balance rollforward | June 2018 December 2018 March 2019 December 2019 Notes Notes Notes Notes Total Gross Balance at August 31, 2019 $ 1,466,000 $ 867,000 $ 4,475,000 $ - $ 6,808,000 Exchanged for December 2019 Notes - (222,000) (2,445,000) 2,934,000 267,000 Conversions to Common Shares (759,000) (422,000) (714,000) (293,000) (2,188,000) Repayments in cash (707,000) (223,000) (310,000) - (1,240,000) Gross Balance - - 1,006,000 2,641,000 3,647,000 Less: Discount and Debt Issuance Costs: - - (400,000) (1,211,000) (1,611,000) Carrying Balance at February 29, 2020 - - 606,000 1,430,000 2,036,000 Less: Current Amount - - (606,000) (821,000) (1,427,000) Long-term Balance at February 29, 2020 $ - $ - $ - $ 609,000 $ 609,000 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Stockholders' Equity. | |
Summary of warrants outstanding | Weighted average Weighted Number remaining average of life exercise shares (years) price Warrants outstanding, August 31, 2019 107,409 4.3 $ 83.21 Issued 53,273 4.0 40.00 (Cancelled) (29,124) 3.8 $ 40.00 Warrants outstanding, February 28, 2019 131,558 3.8 $ 47.71 Warrants exercisable, February 28, 2019 131,558 3.8 $ 47.71 |
Summary of information about warrants outstanding | Weighted average life of Warrants outstanding Exercise Outstanding warrants in years Price March 2019 Warrants (1) 41,430 4.0 $ 40.00 Amended March 2019 Warrants (2) 66,288 4.0 40.00 March 2019 Services Warrants (3) 3,366 4.0 70.00 June 2018 Warrants (4) 12,552 3.8 40.00 June 2018 Services Warrants (5) 5,422 3.8 99.60 2017 PIPE Warrants 2,500 2.3 $ 276.00 131,558 3.8 $ 47.71 |
Stock based Compensation (Table
Stock based Compensation (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Stock based Compensation (Tables). | |
Summary of option activity | Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) Balance, August 31, 2019 50,749 8.95 $ 95.20 Granted - - - Exercised - - - Forfeited (7,343) 8.54 69.85 Balance at February 29, 2020 43,406 8.41 $ 99.55 |
Schedule of Option vesting activity | Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.04 $ 152.80 Vested 13,199 8.53 108.89 Exercised - - - Forfeited (1,305) 5.15 140.09 Balance at November 30, 2019 22,185 8.05 $ 127.49 |
Summarizes of stock options outstanding | Options Outstanding and Exercisable Options Vested Weighted Average Weighted Weighted Weighted Number Remaining Average Number Remaining Average of Contractual Exercise of Contractual Exercise Exercise Prices Options Life Price Options Life Price (In years) (In years) $18.80‑$40.00 5,375 9.27 $ 24.35 250 9.42 $ 20.00 $40.01–$80.00 13,729 9.09 51.21 4,896 9.09 51.23 $80.01–$120.00 10,553 8.22 102.93 6,394 8.22 102.46 $120.01–$160.00 12,625 7.55 155.28 9,521 7.49 155.12 $160.01‑$391.60 1,124 7.38 391.60 1,124 7.38 391.60 43,406 8.41 $ 99.55 22,185 8.05 $ 127.49 |
Senior Secured Convertible No_3
Senior Secured Convertible Notes Payable (in default) (Tables) | 6 Months Ended |
Feb. 29, 2020 | |
Senior Secured Convertible Notes Payable (in default) (Tables) | |
Schedule of senior secured convertible notes payable | February 29 August 31, 2020 2019 (unaudited) Senior Secured Convertible notes, Principal $ 3,647,000 $ 6,808,000 Less: debt discount and deferred financing costs (1,611,000) (3,457,000) Total outstanding convertible notes, net $ 2,036,000 $ 3,351,000 Less: current portion of convertible notes payable (1,427,000) (3,351,000) Long-term convertible notes payable $ 609,000 $ - |
Schedule of rolls forward the Convertible Notes Payable balances | Deferred Gross Financing Note Principal Costs Discount Net Balance at August 31, 2019 $ 6,808,000 $ (344,000) $ (3,113,000) $ 3,351,000 Repayments in cash (1,240,000) - - (1,240,000) Conversions to common shares (2,188,000) - - (2,188,000) Notes issued for exchange 267,000 267,000 Additional note discount issued - exchange (467,000) (467,000) Acceleration of discount and deferred financing costs - - 62,000 595,000 657,000 Amortization of Interest Expense - 150,000 1,506,000 1,656,000 Balance at February 29, 2020 3,647,000 (132,000) (1,479,000) 2,036,000 Less Current Amount (2,327,000) 132,000 718,000 (1,427,000) Long Term Balance at February 29, 2020 $ 1,320,000 $ - $ (711,000) $ 609,000 |
Gross principal balance rollforward | June 2018 December 2018 March 2019 December 2019 Notes Notes Notes Notes Total Gross Balance at August 31, 2019 $ 1,466,000 $ 867,000 $ 4,475,000 $ - $ 6,808,000 Exchanged for December 2019 Notes - (222,000) (2,445,000) 2,934,000 267,000 Conversions to Common Shares (759,000) (422,000) (714,000) (293,000) (2,188,000) Repayments in cash (707,000) (223,000) (310,000) - (1,240,000) Gross Balance - - 1,006,000 2,641,000 3,647,000 Less: Discount and Debt Issuance Costs: - - (400,000) (1,211,000) (1,611,000) Carrying Balance at February 29, 2020 - - 606,000 1,430,000 2,036,000 Less: Current Amount - - (606,000) (821,000) (1,427,000) Long-term Balance at February 29, 2020 $ - $ - $ - $ 609,000 $ 609,000 |
Summary of significant accoun_4
Summary of significant accounting policies - changes in the fair value of the Company's derivative liabilities (Details ) | 6 Months Ended |
Feb. 29, 2020USD ($) | |
Beginning balance | $ 3,756,000 |
Reclassification to APIC due to note settlements, exchanges or conversions | (1,691,000) |
Change in fair value | (1,771,000) |
Ending balance | 294,000 |
March 2019 Warrant Liability [Member] | |
Beginning Balance of warrant liability | 904,000 |
Change in fair value of warrant liabilty | (683,000) |
Ending balance of warrant liability | 182,000 |
Reclassification to APIC due to note settlements, exchanges or conversions | (39,000) |
March 2019 Conversion Feature [Member] | |
Beginning balance of Conversion features | 2,852,000 |
Change in fair value of conversion features | (1,088,000) |
Ending balance of conversion features | 112,000 |
Reclassification to APIC due to note settlements, exchanges or conversions | $ (1,652,000) |
Summary of significant accoun_5
Summary of significant accounting policies - assumptions to estimate fair value of the derivatives (Details) | 3 Months Ended |
Feb. 29, 2020$ / shares | |
Market price per share conversion feature | 12.20% |
Warrants exercise price | $ 40 |
March 2019 Warrant Liability [Member] | |
Risk free rate | 0.89% |
Market price per share | $ 7.33 |
Life of instrument in years | 4 years 11 days |
Volatility | 102.00% |
March 2019 Conversion Feature [Member] | |
Risk free rate | 0.66% |
Market price per share | $ 7.33 |
Life of instrument in years | 6 months 15 days |
Volatility | 83.00% |
Summary of significant accoun_6
Summary of significant accounting policies - Securities that are excluded from the calculation of weighted average dilutive common shares (Details) - shares | 3 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
Total potentially dilutive shares | 473,918 | 243,174 |
Options [Member] | ||
Total potentially dilutive shares | 43,406 | 36,896 |
Senior Secured Convertible Notes [Member] | ||
Total potentially dilutive shares | 298,954 | 118,495 |
Warrant [Member] | ||
Total potentially dilutive shares | 131,558 | 87,783 |
Summary of significant accoun_7
Summary of significant accounting policies - Additional information (Details) | Jan. 01, 2020shares | Dec. 17, 2019 | Jan. 31, 2020 | Feb. 29, 2020USD ($) | Feb. 28, 2019USD ($) | Feb. 29, 2020USD ($) | Feb. 28, 2019USD ($) | Nov. 30, 2019USD ($) | Aug. 31, 2019USD ($) |
Advertising cost, net | $ 179,000 | $ 183,000 | |||||||
Advertising costs | $ 503,000 | $ 582,000 | |||||||
Weighted average number of common shares outstanding for the earnings per share increased | shares | 24,634,560 | ||||||||
Working capital changes | 1,900,000 | ||||||||
Shares conversion ratio | 0.025 | ||||||||
Unbilled accounts receivable | 2,093,000 | 2,093,000 | $ 1,137,000 | ||||||
Research and developments costs | 800,000 | 1,600,000 | 2,100,000 | 2,500,000 | |||||
Capitalized computer software cost | $ 0 | $ 400,000 | 0 | $ 400,000 | |||||
Concentration of credit risk percent | 40.00% | ||||||||
Concentration of credit Risk description | No one individual client represents more than 10% of revenues for the three and six months ended February 29, 2020 | ||||||||
Short term accrued workers compensation | $ 200,000 | 200,000 | |||||||
Long term accrued workers compensation | 700,000 | 700,000 | $ 100,000 | ||||||
Short term assets | 2,000,000 | 2,000,000 | |||||||
Short term liabilities | 2,000,000 | 2,000,000 | |||||||
Long term assets | 3,300,000 | 3,300,000 | |||||||
Long term liabilities | 5,600,000 | 5,600,000 | |||||||
Short-term asset and workers compensation - deposits | 200,000 | 200,000 | |||||||
Long-term asset and workers compensation - deposits | 500,000 | $ 500,000 | |||||||
Settlement claims | $ 500,000 | ||||||||
Preferred Stock | |||||||||
Shares conversion ratio | 1 | 1 |
Discontinued Operations - Trans
Discontinued Operations - Transaction (Details) - USD ($) | Jan. 03, 2020 | Feb. 29, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Net cash proceeds as presented in the statement of cash flows | $ 9,500,000 | |
Overall business | Disposal by sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Percentage of business sold | 88.00% | |
Working capital assets transferred | $ 1,500,000 | |
Gross proceeds to be received | 19,200,000 | 19,166,000 |
Net cash proceeds as presented in the statement of cash flows | 9,700,000 | 9,500,000 |
Gross proceeds to be received in equal monthly payments | $ 9,500,000 | $ 5,739,000 |
Period for payment of gross proceeds (in years) | 4 years | |
Customer retention period (in years) | 12 months | |
PEO business | Disposal by sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Percentage of business sold | 100.00% |
Discontinued Operations - Recon
Discontinued Operations - Reconciliation of gross proceeds to net proceeds from sale transaction (Details) - USD ($) | Jan. 03, 2020 | Feb. 29, 2020 | Feb. 29, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Cash received at closing - asset sale | $ (9,500,000) | ||
Gain from asset sale | $ 15,682,000 | 15,682,000 | |
Overall business | Disposal by sale | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Gross proceeds | $ 19,200,000 | 19,166,000 | 19,166,000 |
Cash received at closing - asset sale | (9,700,000) | (9,500,000) | |
Cash received at closing - working capital | (166,000) | ||
Less: Discount | 1,818,000 | 1,818,000 | |
Less: Transaction reconciliation - working capital adjustment | (1,943,000) | (1,943,000) | |
Adjusted Note Receivable | $ 9,500,000 | 5,739,000 | 5,739,000 |
Short-term note receivable | 358,000 | 358,000 | |
Long-term note receivable | $ 5,381,000 | 5,381,000 | |
Gain from asset sale | $ 15,700,000 |
Discontinued Operations - Notes
Discontinued Operations - Notes receivable (Details) - Overall business - USD ($) | Feb. 28, 2022 | Feb. 29, 2020 | Jan. 03, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Discount rate (as a percent) | (10.00%) | ||
Disposal by sale | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Adjusted Note Receivable | $ 5,739,000 | $ 9,500,000 | |
Less: Discount | 1,818,000 | ||
Short-term note receivable | 358,000 | ||
Long-term note receivable | 5,381,000 | ||
Lower net assets transferred at closing | 88,000 | ||
Liabilities paid on behalf of the Company | 201,000 | ||
Cash remitted to the Company's bank accounts by former clients | $ 1,664,000 |
Discontinued Operations - Carry
Discontinued Operations - Carrying amounts of the classes of assets and liabilities from the asset sale included in discontinued operations (Details) - USD ($) | Feb. 29, 2020 | Aug. 31, 2019 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Total current assets | $ 1,924,000 | $ 10,419,000 |
Total current liabilities | 1,924,000 | 10,058,000 |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Accounts receivable and unbilled account receivable | 8,526,000 | |
Prepaid expenses and other current assets | 171,000 | |
Deposits - workers' compensation | 1,924,000 | 1,722,000 |
Total current assets | 1,924,000 | 10,419,000 |
Fixed assets, net | 40,000 | |
Deposits - workers' compensation | 3,324,000 | 5,527,000 |
Total assets | 5,248,000 | 15,986,000 |
Accounts payable and other current liabilities | 457,000 | |
Payroll related liabilities | 7,879,000 | |
Accrued workers' compensation cost | 1,924,000 | 1,722,000 |
Total current liabilities | 1,924,000 | 10,058,000 |
Accrued workers' compensation cost | 5,652,000 | 3,853,000 |
Total liabilities | 7,576,000 | 13,911,000 |
Net assets/(liability) | $ (2,328,000) | $ 2,075,000 |
Discontinued Operations - Repor
Discontinued Operations - Reported results for the discontinued operations (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Operating expenses: | ||||
Income (Loss) from discontinued operations | $ (1,784,000) | $ 1,594,000 | $ 197,000 | $ 3,418,000 |
Disposal by sale | Overall business | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Revenues, Net | 3,450,000 | 12,002,000 | 17,138,000 | 21,688,000 |
Cost of revenue | 5,038,000 | 8,956,000 | 15,535,000 | 15,442,000 |
Gross profit (loss) | (1,587,000) | 3,046,000 | 1,603,000 | 6,246,000 |
Operating expenses: | ||||
Salaries, wages and payroll taxes | 152,000 | 898,000 | 658,000 | 1,752,000 |
Commissions | 45,000 | 554,000 | 748,000 | 1,076,000 |
Total operating expenses | 197,000 | 1,452,000 | 1,406,000 | 2,828,000 |
Income (Loss) from discontinued operations | (1,784,000) | 1,594,000 | 197,000 | 3,418,000 |
Revenues, Gross | 26,300,000 | 74,400,000 | 120,400,000 | 139,400,000 |
Worksite employee payroll cost | $ 22,800,000 | $ 62,400,000 | $ 103,300,000 | $ 117,700,000 |
Going Concern (Details)
Going Concern (Details) - USD ($) | Sep. 01, 2019 | Jun. 29, 2017 | Jan. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2018 | Feb. 29, 2020 | Feb. 29, 2020 | Feb. 28, 2019 | Mar. 31, 2020 | Aug. 31, 2019 | Mar. 12, 2019 |
Cash | $ 400,000 | $ 400,000 | |||||||||
Working capital deficit | 5,600,000 | 5,600,000 | |||||||||
Cash received at closing - asset sale | 9,500,000 | ||||||||||
Accumulated deficit | $ (38,061,000) | (38,061,000) | $ (44,950,000) | ||||||||
Net cash used in operating activities | (10,595,000) | $ (14,000) | |||||||||
Proceeds from initial public offering | $ 12,000,000 | ||||||||||
Proceeds from initial public offering, net of costs | $ 10,900,000 | ||||||||||
Concentration risk, percentage | 40.00% | ||||||||||
Conversion price | $ 12.20 | ||||||||||
Percentage of customer contracts considered for exchange | 88.00% | ||||||||||
Customer contracts considered for exchange, amount | $ 9,700,000 | ||||||||||
Additional cash received | 1,000,000 | ||||||||||
Cash transferred | 900,000 | ||||||||||
Expected additional cash to be received | $ 7,500,000 | ||||||||||
Expected additional cash to be received, period | 4 years | ||||||||||
Working captial transferred | $ 1,600,000 | ||||||||||
Business transfer in annualized gross profit | $ 6,000,000 | ||||||||||
Percentage of billings and revenue growth | 100.00% | ||||||||||
Convertible Debt [Member] | |||||||||||
Repayment of convertible notes | $ 1,200,000 | ||||||||||
Proceeds from initial public offering | $ 3,750,000 | $ 9,000,000 | |||||||||
Proceeds from initial public offering, net of costs | $ 3,300,000 | $ 8,400,000 | |||||||||
Concentration risk, percentage | 8.00% | ||||||||||
Subsequent Event [Member] | |||||||||||
Conversion price | $ 9.20 | ||||||||||
March 2019 [Member] | |||||||||||
Amended convertible debt | $ 1,000,000 | ||||||||||
Conversion price | $ 9.20 | $ 9.20 | $ 9.20 | $ 66.80 | |||||||
March 2019 [Member] | Convertible Debt [Member] | |||||||||||
Repaid or converted to equity | $ 4,000,000 |
Senior Secured Convertible No_4
Senior Secured Convertible Notes Payable - Senior secured convertible notes payable (Details) - USD ($) $ in Thousands | Feb. 29, 2020 | Aug. 31, 2019 |
Senior Secured Convertible Notes Payable | ||
Senior Secured Convertible notes, Principal | $ 3,647,000 | $ 6,808,000 |
Less debt discount and deferred financing costs | (1,611,000) | (3,457,000) |
Total outstanding convertible notes, net | 2,036,000 | 3,351,000 |
Less current portion of convertible notes payable | (1,427,000) | $ (3,351,000) |
Long-term convertible notes payable | $ 609,000 |
Senior Secured Convertible No_5
Senior Secured Convertible Notes Payable - Rolls forward the convertible notes payable (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Feb. 29, 2020 | Aug. 31, 2019 | |
Gross Principal | ||
Beginning Balance at August 31, 2019, Gross Principal | $ 6,808,000 | |
Repayments in cash, Gross Principal | $ (1,240,000) | |
Conversions to common shares, Gross Principal | (2,188,000) | |
Notes issued for exchange, Gross Principal | 267,000 | |
Ending Balance at February 29, 2020, Gross Principal | 3,647,000 | |
Less Current Gross Principal Amount | (2,327,000) | |
Ending Long-term Balance at February 29, 2020, Gross Principal | 1,320,000 | |
Deferred Financing Costs | ||
Beginning Balance at August 31, 2019, Deferred Financing Costs | (344,000) | |
Acceleration of discount and deferred financing costs, Deferred Financing Costs | 62,000 | |
Amortization of Interest Expense, Deferred Financing Costs | 150,000 | |
Ending Balance At February 29, 2020, Deferred Financing Costs | (132,000) | |
Less Current Amount, Deferred Financing Costs | 132,000 | |
Note Discount | ||
Beginning Balance at August 31, 2019, Note Discount | (3,113,000) | |
Additional note discount issued - exchange, Note Discount | (467,000) | |
Acceleration of discount and deferred financing costs, Note Discount | 595,000 | |
Amortization of Interest Expense, Note discount | 1,506,000 | |
Ending Balance at February 29, 2020, Note Discount | (1,479,000) | |
Less Current Amount, Note Discount | 718,000 | |
Long-term Balance at February 29, 2020, Note Discount | (711,000) | |
Net | ||
Beginning Balance at August 31, 2019, Net | $ 3,351,000 | |
Repayments in cash, Net | (1,240,000) | |
Conversions to common shares, Net | (2,188,000) | |
Notes issued for exchange, Net | 267,000 | |
Additional note discount issued - exchange, Net | (467,000) | |
Acceleration of discount and deferred financing costs, Net | 657,000 | |
Amortization of Interest Expense, Net | 1,656,000 | |
Ending Balance at February 29, 2020, Net | 2,036,000 | |
Less Curent Amount, Net | (1,427,000) | |
Ending Long Term Balance at February 29, 2020, net | $ 609,000 |
Senior Secured Convertible No_6
Senior Secured Convertible Notes Payable - Gross principal balances rollforward (Details) $ in Thousands | 6 Months Ended |
Feb. 29, 2020USD ($) | |
Gross Balance, Beginning | $ 6,808,000 |
Exchanged for December 2019 Notes | 267,000 |
Conversions to Common Shares | (2,188,000) |
Repayments in Cash | (1,240,000) |
Gross Balance, Ending | 3,647,000 |
Less Discount and Debt Issuance Costs: | |
Less Discount and Debt Issuance Costs: | (1,611,000) |
Carrying Balance at February 29, 2020 | 2,036,000 |
Less Current Amount | (1,427,000) |
Long Term Balance at February 29, 2020 | 609,000 |
March 2019 [Member] | |
Gross Balance, Beginning | 4,475,000 |
Exchanged for December 2019 Notes | (2,445,000) |
Conversions to Common Shares | (714,000) |
Repayments in Cash | (310,000) |
Gross Balance, Ending | 1,006,000 |
Less Discount and Debt Issuance Costs: | |
Less Discount and Debt Issuance Costs: | (400,000) |
Carrying Balance at February 29, 2020 | 606,000 |
Less Current Amount | (606,000) |
December 2019 [Member] | |
Exchanged for December 2019 Notes | 2,934,000 |
Conversions to Common Shares | (293,000) |
Gross Balance, Ending | 2,641,000 |
Less Discount and Debt Issuance Costs: | |
Less Discount and Debt Issuance Costs: | (1,211,000) |
Carrying Balance at February 29, 2020 | 1,430,000 |
Less Current Amount | (821,000) |
Long Term Balance at February 29, 2020 | 609,000 |
June 2018 [Member] | |
Gross Balance, Beginning | 1,466,000 |
Conversions to Common Shares | (759,000) |
Repayments in Cash | (707,000) |
December Two Thousand Eighteen Notes [Member] | |
Gross Balance, Beginning | 867,000 |
Exchanged for December 2019 Notes | (222,000) |
Conversions to Common Shares | (422,000) |
Repayments in Cash | $ (223,000) |
Senior Secured Convertible No_7
Senior Secured Convertible Notes Payable - Additional information (Details) - USD ($) | Dec. 06, 2019 | Jun. 03, 2019 | Mar. 12, 2019 | Jan. 31, 2020 | Dec. 31, 2018 | Jun. 30, 2018 | Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | Aug. 31, 2019 |
Value for debt conversion | $ 200,000 | $ 200,000 | |||||||||||
Additional note discount | $ 567,000 | ||||||||||||
Amount of legal judgement on debt instrument | 500,000 | ||||||||||||
Amount of legal judgement on default intererst | 52,000 | ||||||||||||
Repayment of legal judgement on debt instrument | 310,000 | ||||||||||||
Recovery from debt litigation settlement | 760,000 | ||||||||||||
Retained accrued penalties for potential claims | 210,000 | ||||||||||||
Debt accrued interest and penalties | 1,800,000 | ||||||||||||
Convertible notes, net | 609,000 | 609,000 | |||||||||||
Amortized Interest expense | $ 802,000 | $ 722,000 | 1,656,000 | $ 1,433,000 | |||||||||
Amortization debt discount and debt issuance cost | $ 2,313,000 | $ 1,895,000 | |||||||||||
Settlement amount | $ 210,000 | ||||||||||||
Conversion price | $ 12.20 | ||||||||||||
Common stock, shares issued | 1,103,643 | 1,103,643 | 907,047 | ||||||||||
Warrants granted | 0 | ||||||||||||
Warrants exercise price | $ 40 | $ 40 | |||||||||||
Institutional Investors Filed | |||||||||||||
Shares issued for debt conversion | 1,000,000 | ||||||||||||
March 2019 [Member] | |||||||||||||
Principal Outstanding Combined Revised Balance | $ 4,750,000 | ||||||||||||
Interest rate | 18.00% | ||||||||||||
Description for event of default | Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion.Redemption at the option of the Company at 15% premium at any time after 45 days from March 12, 2019. | ||||||||||||
Conversion price | $ 66.80 | $ 9.20 | $ 9.20 | $ 9.20 | |||||||||
Conversion price description | Alternate conversion price at the greater of the floor price of $12.20 and the lower of the conversion price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day prior to the applicable conversion date | ||||||||||||
Debt issuance costs | $ 500,000 | ||||||||||||
Proceeds from Notes Payable | $ 3,300,000 | ||||||||||||
Coupon rate | 0.00% | ||||||||||||
Original issue discount | $ 1,000,000 | ||||||||||||
Purchase price | $ 3,750,000 | ||||||||||||
December 2019 [Member] | |||||||||||||
Interest rate | 18.00% | ||||||||||||
Description for event of default | Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or default related to missed amortization payment, subject to a floor conversion price of $0.00 per share 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion Redemption at the option of the Company at 15% premium at any time. | ||||||||||||
Conversion price | $ 9.20 | ||||||||||||
Debt Instrument, Convertible, Floor Price | $ 40 | ||||||||||||
Exchanged note amount | $ 2,445,000 | ||||||||||||
Percentage of principal increased | 10.00% | ||||||||||||
Coupon rate | 0.00% | ||||||||||||
Conversion price | 12.20% | ||||||||||||
Amortization of principal in cash premium | 12.50% | ||||||||||||
Exchange Agreement [Member] | |||||||||||||
Shares issued for debt conversion | 24,049 | ||||||||||||
Payment in cash for settlement with investors | $ 2,047,000 | ||||||||||||
Shares issued for settlement with investors | 103,593 | ||||||||||||
Elimination of combined default penalties and default interest | $ 2,194,000 | ||||||||||||
Exchange Agreement [Member] | March 2019 [Member] | |||||||||||||
Principal outstanding, Revised | $ 2,690,000 | ||||||||||||
Principal Outstanding Combined Revised Balance | 2,934,000 | ||||||||||||
Shares issued for debt conversion | 12,915 | ||||||||||||
Debt default interest | $ 28,000 | ||||||||||||
Debt amount converted | $ 130,000 | ||||||||||||
Principal outstanding | 2,445,000 | ||||||||||||
Principal outstanding, Revised | $ 2,690,000 | ||||||||||||
Conversion price | $ 12.20 | ||||||||||||
Exchange Agreement [Member] | March 2019 Convertible Notes [Member] | |||||||||||||
Percentage of principal balance payable in cash | 12.50% | ||||||||||||
Conversion price | $ 40 | ||||||||||||
Additional consideration | $ 200,000 | ||||||||||||
Exchange Agreement [Member] | December 2019 [Member] | |||||||||||||
Principal Outstanding Combined Revised Balance | $ 2,934,000 | ||||||||||||
Shares issued for debt conversion | 21,750 | 24,049 | |||||||||||
Value for debt conversion | $ 200,000 | ||||||||||||
Maximum percentage for revised combined principal could be converted | 10 | ||||||||||||
Amount converted to shares | 293,000 | ||||||||||||
Combined additional shares issued | 467,000 | ||||||||||||
Additional notes issued in exchange | 267,000 | ||||||||||||
Debt amount converted to shares | $ 293,000 | ||||||||||||
Debt amount converted | $ 293,000 | ||||||||||||
Conversion price | $ 12.20 | $ 12.20 | |||||||||||
Additional consideration | $ 200,000 | ||||||||||||
Exchange Agreement [Member] | June 2018 And December 2018 Notes | |||||||||||||
Shares issued for debt conversion | 41,004 | ||||||||||||
Amount converted to shares | $ 500,000 | ||||||||||||
Debt amount converted to shares | $ 500,000 | ||||||||||||
Additional shares issued for settlement of default | 4,207 | ||||||||||||
Debt default interest | $ 51,000 | ||||||||||||
Conversion price | $ 12.20 | ||||||||||||
Exchange Agreement [Member] | December Two Thousand Eighteen Notes [Member] | |||||||||||||
Principal outstanding, Revised | 244,000 | ||||||||||||
Principal outstanding | 222,000 | ||||||||||||
Principal outstanding, Revised | $ 244,000 | ||||||||||||
Percentage of principal increased | 10.00% |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Feb. 29, 2020 | Aug. 31, 2019 | |
Number of shares | ||
Number of shares outstanding, beginning balance | 107,409 | |
Issued | 53,273 | |
(Cancelled) | (29,124) | |
Number of shares outstanding, ending balance | 131,558 | |
Weighted remaining life (years) | ||
Weighted remaining life (years), beginning | 4 years 3 months 18 days | |
Weighted remaining life (years), issued | 4 years | |
Weighted remaining life (years), cancelled | 3 years 9 months 18 days | |
Weighted remaining life (years), ending | 3 years 9 months 18 days | |
Weighted average exercise prices | ||
Weighted average exercise prices, beginning | $ 83.21 | |
Weighted average exercise prices, issued | $ 40 | |
Weighted average exercise prices, cancelled | 40 | |
Weighted average exercise prices, ending | $ 47.71 |
Stockholders' Equity - Warrants
Stockholders' Equity - Warrants outstanding (Details) - USD ($) | 1 Months Ended | 6 Months Ended |
Dec. 31, 2019 | Feb. 29, 2020 | |
Exercise price | $ 131,558 | |
Warrants outstanding | $ 3.8 | |
Weighted average life of outstanding warrants in years | 47 years 8 months 16 days | |
March 2019 Notes Warrants [Member] | ||
Exercise price | $ 41,430 | |
Warrants outstanding | $ 4 | |
Weighted average life of outstanding warrants in years | 40 years | |
Amended March 2019 Notes Warrants [Member] | ||
Exercise price | $ 66,288 | |
Warrants outstanding | $ 13,015 | $ 4 |
Weighted average life of outstanding warrants in years | 40 years | |
March 2019 Services Warrants [Member] | ||
Exercise price | $ 3,366 | |
Warrants outstanding | $ 4 | |
Weighted average life of outstanding warrants in years | 70 years | |
June 2018 Notes Warrants [Member] | ||
Exercise price | $ 12,552 | |
Warrants outstanding | $ 3.8 | |
Weighted average life of outstanding warrants in years | 40 years | |
June 2018 Services Warrants [Member] | ||
Exercise price | $ 5,422 | |
Warrants outstanding | $ 3.8 | |
Weighted average life of outstanding warrants in years | 99 years 7 months 6 days | |
2017 PIPE Warrants [Member] | ||
Exercise price | $ 2,500 | |
Warrants outstanding | $ 2.3 | |
Weighted average life of outstanding warrants in years | 276 years |
Stockholders' Equity - Addition
Stockholders' Equity - Additional information (Details) | Dec. 17, 2019 | Dec. 06, 2019shares | Jan. 31, 2020$ / sharesshares | Dec. 31, 2019USD ($)$ / shares | Feb. 29, 2020USD ($)$ / sharesshares | Feb. 29, 2020USD ($)$ / sharesshares | Aug. 31, 2019$ / sharesshares |
Preferred stock, per share | $ / shares | $ 0.0001 | $ 40 | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Shares conversion ratio | 0.025 | ||||||
Reverse split description | On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common share equivalents are presented retroactively to reflect the reverse split. | ||||||
Reverse stock split | 0.025 | ||||||
Common stock shares issued | shares | 1,103,643 | 1,103,643 | 907,047 | ||||
Shares issued for services rendered, value | $ | $ 75,000 | ||||||
Warrants exercise price | $ / shares | $ 40 | $ 40 | |||||
Issued | shares | 53,273 | ||||||
Warrants outstanding | $ | $ 3.8 | ||||||
Amended March 2019 Notes Warrants [Member] | |||||||
Preferred stock, per share | $ / shares | $ 70 | ||||||
Warrants outstanding | $ | $ 13,015 | 4 | |||||
June 2018 Notes Warrants [Member] | |||||||
Preferred stock, per share | $ / shares | $ 40 | ||||||
Warrants outstanding | $ | $ 3.8 | ||||||
Director [Member] | |||||||
Shares issued for services rendered | shares | 856 | 856 | |||||
Shares issued for services rendered, value | $ | $ 7,000 | $ 7,000 | |||||
Scott W Absher [Member] | |||||||
Number option additionally available for grant to founder shareholders | shares | 12,500,000 | ||||||
Stephen Holmes [Member] | |||||||
Number option additionally available for grant to founder shareholders | shares | 12,500,000 | ||||||
Exchange Agreement [Member] | |||||||
Shares issued in exchange of debt | shares | 24,049 | ||||||
Convertible Notes Payable [Member] | |||||||
Shares issued in exchange of debt | shares | 185,768 | 185,768 | |||||
Debt amount qualified for conversion | $ | $ 2,187,000 | $ 2,187,000 | |||||
Debt default interest | $ | 79,000 | 79,000 | |||||
March 2019 Convertible Notes [Member] | |||||||
Amount of debt exchanged | $ | $ 2,700,000 | $ 2,700,000 | |||||
December 2019 [Member] | |||||||
Common stock shares issued | shares | 21,750 | 21,750 | |||||
Value of shares issued | $ | $ 200,000 | $ 200,000 | |||||
Amount of debt exchanged | $ | $ 2,900,000 | $ 2,900,000 | |||||
Preferred Stock | |||||||
Shares conversion ratio | 1 | 1 | |||||
Reverse stock split | 1 | 1 | |||||
Stock Option | Scott W Absher and Stephen Holmes | |||||||
Number of options available for grant to founder shareholders | shares | 50,000,000 | ||||||
Stock Option | Preferred Stock | |||||||
Convertible preferred stock | shares | 24,634,560 |
Stock based Compensation - Opti
Stock based Compensation - Option activity (Details) | 6 Months Ended |
Feb. 29, 2020$ / sharesshares | |
Number of Options | |
Options outstanding, beginning balance | shares | 50,749 |
Granted | shares | 0 |
Forfeited | shares | (7,343) |
Options outstanding, ending balance | shares | 43,406 |
Weighted Average Remaining Contractual Life (In years) | |
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years 11 months 12 days |
Weighted Average Remaining Contractual Life In Years, Forfeited | 8 years 6 months 15 days |
Weighted Average Remaining Contractual Life In Years, Ending balance | 8 years 4 months 28 days |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Beginning | $ / shares | $ 95.20 |
Granted | $ / shares | 131,558 |
Forfeited | $ / shares | 69.85 |
Weighted Average Exercise Price Ending | $ / shares | $ 99.55 |
Stock based Compensation - Op_2
Stock based Compensation - Option vesting activity (Details) | 3 Months Ended |
Nov. 30, 2019$ / sharesshares | |
Number of Option | |
Options Vested, Beginning balance | shares | 10,291 |
Vested | shares | 13,199 |
Forfeited | shares | (1,305) |
Options Vested, Ending balance | shares | 22,185 |
Weighted Average Remaining Contractual Life (In years) | |
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years 15 days |
Weighted Average Remaining Contractual Life In Years, Vested | 8 years 6 months 11 days |
Weighted Average Remaining Contractual Life In Years, Forfeited | 5 years 1 month 24 days |
Weighted Average Remaining Contractual Life In Years, Ending balance | 8 years 18 days |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Beginning | $ / shares | $ 152.80 |
Vested | $ / shares | 108.89 |
Forfeited | $ / shares | 140.09 |
Weighted Average Exercise Price Ending | $ / shares | $ 127.49 |
Stock based Compensation - Stoc
Stock based Compensation - Stock options outstanding and vested (Details) | 6 Months Ended |
Feb. 29, 2020$ / sharesshares | |
Exercise Prices Two [Member] | Minimum [Member] | |
Exercise Prices | $ 40.01 |
Exercise Prices Two [Member] | Maximum [Member] | |
Exercise Prices | 80 |
Exercise Prices Three [Member] | Minimum [Member] | |
Exercise Prices | 80.01 |
Exercise Prices Three [Member] | Maximum [Member] | |
Exercise Prices | 120 |
Exercise Prices Four [Member] | Minimum [Member] | |
Exercise Prices | 120.01 |
Exercise Prices Four [Member] | Maximum [Member] | |
Exercise Prices | $ 160 |
Options Vested One [Member] | |
Number of options | shares | 250 |
Weighted Average Remaining Contractual Life In Years | 9 years 5 months 1 day |
Weighted Average Exercise Price | $ 20 |
Options Vested Two [Member] | |
Number of options | shares | 4,896 |
Weighted Average Remaining Contractual Life In Years | 9 years 1 month 2 days |
Weighted Average Exercise Price | $ 51.23 |
Options Vested Three [Member] | |
Number of options | shares | 6,394 |
Weighted Average Remaining Contractual Life In Years | 8 years 2 months 19 days |
Weighted Average Exercise Price | $ 102.46 |
Options Vested Four [Member] | |
Number of options | shares | 9,521 |
Weighted Average Remaining Contractual Life In Years | 7 years 5 months 27 days |
Weighted Average Exercise Price | $ 155.12 |
Options Vested Five [Member] | |
Number of options | shares | 1,124 |
Weighted Average Remaining Contractual Life In Years | 7 years 4 months 17 days |
Weighted Average Exercise Price | $ 391.60 |
Options Vested [Member] | |
Number of options | shares | 22,185 |
Weighted Average Remaining Contractual Life In Years | 8 years 18 days |
Weighted Average Exercise Price | $ 127.49 |
Options Outstanding and Exercisable One [Member] | |
Number of options | shares | 5,375 |
Weighted Average Remaining Contractual Life In Years | 9 years 3 months 7 days |
Weighted Average Exercise Price | $ 24.35 |
Options Outstanding and Exercisable Two [Member] | |
Number of options | shares | 13,729 |
Weighted Average Remaining Contractual Life In Years | 9 years 1 month 2 days |
Weighted Average Exercise Price | $ 51.21 |
Options Outstanding and Exercisable Three [Member] | |
Number of options | shares | 10,553 |
Weighted Average Remaining Contractual Life In Years | 8 years 2 months 19 days |
Weighted Average Exercise Price | $ 102.93 |
Options Outstanding and Exercisable Four [Member] | |
Number of options | shares | 12,625 |
Weighted Average Remaining Contractual Life In Years | 7 years 6 months 18 days |
Weighted Average Exercise Price | $ 155.28 |
Options Outstanding and Exercisable Five [Member] | |
Number of options | shares | 1,124 |
Weighted Average Remaining Contractual Life In Years | 7 years 4 months 17 days |
Weighted Average Exercise Price | $ 391.60 |
Options Outstanding and Exercisable [Member] | |
Number of options | shares | 43,406 |
Weighted Average Remaining Contractual Life In Years | 8 years 4 months 28 days |
Weighted Average Exercise Price | $ 99.55 |
Stock based Compensation (Detai
Stock based Compensation (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Granted options | 0 | |||
Accelerated options | 9,737 | |||
Compensation expense | $ 619,000 | $ 81,000 | $ 745,000 | $ 158,000 |
Intrinsic value of options | 0 | 0 | 0 | 0 |
Compensation expense due to acceleration | $ 483,000 | |||
Weighted average vesting period for unrecognized deferred share-based compensation (in years) | 1 year 1 month 6 days | |||
Unrecognized deferred share-based compensation expense expected to be recognized | $ 700,000 | $ 700,000 | ||
Share Based Compensation [Member] | ||||
Aggregate intrinsic value | $ 0 | |||
Compensation expense | $ 81,000 | $ 158,000 |
Related Parties (Details)
Related Parties (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | Dec. 23, 2019 | Aug. 31, 2019 | |
Professional fees | $ 997,000 | $ 895,000 | $ 1,837,000 | $ 1,519,000 | ||
Common stock shares issued | 1,103,643 | 1,103,643 | 907,047 | |||
J. Steven Holmes [Member] | ||||||
Professional fees | $ 360,000 | $ 180,000 | $ 360,000 | $ 180,000 | ||
Messrs. Higgins and White [Member] | ||||||
Common stock shares issued | 856 | |||||
Common stock, shares value | $ 7,000 | |||||
Messrs. Higgins [Member] | ||||||
Common stock shares issued | 428 |
Contingencies Additional inform
Contingencies Additional information (Details) - USD ($) | Jan. 22, 2020 | Jan. 17, 2020 | Jan. 31, 2020 | Apr. 30, 2019 | May 31, 2016 | Feb. 29, 2020 | Jan. 16, 2020 | Nov. 30, 2019 | Aug. 31, 2019 | Aug. 27, 2019 | Jun. 20, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2018 |
Common stock shares issued | 1,103,643 | 907,047 | ||||||||||||
Kadima Ventures [Member] | Software Development [Member] | ||||||||||||||
Software development cost | $ 8,500,000 | |||||||||||||
Software modules cost | $ 11,000,000 | |||||||||||||
Additional cost | $ 10,000,000 | |||||||||||||
Alpha Capital v. ShiftPixy, Inc. [Member] | ||||||||||||||
Convertable notes | $ 310,000 | |||||||||||||
Convertible notes outstanding | $ 1,700,000 | $ 1,200,000 | $ 200,000 | $ 300,000 | ||||||||||
Common stock shares issued | 25,000 | |||||||||||||
Proceeds from issuance of notes | $ 310,000 | |||||||||||||
Damages incurred | 190,000 | |||||||||||||
Total award money received | 500,000 | |||||||||||||
Accrued interest | $ 51,000 | |||||||||||||
Convertible notes per share | $ 12.20 | |||||||||||||
Dominion Capital LLC v. ShiftPixy [Member] | ||||||||||||||
Related warrants by issuing shares of common stock | 83,593 | |||||||||||||
Cash paid | $ 1,322,000 | |||||||||||||
MEF I, LP v. ShiftPixy, Inc. [Member] | ||||||||||||||
Convertable notes | $ 2,100,000 | |||||||||||||
Convertible notes outstanding | $ 700,000 | $ 200,000 | $ 500,000 | |||||||||||
Accrued interest and accrued damages cash payment | $ 725,000 | |||||||||||||
Accrued interest and accrued damages shares issued | 20,000 |
Subsequent Events (Details)
Subsequent Events (Details) | Apr. 15, 2020USD ($)shares | Mar. 25, 2020$ / shares | Mar. 24, 2020USD ($)$ / sharesshares | Mar. 23, 2020USD ($)$ / sharesshares | Dec. 17, 2019 | Mar. 31, 2020USD ($)$ / sharesshares | Feb. 29, 2020USD ($)$ / shares | Feb. 29, 2020USD ($)$ / shares | Jan. 31, 2020$ / shares | Dec. 31, 2019$ / shares | Aug. 31, 2019$ / shares |
Subsequent Event [Line Items] | |||||||||||
Conversion price | $ / shares | $ 12.20 | ||||||||||
Value for debt conversion | $ 200,000 | $ 200,000 | |||||||||
Warrants exercise price | $ / shares | $ 40 | $ 40 | |||||||||
Preferred stock, shares par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 40 | $ 0.0001 | ||||||
Shares conversion ratio | 0.025 | ||||||||||
Subsequent Event [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, conversion original amount | $ 1,047,000 | ||||||||||
Accrued default interest | $ 25,000 | ||||||||||
Share issued due to conversion of debt | shares | 135,507 | ||||||||||
Conversion price | $ / shares | $ 9.20 | ||||||||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Preferred stock, shares par value | $ / shares | $ 0.0001 | ||||||||||
Shares conversion ratio | 1 | ||||||||||
Subsequent Event [Member] | Amendment and Exchange Agreements [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, conversion original amount | $ 167,000 | ||||||||||
Share issued due to conversion of debt | shares | 82,654 | ||||||||||
Conversion price | $ / shares | $ 9.20 | ||||||||||
Warrants issued due to conversion of debt | shares | 162,950 | ||||||||||
Warrants exercise price | $ / shares | $ 10.17 | ||||||||||
Subsequent Event [Member] | Alpha Amendment and Exchange Agreement [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, conversion original amount | $ 723,000 | ||||||||||
Share issued due to conversion of debt | shares | 66,123 | ||||||||||
Agreed additional notes | $ 145,000 | ||||||||||
Warrants issued due to conversion of debt | shares | 130,360 | ||||||||||
Subsequent Event [Member] | Osher Amendment and Exchange Agreement [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, conversion original amount | $ 108,000 | ||||||||||
Share issued due to conversion of debt | shares | 16,531 | ||||||||||
Agreed additional notes | $ 22,000 | ||||||||||
Warrants issued due to conversion of debt | shares | 32,590 | ||||||||||
Subsequent Event [Member] | Exchange Agreement with CVI [Member] | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, conversion original amount | $ 1,829,000 | ||||||||||
Share issued due to conversion of debt | shares | 260,719 | ||||||||||
Conversion price | $ / shares | $ 9.20 | ||||||||||
Value for debt conversion | $ 1,829,000 | ||||||||||
Shares issued in exchange of debt | shares | 198,756 |