Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Nov. 30, 2020 | Feb. 28, 2020 | |
Document And Entity Information | |||
Entity Registrant Name | ShiftPixy, Inc. | ||
Entity Central Index Key | 0001675634 | ||
Document Type | 10-K | ||
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 | Aug. 31, 2020 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 | ||
Entity Ex Transition Period | false | ||
Entity Common Stock Shares Outstanding | 20,902,146 | ||
Entity Public Float | $ 3,682,000 | ||
EntityFileNumber | 024-10557 | ||
Entity Address Address Line1 | 501 Brickell Key Drive | ||
Entity Address Address Line2 | Suite 300 | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Address Postal Zip Code | 92618 | ||
Entity Tax Identification Number | 47-4211438 | ||
Entity Address City Or Town | Miami | ||
Local Phone Number | 798-9100 | ||
City Area Code | 888 | ||
Entity Address State Or Province | FL | ||
Title of 12(b) Security | Common Stock, par value $0.0001 per share | ||
Trading Symbol | PIXY | ||
Security Exchange Name | NASDAQ |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 |
Current assets | ||
Cash | $ 4,303,000 | $ 1,561,000 |
Accounts receivable, net | 308,000 | 85,000 |
Unbilled accounts receivable | 2,303,000 | 1,418,000 |
Deposit - workers' compensation | 293,000 | 235,000 |
Prepaid expenses | 723,000 | 349,000 |
Other current assets | 73,000 | 244,000 |
Current assets of discontinued operations | 1,030,000 | 10,139,000 |
Total current assets | 9,033,000 | 14,031,000 |
Fixed assets, net | 575,000 | 4,155,000 |
Note receivable, net | 4,045,000 | 0 |
Deposits - workers' compensation | 736,000 | 754,000 |
Deposits and other assets | 449,000 | 124,000 |
Non current assets of discontinued operations | 2,582,000 | 5,567,000 |
Total assets | 17,420,000 | 24,631,000 |
Current liabilities | ||
Accounts payable and other accrued liabilities | 3,831,000 | 4,454,000 |
Payroll related liabilities | 5,752,000 | 2,559,000 |
Convertible notes, net | 0 | 3,351,000 |
Accrued workers' compensation costs | 497,000 | 235,000 |
Default penalties accrual | 0 | 1,800,000 |
Derivative liability | 0 | 3,756,000 |
Current liabilities of discontinued operations | 1,746,000 | 16,033,000 |
Total current liabilities | 11,826,000 | 32,188,000 |
Non-current liabilities | ||
Accrued workers' compensation costs | 1,247,000 | 525,000 |
Non-current liabilities of discontinued operations | 4,377,000 | 3,853,000 |
Total liabilities | 17,450,000 | 36,566,000 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Preferred stock, 50,000,000 authorized shares; $0.0001 par value | 0 | 0 |
Common stock, 750,000,000 authorized shares; $0.0001 par value; 16,902,146 and 909,222 shares issued as of August 31, 2020 and 2019 | 1,000 | 0 |
Additional paid-in capital | 119,431,000 | 32,505,000 |
Treasury stock, at cost-0 and 13,953 shares as of August 31, 2020 and August 31, 2019 | (325,000) | |
Accumulated deficit | (119,462,000) | (44,115,000) |
Total stockholders' deficit | (30,000) | (11,935,000) |
Total liabilities and stockholders' deficit | $ 17,420,000 | $ 24,631,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Aug. 31, 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 | 16,902,146 | 909,222 |
Treasury stock, shares | 0 | 13,953 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Consolidated Statements of Operations | ||
Revenues (gross billings of $65.5 million and $73.4 million less worksite employee payroll cost of $56.9 million and $62.9 million, respectively) | $ 8,642,000 | $ 10,451,000 |
Cost of revenue | 7,685,000 | 8,538,000 |
Gross profit | 957,000 | 1,913,000 |
Operating expenses: | ||
Salaries, wages, and payroll taxes | 7,227,000 | 6,283,000 |
Stock-based compensation - general and administrative | 1,526,000 | 632,000 |
Commissions | 181,000 | 201,000 |
Professional fees | 3,366,000 | 3,918,000 |
Software development - external | 2,240,000 | 1,209,000 |
Depreciation and amortization | 272,000 | 194,000 |
Impaired asset expense | 3,543,000 | 0 |
General and administrative | 4,180,000 | 5,032,000 |
Total operating expenses | 22,535,000 | 17,469,000 |
Operating Loss | (21,578,000) | (15,556,000) |
Other (expense) income: | ||
Interest expense | (2,525,000) | (8,507,000) |
Change in fair value of note receivable | (1,074,000) | |
Expense related to Preferred Options | (62,091,000) | |
Expense related to modification of warrants | (21,000) | |
Loss from debt conversion | (3,500,000) | |
Inducement loss | (624,000) | |
Loss on debt extinguishment | (1,592,000) | |
Change in fair value derivative and warrant liability | 2,569,000 | |
Loss on convertible note settlement | 811,000 | |
Gain on convertible note penalties accrual | 760,000 | |
Total other (expense) income | (68,890,000) | (9,054,000) |
Loss from continuing operations | (90,468,000) | (24,610,000) |
(Loss) Income from discontinued operations | ||
(Loss) Income from discontinued operations | (561,000) | 6,528,000 |
Gain from asset sale | 15,682,000 | |
Total Income (Loss) from discontinued operations, net of tax | 15,121,000 | 6,528,000 |
Net loss | $ (75,347,000) | $ (18,082,000) |
Net Loss per share, Basic and diluted | ||
Continuing operations | $ (4.96) | $ (30.09) |
Discontinued operations | ||
Operating (loss) income | (0.03) | 7.98 |
Gain on sale of assets | 0.86 | |
Total discontinued operations | 0.83 | $ 7.98 |
Net loss per share of common stock - Basic and diluted | $ (4.13) | |
Weighted average common stock outstanding - Basic and diluted | 18,222,661 | 817,720 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Consolidated Statements of Operations | ||
Gross billings | $ 65.5 | $ 73.4 |
Worksite employee payroll cost | $ 56.9 | $ 62.9 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity Deficit - USD ($) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total |
Balance, shares at Aug. 31, 2018 | 723,470 | |||||
Balance, amount at Aug. 31, 2018 | $ 18,468,000 | $ (26,033,000) | $ (7,565,000) | |||
Warrants exercised for cash, amount | 660,000 | 660,000 | ||||
Warrants exercised for cash, shares | 6,688 | |||||
Common stock issued for services rendered, amount | 263,000 | 263,000 | ||||
Common stock issued for services rendered, shares | 4,984 | |||||
Stock-based compensation expense | 369,000 | 369,000 | ||||
Reclassification of derivative liability upon conversion of related convertible notes | 12,000 | 12,000 | ||||
Common shares issued upon conversion of convertible notes and interest, amount | 8,904,000 | 8,904,000 | ||||
Common stock issued upon conversion of convertible notes and interest, shares | 105,776 | |||||
Shares issued to induce debt conversion, amount | 3,829,000 | 3,829,000 | ||||
Shares issued to induce debt conversion, shares | 68,304 | |||||
Treasury stock received for settlement of note receivable, amount | $ (325,000) | (325,000) | ||||
Net Loss | (18,082,000) | (18,082,000) | ||||
Balance, shares at Aug. 31, 2019 | 909,222 | |||||
Balance, amount at Aug. 31, 2019 | 32,505,000 | (44,115,000) | (325,000) | (11,935,000) | ||
Common stock issued for services rendered, amount | 75,000 | 75,000 | ||||
Common stock issued for services rendered, shares | 856 | |||||
Stock-based compensation expense | 1,300,000 | 1,300,000 | ||||
Common shares issued upon conversion of convertible notes and interest, amount | 6,238,000 | 6,238,000 | ||||
Common stock issued upon conversion of convertible notes and interest, shares | 589,695 | |||||
Treasury Stock retired, amount | (325,000) | $ 325,000 | ||||
Treasury Stock retired, shares | (13,953) | |||||
Common stock issued for note exchange | 200,000 | 200,000 | ||||
Common stock issued for note exchange, shares | 21,750 | |||||
Common stock issued for warrant exercise | 33,000 | 33,000 | ||||
Common stock issued for warrant exercise, shares | 6,275 | |||||
Common stock issued for underwritten offering, net of offering costs | 11,478,000 | 11,478,000 | ||||
Common stock issued for underwritten offering, net of offering costs, shares | 2,472,500 | |||||
Reclassification of derivative liabilities to paid in capital | 1,979,000 | 1,979,000 | ||||
Inducement loss on note conversions, amount | 624,000 | 624,000 | ||||
Inducement loss on note conversions, shares | 38,658 | |||||
Common stock issued for warrant exchange | 552,000 | 552,000 | ||||
Common stock issued for warrant exchange, shares | 82,653 | |||||
Allocated fair value of beneficial conversion feature - exchanged notes payable | 653,000 | 653,000 | ||||
Allocated fair value of warrants issued - exchanged notes payable | 2,006,000 | 2,006,000 | ||||
Modification of warrants | 22,000 | 22,000 | ||||
Expense related to Preferred Options | 62,091,000 | 62,091,000 | ||||
Preferred stock issued for Preferred Option exercise | $ 1,000 | 1,000 | ||||
Preferred stock issued for Preferred Option exercise (in shares) | 12,794,490 | |||||
Common stock issued for preferred stock exchange | $ (1,000) | $ 1,000 | ||||
Common stock issued for preferred stock exchange (in shares) | (12,794,490) | 12,794,490 | ||||
Net Loss | (75,347,000) | (75,347,000) | ||||
Balance, shares at Aug. 31, 2020 | 16,902,146 | |||||
Balance, amount at Aug. 31, 2020 | $ 1,000 | $ 119,431,000 | $ (119,462,000) | $ (30,000) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
OPERATING ACTIVITIES | ||
Net Loss | $ (75,347,000) | $ (18,082,000) |
Income from discontinued operations | 15,121,000 | 6,528,000 |
Net loss from continuing operations | (90,468,000) | (24,610,000) |
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: | ||
Expense related to Preferred Options | 62,091,000 | |
Depreciation and amortization | 272,000 | 194,000 |
Impaired asset expense | 3,543,000 | 0 |
Gain on convertible note settlement | (811,000) | |
Gain on convertible note penalties accrual | (760,000) | |
Amortization of debt discount and debt issuance cost | 6,749,000 | 5,607,000 |
Stock issued for services | 75,000 | 263,000 |
Stock-based compensation- general and administrative | 1,300,000 | 369,000 |
Expense related to warrant modification | 22,000 | |
Inducement loss on note conversions | 624,000 | |
Expense related to warrant exchange | 552,000 | |
Change in fair value of note receivable | 1,074,000 | |
Non-cash interest | 509,000 | |
Change in fair value of derivative and warrant liability | (2,569,000) | |
Financing costs | 2,588,000 | |
Changes in operating assets and liabilities | ||
Accounts receivable | (223,000) | (236,000) |
Unbilled accounts receivable | (885,000) | (643,000) |
Prepaid expenses | (374,000) | 97,000 |
Other current assets | 171,000 | 15,000 |
Deposits - workers' compensation | (40,000) | (794,000) |
Deposits and other assets | (325,000) | (3,000) |
Accounts payable | (623,000) | 1,372,000 |
Payroll related liabilities | 3,193,000 | 4,118,000 |
Accrued workers' compensation | 984,000 | 700,000 |
Other current liabilities | (803,000) | (25,000) |
Total Adjustments | 74,840,000 | 14,580,000 |
Net cash used in continuing operating activities | (15,628,000) | (10,030,000) |
Net cash provided by discontinued operating activities | (1,255,000) | 7,946,000 |
Net cash used in operating activities | (16,883,000) | (2,084,000) |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (235,000) | (1,169,000) |
Proceeds from working capital adjustment - sale of assets | 88,000 | |
Proceeds from sale of assets | 9,500,000 | |
Issuance of related party note receivable | (325,000) | |
Net cash provided by (used in) investing activities | 9,353,000 | (1,494,000) |
FINANCING ACTIVITIES | ||
Proceeds from underwritten public offering, net of offering costs | 11,479,000 | |
Proceeds from issuance of convertible notes | 3,750,000 | |
Issuance costs related to convertible notes | (485,000) | |
Repayment of convertible notes | (1,240,000) | (436,000) |
Proceeds from exercise of warrants | 33,000 | 660,000 |
Net cash provided by financing activities | 10,272,000 | 3,489,000 |
Net increase (decrease) in cash | 2,742,000 | (89,000) |
Cash - Beginning of Period | 1,561,000 | 1,650,000 |
Cash - End of Period | 4,303,000 | 1,561,000 |
Supplemental Disclosure of Cash Flows Information: | ||
Cash paid for interest | 315,000 | 226,000 |
Income taxes | ||
Non-cash Investing and Financing Activities: | ||
Conversion of debt and accrued interest into common stock | 6,238,000 | 8,904,000 |
Additional Principal to settle registration rights penalties | 889,000 | |
Common stock issued for note exchange | 200,000 | |
Additional principal issued for note exchange | 433,000 | |
Interest capitalized into notes receivable | 59,000 | |
Common stock issued in exchange for warrants | 552,000 | |
Discount recorded for asset sale note receivable | 1,818,000 | |
Reclassification of derivative liabilities to paid in capital | $ 1,979,000 | |
Discharge of related party note receivable for common shares | 325,000 | |
Allocated fair value of beneficial conversion feature | 1,479,000 | |
Allocated fair value of warrants included with convertible notes | $ 2,271,000 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Aug. 31, 2020 | |
Nature of Operations | |
Nature of Operations | Note 1: Nature of Operations ShiftPixy, Inc. was incorporated on June 3, 2015, in the State of Wyoming. The Company is a specialized staffing service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant and hospitality service trades. The Company’s historic focus has been on the quick service restaurant industry in Southern California, but has begun to expand into other geographic areas and industries employing temporary or part-time labor sources. The Company and its wholly-owned subsidiary Rethink, Inc. (“RT”) function as 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 provider of workers’ compensation coverage written in the names of the Company’s clients (as may be required by some states). The Company has built a human resources information systems platform to assist in customer acquisition that simplifies the onboarding of new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”). This platform is expected to facilitate additional value-added services in future reporting periods. In January 2020, the Company sold the assets of Shift Human Capital Management Inc. (“SHCM”), a wholly-owned subsidiary of the Company, pursuant to which it assigned the majority of the Company’s billable clients to a third party for cash as described below in Note 3. On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common shares and common stock equivalents are presented retroactively to reflect the reverse split. 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 (the “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. |
Summary of significant accounti
Summary of significant accounting policies | 12 Months Ended |
Aug. 31, 2020 | |
Summary of significant accounting policies | |
Summary of significant accounting policies | Note 2: Summary of significant accounting policies Basis of Presentation The 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”). Principles of Consolidation The Company and its wholly-owned subsidiaries have been consolidated in the accompanying 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: · Valuation expense related to Preferred Options; · 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 60 days' written notice. Contract performance obligations are satisfied as services are rendered, and the time period 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 that 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 ("WSEs") and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each client concurrently with each periodic payroll of the Company’s WSEs which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were not material as of August 31, 2020 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business as it migrates to a staffing business model. For Fiscal 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. Segment Reporting The Company operates as one reportable segment under ASC 280, Segment Reporting . The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2020, the Company began to enter into new business lines and geographic areas that, to date, are not material. The Company expects to operate in multiple segments in the future as its business evolves and will evaluate these changes prospectively. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of August 31, 2020 or 2019. Concentration of Credit Risk The Company maintains cash with a commercial bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. As of August 31, 2020, there was $4,535,000 of cash in excess of the amounts insured by the FDIC. The Company had zero and two individual clients that represented more than 10% of its annual revenues in Fiscal 2020 and 2019, respectively. Three clients represented 92% of total accounts receivable at August 31, 2020, compared to two clients representing approximately 99% of its total accounts receivable at August 31, 2019. Fixed Assets Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Leasehold improvements are amortized over the shorter of the useful life or the initial lease term. Fixed assets are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment for purposes of computing depreciation are as follows: Equipment: 5 years Furnitures & Fixtures: 5 – 7 years The amortization of these assets is included in depreciation expense on the consolidated statements of operations. Computer Software Development Software development costs relate primarily to software coding, systems interfaces and testing of the Company’s proprietary employer information systems and are accounted for in accordance with ASC 350‑40, Internal Use Software . Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development costs are reported under the section fixed assets, net in the consolidated balance sheets. The Company determined that there were no material internal software development costs for the years ended August 31, 2020 or 2019. All capitalized software recorded was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally five years from when the asset is placed in service. Impairment and Disposal of Long-Lived Assets The Company periodically evaluates its long-lived assets for impairment in accordance with ASC 360‑10, Property, Plant, and Equipment . ASC 360‑10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed not to be recoverable. If events or circumstances were to indicate that any of the Company’s long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. We recorded an expense related to asset impairment of $3,542,000 and $0 for the years ended August 31, 2020, and 2019, respectively. Workers’ Compensation Everest Program Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. Sunz Program Since July 2018, the Company’s workers’ compensation program for its WSEs 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 is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit – workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. Under both the Everest and Sunz Programs, the Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of WSEs’ job responsibilities, the location of WSEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of August 31, 2020, the Company had $0.3 million in Deposit – workers’ compensation classified as a short-term asset and $0.7 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 August 31, 2020, the Company had short term accrued workers’ compensation costs of $0.5 million and long term accrued workers’ compensation costs of $1.2 million. The Company retained workers’ compensation asset reserves and workers’ compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition, LLC, part of Vensure Employer Services, Inc. (“Vensure”), in connection with the Vensure Asset Sale described in Note 3. As of August 31, 2020, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of August 31, 2020, the Company had $1.0 million in short term assets and $1.8 million of short term liabilities, and had $2.6 million of long term assets and $4.4 million of long term liabilities. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are primarily based upon the WSE’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into 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. The Company has had very limited and immaterial COVID-19 related claims between March 2020 through the date of this report, although there is a possibility of additional workers’ compensation claims being made by furloughed WSEs as a result of the employment downturn caused by the 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. There is a possibility that additional workers’ compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic, which could have a material impact on its workers’ compensation liability estimates. While the Company has not seen significant additional expenses as a result of any such potential claims to date, which would include claims for reporting periods after August 31, 2020, it continues to closely monitor all workers’ compensation claims made as the COVID-19 pandemic continues. Debt Issuance Costs and Debt Discount Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets. Portions attributable to notes converted into equity are accelerated to interest expense upon conversion. Beneficial Conversion Features The intrinsic value of a beneficial conversion feature (“BCF”) inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the stated maturity using the straight-line method which approximates the effective interest method. If the note payable is retired prior to the end of the contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion. Derivative Financial Instruments When a Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated as a derivative based on an analysis of the following: a) the settlement amount is determined by one or more underlying factors, typically the price of the Company’s stock; b) the settlement amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares upon conversion; c) there is no initial net investment, which typically excludes the amount borrowed; and d) there is a net settlement provision, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares. When the Company issues warrants to purchase its common stock, it evaluates whether they meet the requirements to be treated as derivatives. Generally, warrants are treated as derivatives if the provisions of the warrants agreements create uncertainty as to: a) the number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature within convertible debt or warrants meet the requirements to be treated as a derivative, the Company estimates the fair value of the derivative liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the consolidated balance sheet date. The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Fair Value of Financial Instruments 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. ASC 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 August 31, 2020 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximated fair value due to the short-term nature of the instruments. Convertible notes approximated fair value based on comparison of terms from similar instruments in the marketplace. Notes Receivable is valued at estimated fair value as described below. 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 used in measuring fair value are: · Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. · Level 2: Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets or liabilities at August 31, 2020 or August 31, 2019. The Company recorded expense related to Preferred Options in the year ended August 31, 2020 using Level 2 fair value measurements. See Note 10 for assumptions used for this valuation. The valuation of the Note Receivable (as defined below) from the Vensure Asset Sale, as defined below, and the derivative liabilities associated with its March 2019 Notes (see Note 9), consisting of conversion feature derivatives and warrants, are Level 3 fair value measurements. The Note Receivable, as described in Note 3, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date, and on August 31, 2020, using a 10% and 15% discount rate, respectively, which contemplates the risk and probability assessments of the expected future cash flows. For the year ended August 31, 2020, the Company identified $2.6 million of adjustments to the Note Receivable, representing an estimate of a working capital adjustment and cash activity benefitting the Company net of cash activity benefitting Vensure. These amounts were used to reduce the Note Receivable on a dollar for dollar basis as is contemplated in the Vensure Asset Sale contract and per agreement with Vensure. The Company further recorded an estimated proceeds reduction of $1.4 million related to estimated gross wages adjustments, and a $0.3 million impact for fair value assumptions. 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 Vensure Asset Sale agreement. The Company believes 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 are based on gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale. Those transferred clients may have had their business impacted due to the pandemic which, in turn, would have resulted in lower gross wage billings. While the Company believes the current valuation of the Note Receivable is fairly recorded as of August 31, 2020, a material change in the business transferred may result in a reduction of the estimate of the contingent payments expected to be received and therefore the value 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 Company used the following assumptions to value the Note Receivable during Fiscal 2020: · Discount rate of 10% (at the transaction date) and 15% (at August 31, 2020) · Actual monthly wages billed to the extent available to the Company · 20% per year annualized gross wage reduction representing an approximate 1.5% per month decline (at August 31, 2020) 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 August 31, 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 (1,784,000) (195,000) (1,979,000) Change in fair value (1,068,000) (709,000) (1,777,000) Balance at August 31, 2020 $ — $ — $ — The Company had no derivative liabilities as of August 31, 2020 since all the convertible notes were converted to equity or repaid, any warrants requiring accounting as derivatives were exchanged for shares of common stock, and new warrant issuances do not require derivative liability accounting treatment. As of August 31, 2019, and during the year ended August 31, 2020, 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 consist, in part, of the price of the common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the 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 in March 2020 prior to the amendments and exchanges for the convertible notes and warrants: March 2019 March 2019 Conversion Warrant Feature Liability Risk free rate 0.08-0.17 % 1.6 % Market price per share $ 6.68 $ 6.68 Life of instrument in years 0.47-1.15 4.0 Volatility 117-139 % 102 % Dividend yield 0 % 0 % 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 could be required 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 August 31, 2020 and August 31, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels. Research and Development During the years ended August 31, 2020 and August 31, 2019, the Company incurred both internal and external research and development costs for its software development of approximately $4.2 million and $3.1 million, respectively, of which $2 million and .9 million, respectively, are included in salaries, wages and payroll taxes. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS platform and related mobile application and consist of internal salaries, outsourced contractor costs and other specific research and development expenses. In addition, $0 and $1.0 million of software costs were capitalized for the year ended August 31, 2020 and 2019, respectively. Advertising Costs The Company expenses all advertising as incurred. The Company recorded expenses totaling $646,000 and $1,208,000 for the years ended August 31, 2020 and 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 stock equivalents are presented retroactively to reflect the reverse split. Income Taxes The Company accounts for income taxes pursuant to ASC 740, Income Taxes . Under ASC 740, deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Share-Based Compensation As of August 31, 2020 and 2019, the Company had one stock-based compensation plan under which the Company may issue both share and stock option 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 consolidated statements of operations at their fair values. Share grants are valued at the closing market price on the date of issuance, which approximates fair value. For option grants, the grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. Option grants are typically issued with vesting depending on a term of service. For all employee stock options granted, the Company recognizes expense over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected volatility is based on the historical volatility of the Company's common stock since its Initial Public Offering. Any changes in these highly subjective assumptions could materially impact stock-based compensation expense. Following the adoption of Accounting Standards Update (“ASU”) 2016‑09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. 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 shares of common stock outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Aug. 31, 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, to a wholly owned subsidiary of Vensure Employer Services, Inc. (the “Vensure Asset Sale”). Gross proceeds from the Vensure Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million 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 , (as measured by a gross wage guarantee included in the governing agreement), over the twelve month period following the Vensure Asset Sale. The following is a reconciliation of the gross proceeds to the net proceeds from the Vensure Asset Sale as presented in the statement of cash flows for the period ending August 31, 2020. Gross proceeds $ 19,166,000 Cash received at closing – asset sale (9,500,000) Cash received at closing – working capital (166,000) Less: Transaction reconciliation – working capital adjustment (88,000) Less: Transaction reconciliation – net cash paid by Vensure on behalf of the Company (2,475,000) Less: Transaction reconciliation – estimate of reduction due to gross wages (1,400,000) Adjusted Note Receivable 5,537,000 Discount recorded (1,492,000) Long-term note receivable $ 4,045,000 The entire note receivable is recorded as a long term note receivable as of August 31, 2020. Any adjustments to the note receivable are applied against payments in the order they are due to be paid. As such, the estimates of the working capital and gross billings adjustments would not result in any cash payments due to the company within one year of August 31, 2020. The Vensure Asset Sale generated a gain of $15.6 million for the year ended August 31, 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 from discontinued operations tax provision with a corresponding offset to the valuation allowance. The Vensure Asset Sale met the criteria of discontinued operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented and has excluded the results of its discontinued operations from continuing operations for all periods presented. The Company recorded the Note Receivable net of a discount using a discount rate of 15% per year. The Vensure Asset Sale calls for adjustments to the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross wages of the business transferred is less than the required amount. (i) Working capital adjustments: Through August 31, 2020, the Company has identified $2,563,000 of likely working capital adjustments, including $88,000 related to lower net assets transferred at closing, and $2,475,000 of cash remitted to the Company’s bank accounts, net of cash remitted to Vensure’s bank accounts. Under the terms of the Vensure Asset Sale, a reconciliation of the working capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by the outbreak of COVID-19 , Vensure requested a postponement of the working capital reconciliation that was due in Fiscal 2020. The working capital adjustment recorded as of August 31, 2020 represents the Company’s estimate of the reconciliation. There is no assurance that the working capital change identified as of August 31, 2020 represents the final working capital adjustment. (ii) Gross billings adjustment: Under the terms of the Vensure Asset Sale, the proceeds of the transaction are reduced if the actual gross wages of customers transferred for calendar 2020 are less than 90% of those customers' 2019 gross wages. The Company has prepared an estimate of the calendar year 2020 gross wages based on a combination of factors including reports of actual transferred client billings in early 2020, actual gross wages of continuing customers of the Company, publicly available unemployment reports for the Southern California markets and the relevant COVID-19 impacts on employment levels, and other information. Based on the information available, the Company estimated that it would receive additional consideration below the required threshold and reduced the contingent consideration by $1.4 million. The Company expects to conduct a full reconciliation in the first calendar quarter of 2021, after calendar 2020 wage information becomes available. The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations were as follows: August 31, 2020 August 31, 2019 Cash $ — $ — Accounts receivable and unbilled account receivable — 8,246,000 Prepaid expenses and other current assets — 171,000 Deposits – workers’ compensation 1,030,000 1,722,000 Total current assets 1,030,000 10,139,000 Fixed assets, net — 40,000 Deposits – workers’ compensation 2,581,000 5,527,000 Total assets $ 3,611,000 $ 15,706,000 Accounts payable and other current liabilities $ — $ 458,000 Payroll related liabilities — 13,853,000 Accrued workers’ compensation cost 1,745,000 1,722,000 Total current liabilities 1,745,000 16,033,000 Accrued workers’ compensation cost 4,377,000 3,853,000 Total liabilities 6,122,000 19,886,000 Net liability $ (2,511,000) $ (4,180,000) Reported results for the discontinued operations by period were as follows: For the Year Ended August 31, 2020 August 31, 2019 Revenues (gross billings of $120.7 million and $279.3 million less WSE payroll cost of $103.0 million and $236.3 million, respectively for Year ended) $ 17,633,000 $ 42,986,000 Cost of revenue 16,899,000 32,509,000 Gross profit 733,000 10,477,000 Operating expenses: Salaries, wages and payroll taxes 553,000 1,418,000 Commissions 741,000 2,531,000 Total operating expenses 1,294,000 3,949,000 (Loss) income from discontinued operations $ (561,000) $ 6,528,000 During the years ended August 31, 2020 and 2019, the Company utilized fully reserved net operating loss carryforwards of approximately $24,304,000 to offset income from discontinuing operations as follows: For the Year Ended August 31, 2020 2019 Provision for income tax expense Federal tax expense $ 3,436,000 $ 1,260,000 State tax expense 1,565,000 540,000 Total tax expense 5,001,000 1,800,000 Tax benefit for utilization of tax loss carryforwards (5,001,000) (1,800,000) Provision for income tax expense from discontinued operations $ — $ — |
Liquidity
Liquidity | 12 Months Ended |
Aug. 31, 2020 | |
Liquidity | |
Liquidity | Note 4: Liquidity As of August 31, 2020, the Company had cash of $4.3 million and a working capital deficit of $2.8 million. Subsequent to the end of Fiscal 2020, in October 2020, the Company closed an additional equity financing for $12 million, or $10.7 million net of fees. During Fiscal 2020, the Company used approximately $15.5 million of cash from its continuing operations and repaid $1.2 million of convertible notes, after receiving $9.7 million of cash from the Vensure Asset Sale described above and closed an underwritten public offering that yielded $11.5 million in proceeds, net of offering costs. The Company has incurred recurring losses, resulting in an accumulated deficit of $119.5 million as of August 31, 2020. The recurring losses and cash used in operations are indicators of substantial doubt as to the Company’s ability to continue as going concern for at least one year from issuance of these financial statements. The Company’s plans to alleviate substantial doubt are discussed below. Historically, the Company’s principal source of financing has come through the sale of its common stock and issuance of convertible notes. In March 2019, the Company completed a private placement of senior secured notes to certain institutional investors, raising $3.75 million ($3.3 million net of costs). Between September 1, 2019 and May 22, 2020, all convertible notes outstanding as of August 31, 2019 were repaid or converted into equity. On May 26, 2020, the Company successfully completed an underwritten public offering, raising a total of $12 million ($10.3 million net of costs), and closed an additional $1.35 million ($1.24 million net of costs) between June 1, 2020 and July 7, 2020 pursuant to the underwriter’s overallotment. In October 2020, the Company closed an additional $12 million equity offering ($10.7 million net of costs). 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. The Company has engaged an investment banking firm to assist in (i) preparing information materials, (ii) providing advice concerning the structure, price and conditions associated with a capital raise, and (iii) organizing marketing efforts in connection with a financing transaction. In January 2020, the Company closed the Vensure Asset Sale, pursuant to which it assigned approximately 88% of its customer contracts in exchange for $9.7 million in cash at closing and received an additional $2.5 million of cash payments made on behalf of the Company, net of $0.9 million of cash paid on behalf of Vensure. Pursuant to this transaction, the Company expects to receive an additional $5.6 million over the next four years, subject to certain closing conditions. The Company transferred $1.6 million of working capital, including $0.9 million of cash, in connection with the Vensure Asset Sale. During Fiscal 2020, the Company instituted certain cost reductions, has reduced its anticipated monthly cash needs by approximately $1 million, and continues to experience significant growth in the number of WSEs, which it expects to generate additional administrative fees. The reduction in the Company’s monthly cash needs along with the anticipated additional administrative fees earned should mitigate its current level of operational cash burn. The Company retained its high growth business as part of the Vensure Asset Sale, which has accounted for billings and revenue growth for the customers that existed as of January 1, 2020 and who were not transferred to Vensure. The Company also retained the rights to monetize its existing pool of WSEs, including WSEs transferred to Vensure, and has begun to roll out its delivery and scheduling applications to its customers. The Company has been and expects to continue to be impacted by the COVID-19 pandemic, from which it has experienced both positive and negative impacts. Its current business focus is providing payroll services for the restaurant and hospitality industries, which have seen a reduction in payroll and consequently a reduction in payroll processing fees on a per WSE and per location basis. However, the Company believes that it provides the means for current and potential clients to adapt to many of the obstacles posed by COVID-19 by providing additional services such as delivery, which have facilitated an increase by the Company in its client and client location counts, resulting in recovery of billings lost during the first months of the pandemic. Beginning in June 2020, the Company’s billings per WSE and per location improved as lockdowns in its primary Southern California market were lifted. In November 2020, the State of California re-implemented lockdowns. The Company believes that many of its clients have modified their businesses after the initial lockdowns to adapt somewhat to these adverse circumstances. Nevertheless, if additional lockdowns persist, the Company’s clients delay hiring or rehiring employees, or if its clients shut down operations, the Company’s ability to generate operational cash flows may be significantly impaired. The Company also signed a new client in July 2020 representing a significant revenue opportunity. This client provides outsourced nurses that are paid gross wages in an amount approximately three times what the Company’s typical food WSEs receive, with the Company receiving the same admin fee rates per wage dollar paid. We believe that this client will generate a significant amount of new business for the Company, as the need for nurses increases to administer COVID-19 testing and vaccination services. The Company’s management believes that the Company’s current cash position, along with its anticipated revenue growth, expense reduction, no funded debt outstanding and anticipated financing from potential institutional investors, will be sufficient to alleviate substantial doubt and 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, 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 will be available. These consolidated financial statements do not include any adjustments for this uncertainty. |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Aug. 31, 2020 | |
Accounts Receivable | |
Accounts Receivable | Note 5: Accounts Receivable Accounts receivables, which represent outstanding gross billings to clients, are reported net of allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of specific accounts and by making a general provision, based on its past experiences, for other potentially uncollectible amounts. The provision for doubtful accounts during the fiscal years ending August 31, 2020 and 2019 was not material. The Company makes an accrual at the end of each accounting period for the obligations associated with the earned but unpaid wages of its WSEs and for the accrued gross billings associated with such wages. These accruals are included in unbilled accounts receivable. The Company generally requires clients to pay invoices for service fees no later than 1 day prior to the applicable payroll date. As such the Company generally does not require collateral. |
Fixed Assets
Fixed Assets | 12 Months Ended |
Aug. 31, 2020 | |
Fixed Assets. | |
Fixed Assets | Note 6: Fixed Assets Fixed assets consisted of the following at August 31, 2020 and 2019: August 31, August 31, 2020 2019 Equipment $ 576,000 $ 341,000 Furniture & fixtures 348,000 348,000 Software, net of impairment — 3,737,000 Leasehold improvements 41,000 41,000 965,000 4,467,000 Accumulated depreciation & amortization (390,000) (312,000) Fixed assets, net $ 575,000 $ 4,155,000 Depreciation and amortization expense for the years ended August 31, 2020 and 2019, was $272,000 and $194,000, respectively. Software consists primarily of customized software purchased from third party providers, which is incorporated into the Company’s HRIS platform and related mobile application. Information related to capitalized software costs is as follows: August 31, August 31, 2020 2019 Software costs capitalized $ 3,737,000 $ 3,737,000 Software costs impaired (3,737,000) — Software costs, Net $ — $ 3,737,000 The Company has evaluated certain development costs of its software solution in accordance with ASC Topic 350‑40, Internal Use Software, which outlines the stages of computer software development and specifies when capitalization of costs is required. Projects that are determined to be in the development stage are capitalized and amortized over their useful lives of five years. Projects that are determined to be within the preliminary stage are expensed as incurred. For the years ended August 31, 2020 and 2019, no internally developed software was capitalized. A substantial portion of the capitalized software is attributable to a third party with whom the Company is in litigation. During Fiscal 2020, the Company evaluated its capital software costs in the context of the procedural status and progress of the Kadima litigation. Based on this evaluation, and the Company’s estimate of the timeline for the resolution of this matter, the Company determined the capital software costs related to certain of the applications not in use became impaired. |
Workers Compensation
Workers Compensation | 12 Months Ended |
Aug. 31, 2020 | |
Workers Compensation | |
Workers Compensation | Note 7: Workers’ Compensation The Company had two workers’ compensation programs in effect during the years ended August 31, 2020 and 2019. The Everest program covered corporate employees and WSEs from July 1, 2017 until June 30, 2018 and the SUNZ program has covered corporate employees and WSEs since July 1, 2018. The following table summarizes the workers’ compensation deposit from continuing operations for the years ended August 31, 2020 and 2019: Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2018 $ 336,000 523,000 $ 859,000 Premiums paid (32,000) — (32,000) Paid in deposits — 1,714,000 1,714,000 Claim losses (33,000) (410,000) (443,000) Deposit refund (271,000) — (271,000) Workers’ Comp Deposit at August 31, 2019 $ — 1,827,000 $ 1,827,000 Paid in deposits — 601,000 601,000 Claim losses — (1,399,000) (1,399,000) Workers’ Comp Deposit at August 31, 2020 — 1,029,000 1,029,000 Less Current Amount — (293,000) (293,000) Long Term Balance at August 31, 2020 $ — 736,000 $ 736,000 The following table summarizes the workers’ compensation deposit from discontinued operations for the years ended August 31, 2020 and 2019: Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2018 $ 1,180,000 1,835,000 $ 3,015,000 Premiums paid (112,000) — (112,000) Paid in deposits — 6,016,000 6,016,000 Claim losses (116,000) (1,440,000) (1,556,000) Deposit refund (952,000) — (952,000) Workers’ Comp Deposit at August 31, 2019 $ — 6,411,000 $ 6,411,000 Paid in deposits — 2,107,000 2,107,000 Claim losses — (4,907,000) (4,907,000) Workers’ Comp Deposit at August 31, 2020 — 3,611,000 3,611,000 Less Current Amount — (1,030,000) (1,030,000) Long Term Balance at August 31, 2020 $ — 2,581,000 $ 2,581,000 The following table summarizes the accrued workers’ compensation liability from continuing operations for the years ended August 31, 2020 and 2019: Everest SUNZ Program Program Total Workers’ Comp Liability at August 31, 2018 $ 127,000 141,000 $ 268,000 Claim loss development — 1,581,000 1,581,000 Paid in losses (33,000) (410,000) (443,000) Workers’ Comp Liability at August 31, 2019 $ 94,000 1,312,000 $ 1,406,000 Claim loss development 110,000 1,628,000 1,738,000 Paid in losses — (1,399,000) (1,399,000) Workers’ Comp Liability at August 31, 2020 204,000 1,541,000 1,745,000 Less Current Amount (78,000) (420,000) (498,000) Long Term Balance at August 31, 2020 $ 126,000 1,121,000 $ 1,247,000 The following table summarizes the accrued workers’ compensation liability from discontinued operations for the years ended August 31, 2020 and 2019: Everest SUNZ Program Program Total Workers’ Comp Liability at August 31, 2018 $ 445,000 493,000 $ 938,000 Claim loss development — 5,548,000 5,548,000 Paid in losses (116,000) (1,440,000) (1,556,000) Workers’ Comp Liability at August 31, 2019 $ 329,000 4,601,000 $ 4,930,000 Claim loss development 388,000 5,711,000 6,099,000 Paid in losses — (4,907,000) (4,907,000) Workers’ Comp Liability at August 31, 2020 717,000 5,405,000 6,122,000 Less Current Amount (272,000) (1,473,000) (1,745,000) Long Term Balance at August 31, 2020 $ 445,000 3,932,000 $ 4,377,000 |
Accrued Payroll and Related Lia
Accrued Payroll and Related Liabilities | 12 Months Ended |
Aug. 31, 2020 | |
Accrued Payroll and Related Liabilities | |
Accrued Payroll and Related Liabilities | Note 8: Accrued Payroll and Related Liabilities Accrued payroll liabilities consisted of the following at August 31, 2020 and 2019: August 31, August 31, 2020 2019 Accrued Payroll $ 1,970,000 $ 1,212,000 Accrued Payroll Taxes 3,324,000 984,000 Corporate employee accrued paid time off 457,000 363,000 Accrued Payroll and related liabilities $ 5,752,000 $ 2,559,000 Accrued payroll and accrued payroll taxes represent payroll liabilities associated with the Company’s client WSEs as well as corporate employees of the Company. |
Senior Convertible Notes Payabl
Senior Convertible Notes Payable | 12 Months Ended |
Aug. 31, 2020 | |
Senior Convertible Notes Payable | |
Senior Convertible Notes Payable | Note 9: Senior Convertible Notes Payable The Company has issued four series of senior secured convertible notes payable (collectively, the “Senior Convertible Notes”). In general, each series is convertible into shares of common stock. At August 31, 2019, the Company had $6.8 million of the Senior Convertible Notes in default. During the year ended August 31, 2020, the Company entered into a series of note amendments, exchanges, and settlements resulting in the resolution of the default conditions and subsequent repayment or conversion of all Senior Convertible Notes. The Senior Convertible Notes Payable consist of the following: August 31, 2020 August 31, 2019 Senior Convertible Notes, Principal $ — $ 6,808,000 Less: debt discount and deferred financing costs — (3,457,000) Total outstanding convertible notes, net $ — $ 3,351,000 Less: current portion of convertible notes payable — (3,351,000) Long-term convertible notes payable $ — $ — As of August 31, 2019, the Company had been declared in default of its Senior Convertible Notes for not honoring conversion notices in June 2019. Three of the Company's five institutional investors had filed litigation and the Senior Convertible Notes were considered to be in default as of August 31, 2019. See also Note 15 for additional information on the litigation related to the Senior Convertible Notes. During the year ended August 31, 2020, the Company resolved all litigation related to its outstanding notes and all of the Senior Convertible Notes were repaid in cash or converted into common stock. On August 31, 2019, the Company had gross principal of $6,808,000 outstanding, representing: · June 2018 Senior Convertible Notes due September 6, 2019 with a principal balance of $1,466,000 (the “June 2018 Notes”). The June 2018 Notes were converted or repaid in cash in January 2020 as described in the activity below. · Senior Convertible Notes due December 31, 2019 with a principal balance of $867,000 (the “December 2018 Notes”). The December 2018 Notes were either exchanged for December 2019 Exchange Notes and subsequently converted into common shares, converted into common shares in January 2020 or repaid in cash in January 2020 as described in the activity below. · Senior Convertible Notes due September 12, 2020 with a principal balance of $4,475,000 (the “March 2019 Notes”). The March 2019 Notes were either exchanged for December 2019 Exchange Notes (as defined below), converted or repaid in cash in January 2020 or exchanged for amended notes in March 2020 which were converted in the quarter ended August 31, 2020. On December 6, 2019, the Company entered into an exchange agreement with the holder of $2,445,000 of its March 2019 Notes and $222,000 of its December 2018 Notes for new senior convertible notes (the “December 2019 Exchange Notes”). The December 2019 Exchange Notes and the related warrant and note conversion agreement revised the conversion price of the holder’s December 2018 Notes and March 2019 Notes to $40.00 per share, extended the term of the 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 included in certain warrants issued in March 2019 (the “March 2019 Warrants”). 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 in notes 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. 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% if such alternate conversion is an alternate optional conversion; · Redemption at the option of the Company at 15% premium at any time. In January 2020, one investor received a legal judgement for $500,000 plus default interest of $52,000. The judgment 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 judgment, the litigation was resolved with this investor. In January 2020, 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. In January 2020, the Company reduced the conversion price of the remaining 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. In January 2020, 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, and one investor converted $293,000 of the December 2019 Exchange 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 year ended August 31, 2020. March 2020 Warrant and Note Exchanges and Note Conversions Between March 1, 2020 and March 22, 2020, the conversion terms of the December 2019 Exchange Notes and March 2019 Notes were modified at the mutual agreement of the investors and the Company to temporarily change the conversion price to a fixed conversion price of $9.20 per share. Three investors converted $1,047,000 of the Company’s Convertible Notes and $25,000 of accrued default interest into 135,508 shares of common stock at a conversion price of $9.20 per share. The Company recorded an additional loss on note conversion of $413,000 representing the pro rata portion of the unamortized note discount and deferred financing fees. 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 March 2019 Notes , which included the capitalization of $59,000 of accrued default interest (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, as described below: · On March 23, 2020, the Company entered into an 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, which included the capitalization of $51,000 of accrued default interest, 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) a March 2020 Exchange Warrant to purchase 130,360 shares of common stock, and (iii) a March 2020 Exchange Note in an aggregate principal amount of $145,000. · On March 23, 2020, the Company entered into an 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, which included the capitalization of $8,000 of accrued default interest, 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) a March 2020 Exchange Warrant to purchase 32,590 shares of common stock, and (iii) a March 2020 Exchange Note in an aggregate principal amount of $22,000. On March 24, 2020, the Company entered into an Exchange Agreement (the “Exchange Agreement” and, together with the Amendment and Exchange Agreements, the “March 2020 Agreements”) with CVI Investments, Inc. (“CVI”) pursuant to which CVI exchanged its outstanding senior convertible note due 2022 for (i) a warrant to purchase 260,719 shares of common stock (the “CVI Exchange Warrant” and, together with the Exchange Warrants the “March 2020 Exchange Warrants”) 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 (the “CVI Exchange Note”, and together with the Exchange Notes, the “March 2020 Exchange Notes”). The Company evaluated the March 2020 Agreements as an exchange under ASC 470 and determined that the exchanges should be treated as debt extinguishments and reissuances. The Company accelerated the remaining unamortized discount and deferred financing fees as of the date of the exchange and recorded the fair value of the shares issued in exchange for the warrants cancelled as a loss on exchange of $1,592,000. The Company valued the revised conversion features of the Amended and Restated Notes, the March 2020 Exchange Notes and the March 2020 Exchange Warrants using the binomial method and recorded a discount of $2,825,000 on the exchange dates. The Company used the following assumptions to value the conversion features and March 2020 Exchange Warrants: March 2020 March 2020 Conversion Exchange Feature Warrants (unaudited) (unaudited) Risk free rate 0.08-0.17 % 0.038 % Market price per share $ 6.63-6.68 $ 6.63- 6.68 Life of instrument in years 0.47-1.15 5.5 Volatility 117-139 % 117 % Dividend yield 0 % 0 % Between March 24, 2020 and May 18, 2020 CVI converted $1,829,000 of its senior convertible notes into 198,756 shares of common stock, Alpha converted $868,000 of its senior convertible notes into 94,298 shares of common stock, and Osher converted $130,000 of its senior convertible notes into 14,023 shares of common stock. These conversions resulted in full acceleration of all unamortized debt discount to expense of $2,419,000, recorded as other expense in the statement of operations as loss on conversion. Certain conversions during Fiscal 2020 resulted in shares issued below the closing market price on the date of conversion. The Company recorded $57,000 of additional loss on conversion to the statement of operations for the year ended August 31, 2020, representing the difference in fair value between the closing share price and the conversion price on the date of issuance. The following table rolls forward the Senior Convertible Notes balances and related deferred financing costs and note discount balances from August 31, 2019 to August 31, 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 stock (6,060,000) 89,000 3,402,000 (2,569,000) Notes issued – December 2019 exchange 267,000 — — 267,000 Additional note discount issued – December 2019 exchange — — (467,000) (467,000) Acceleration of discount and deferred financing cost – extinguishment — 88,000 960,000 1,048,000 Additional notes issued – March 2020 exchange 166,000 — — 166,000 Interest capitalized – March 2020 exchange 59,000 — — 59,000 Additional note discount issued – March 2020 exchange — — (2,825,000) (2,825,000) Amortization of interest expense — 167,000 2,043,000 2,210,000 Balance at August 31, 2020 $ — $ — $ — $ — During the year ended August 31, 2020, the Company amortized $2,210,000, and for the year ended August 31, 2019, the Company amortized $1,433,000, 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, March 2019 Exchange Notes, and the December 2019 Exchange Notes (as defined above). |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Aug. 31, 2020 | |
Stockholders' Equity. | |
Stockholders' Equity | Note 10: 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 “Preferred Options”). The number of Preferred Options granted was based upon the number of shares held at that time. These Preferred 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 Preferred Option to purchase one share of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of common stock on a one-for-one basis pursuant to the Restated Articles of Incorporation. The Preferred Options became exercisable to purchase shares of preferred stock upon the Vensure Asset Sale in January 2020, as discussed above. On March 25, 2020, the Company recorded an expense related to the Preferred Options in “other expense” of $62.1 million, representing the Black-Scholes value of 24,634,560 options exercisable and exchangeable into an equal number of shares of common stock. The Company initially evaluated the Preferred Options using the Level 1 market price on the March 25, 2020 date and concluded that the market price on that date represented an illiquid market price and therefore was not a reliable valuation metric. The Company then evaluated the Preferred options on the March 25, 2020 date and valued the Preferred Options using Level 2 inputs of an estimated market price based on the cash per share received from the May 2020 Public Offering, as adjusted for the fair value of the warrants issued in conjunction with the May 2020 offering. The resulting allocated common share price was then discounted for a lack of marketability due to the lock-up provisions of the shares issuable to arrive at a Preferred Option fair value of $2.52 per option. The Company used the following assumptions to value the expense related to the Preferred Options: Option life of 3.77 years, Risk free rate of 0.47%, volatility of 134%, exercise price of $0.0001 per share and a fair value of $3.62 per common share. On June 4, 2020, Scott Absher, the Company’s Chief Executive Officer, exercised 12,500,000 Preferred Options for 12,500,000 shares of preferred stock. Immediately thereafter, Mr. Absher converted all 12,500,000 shares of preferred stock into 12,500,000 shares of common stock. These shares of common stock are subject to a two-year lockup from the date of the conversion. Between June 4, 2020 and August 31, 2020, an additional 294,490 Preferred Options were exercised and exchanged for a like number of common shares. As of the date of this filing, 11,840,070 Preferred Options remain outstanding and exercisable. The right to exercise the options terminates on December 31, 2023. As stated above, the amount of the Preferred Options, and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common stock held by 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, Mr. 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 Messrs. Absher and 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. May 2020 Public Offering On May 20, 2020, the Company entered into an underwriting agreement (the “May Underwriting Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”), in connection with a public offering (the “May 2020 Offering”) of an aggregate of (i) 1,898,850 shares of the Company’s common stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock (the “Pre-Funded Warrants”) and (iii) warrants to purchase 1,277,580 shares of common stock (the “May 2020 Common Warrants”), which included the partial exercise of A.G.P.’s over-allotment option to purchase 166,500 additional Common Warrants. Each share of common stock and Pre-Funded Warrant sold in the May 2020 Offering was sold together with a May 2020 Common Warrant as a fixed combination, with each share of common stock and Pre-Funded Warrant sold being accompanied by a May 2020 Common Warrant to purchase 0.5 shares of common stock. Each share of common stock and accompanying May 2020 Common Warrant was sold at a price to the public of $5.40, and each Pre-Funded Warrant and accompanying May 2020 Common Warrant was sold at a price to the public of $5.399. The May 2020 Common Warrants were immediately exercisable and will expire on May 26, 2025 and have an exercise price of $5.40 per share, subject to anti-dilution and other adjustments for certain stock splits, stock dividends, or recapitalizations. The May 2020 Offering closed on May 26, 2020 for gross proceeds of approximately $12.0 million, prior to deducting $1.7 million of costs consisting of underwriting discounts and commissions and offering expenses payable by the Company, which includes a partial exercise of the underwriter’s over-allotment option to purchase additional May 2020 Common Warrants. All Pre-Funded Warrants issued or issuable were exercised on the closing date of May 26, 2020. Pursuant to the May Underwriting Agreement, the Company, upon closing of the May 2020 Offering, issued to A.G.P. warrants to purchase up to 111,108 shares of common stock (the “May Underwriter Warrants”), which is 5.0% of the aggregate number of shares of common stock issuable upon exercise of the Pre-Funded Warrants sold in the May 2020 Offering. The May Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, commencing from six months after the closing date and ending five years from the closing date, at a price per share equal to $5.94, which is 110% of the public offering price per share. On June 11, 2020 the Company closed an over-allotment option from the May 2020 Offering for additional gross proceeds of approximately $0.9 million, prior to deducting underwriting discounts and commissions and offering expenses payable by the Company, representing the partial exercise of A.G.P.’s over-allotment option to purchase 166,500 shares of common stock at $5.40 per share. On July 7, 2020, the Company closed an over-allotment option from the May 2020 Offering for additional gross proceeds of approximately $0.45 million, prior to deducting underwriting discounts and commissions and offering expenses payable by the Company, representing the partial exercise of A.G.P.’s over-allotment option to purchase 83,840 shares of common stock at $5.40 per share. Common Stock and Warrants On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common stock and common stock equivalents are presented retroactively to reflect the reverse split. During the year ended August 31, 2020, the Company issued the following: · 12,794,220 shares of common stock pursuant to the exercise of Preferred Options as described above. · 2,472,500 shares of common stock pursuant to the May 2020 Offering at $5.40 per share, as described above. · 628,353 shares of common stock in connection with the conversion of $6,060,000 of June 2018 Notes, December 2018 Notes, March 2019 Notes, and December 2019 Exchange Notes payable and $178,000 of related default interest payable. · 82,653 shares of common stock valued at $552,000 to two senior convertible note holders as an inducement to eliminate the March 2019 Warrants and as partial consideration to amend the senior notes to a fixed conversion price. · 21,750 shares of common stock valued at $200,000 as an inducement to exchange $2.7 million of March 2019 Notes for $2.9 million of December 2019 Exchange Notes. · 6,275 shares of common stock for a warrant exercise for cash proceeds of $33,000. · 856 shares of common stock to two directors for services rendered valued at $75,000. Weighted average Weighted Number of remaining average shares life (years) exercise price Warrants outstanding, August 31, 2019 107,409 4.3 $ 83.21 Issued 1,840,773 5.1 7.03 (Cancelled) (45,698) 4.3 78.13 (Exercised) (6,275) 3.6 5.29 Warrants outstanding, August 31, 2020 1,896,209 4.8 $ 8.42 Warrants exercisable, August 31, 2020 1,472,540 4.7 $ 7.91 The warrant reconciliation table above excludes 323,310 Pre-Funded warrants that were originally subscribed to be issued in conjunction with the underwritten offering closing on May 26, 2020. The Pre-Funded warrants were to be sold at $5.399 per share and exercisable at $0.001 per share but were all exercised and fully paid prior to the May 26, 2020 closing. The 323,310 shares are included in the 2,222,160 common share count reported above for the underwritten public offering. The following tables summarize the Company’s warrants outstanding as of August 31, 2020: Weighted average Life of Outstanding Warrants Warrants in Exercise Outstanding years price May 2020 Common Warrants 1,277,580 4.7 $ 5.40 May 2020 Underwriter Warrants 111,108 4.7 5.40 March 2020 Exchange Warrants (1) 423,669 5.1 10.17 Amended March 2019 Warrants (2) 66,288 3.5 40.00 March 2019 Services Warrants 3,366 3.5 70.00 June 2018 Warrants 6,276 3.3 40.00 June 2018 Services Warrants 5,422 3.3 99.60 2017 PIPE Warrants 2,500 1.8 276.00 1,896,209 4.8 $ 7.91 (1) Warrants were issued in conjunction with the March 2020 Agreements as described in Note 9 above. Warrants are not exercisable until September 23, 2020. (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. All warrants outstanding and exercise prices have been adjusted to reflect the 1 for 40 reverse split. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Aug. 31, 2020 | |
Stock Based Compensation | |
Stock Based Compensation | Note 11: Stock Based Compensation Employee Stock Option Plan Increase On July 1, 2020, the board of directors unanimously approved an increase in the number of shares of common stock issuable under the Company's 2017 Stock Option/Stock Issuance Plan from 250,000 to 3,000,000, subject to approval by a majority of the Company's shareholders no later than the next regularly scheduled annual shareholders meeting. Also on July 1, 2020, the board approved the award, primarily to current employees, and subject to shareholder approval no later than the next regularly scheduled annual meeting, of grants of options to purchase 1,235,159 shares of the Company's common stock at an exercise price of $5.40 per share, which was the closing price of the Company's common stock as reported by Nasdaq at the close of trading on the day of the board's action. Of the options awarded, 995,000 are designated as "incentive stock options" ("ISO"), and 280,159 are designated as "non-qualifying" ("NQ")or "non-statutory" options under the Internal Revenue Code. These options have a 10-year life, and will vest over a four-year period, with 25% vesting on July 1, 2021, and the remainder vesting ratably on a quarterly basis over the following three years. During the three months ended August 31, 2020 an additional 270,937 ISOs were granted at prices between $3.44 and $5.40, the closing price on the date of grant and 148,959 of the options granted between July 1, 2020 and August 31, 2020 were cancelled. The remaining 1,357,137 options are reported as non-exercisable in the table below. The Company recognized approximately $1,300,000 and $369,000 of compensation expense for the years ended August 31, 2020, and 2019, respectively. During the year ended August 31, 2020, the Company fully vested all options granted to personnel who were terminated as a result of the Vensure Asset Sale, as described above, which resulted in the acceleration of 9,737 options and $483,000 of stock-based compensation recorded in “stock-based compensation – general and administrative.” At August 31, 2020, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 1.8 years for outstanding grants was $5.7 million. A summary of option activity is as follows: Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) Balance, August 31, 2018 33,719 9.77 $ 138.00 Granted 36,073 10.0 $ 43.60 Exercised — — $ — Forfeited (19,043) 8.06 $ 111.20 Balance, August 31, 2019 50,749 9.0 $ 95.20 Granted 1,506,096 10.0 $ 5.30 Exercised — — $ — Forfeited (158,105) 9.6 $ 56.08 Balance at August 31, 2020 1,398,740 9.51 $ 8.18 Options outstanding as of August 31, 2020 and 2019 had aggregate intrinsic value of $22,000 and $575,000, respectively. At August 31, 2020, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 3.7 years for outstanding grants was $6.0 million. Option vesting activity was as follows: Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2018 4,513 8.6 $ 182.40 Vested 7,410 8.6 $ 137.20 Exercised — — $ — Forfeited (1,632) 8.1 $ 164.40 Balance, August 31, 2019 10.291 8.0 $ 152.80 Vested 19,414 8.1 $ 89.06 Exercised — — $ — Forfeited (1,295) 6.4 $ 140.09 Balance at August 31, 2020 28,410 7.2 $ 115.10 The following table summarizes information about stock options outstanding and vested at August 31, 2020: Options Outstanding Options Vested Number Weighted of Number Average Weighted Weighted Weighted Options of Remaining Average Number Remaining Average not Options Contractual Exercise of Contractual Exercise Exercise Prices Exercisable Exercisable Life Price Options Life Price (In years) (In years) $3.44-10.00 1,357,137 — 9.9 $ 5.31 — — $ — $10.01-$40.00 — 3,917 8.8 23.00 1,636 8.8 24.84 $40.01-$80.00 — 13,509 8.6 51.21 7,798 8.6 51.22 $80.01-$120.00 — 10,427 7.7 102.92 7,295 7.7 102.63 $120.01-$160.00 12,625 7.0 155.28 10,558 7.0 155.41 $160.01-$391.60 — 1,124 6.9 391.60 1,124 6.9 391.60 1,357,137 41,603 7.7 $ 8.17 28,411 7.2 $ 115.09 The options not exercisable were conditionally granted by the Company’s board of directors between July 1, 2020 and August 31, 2020 and are not exercisable until shareholder approval is received for the increase in the option pool as discussed above. The number of options and exercise prices have been presented retroactively for the 1 for 40 reverse stock split, which was effective on December 17, 2019. |
Related Parties
Related Parties | 12 Months Ended |
Aug. 31, 2020 | |
Related Parties. | |
Related Parties | Note 12: Related Parties J. Stephen Holmes, our non-employee Sales Manager, is an advisor to and significant shareholder of the Company , when giving effect to unexercised Preferred Options convertible into shares of the Company’s common stock. On June 6, 2019, the Company advanced $325,000 in cash to Mr. Holmes as payment for consulting services. On July 18, 2019, Mr. Holmes repaid the advance by returning 558,132 shares of common stock valued at $0.58 per share. The Company classified these shares as treasury stock, which it retired in Fiscal 2020. The Company incurred $750,000 in professional fees for management consulting services in the years ended August 31, 2020 and 2019, respectively. On December 23, 2019, the Company issued 428 shares to each of Sean Higgins and Whitney White, both directors of the Company at the time of the share issuance, 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 $75,000. |
Income Taxes
Income Taxes | 12 Months Ended |
Aug. 31, 2020 | |
Income Taxes | |
Income taxes | Note 13: Income Taxes Current income taxes are based upon the year’s income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes. Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income. The Company’s deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers would be limited under the Internal Revenue Code should a significant change in ownership occur within a three-year period. Significant components of the net deferred tax assets as reflected on the Consolidated Balance Sheets are as follows: August 31, 2020 2019 Deferred tax liabilities: Depreciation $ (111,000) $ (122,000) Software development costs (265,000) (845,000) Note receivable (1,132,000) — Total deferred tax liabilities (1,508,000) (967,000) Deferred tax assets: Net operating loss carryforward 9,362,000 (9,157,000) Business interest 3,087,000 (2,539,000) Workers’ compensation accruals 2,202,000 1,763,000 Stock-based compensation 759,000 354,000 Deferred rent 14,000 15,000 Total deferred tax assets 15,424,000 13,828,000 Valuation allowance (13,916,000) (12,861,000) Total net deferred tax assets $ 1,508,000 $ 967,000 Net deferred tax assets $ — $ — Income tax expense consists of the following: For the Year Ended August 31, 2020 2019 Current Federal $ — $ — State — — Total current — — Deferred Federal (4,670,000) 3,162,000 State (1,915,000) 197,000 Total deferred (6,584,000) 3,359,000 Change in valuation allowance $ 6,584,000 $ (3,359,000) Total Income Tax Expense (Benefit) $ — $ — The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows: August 31, August 31, 2020 2019 Federal statutory rate (21%) $ 19,000,000 $ 2,673,000 Non-deductible penalties and other permanent differences (49,000) (430,000) State taxes (8.84%) 1,688,000 1,116,000 Redetermination of prior year taxes (184,000) — Loss on debt extinguishment (747,000) — Preferred option exchange expense (13,039,000) — Loss on inducement (453,000) — Change in fair value of derivative and warrant liability 368,000 — Change in valuation allowance (6,584,000) (3,359,000) Net income tax provision $ — $ — The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of August 31, 2020, and 2019, the Company had no accrued interest and penalties related to uncertain tax positions. As of August 31, 2020, and 2019, the Company had cumulative net operating loss carryforwards of approximately $34,115,000 and $30,686,000 respectively, which begin to expire in 2029. The deferred tax assets primarily comprise net operating loss carryforwards and other net temporary deductible differences such as stock-based compensation, deferred rent, depreciation and workers’ compensation accrual. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Based on management's analysis, they concluded that it was more likely than not that the deferred tax asset would not be realized. Therefore, the Company established a full valuation allowance against the deferred tax assets. The change in the valuation allowance in 2020 and 2019 was approximately $6,584,000 and $3,359,000, respectively. The Company’s net operating losses (“NOL”) may be limited by the provisions of IRC Section 382, for which the Company has not performed an analysis of the potential limitations. These limitations will be imposed when the Company attains taxable income against which the NOL will be utilized. The company had NOLs of $19,971,000 and $3,843,000 during the periods ending August 31, 2020 and 2019, respectively. These NOLs have an indefinite life but are limited to 80%. As explained above, the Company has determined that it is more likely than not that the Company’s deferred tax assets related to NOL Carryforwards will not be utilized. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID- 19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but at present does not expect that the NOL carryback provision of the CARES Act would result in a material cash benefit. The Company is subject to taxation in the U.S. The tax years for 2017 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority. Management has evaluated tax positions in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure. The Company does not expect a material change to this assessment over the 12 months following August 31, 2020. |
Commitments
Commitments | 12 Months Ended |
Aug. 31, 2020 | |
Commitments | |
Commitments | Note 14: Commitments Operating Lease Effective April 15, 2016, the Company entered into a non-cancelable five-year operating lease for its Irvine facility. On July 25, 2017, the Company entered into a non-cancelable operating lease for expansion space at its Irvine offices with a termination date that coincides with the termination date of the prior lease and extended the terms of the original lease to extend until 2022. The leases for certain facilities contain escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective August 13, 2020, the Company entered into a non-cancelable seven-year operating lease for its Miami facility commencing October 2020 through September 2027. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Future minimum lease payments under non-cancelable operating leases at August 31, 2020, are as follows: Years ended August 31, 2021 $ 1,223,000 2022 1,360,000 2023 1,044,000 2024 1,075,000 2025 1,108,000 Thereafter 1,652,000 Total minimum payments $ 7,462,000 Non-contributory 401(k) Plan The Company has a non-contributory 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers all non-union employees who are at least 21 years of age and have completed 3 months of service. There were no employer contributions to the 401(k) Plan for the years ended August 31, 2020 and 2019. Share Repurchase Plan On July 9, 2019, the Company’s board of directors authorized the repurchase of up to 10 million shares of its outstanding common stock as market conditions warrant over a period of 18 months. The Company has not implemented the share repurchase plan to date and has not repurchased any shares under the plan. |
Contingencies
Contingencies | 12 Months Ended |
Aug. 31, 2020 | |
Contingencies | |
Contingencies | Note 15: 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 calendar 2019, three of the Company’s convertible note holders filed legal complaints. During the year ended August 31, 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 filed by Alpha in the United States District Court, Southern District of New York, alleging breach of contract for refusing to honor the conversion of certain convertible notes, specifically one for $310,000 submitted on June 20, 2019. Alpha sought an injunction requiring the Company to issue 25,000 shares of common stock, damages for the claimed breaches, and attorneys’ 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 Alpha 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 judgment for $500,000 consisting of the $310,000 of notes and $190,000 of damages, and was also awarded accrued interest of $51,000. On January 16, 2020 Alpha 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 filed by Dominion Capital LLC ("Dominion") 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 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, repaid all remaining notes and cancelled all related warrants by issuing 83,593 shares of common stock on the date of issuance and making a cash payment 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 sought monetary relief of $2.1 million and to appoint themselves as receiver of the Company. As of August 31, 2019, the Company had convertible notes outstanding to MEF of 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 formally opposed MEF's request to be appointed as receiver. On January 17, 2020, the Company and MEF settled all claims, pursuant to which the Company repaid all note principal outstanding, accrued damages, and accrued interest, and cancelled the June 2018 Warrants with the issuance of 20,000 shares of common stock and a cash payment of $725,000. See also Note 9 above. Kadima Litigation The Company is in a dispute with its former software developer, Kadima Ventures (“Kadima”), over incomplete but paid for software development work. In May 2016, the Company entered into a contract with Kadima for the development and deployment of user features that were proposed by Kadima for an original build cost of $2.2 million to complete. This proposal was later revised upward to approximately $7.2 million to add certain features to the original proposal. As of the date of this Report, the Company has paid approximately $11 million to Kadima, but has never been provided access to the majority of the promised software. Kadima refused to continue development work, denied access to developed software, and refuses to surrender to the Company any software that it has developed unless the Company pays an additional $12.0 million above the $11.0 million already paid. In 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. In April 2019, Kadima filed a complaint against the Company in the Superior Court of the State of Arizona, Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust enrichment, and seeking damages in excess of $11.0 million. The Company vigorously disputes and denies each of Kadima’s claims, including that it owes any sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial portion of the sums that it has already paid, along with the release of the software modules currently being withheld. In June 2020 the Company engaged in a mediation with Kadima in an attempt to resolve the matter, which was unsuccessful. On July 14, 2020 the Company filed an answer to Kadima’s complaint, which denied Kadima’s claims and asserted counter-claims for breach of contract and fraud. Discovery is underway, and a trial date has not been set. Splond Litigation On April 8, 2019, claimant, Corey Splond, filed a class action lawsuit, on behalf of himself and other similarly situated individuals, in the Eighth Judicial District Court for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations of certain wage and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff ultimately prevails, the potential damages recoverable will depend substantially upon whether the Court determines in the future that this lawsuit may appropriately be maintained as a class action. Further, in the event that the Court ultimately enters a judgment in favor of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client against at least a portion of any damage award. Radaro Litigation On July 9, 2020, we were served with a complaint filed by one of our former software vendors, Radaro Inc., in the United States District Court for the Central District of California, alleging damages arising from claims sounding in breach of contract and fraud. By Order filed October 21, 2020, the Court dismissed plaintiff’s claims for fraud and for punitive damages, with leave to replead. The Company denies plaintiff’s claims and is defending the lawsuit vigorously. Discovery is underway, and the Court has set a trial date of March 1, 2022. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Aug. 31, 2020 | |
Subsequent Events | |
Subsequent Events | Note 16: Subsequent Events Diamond Litigation On September 8, 2020, a former financial advisor to the Company filed a Complaint in the United States District Court for the Southern District of New York naming the Company and one of its officers as defendants. The Complaint asserts multiple causes of action, all of which stem from plaintiff’s claim that he is entitled to compensation from the Company, in the form of warrants to purchase ShiftPixy common stock, based upon a prior agreement to provide financial advisory services to the Company in connection with a prior transaction. The Company and the named officer deny the plaintiff’s allegations, and have moved to dismiss plaintiff’s complaint in its entirety. October 2020 Public Offering On October 8, 2020, the Company entered into an underwriting agreement (the " October Underwriting Agreement") with A.G.P. in connection with a public offering (the "October 2020 Offering") of an aggregate of (i) 4,000,000 shares of its common stock and (ii) warrants to purchase 2,300,000 shares of common stock (the "October 2020 Common Warrants"), which included the partial exercise of A.G.P.'s over-allotment option to purchase 300,000 additional October 2020 Common Warrants. Each share of common stock was sold together with an October 2020 Common Warrant as a fixed combination, with each share of common stock sold being accompanied by an October 2020 Common Warrant to purchase 0.5 shares of common stock. Each share of common stock and accompanying October 2020 Common Warrant was sold at a price to the public of $3.00. The October 2020 Common Warrants were immediately exercisable and will expire on October 13, 2025 and have an exercise price of $3.30 per share, subject to anti-dilution and other adjustments for certain stock splits, stock dividends, or recapitalizations. The October 2020 Offering closed on October 14, 2020 for gross proceeds of approximately $12.0 million, prior to deducting $1.4 million of costs consisting of underwriting discounts and commissions and offering expenses payable by the Company, which includes a partial exercise of the underwriter's over-allotment option to purchase additional October 2020 Common Warrants. Pursuant to the October Underwriting Agreement, the Company, upon closing of the October 2020 Offering, issued to A.G.P. warrants to purchase up to 200,000 shares of common stock (the " October Underwriter Warrants"), which is 5.0% of the aggregate number of shares of common stock sold in the October 2020 Offering. The October Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, commencing from six months after the closing date and ending five years from the closing date, at a price per share equal to $3.30, which is 110% of the public offering price per share. ShiftPixy Labs Lease In October 2020, the Company signed a lease for 23,500 of space located at 4101 NW 25 Street, Miami FL 33142, to house ghost kitchens and production facilities associated with ShiftPixy Labs. The landlord is Runway 1 LLC, and the lease term is for 64 months, with an expiration date of February 28, 2026. Management has evaluated subsequent events pursuant to the issuance of the consolidated financial statements and has determined that, other than listed above, no other reportable subsequent events exist through the date of these consolidated financial statements. |
Summary of significant accoun_2
Summary of significant accounting policies (Policies) | 12 Months Ended |
Aug. 31, 2020 | |
Summary of significant accounting policies | |
Basis of Presentation | Basis of Presentation The 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”). |
Principles of Consolidation | Principles of Consolidation The Company and its wholly-owned subsidiaries have been consolidated in the accompanying 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: · Valuation expense related to Preferred Options; · 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 60 days' written notice. Contract performance obligations are satisfied as services are rendered, and the time period 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 that 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 ("WSEs") and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each client concurrently with each periodic payroll of the Company’s WSEs which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were not material as of August 31, 2020 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business as it migrates to a staffing business model. For Fiscal 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. |
Segment Reporting | Segment Reporting The Company operates as one reportable segment under ASC 280, Segment Reporting . The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2020, the Company began to enter into new business lines and geographic areas that, to date, are not material. The Company expects to operate in multiple segments in the future as its business evolves and will evaluate these changes prospectively. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of August 31, 2020 or 2019. |
Concentration of Credit Risk | Concentration of Credit Risk The Company maintains cash with a commercial bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. As of August 31, 2020, there was $4,535,000 of cash in excess of the amounts insured by the FDIC. The Company had zero and two individual clients that represented more than 10% of its annual revenues in Fiscal 2020 and 2019, respectively. Three clients represented 92% of total accounts receivable at August 31, 2020, compared to two clients representing approximately 99% of its total accounts receivable at August 31, 2019. |
Fixed Assets | Fixed Assets Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Leasehold improvements are amortized over the shorter of the useful life or the initial lease term. Fixed assets are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment for purposes of computing depreciation are as follows: Equipment: 5 years Furnitures & Fixtures: 5 – 7 years The amortization of these assets is included in depreciation expense on the consolidated statements of operations. |
Computer Software Development | Computer Software Development Software development costs relate primarily to software coding, systems interfaces and testing of the Company’s proprietary employer information systems and are accounted for in accordance with ASC 350‑40, Internal Use Software . Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development costs are reported under the section fixed assets, net in the consolidated balance sheets. The Company determined that there were no material internal software development costs for the years ended August 31, 2020 or 2019. All capitalized software recorded was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally five years from when the asset is placed in service. |
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 not to be recoverable. If events or circumstances were to indicate that any of the Company’s long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. We recorded an expense related to asset impairment of $3,542,000 and $0 for the years ended August 31, 2020, and 2019, respectively. |
Workers' compensation | Workers’ Compensation Everest Program Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. Sunz Program Since July 2018, the Company’s workers’ compensation program for its WSEs 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 is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit – workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. Under both the Everest and Sunz Programs, the Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of WSEs’ job responsibilities, the location of WSEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of August 31, 2020, the Company had $0.3 million in Deposit – workers’ compensation classified as a short-term asset and $0.7 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 August 31, 2020, the Company had short term accrued workers’ compensation costs of $0.5 million and long term accrued workers’ compensation costs of $1.2 million. The Company retained workers’ compensation asset reserves and workers’ compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition, LLC, part of Vensure Employer Services, Inc. (“Vensure”), in connection with the Vensure Asset Sale described in Note 3. As of August 31, 2020, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of August 31, 2020, the Company had $1.0 million in short term assets and $1.8 million of short term liabilities, and had $2.6 million of long term assets and $4.4 million of long term liabilities. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are primarily based upon the WSE’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into 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. The Company has had very limited and immaterial COVID-19 related claims between March 2020 through the date of this report, although there is a possibility of additional workers’ compensation claims being made by furloughed WSEs as a result of the employment downturn caused by the 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. There is a possibility that additional workers’ compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic, which could have a material impact on its workers’ compensation liability estimates. While the Company has not seen significant additional expenses as a result of any such potential claims to date, which would include claims for reporting periods after August 31, 2020, it continues to closely monitor all workers’ compensation claims made as the COVID-19 pandemic continues. |
Debt Issuance Costs and Debt Discount | Debt Issuance Costs and Debt Discount Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets. Portions attributable to notes converted into equity are accelerated to interest expense upon conversion. |
Beneficial Conversion Features | Beneficial Conversion Features The intrinsic value of a beneficial conversion feature (“BCF”) inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the stated maturity using the straight-line method which approximates the effective interest method. If the note payable is retired prior to the end of the contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion. |
Derivative financial instruments | Derivative Financial Instruments When a Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated as a derivative based on an analysis of the following: a) the settlement amount is determined by one or more underlying factors, typically the price of the Company’s stock; b) the settlement amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares upon conversion; c) there is no initial net investment, which typically excludes the amount borrowed; and d) there is a net settlement provision, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares. When the Company issues warrants to purchase its common stock, it evaluates whether they meet the requirements to be treated as derivatives. Generally, warrants are treated as derivatives if the provisions of the warrants agreements create uncertainty as to: a) the number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature within convertible debt or warrants meet the requirements to be treated as a derivative, the Company estimates the fair value of the derivative liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the consolidated balance sheet date. The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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. ASC 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 August 31, 2020 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximated fair value due to the short-term nature of the instruments. Convertible notes approximated fair value based on comparison of terms from similar instruments in the marketplace. Notes Receivable is valued at estimated fair value as described below. 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 used in measuring fair value are: · Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. · Level 2: Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets or liabilities at August 31, 2020 or August 31, 2019. The Company recorded expense related to Preferred Options in the year ended August 31, 2020 using Level 2 fair value measurements. See Note 10 for assumptions used for this valuation. The valuation of the Note Receivable (as defined below) from the Vensure Asset Sale, as defined below, and the derivative liabilities associated with its March 2019 Notes (see Note 9), consisting of conversion feature derivatives and warrants, are Level 3 fair value measurements. The Note Receivable, as described in Note 3, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date, and on August 31, 2020, using a 10% and 15% discount rate, respectively, which contemplates the risk and probability assessments of the expected future cash flows. For the year ended August 31, 2020, the Company identified $2.6 million of adjustments to the Note Receivable, representing an estimate of a working capital adjustment and cash activity benefitting the Company net of cash activity benefitting Vensure. These amounts were used to reduce the Note Receivable on a dollar for dollar basis as is contemplated in the Vensure Asset Sale contract and per agreement with Vensure. The Company further recorded an estimated proceeds reduction of $1.4 million related to estimated gross wages adjustments, and a $0.3 million impact for fair value assumptions. 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 Vensure Asset Sale agreement. The Company believes 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 are based on gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale. Those transferred clients may have had their business impacted due to the pandemic which, in turn, would have resulted in lower gross wage billings. While the Company believes the current valuation of the Note Receivable is fairly recorded as of August 31, 2020, a material change in the business transferred may result in a reduction of the estimate of the contingent payments expected to be received and therefore the value 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 Company used the following assumptions to value the Note Receivable during Fiscal 2020: · Discount rate of 10% (at the transaction date) and 15% (at August 31, 2020) · Actual monthly wages billed to the extent available to the Company · 20% per year annualized gross wage reduction representing an approximate 1.5% per month decline (at August 31, 2020) 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 August 31, 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 (1,784,000) (195,000) (1,979,000) Change in fair value (1,068,000) (709,000) (1,777,000) Balance at August 31, 2020 $ — $ — $ — The Company had no derivative liabilities as of August 31, 2020 since all the convertible notes were converted to equity or repaid, any warrants requiring accounting as derivatives were exchanged for shares of common stock, and new warrant issuances do not require derivative liability accounting treatment. As of August 31, 2019, and during the year ended August 31, 2020, 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 consist, in part, of the price of the common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the 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 in March 2020 prior to the amendments and exchanges for the convertible notes and warrants: March 2019 March 2019 Conversion Warrant Feature Liability Risk free rate 0.08-0.17 % 1.6 % Market price per share $ 6.68 $ 6.68 Life of instrument in years 0.47-1.15 4.0 Volatility 117-139 % 102 % Dividend yield 0 % 0 % 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 could be required 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 August 31, 2020 and August 31, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels. |
Research and Development | Research and Development During the years ended August 31, 2020 and August 31, 2019, the Company incurred both internal and external research and development costs for its software development of approximately $4.2 million and $3.1 million, respectively, of which $2 million and .9 million, respectively, are included in salaries, wages and payroll taxes. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS platform and related mobile application and consist of internal salaries, outsourced contractor costs and other specific research and development expenses. In addition, $0 and $1.0 million of software costs were capitalized for the year ended August 31, 2020 and 2019, respectively. |
Advertising Costs | Advertising Costs The Company expenses all advertising as incurred. The Company recorded expenses totaling $646,000 and $1,208,000 for the years ended August 31, 2020 and 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 stock equivalents are presented retroactively to reflect the reverse split. |
Income Taxes | Income Taxes The Company accounts for income taxes pursuant to ASC 740, Income Taxes . Under ASC 740, deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. |
Share-Based Compensation | Share-Based Compensation As of August 31, 2020 and 2019, the Company had one stock-based compensation plan under which the Company may issue both share and stock option 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 consolidated statements of operations at their fair values. Share grants are valued at the closing market price on the date of issuance, which approximates fair value. For option grants, the grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. Option grants are typically issued with vesting depending on a term of service. For all employee stock options granted, the Company recognizes expense over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected volatility is based on the historical volatility of the Company's common stock since its Initial Public Offering. Any changes in these highly subjective assumptions could materially impact stock-based compensation expense. Following the adoption of Accounting Standards Update (“ASU”) 2016‑09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. |
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 shares of common stock 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 stock equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock is considered anti-dilutive and thus is excluded from the calculation. The number used for the weighted average number of shares of common stock outstanding for the earnings per share for the year ended August 31, 2020 was increased by 24,634,560 effective as of January 1, 2020. This increase reflects the inclusion of common stock issuable upon full exercise of options to purchase a similar number of preferred shares and full conversion of those shares of preferred stock to shares of common stock. The Preferred Option was deemed to be exercisable into preferred shares on the effective date of the Vensure Asset Sale as described in Note 3. The one to one ratio of conversion of shares of preferred stock to shares of common stock was set on March 25, 2020, as described in Note 10. Between March 25 and August 31, 2020, 12,794,490 of the 24,634,560 Preferred Options were exercised into a like number of shares preferred stock and immediately exchanged for a like number of shares of common stock. Securities used in, or that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive are: For the Year For the Year Ended Ended August 31, August 31, 2020 2019 Options 1,398,740 50,749 Senior Convertible Notes (Note 9) — 308,312 Warrants 1,896,209 107,410 Total potentially dilutive shares 3,294,949 466,471 Options to purchase shares of preferred stock are excluded from the potentially dilutive shares in the table above since the Preferred Options are included in the weighted average outstanding share count for the basic earnings per share calculation. |
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 12 to the accompanying financial statements. 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 as additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated deficit. |
Revision of Financial Statements | Revision of Financial Statements During the preparation of the consolidated financial statements for the fiscal year ended August 31, 2020, the Company determined that it had improperly amortized capitalized software that had not been placed into service. This resulted in an understatement of the net carrying amount of capitalized software through an overstatement of the amortization expense recorded to date by $835,000. The Company assessed the materiality of the misstatements in accordance with Staff Accounting Bulletin No.99, Materiality , and No. 108, Quantifying Misstatements , and concluded that this error was not qualitatively material on the Company’s consolidated balance sheet, statement of operations, statement of cash flows, statement of stockholders’ equity (deficit) or net loss for the periods then ended. The effect of this revision on the line items within the Company’s consolidated financial statements as of and for the year ended August 31, 2019, was as follows: As of August 31, 2019 As Previously Reported Adjustments As Restated Fixed Assets, net $ 3,320,000 $ 835,000 $ 4,155,000 Total Assets $ 23,796,000 $ 835,000 $ 24,631,000 Accumulated Deficit 44,950,000 (835,000) 44,115,000 Total Liabilities and Stockholders' Equity $ 23,796,000 $ 835,000 $ 24,631,000 For the year ended August 31, 2019 As Previously Reported Adjustments As Restated Depreciation and Amortization $ 839,000 $ (645,000) $ 194,000 Operating Loss $ (16,201,000) $ 645,000 $ (15,556,000) Net Loss $ (18,727,000) $ 645,000 $ (18,082,000) Net loss per common share – continuing operations, Basic and diluted $ (30.09) $ (0.79) $ (29.30) Weighted average number of common shares Basic and diluted 817,720 — 817,720 |
Reclassifications | Reclassifications Certain reclassifications have been made to prior year’s data to conform to the current year’s presentation. Such reclassifications had no material impact on the Company’s financial condition, operating results, cash flows or stockholders’ equity. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the FASB issued 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 requires enhanced revenue disclosures, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple-element arrangements. This accounting standard was initially scheduled to become effective for the Company for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019, but has since been delayed. Early adoption was 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. The Company is continuing to evaluate the impact and believes that the adoption of Topic 606 will not have a material impact on its reported financial results. 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 consideration, contract modifications at transition, completed contracts at 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. In June 2020, the FASB issued ASU 2020-05: Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) . For entities that, as of June 2020, had not issued financial statements under Topic 606, the effective date was extended by one year to annual periods beginning after December 15, 2019 and interim periods within annual periods beginning after December 15, 2020. Entities who have not issued financial statements under Topic 842, are required to adopt Topic 842 for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement . For all entities, amendments pursuant to ASU 2018-13 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 has not yet adopted ASU 2018-13, and is currently evaluating the potential impact this guidance will have on its consolidated financial statements, if any. In February 2016, the FASB issued 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 of the lease as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases . For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In June 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, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. The update also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The new guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update can be adopted on either a fully retrospective or a modified retrospective basis. The Company does not expect the adoption of ASU 2020-06 to have any material impact on its consolidated financial statements. |
Summary of significant accoun_3
Summary of significant accounting policies (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Summary of significant accounting policies | |
Schedule of estimated useful lives of property and equipment | Equipment: 5 years Furnitures & Fixtures: 5 – 7 years |
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 (1,784,000) (195,000) (1,979,000) Change in fair value (1,068,000) (709,000) (1,777,000) Balance at August 31, 2020 $ — $ — $ — March 2019 March 2019 Conversion Warrant Feature Liability (unaudited) (unaudited) Risk free rate 0.08-0.17 % 1.6 % Market price per share $ 6.68 $ 6.68 Life of instrument in years 0.47-1.15 4.0 Volatility 117-139 % 102 % Dividend yield 0 % 0 % |
Schedule of weighted average dilutive common shares | For the Year For the Year Ended Ended August 31, August 31, 2020 2019 Options 1,398,740 50,749 Senior Convertible Notes (Note 9) — 308,312 Warrants 1,896,209 107,410 Total potentially dilutive shares 3,294,949 466,471 |
Schedule of revision on line items in financial statements | As of August 31, 2019 As Previously Reported Adjustments As Restated Fixed Assets, net $ 3,320,000 $ 835,000 $ 4,155,000 Total Assets $ 23,796,000 $ 835,000 $ 24,631,000 Accumulated Deficit 44,950,000 (835,000) 44,115,000 Total Liabilities and Stockholders' Equity $ 23,796,000 $ 835,000 $ 24,631,000 For the year ended August 31, 2019 As Previously Reported Adjustments As Restated Depreciation and Amortization $ 839,000 $ (645,000) $ 194,000 Operating Loss $ (16,201,000) $ 645,000 $ (15,556,000) Net Loss $ (18,727,000) $ 645,000 $ (18,082,000) Net loss per common share – continuing operations, Basic and diluted $ (30.09) $ (0.79) $ (29.30) Weighted average number of common shares Basic and diluted 817,720 — 817,720 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Discontinued Operations | |
Schedule of a reconciliation of the gross proceeds to the net proceeds from the Vensure 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) Less: Transaction reconciliation – working capital adjustment (88,000) Less: Transaction reconciliation – net cash paid by Vensure on behalf of the Company (2,475,000) Less: Transaction reconciliation – estimate of reduction due to gross wages (1,400,000) Adjusted Note Receivable 5,537,000 Discount recorded (1,492,000) Long-term note receivable $ 4,045,000 |
Schedule of note receivable on disposal of business | The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations were as follows: August 31, 2020 August 31, 2019 Cash $ — $ — Accounts receivable and unbilled account receivable — 8,246,000 Prepaid expenses and other current assets — 171,000 Deposits – workers’ compensation 1,030,000 1,722,000 Total current assets 1,030,000 10,139,000 Fixed assets, net — 40,000 Deposits – workers’ compensation 2,581,000 5,527,000 Total assets $ 3,611,000 $ 15,706,000 Accounts payable and other current liabilities $ — $ 458,000 Payroll related liabilities — 13,853,000 Accrued workers’ compensation cost 1,745,000 1,722,000 Total current liabilities 1,745,000 16,033,000 Accrued workers’ compensation cost 4,377,000 3,853,000 Total liabilities 6,122,000 19,886,000 Net liability $ (2,511,000) $ (4,180,000) |
Schedule of carrying amounts of the classes of assets and liabilities from the Asset Sale included in discontinued operations | August 31, 2020 August 31, 2019 Cash $ — $ — Accounts receivable and unbilled account receivable — 8,246,000 Prepaid expenses and other current assets — 171,000 Deposits – workers’ compensation 1,030,000 1,722,000 Total current assets 1,030,000 10,139,000 Fixed assets, net — 40,000 Deposits – workers’ compensation 2,581,000 5,527,000 Total assets $ 3,611,000 $ 15,706,000 Accounts payable and other current liabilities $ — $ 458,000 Payroll related liabilities — 13,853,000 Accrued workers’ compensation cost 1,745,000 1,722,000 Total current liabilities 1,745,000 16,033,000 Accrued workers’ compensation cost 4,377,000 3,853,000 Total liabilities 6,122,000 19,886,000 Net liability $ (2,511,000) $ (4,180,000) |
Schedule of reported results for the discontinued operations by period | For the Year Ended August 31, 2020 August 31, 2019 Revenues (gross billings of $120.7 million and $279.3 million less WSE payroll cost of $103.0 million and $236.3 million, respectively for Year ended) $ 17,633,000 $ 42,986,000 Cost of revenue 16,899,000 32,509,000 Gross profit 733,000 10,477,000 Operating expenses: Salaries, wages and payroll taxes 553,000 1,418,000 Commissions 741,000 2,531,000 Total operating expenses 1,294,000 3,949,000 (Loss) income from discontinued operations $ (561,000) $ 6,528,000 |
Fixed Assets (Tables)
Fixed Assets (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Fixed Assets | |
Schedule of Fixed Assets | August 31, August 31, 2020 2019 Equipment $ 576,000 $ 341,000 Furniture & fixtures 348,000 348,000 Software, net of impairment — 3,737,000 Leasehold improvements 41,000 41,000 965,000 4,467,000 Accumulated depreciation & amortization (390,000) (312,000) Fixed assets, net $ 575,000 $ 4,155,000 |
Schedule of capitalized software | August 31, August 31, 2020 2019 Software costs capitalized $ 3,737,000 $ 3,737,000 Software costs impaired (3,737,000) — Software costs, Net $ — $ 3,737,000 |
Workers Compensation (Tables)
Workers Compensation (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Continuing operations | |
Summarizes of workers' compensation deposit | Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2018 $ 336,000 523,000 $ 859,000 Premiums paid (32,000) — (32,000) Paid in deposits — 1,714,000 1,714,000 Claim losses (33,000) (410,000) (443,000) Deposit refund (271,000) — (271,000) Workers’ Comp Deposit at August 31, 2019 $ — 1,827,000 $ 1,827,000 Paid in deposits — 601,000 601,000 Claim losses — (1,399,000) (1,399,000) Workers’ Comp Deposit at August 31, 2020 — 1,029,000 1,029,000 Less Current Amount — (293,000) (293,000) Long Term Balance at August 31, 2020 $ — 736,000 $ 736,000 |
Summarizes the accrued workers' compensation liability | Everest SUNZ Program Program Total Workers’ Comp Liability at August 31, 2018 $ 127,000 141,000 $ 268,000 Claim loss development — 1,581,000 1,581,000 Paid in losses (33,000) (410,000) (443,000) Workers’ Comp Liability at August 31, 2019 $ 94,000 1,312,000 $ 1,406,000 Claim loss development 110,000 1,628,000 1,738,000 Paid in losses — (1,399,000) (1,399,000) Workers’ Comp Liability at August 31, 2020 204,000 1,541,000 1,745,000 Less Current Amount (78,000) (420,000) (498,000) Long Term Balance at August 31, 2020 $ 126,000 1,121,000 $ 1,247,000 |
Discontinued operations | |
Summarizes of workers' compensation deposit | Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2018 $ 1,180,000 1,835,000 $ 3,015,000 Premiums paid (112,000) — (112,000) Paid in deposits — 6,016,000 6,016,000 Claim losses (116,000) (1,440,000) (1,556,000) Deposit refund (952,000) — (952,000) Workers’ Comp Deposit at August 31, 2019 $ — 6,411,000 $ 6,411,000 Paid in deposits — 2,107,000 2,107,000 Claim losses — (4,907,000) (4,907,000) Workers’ Comp Deposit at August 31, 2020 — 3,611,000 3,611,000 Less Current Amount — (1,030,000) (1,030,000) Long Term Balance at August 31, 2020 $ — 2,581,000 $ 2,581,000 |
Summarizes the accrued workers' compensation liability | Everest SUNZ Program Program Total Workers’ Comp Liability at August 31, 2018 $ 445,000 493,000 $ 938,000 Claim loss development — 5,548,000 5,548,000 Paid in losses (116,000) (1,440,000) (1,556,000) Workers’ Comp Liability at August 31, 2019 $ 329,000 4,601,000 $ 4,930,000 Claim loss development 388,000 5,711,000 6,099,000 Paid in losses — (4,907,000) (4,907,000) Workers’ Comp Liability at August 31, 2020 717,000 5,405,000 6,122,000 Less Current Amount (272,000) (1,473,000) (1,745,000) Long Term Balance at August 31, 2020 $ 445,000 3,932,000 $ 4,377,000 |
Accrued Payroll and Related L_2
Accrued Payroll and Related Liabilities (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Accrued Payroll and Related Liabilities | |
Schedule of Accrued payroll liabilities | August 31, August 31, 2020 2019 Accrued Payroll $ 1,970,000 $ 1,212,000 Accrued Payroll Taxes 3,324,000 984,000 Corporate employee accrued paid time off 457,000 363,000 Accrued Payroll and related liabilities $ 5,752,000 $ 2,559,000 |
Senior Convertible Notes Paya_2
Senior Convertible Notes Payable (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Senior Convertible Notes Payable | |
Schedule of senior secured convertible notes payable | August 31, 2020 August 31, 2019 Senior Convertible Notes, Principal $ — $ 6,808,000 Less: debt discount and deferred financing costs — (3,457,000) Total outstanding convertible notes, net $ — $ 3,351,000 Less: current portion of convertible notes payable — (3,351,000) Long-term convertible notes payable $ — $ — |
Schedule of conversion on warrant exchange | March 2020 March 2020 Conversion Exchange Feature Warrants (unaudited) (unaudited) Risk free rate 0.08-0.17 % 0.038 % Market price per share $ 6.63-6.68 $ 6.63- 6.68 Life of instrument in years 0.47-1.15 5.5 Volatility 117-139 % 117 % Dividend yield 0 % 0 % |
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 stock (6,060,000) 89,000 3,402,000 (2,569,000) Notes issued – December 2019 exchange 267,000 — — 267,000 Additional note discount issued – December 2019 exchange — — (467,000) (467,000) Acceleration of discount and deferred financing cost – extinguishment — 88,000 960,000 1,048,000 Additional notes issued – March 2020 exchange 166,000 — — 166,000 Interest capitalized – March 2020 exchange 59,000 — — 59,000 Additional note discount issued – March 2020 exchange — — (2,825,000) (2,825,000) Amortization of interest expense — 167,000 2,043,000 2,210,000 Balance at August 31, 2020 $ — $ — $ — $ — |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Stockholders' Equity. | |
Summary of warrants outstanding | Weighted average Weighted Number of remaining average shares life (years) exercise price Warrants outstanding, August 31, 2019 107,409 4.3 $ 83.21 Issued 1,840,773 5.1 7.03 (Cancelled) (45,698) 4.3 78.13 (Exercised) (6,275) 3.6 5.29 Warrants outstanding, August 31, 2020 1,896,209 4.8 $ 8.42 Warrants exercisable, August 31, 2020 1,472,540 4.7 $ 7.91 |
Summary of information about warrants outstanding | Weighted average Life of Outstanding Warrants Warrants in Exercise Outstanding years price May 2020 Common Warrants 1,277,580 4.7 $ 5.40 May 2020 Underwriter Warrants 111,108 4.7 5.40 March 2020 Exchange Warrants (1) 423,669 5.1 10.17 Amended March 2019 Warrants (2) 66,288 3.5 40.00 March 2019 Services Warrants 3,366 3.5 70.00 June 2018 Warrants 6,276 3.3 40.00 June 2018 Services Warrants 5,422 3.3 99.60 2017 PIPE Warrants 2,500 1.8 276.00 1,896,209 4.8 $ 7.91 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Stock Based Compensation | |
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, 2018 33,719 9.77 $ 138.00 Granted 36,073 10.0 $ 43.60 Exercised — — $ — Forfeited (19,043) 8.06 $ 111.20 Balance, August 31, 2019 50,749 9.0 $ 95.20 Granted 1,506,096 10.0 $ 5.30 Exercised — — $ — Forfeited (158,105) 9.6 $ 56.08 Balance at August 31, 2020 1,398,740 9.51 $ 8.18 |
Schedule of Option vesting activity | Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2018 4,513 8.6 $ 182.40 Vested 7,410 8.6 $ 137.20 Exercised — — $ — Forfeited (1,632) 8.1 $ 164.40 Balance, August 31, 2019 10.291 8.0 $ 152.80 Vested 19,414 8.1 $ 89.06 Exercised — — $ — Forfeited (1,295) 6.4 $ 140.09 Balance at August 31, 2020 28,410 7.2 $ 115.10 |
Summarizes of stock options outstanding | Options Outstanding Options Vested Number Weighted of Number Average Weighted Weighted Weighted Options of Remaining Average Number Remaining Average not Options Contractual Exercise of Contractual Exercise Exercise Prices Exercisable Exercisable Life Price Options Life Price (In years) (In years) $3.44-10.00 1,357,137 — 9.9 $ 5.31 — — $ — $10.01-$40.00 — 3,917 8.8 23.00 1,636 8.8 24.84 $40.01-$80.00 — 13,509 8.6 51.21 7,798 8.6 51.22 $80.01-$120.00 — 10,427 7.7 102.92 7,295 7.7 102.63 $120.01-$160.00 12,625 7.0 155.28 10,558 7.0 155.41 $160.01-$391.60 — 1,124 6.9 391.60 1,124 6.9 391.60 1,357,137 41,603 7.7 $ 8.17 28,411 7.2 $ 115.09 |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Income Taxes | |
Schedule of net deferred tax assets | August 31, 2020 2019 Deferred tax liabilities: Depreciation $ (111,000) $ (122,000) Software development costs (265,000) (845,000) Note receivable (1,132,000) — Total deferred tax liabilities (1,508,000) (967,000) Deferred tax assets: Net operating loss carryforward 9,362,000 (9,157,000) Business interest 3,087,000 (2,539,000) Workers’ compensation accruals 2,202,000 1,763,000 Stock-based compensation 759,000 354,000 Deferred rent 14,000 15,000 Total deferred tax assets 15,424,000 13,828,000 Valuation allowance (13,916,000) (12,861,000) Total net deferred tax assets $ 1,508,000 $ 967,000 Net deferred tax assets $ — $ — |
Schedule of Income tax expense | For the Year Ended August 31, 2020 2019 Current Federal $ — $ — State — — Total current — — Deferred Federal (4,670,000) 3,162,000 State (1,915,000) 197,000 Total deferred (6,584,000) 3,359,000 Change in valuation allowance $ 6,584,000 $ (3,359,000) Total Income Tax Expense (Benefit) $ — $ — |
Reconciliation of the statutory federal rate | August 31, August 31, 2020 2019 Federal statutory rate (21%) $ 19,000,000 $ 2,673,000 Non-deductible penalties and other permanent differences (49,000) (430,000) State taxes (8.84%) 1,688,000 1,116,000 Redetermination of prior year taxes (184,000) — Loss on debt extinguishment (747,000) — Preferred option exchange expense (13,039,000) — Loss on inducement (453,000) — Change in fair value of derivative and warrant liability 368,000 — Change in valuation allowance (6,584,000) (3,359,000) Net income tax provision $ — $ — |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Aug. 31, 2020 | |
Operating Lease [Member] | |
Schedule of Future minimum lease payments under non-cancelable operating leases | Future minimum lease payments under non-cancelable operating leases at August 31, 2020, are as follows: Years ended August 31, 2021 $ 1,223,000 2022 1,360,000 2023 1,044,000 2024 1,075,000 2025 1,108,000 Thereafter 1,652,000 Total minimum payments $ 7,462,000 |
Nature of Operations (Details)
Nature of Operations (Details) | May 25, 2020 | Mar. 25, 2020$ / shares | Dec. 17, 2019 | Aug. 31, 2020$ / shares | Jan. 31, 2020$ / shares | Aug. 31, 2019$ / shares |
Preferred stock, shares par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Stockholders' Equity Note, Stock Split, Conversion Ratio | 1 | 1 | 0.025 | 0.025 | ||
Preferred Class A [Member] | ||||||
Preferred stock, shares par value | $ 0.0001 |
Summary of significant accoun_4
Summary of significant accounting policies (Details) | 12 Months Ended |
Aug. 31, 2020 | |
Equipment | 5 years |
Minimum | |
Furnitures & Fixtures | 5 years |
Maximum | |
Furnitures & Fixtures | 7 years |
Summary of significant accoun_5
Summary of significant accounting policies - Derivative liabilities (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Reclassification to APIC due to note settlements, exchanges or conversions | $ (1,979,000) | |
Unbilled Contracts Receivable | 2,303,000 | $ 1,418,000 |
Beginning balance | 3,756,000 | |
Change in fair value | (1,777,000) | |
March 2019 Conversion Feature [Member] | ||
Beginning balance of conversion features | 2,852,000 | |
Reclassification to APIC due to note settlements, exchanges or conversions | (1,784,000) | |
Change in fair value of conversion features | (1,068,000) | |
March 2019 Warrant Liability [Member] | ||
Reclassification to APIC due to note settlements, exchanges or conversions | (195,000) | |
Beginning balance of warrant liability | $ 904,000 | |
Change in fair value of warrant liability | $ (709,000) |
Summary of significant accoun_6
Summary of significant accounting policies - Estimate fair value (Details) | 12 Months Ended |
Aug. 31, 2020$ / shares | |
Volatility | 134.00% |
March 2019 Conversion Feature [Member] | |
Market price per share | $ 6.68 |
Dividend yield | 0.00% |
March 2019 Conversion Feature [Member] | Minimum | |
Risk free rate | 0.08% |
Life of instrument in years | 5 months 19 days |
Volatility | 117.00% |
March 2019 Conversion Feature [Member] | Maximum | |
Risk free rate | 0.17% |
Life of instrument in years | 1 year 1 month 24 days |
Volatility | 139.00% |
March 2019 Warrant Liability [Member] | |
Risk free rate | 1.60% |
Market price per share | $ 6.68 |
Life of instrument in years | 4 years |
Volatility | 102.00% |
Dividend yield | 0.00% |
Summary of significant accoun_7
Summary of significant accounting policies - Weighted average dilutive common shares (Details) - shares | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Total potentially dilutive shares | 3,294,949 | 466,471 |
Options [Member] | ||
Total potentially dilutive shares | 1,398,740 | 50,749 |
Senior Secured Convertible Notes [Member] | ||
Total potentially dilutive shares | 308,312 | |
Warrant [Member] | ||
Total potentially dilutive shares | 1,896,209 | 107,410 |
Summary of significant accoun_8
Summary of significant accounting policies - Effect of the revision on the consolidated financial statements (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Reclassification [Line Items] | ||
Fixed Assets, net | $ 575,000 | $ 4,155,000 |
Total Assets | 17,420,000 | 24,631,000 |
Accumulated Deficit | (119,462,000) | (44,115,000) |
Total Liabilities and Stockholders' Equity | 17,420,000 | 24,631,000 |
Depreciation and amortization | 272,000 | 194,000 |
Operating Loss | (21,578,000) | (15,556,000) |
Net Loss | $ (75,347,000) | $ (18,082,000) |
Net Loss per common share - continuing operations, Basic and diluted | $ (4.13) | |
Weighted average number of common shares Basic and diluted | 18,222,661 | 817,720 |
As Previously Reported | ||
Reclassification [Line Items] | ||
Fixed Assets, net | $ 3,320,000 | |
Total Assets | 23,796,000 | |
Accumulated Deficit | 44,950,000 | |
Total Liabilities and Stockholders' Equity | 23,796,000 | |
Depreciation and amortization | 839,000 | |
Operating Loss | (16,201,000) | |
Net Loss | $ (18,727,000) | |
Net Loss per common share - continuing operations, Basic and diluted | $ (30.09) | |
Weighted average number of common shares Basic and diluted | 817,720 | |
Adjustments | ||
Reclassification [Line Items] | ||
Fixed Assets, net | $ 835,000 | |
Total Assets | 835,000 | |
Accumulated Deficit | (835,000) | |
Total Liabilities and Stockholders' Equity | 835,000 | |
Depreciation and amortization | (645,000) | |
Operating Loss | 645,000 | |
Net Loss | $ 645,000 | |
Net Loss per common share - continuing operations, Basic and diluted | $ (0.79) |
Summary of significant accoun_9
Summary of significant accounting policies - Additional Information (Details) | May 25, 2020 | Mar. 25, 2020 | Jan. 01, 2020shares | Dec. 17, 2019 | Aug. 31, 2020USD ($)shares | Aug. 31, 2019USD ($) |
Unbilled accounts receivable | $ 2,303,000 | $ 1,418,000 | ||||
Cash in excess by FDIC | 4,535,000 | |||||
Advertising costs | 646,000 | 1,208,000 | ||||
Weighted average number of common shares outstanding for the earnings per share increased | shares | 24,634,560 | |||||
Working capital changes | 2,600,000 | |||||
Gross wages adjustments | 1,400,000 | |||||
Impact for fair value assumptions. | $ 300,000 | |||||
Discount rate (as a percent) | 15.00% | |||||
Annualized gross wages (in percentage) | 20.00% | |||||
Reduction in gross wages per month (in percentage) | 1.50% | |||||
Shares conversion ratio | 1 | 1 | 0.025 | 0.025 | ||
Research and developments costs | $ 4,200,000 | 3,100,000 | ||||
Salaries, Wages and Payroll taxes | 2,000,000 | 900,000 | ||||
Capitalized computer software cost | $ 0 | $ 1,000,000 | ||||
Concentration of credit risk percent | 92.00% | 99.00% | ||||
Concentration of credit Risk description | had zero and two individual clients that represented more than 10% of its annual revenues in Fiscal 2020 and 2019, respectively. | |||||
Short term accrued workers compensation | $ 500,000 | |||||
Long term accrued workers compensation | 1,200,000 | |||||
Impaired asset expense | 3,543,000 | $ 0 | ||||
Short term assets | $ 1,000,000 | |||||
Risk-free interest rate | 0.47% | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 134.00% | |||||
Short term liabilities | $ 1,800,000 | |||||
Long term assets | 2,600,000 | |||||
Long term liabilities | 4,400,000 | |||||
Short-term asset and workers compensation - deposits | 300,000 | |||||
Long-term asset and workers compensation - deposits | $ 700,000 | |||||
Preferred stock issued for Preferred Options exercise (in shares) | shares | 12,794,490 | |||||
Common stock issued for preferred stock exchange (in shares) | shares | 12,794,490 | |||||
Minimum | ||||||
Discount rate (as a percent) | 10.00% | |||||
Maximum | ||||||
Discount rate (as a percent) | 15.00% | |||||
Preferred Stock | ||||||
Shares conversion ratio | 1 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | Jan. 03, 2020 | Aug. 31, 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 | $ 9,700,000 | |
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 | $ 5,537,000 |
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 | Aug. 31, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Cash received at closing - asset sale | $ (9,700,000) | |
Gain from asset sale | 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 |
Cash received at closing - asset sale | (9,700,000) | (9,500,000) |
Cash received at closing - working capital | (166,000) | |
Less: Transaction reconciliation - working capital adjustment | (88,000) | |
Less: Transaction reconciliation - net cash paid by Vensure on behalf of the Company | (2,475,000) | |
Less: Transaction reconciliation - estimate of reduction due to gross billings | (1,400,000) | |
Adjusted Note Receivable | $ 9,500,000 | 5,537,000 |
Discount recorded | (1,492,000) | |
Long-term note receivable | 4,045,000 | |
Gain from asset sale | $ 15,600,000 |
Discontinued Operations - Notes
Discontinued Operations - Notes receivable (Details) - USD ($) | Aug. 31, 2020 | Jan. 03, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Discount rate (as a percent) | 15.00% | |
Minimum | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Discount rate (as a percent) | 10.00% | |
Maximum | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Discount rate (as a percent) | 15.00% | |
Disposal by sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Lower net assets transferred at closing | $ 88,000 | |
Cash remitted to the Company's bank accounts by former clients | 2,475,000 | |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Adjusted Note Receivable | 5,537,000 | $ 9,500,000 |
Less: Transaction reconciliation - working capital adjustment | $ 2,563,000 | |
Lower percentage of gross wages | 90.00% |
Discontinued Operations - Carry
Discontinued Operations - Carrying amounts of assets and liabilities (Details) - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Total current assets | $ 1,030,000 | $ 10,139,000 |
Total current liabilities | 1,746,000 | 16,033,000 |
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 | 8,246,000 | |
Prepaid expenses and other current assets | 171,000 | |
Deposits - workers' compensation | 1,030,000 | 1,722,000 |
Total current assets | 1,030,000 | 10,139,000 |
Fixed assets, net | 40,000 | |
Deposits - workers' compensation | 2,581,000 | 5,527,000 |
Total assets | 3,611,000 | 15,706,000 |
Accounts payable and other current liabilities | 458,000 | |
Payroll related liabilities | 13,853,000 | |
Accrued workers' compensation cost | 1,745,000 | 1,722,000 |
Total current liabilities | 1,745,000 | 16,033,000 |
Accrued workers' compensation cost | 4,377,000 | 3,853,000 |
Total liabilities | 6,122,000 | 19,886,000 |
Net liability | $ (2,511,000) | $ (4,180,000) |
Discontinued Operations - Repor
Discontinued Operations - Reported results for the discontinued operations (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Operating expenses: | ||
Contingent consideration | $ 1,400,000 | |
(Loss) income from discontinued operations | (561,000) | $ 6,528,000 |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Revenues, Net | 17,633,000 | 42,986,000 |
Cost of revenue | 16,899,000 | 32,509,000 |
Gross profit | 733,000 | 10,477,000 |
Operating expenses: | ||
Salaries, wages and payroll taxes | 553,000 | 1,418,000 |
Commissions | 741,000 | 2,531,000 |
Total operating expenses | 1,294,000 | 3,949,000 |
(Loss) income from discontinued operations | (561,000) | 6,528,000 |
Revenues, Gross | 120,700,000 | 279,300,000 |
Worksite employee payroll cost | $ 103,000,000 | $ 236,300,000 |
Discontinued Operations - Net o
Discontinued Operations - Net operating loss carryforwards (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Discontinued Operations | ||
Reserved net operating loss carryforwards fully utilized to offset income from discontinuing operations | $ 24,304,000 | $ 24,304,000 |
Provision of income tax expense: | ||
Federal tax expense | 3,436,000 | 1,260,000 |
State tax expense | 1,565,000 | 540,000 |
Total tax expense | 5,001,000 | 1,800,000 |
Tax benefit for utilization of tax loss carryforwards | $ (5,001,000) | $ (1,800,000) |
Liquidity (Details)
Liquidity (Details) - USD ($) | Oct. 14, 2020 | Jul. 07, 2020 | May 26, 2020 | Jan. 31, 2020 | Mar. 31, 2019 | Aug. 31, 2020 | Aug. 31, 2019 |
Cash | $ 4,300,000 | ||||||
Working capital deficit | 2,800,000 | ||||||
Net Cash Provided by (Used in) Operating Activities, Continuing Operations | (15,628,000) | $ (10,030,000) | |||||
Repayment of convertible notes | 1,240,000 | 436,000 | |||||
Cash received at closing - asset sale | 9,700,000 | ||||||
Proceeds from underwritten public offering, net of offering costs | 11,479,000 | ||||||
Retained Earnings (Accumulated Deficit) | (119,462,000) | $ (44,115,000) | |||||
Percentage of customer contracts considered for exchange | 88.00% | ||||||
Customer contracts considered for exchange, amount | $ 9,700,000 | ||||||
Additional cash received | 2,500,000 | ||||||
Cash transferred | 900,000 | ||||||
Expected additional cash to be received | $ 5,600,000 | ||||||
Expected additional cash to be received, period | 4 years | ||||||
Working capital transferred | $ 1,600,000 | ||||||
Maximum | |||||||
Cash | 1,000,000 | ||||||
Convertible Debt [Member] | |||||||
Repayment of convertible notes | 1,200,000 | ||||||
Proceeds from initial public offering | $ 3,750,000 | ||||||
Proceeds from initial public offering, net of costs | $ 3,300,000 | ||||||
October 2020 Public Offering | Subsequent Event [Member] | |||||||
Equity financing | $ 12,000,000 | ||||||
Equity financing , net of fees | $ 10,700,000 | ||||||
Underwritten Public Offering [Member] | |||||||
Gross proceeds from issuance of shares | $ 12,000,000 | ||||||
Proceeds from underwritten public offering, net of offering costs | $ 10,300,000 | $ 11,500,000 | |||||
Overallotment | |||||||
Gross proceeds from issuance of shares | $ 1,350,000 | ||||||
Proceeds from underwritten public offering, net of offering costs | $ 1,240,000 |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) $ in Thousands | Aug. 31, 2020 | Aug. 31, 2019 |
Fixed Assets | $ 965,000 | $ 4,467,000 |
Accumulated depreciation & amortization | (390,000) | (312,000) |
Fixed assets, net | 575,000 | 4,155,000 |
Equipment [Member] | ||
Fixed Assets | 576,000 | 341,000 |
Furniture and Fixtures [Member] | ||
Fixed Assets | 348,000 | 348,000 |
Software [Member] | Minimum | ||
Fixed Assets | 3,737,000 | |
Lyons Capital LLc [Member] | Leasehold Improvements [Member] | ||
Fixed Assets | $ 41,000 | $ 41,000 |
Fixed Assets - Capitalized soft
Fixed Assets - Capitalized software costs (Details) - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 |
Fixed Assets (Details) | ||
Software costs capitalized | $ 3,737,000 | $ 3,737,000 |
Software costs impaired | $ (3,737,000) | |
Software costs, Net | $ 3,737,000 |
Fixed Assets - Additional Infor
Fixed Assets - Additional Information (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Fixed Assets (Details Narrative) | ||
Depreciation and amortization expense | $ 272,000 | $ 194,000 |
Workers Compensation (Details)
Workers Compensation (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | |
Continuing operations | |||
Workers Comp Deposit Beginning Balance | $ 859,000 | ||
Premiums paid | $ (32,000) | ||
Paid in deposits | $ 601,000 | 1,714,000 | |
Claim losses | (1,399,000) | (443,000) | |
Deposit refund | (271,000) | ||
Workers' Comp Deposit Ending balance | 1,029,000 | 1,827,000 | |
Less Currents Amount | (293,000) | ||
Long Term Balance | 736,000 | ||
Discontinued operations | |||
Workers Comp Deposit Beginning Balance | 3,015,000 | ||
Premiums paid | (112,000) | ||
Paid in deposits | 2,107,000 | 6,016,000 | |
Claim losses | (4,907,000) | (1,556,000) | |
Deposit refund | (952,000) | ||
Workers' Comp Deposit Ending balance | 3,611,000 | 6,411,000 | |
Less Currents Amount | (1,030,000) | ||
Long Term Balance | 2,581,000 | ||
Sunz Program One | Continuing operations | |||
Workers Comp Deposit Beginning Balance | 523,000 | ||
Paid in deposits | 601,000 | 1,714,000 | |
Claim losses | (1,399,000) | (410,000) | |
Workers' Comp Deposit Ending balance | 1,029,000 | 1,827,000 | |
Less Currents Amount | (293,000) | ||
Long Term Balance | 736,000 | ||
Sunz Program One | Discontinued operations | |||
Workers Comp Deposit Beginning Balance | 1,835,000 | ||
Paid in deposits | 2,107,000 | 6,016,000 | |
Claim losses | (4,907,000) | (1,440,000) | |
Workers' Comp Deposit Ending balance | 3,611,000 | 6,411,000 | |
Less Currents Amount | (1,030,000) | ||
Long Term Balance | 2,581,000 | ||
Everest Program One | Continuing operations | |||
Workers Comp Deposit Beginning Balance | 336,000 | ||
Premiums paid | (32,000) | ||
Claim losses | (33,000) | ||
Deposit refund | $ (271,000) | ||
Everest Program One | Discontinued operations | |||
Workers Comp Deposit Beginning Balance | $ 1,180,000 | ||
Premiums paid | (112,000) | ||
Claim losses | (116,000) | ||
Deposit refund | $ (952,000) |
Workers Compensation - Workers'
Workers Compensation - Workers' compensation liability (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | |
Continuing operations | |||
Workers Comp Liability Beginning Balance | $ 268,000 | ||
Claim loss developement | $ 1,738,000 | $ 1,581,000 | |
Paid in losses | (1,399,000) | (443,000) | |
Workers' comp deposits | 1,745,000 | 1,406,000 | |
Less Current Amount | (498,000) | ||
Long Term Balance | 1,247,000 | ||
Continuing operations | Everest Program One | |||
Workers Comp Liability Beginning Balance | 127,000 | ||
Claim loss developement | 110,000 | ||
Paid in losses | (33,000) | ||
Workers' comp deposits | 204,000 | 94,000 | |
Less Current Amount | (78,000) | ||
Long Term Balance | 126,000 | ||
Continuing operations | Sunz Program One | |||
Workers Comp Liability Beginning Balance | 141,000 | ||
Claim loss developement | 1,628,000 | 1,581,000 | |
Paid in losses | (1,399,000) | (410,000) | |
Workers' comp deposits | 1,541,000 | 1,312,000 | |
Less Current Amount | (420,000) | ||
Long Term Balance | 1,121,000 | ||
Discontinued operations | |||
Workers Comp Liability Beginning Balance | 938,000 | ||
Claim loss developement | 6,099,000 | 5,548,000 | |
Paid in losses | (4,907,000) | (1,556,000) | |
Workers' comp deposits | 6,122,000 | 4,930,000 | |
Less Current Amount | (1,745,000) | ||
Long Term Balance | 4,377,000 | ||
Discontinued operations | Everest Program One | |||
Workers Comp Liability Beginning Balance | 445,000 | ||
Claim loss developement | 388,000 | ||
Paid in losses | (116,000) | ||
Workers' comp deposits | 717,000 | 329,000 | |
Less Current Amount | (272,000) | ||
Long Term Balance | 445,000 | ||
Discontinued operations | Sunz Program One | |||
Workers Comp Liability Beginning Balance | $ 493,000 | ||
Claim loss developement | 5,711,000 | 5,548,000 | |
Paid in losses | (4,907,000) | (1,440,000) | |
Workers' comp deposits | 5,405,000 | $ 4,601,000 | |
Less Current Amount | (1,473,000) | ||
Long Term Balance | $ 3,932,000 |
Accrued Payroll and Related L_3
Accrued Payroll and Related Liabilities (Details) - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 |
Accrued Payroll and Related Liabilities | ||
Accrued Payroll | $ 1,970,000 | $ 1,212,000 |
Accrued Payroll Taxes | 3,324,000 | 984,000 |
Corporate employee accrued paid time off | 457,000 | 363,000 |
Accrued Payroll and related liabilities | $ 5,752,000 | $ 2,559,000 |
Senior Convertible Notes Paya_3
Senior Convertible Notes Payable - Senior convertible notes payable (Details) - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 |
Senior Convertible Notes Payable | ||
Senior Convertible Notes, Principal | $ 0 | $ 6,808,000 |
Less debt discount and deferred financing costs | 0 | (3,457,000) |
Total outstanding convertible notes, net | 0 | 3,351,000 |
Less current portion of convertible notes payable | 0 | (3,351,000) |
Long-term convertible notes payable | $ 0 | $ 0 |
Senior Convertible Notes Paya_4
Senior Convertible Notes Payable - Assumptions to conversion features and exchange warrants (Details) | 12 Months Ended |
Aug. 31, 2020$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk free rate | 0.47% |
Volatility | 134.00% |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Life of instrument in years | 5 years |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Life of instrument in years | 7 years |
March 2020 Conversion Feature | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Dividend yield | 0.00% |
March 2020 Conversion Feature | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk free rate | 0.08% |
Market Price Per Share | $ 6.63 |
Life of instrument in years | 5 months 19 days |
Volatility | 117.00% |
March 2020 Conversion Feature | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk free rate | 0.17% |
Market Price Per Share | $ 6.68 |
Life of instrument in years | 1 year 1 month 24 days |
Volatility | 139.00% |
March 2020 Exchange Warrants | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk free rate | 0.038% |
Life of instrument in years | 5 years 6 months |
Volatility | 117.00% |
Dividend yield | 0.00% |
March 2020 Exchange Warrants | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Market Price Per Share | $ 6.63 |
March 2020 Exchange Warrants | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Market Price Per Share | $ 6.68 |
Senior Convertible Notes Paya_5
Senior Convertible Notes Payable - Rolls forward the convertible notes payable (Details) - USD ($) | Mar. 24, 2020 | Aug. 31, 2020 | Aug. 31, 2019 |
Gross Principal | |||
Balance at August 31, 2019 | $ 6,808,000 | ||
Repayments in cash | $ (1,240,000) | ||
Conversions to common shares | (6,060,000) | ||
Notes issued - December 2019 exchange | 267,000 | ||
Additional note discount issued - December 2019 exchange | 0 | ||
Acceleration of discount and deferred financing cost - extinguishment | 0 | ||
Additional notes issued - March 2020 exchange | 166,000 | ||
Interest capitalized - March 2020 exchange | 59,000 | ||
Additional note discount issued - March 2020 exchange | 0 | ||
Amortization of Interest Expense | 0 | ||
Balance at August 31, 2020 | 0 | ||
Deferred Financing Costs | |||
Beginning Balance at August 31, 2018, Deferred Financing Costs | (344,000) | ||
Repayments in cash | 0 | ||
Conversions to common shares | 89,000 | ||
Notes issued - December 2019 exchange | 0 | ||
Additional note discount issued - December 2019 exchange | 0 | ||
Acceleration of discount and deferred financing cost - extinguishment | 88,000 | ||
Additional notes issued - March 2020 exchange | 0 | ||
Interest capitalized - March 2020 exchange | 0 | ||
Additional note discount issued - March 2020 exchange | 0 | ||
Amortization of Interest Expense | 167,000 | ||
Ending Long-term Balance at August 31, 2019, Deferred Financing Costs | 0 | ||
Note Discount | |||
Beginning Balance at August 31, 2019, Note Discount | (3,113,000) | ||
Repayments in cash | 0 | ||
Conversions to common shares | 3,402,000 | ||
Notes issued - December 2019 exchange | 0 | ||
Additional note discount issued - December 2019 exchange | 467,000 | ||
Acceleration of discount and deferred financing cost - extinguishment | 960,000 | ||
Additional notes issued - March 2020 exchange | 0 | ||
Interest capitalized - March 2020 exchange | 0 | ||
Additional note discount issued - March 2020 exchange | $ 2,825,000 | (2,825,000) | |
Amortization of Interest Expense | 2,043,000 | ||
Long-term Balance at August 31, 2019, Note Discount | 0 | ||
Net | |||
Beginning Balance at August 31, 2019, Net | $ 3,351,000 | ||
Repayments in cash | (1,240,000) | ||
Conversions to common shares | (2,569,000) | ||
Notes issued - December 2019 exchange | 267,000 | ||
Additional note discount issued - December 2019 exchange | (467,000) | ||
Acceleration of discount and deferred financing cost - extinguishment | 1,048,000 | ||
Additional notes issued - March 2020 exchange | 166,000 | ||
Interest capitalized - March 2020 exchange | 59,000 | ||
Additional note discount issued - March 2020 exchange | (2,825,000) | ||
Amortization of Interest Expense | 2,210,000 | ||
Ending Long Term Balance at August 31, 2019, net | $ 0 |
Senior Convertible Notes Paya_6
Senior Convertible Notes Payable - Additional information (Details) - USD ($) | May 31, 2020 | May 18, 2020 | Mar. 24, 2020 | Mar. 23, 2020 | Mar. 22, 2020 | Dec. 11, 2019 | Dec. 06, 2019 | Jan. 31, 2020 | Aug. 31, 2020 | Aug. 31, 2019 |
Amortized Interest expense | $ 2,210,000 | $ 1,433,000 | ||||||||
Gross principal | 6,808,000 | |||||||||
Conversion price | $ 9.20 | $ 12.20 | ||||||||
Value for debt conversion | 200,000 | |||||||||
Additional note discount | $ 567,000 | |||||||||
Expense related to extinguishment of convertible notes | $ 1,592,000 | (1,592,000) | ||||||||
Amount of legal judgement on debt instrument | 500,000 | |||||||||
Amount of legal judgement on default interest | 52,000 | |||||||||
Repayment of legal judgement on debt instrument | 310,000 | |||||||||
Additional Loss On Conversion Of Debt | $ 57,000 | |||||||||
Recovery from debt litigation settlement | 760,000 | |||||||||
Accrued interest payable | 1,800,000 | |||||||||
Debt instrument, conversion original amount | $ 1,047,000 | |||||||||
Debt instrument converted amount shares issued | 135,508 | |||||||||
Accrued default interest | $ 25,000 | |||||||||
Loss on pro rata portion of the unamortized note discount and deferred financing fees | $ 413,000 | |||||||||
Discount on the exchange dates | 2,825,000 | (2,825,000) | ||||||||
Amortization debt discount, debt issuance cost | $ 2,419,000 | 6,749,000 | $ 5,607,000 | |||||||
June 2018 Notes Due September 6, 2019 [Member] | ||||||||||
Gross principal | 1,466,000 | |||||||||
December 2018 Notes Due December 31, 2019 [Member] | ||||||||||
Gross principal | 867,000 | |||||||||
March 2019 Notes Due September 12, 2020 [Member] | ||||||||||
Gross principal | $ 4,475,000 | |||||||||
March 2019 [Member] | ||||||||||
Debt amount converted | $ 130,000 | |||||||||
December 2019 [Member] | ||||||||||
Conversion price | $ 12.20 | |||||||||
Percentage of principal increased | 10.00% | |||||||||
Coupon rate | 0.00% | |||||||||
Interest rate | 18.00% | |||||||||
Debt Instrument, Convertible, Floor Price | $ 40 | |||||||||
Amortization of principal in cash premium | 12.50% | |||||||||
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 $1.84 per share, 80% for all alternate event of default conversion, or 85% if such alternate conversion is an alternate optional conversion;Redemption at the option of the Company at 15% premium at any time. | |||||||||
Exchange Agreement [Member] | ||||||||||
Common stock issued for note exchange, shares | 24,049 | |||||||||
Exchange Agreement [Member] | March 2019 [Member] | ||||||||||
Principal outstanding | $ 2,445,000 | |||||||||
Conversion price | $ 12.20 | |||||||||
Principal outstanding, Revised | 2,690,000 | |||||||||
Principal Outstanding Combined Revised Balance | 2,934,000 | |||||||||
Common stock issued for note exchange, shares | 12,915 | |||||||||
Debt amount converted | $ 28,000 | |||||||||
Principal outstanding, Revised | $ 2,690,000 | |||||||||
Exchange Agreement [Member] | March 2019 Convertible Notes [Member] | ||||||||||
Conversion price | $ 40 | |||||||||
Percentage of principal balance payable in cash | 12.50% | |||||||||
Additional consideration | $ 200,000 | |||||||||
Exchange Agreement [Member] | December 2019 [Member] | ||||||||||
Conversion price | $ 12.20 | $ 12.20 | ||||||||
Additional consideration | $ 200,000 | |||||||||
Principal Outstanding Combined Revised Balance | $ 2,934,000 | |||||||||
Common stock issued for note exchange, shares | 21,750 | 24,049 | ||||||||
Value for debt conversion | $ 200,000 | |||||||||
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 | |||||||||
Exchange Agreement [Member] | June 2018 December 2018 And March 2019 Notes | ||||||||||
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] | June 2018 And December 2018 Notes | ||||||||||
Conversion price | $ 12.20 | |||||||||
Common stock issued for note exchange, shares | 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 | |||||||||
Exchange Agreement [Member] | December 2018 Notes [Member] | ||||||||||
Principal outstanding | 222,000 | |||||||||
Principal outstanding, Revised | $ 244,000 | |||||||||
Interest rate | 10.00% | |||||||||
Principal outstanding, Revised | $ 244,000 | |||||||||
Amendment and Exchange Agreements [Member] | ||||||||||
Conversion price | $ 9.20 | |||||||||
Debt instrument, conversion original amount | $ 167,000 | |||||||||
Debt instrument converted amount shares issued | 82,654 | |||||||||
Capitalization of accrued default interest | $ 59,000 | |||||||||
Warrants issued due to conversion of debt | 162,950 | |||||||||
Warrants exercise price | $ 10.17 | |||||||||
Alpha Amendment and Exchange Agreement [Member] | ||||||||||
Debt instrument, conversion original amount | $ 868,000 | $ 723,000 | ||||||||
Debt instrument converted amount shares issued | 94,298 | 66,123 | ||||||||
Capitalization of accrued default interest | $ 51,000 | |||||||||
Warrants issued due to conversion of debt | 130,360 | |||||||||
Agreed additional notes | $ 145,000 | |||||||||
Osher Amendment and Exchange Agreement [Member] | ||||||||||
Debt instrument, conversion original amount | $ 130,000 | $ 108,000 | ||||||||
Debt instrument converted amount shares issued | 14,023 | 16,531 | ||||||||
Capitalization of accrued default interest | $ 8,000 | |||||||||
Warrants issued due to conversion of debt | 32,590 | |||||||||
Agreed additional notes | $ 22,000 | |||||||||
Exchange Agreement with CVI [Member] | ||||||||||
Debt instrument, conversion original amount | $ 1,829,000 | $ 1,829,000 | ||||||||
Debt instrument converted amount shares issued | 198,756 | 260,719 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of warrants outstanding (Details) - $ / shares | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Number of shares | ||
Number of shares outstanding, beginning balance | 107,409 | |
Issued | 1,840,773 | |
(Cancelled) | (45,698) | |
(Exercised) | (6,275) | |
Number of shares outstanding, ending balance | 1,896,209 | |
Number of shares Exercisable | 1,472,540 | |
Weighted remaining life (years) | ||
Weighted remaining life (years), beginning | 4 years 3 months 18 days | |
Weighted remaining life (years), issued | 5 years 1 month 6 days | |
Weighted remaining life (years), cancelled | 4 years 3 months 18 days | |
Weighted remaining life (years), exercised | 3 years 7 months 6 days | |
Weighted remaining life (years), ending | 4 years 9 months 18 days | |
Weighted Remaining Life (Years) Exercisable | 4 years 8 months 12 days | |
Weighted average exercise prices | ||
Weighted average exercise prices, beginning | $ 83.21 | |
Weighted average exercise prices, issued | 7.03 | |
Weighted average exercise prices, cancelled | 78.13 | |
Weighted average exercise prices, exercised | 5.29 | |
Weighted average exercise prices, ending | 8.42 | |
Weighted Average Exercise Prices Exercisable | $ 7.91 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of information about warrants outstanding (Details) - $ / shares | 1 Months Ended | 12 Months Ended | |
Dec. 31, 2019 | Aug. 31, 2020 | Aug. 31, 2019 | |
Exercise price (in dollars per share) | $ 5.30 | $ 43.60 | |
May 2020 Offering Common Warrants Member | |||
Warrants outstanding | 1,277,580 | ||
Weighted average life of outstanding warrants in years | 4 years 8 months 12 days | ||
Exercise price (in dollars per share) | $ 5.40 | ||
May 2020 Offering Underwriter Warrants Member | |||
Warrants outstanding | 111,108 | ||
Weighted average life of outstanding warrants in years | 4 years 8 months 12 days | ||
Exercise price (in dollars per share) | $ 5.40 | ||
March 2020 Exchange Warrants Member | |||
Warrants outstanding | 423,669 | ||
Weighted average life of outstanding warrants in years | 5 years 1 month 6 days | ||
Exercise price (in dollars per share) | $ 10.17 | ||
Amended March 2019 Notes Warrants [Member] | |||
Warrants outstanding | 13,015 | 66,288 | |
Weighted average life of outstanding warrants in years | 3 years 6 months | ||
Exercise price (in dollars per share) | $ 40 | ||
March 2019 Services Warrants [Member] | |||
Warrants outstanding | 3,366 | ||
Weighted average life of outstanding warrants in years | 3 years 6 months | ||
Exercise price (in dollars per share) | $ 70 | ||
June 2018 Notes Warrants [Member] | |||
Warrants outstanding | 6,276 | ||
Weighted average life of outstanding warrants in years | 3 years 3 months 18 days | ||
Exercise price (in dollars per share) | $ 40 | ||
June 2018 Services Warrants [Member] | |||
Warrants outstanding | 5,422 | ||
Weighted average life of outstanding warrants in years | 3 years 3 months 18 days | ||
Exercise price (in dollars per share) | $ 99.60 | ||
2017 PIPE Warrants [Member] | |||
Warrants outstanding | 2,500 | ||
Weighted average life of outstanding warrants in years | 1 year 9 months 18 days | ||
Exercise price (in dollars per share) | $ 276 | ||
Warrant [Member] | |||
Warrants outstanding | 1,896,209 | ||
Weighted average life of outstanding warrants in years | 4 years 9 months 18 days | ||
Exercise price (in dollars per share) | $ 7.91 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional information (Details) | Aug. 31, 2020USD ($)$ / sharesshares | Jul. 07, 2020USD ($)$ / sharesshares | Jul. 04, 2020shares | Jul. 01, 2020 | Jun. 11, 2020USD ($)$ / sharesshares | Jun. 04, 2020 | May 26, 2020USD ($)$ / sharesshares | May 25, 2020 | May 20, 2020$ / sharesshares | Mar. 25, 2020USD ($)shares | Mar. 22, 2020USD ($) | Dec. 17, 2019 | Dec. 31, 2019$ / sharesshares | Aug. 31, 2020USD ($)$ / sharesshares | Aug. 31, 2020USD ($)$ / sharesshares | Aug. 31, 2019USD ($)$ / sharesshares | Jul. 31, 2020shares | Jan. 31, 2020$ / shares | Aug. 31, 2018shares |
Preferred stock, per share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||||||
Compensation expense | $ | $ 62,100,000 | $ 1,526,000 | $ 632,000 | ||||||||||||||||
Preferred options Exercised | |||||||||||||||||||
Fair value exercise price per share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||||||||
Proceeds from exercise of warrants | (45,698) | ||||||||||||||||||
Proceeds from exercise of warrants | $ | $ 33,000 | $ 660,000 | |||||||||||||||||
Exercise price (in dollars per share) | $ / shares | $ 5.30 | $ 43.60 | |||||||||||||||||
Number of shares outstanding, Beginning balance | 33,719 | ||||||||||||||||||
Expected maturity period | 10 years | 3 years 9 months 7 days | |||||||||||||||||
Risk-free interest rate | 0.47% | ||||||||||||||||||
Volatility | 134.00% | ||||||||||||||||||
Shares conversion ratio | 1 | 1 | 0.025 | 0.025 | |||||||||||||||
Reverse split description | On December 17, 2019, the Company effected a 1 for 40 reverse stock split. All common stock and common stock equivalents are presented retroactively to reflect the reverse split. | ||||||||||||||||||
Reverse stock split | 1 | 1 | 0.025 | 0.025 | |||||||||||||||
Debt amount qualified for conversion | $ | $ 1,047,000 | ||||||||||||||||||
Common stock shares issued | 16,902,146 | 16,902,146 | 16,902,146 | 909,222 | |||||||||||||||
Issued | 1,840,773 | ||||||||||||||||||
Price per share | $ / shares | $ 3.62 | $ 3.62 | $ 3.62 | ||||||||||||||||
Amended March 2019 Notes Warrants [Member] | |||||||||||||||||||
Exercise price (in dollars per share) | $ / shares | $ 40 | ||||||||||||||||||
Issued | 53,273 | ||||||||||||||||||
Warrants outstanding | 13,015 | 66,288 | |||||||||||||||||
Amended March 2019 Notes Warrants [Member] | Minimum | |||||||||||||||||||
Preferred stock, per share | $ / shares | $ 40 | ||||||||||||||||||
Amended March 2019 Notes Warrants [Member] | Maximum | |||||||||||||||||||
Preferred stock, per share | $ / shares | $ 70 | ||||||||||||||||||
May 2020 Common Warrant [Member] | |||||||||||||||||||
Warrants outstanding | 111,108 | ||||||||||||||||||
Percentage on aggregate number of shares of common stock | 5.00% | ||||||||||||||||||
Price per share | $ / shares | $ 5.94 | ||||||||||||||||||
Percentage of warrants exercisable price on offering price | 110.00% | ||||||||||||||||||
May 2020 Common Warrant [Member] | Minimum | |||||||||||||||||||
Warrants term | 6 months | ||||||||||||||||||
May 2020 Common Warrant [Member] | Maximum | |||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||
June 2018 Notes Warrants [Member] | |||||||||||||||||||
Exercise price (in dollars per share) | $ / shares | $ 40 | ||||||||||||||||||
Warrants outstanding | 6,276 | ||||||||||||||||||
Director [Member] | |||||||||||||||||||
Shares issued for services rendered | 856 | ||||||||||||||||||
Shares issued for services | $ | $ 75,000 | ||||||||||||||||||
Convertible Notes Payable [Member] | |||||||||||||||||||
Stock Issued During Period, Shares, Conversion of Convertible Securities | 628,353 | ||||||||||||||||||
Shares issued in exchange of debt | 628,353 | ||||||||||||||||||
Debt amount qualified for conversion | $ | $ 6,060,000 | ||||||||||||||||||
Debt default interest | $ | $ 178,000 | $ 178,000 | $ 178,000 | ||||||||||||||||
Senior Convertible Notes Holder | |||||||||||||||||||
Shares issued for services rendered | 82,653 | ||||||||||||||||||
Shares issued for services | $ | $ 552,000 | ||||||||||||||||||
March 2019 Convertible Notes [Member] | |||||||||||||||||||
Amount of debt exchanged | $ | $ 2,700,000 | $ 2,700,000 | $ 2,700,000 | ||||||||||||||||
December 2019 [Member] | |||||||||||||||||||
Common stock shares issued | 21,750 | 21,750 | 21,750 | ||||||||||||||||
Value of shares issued | $ | $ 200,000 | $ 200,000 | $ 200,000 | ||||||||||||||||
Amount of debt exchanged | $ | $ 2,900,000 | $ 2,900,000 | $ 2,900,000 | ||||||||||||||||
Preferred Stock | |||||||||||||||||||
Preferred options Exercised | 294,490 | 12,794,220 | |||||||||||||||||
Preferred Stock Shares Options Outstanding and Exercisable | 11,840,070 | ||||||||||||||||||
Number option additionally available for grant to founder shareholders | 12,500,000 | ||||||||||||||||||
Shares conversion ratio | 1 | ||||||||||||||||||
Reverse stock split | 1 | ||||||||||||||||||
Preferred Stock | May 2020 Common Warrant [Member] | |||||||||||||||||||
Price per share | $ / shares | $ 2.52 | $ 2.52 | $ 2.52 | ||||||||||||||||
Preferred Stock | Scott W Absher [Member] | |||||||||||||||||||
Preferred options Exercised | 12,500,000 | ||||||||||||||||||
Number of options available for grant to founder shareholders | 12,500,000 | ||||||||||||||||||
Stock Option | Scott W Absher [Member] | |||||||||||||||||||
Number of options available for grant to founder shareholders | 50,000,000 | ||||||||||||||||||
Stock Option | Preferred Stock | |||||||||||||||||||
Convertible preferred stock | 24,634,560 | ||||||||||||||||||
Common Share Units [Member] | May 2020 Common Warrant [Member] | |||||||||||||||||||
Number of Shares of Common Stock to be Purchased Accompanied by Common Warrant | 0.5 | ||||||||||||||||||
Units issued | 166,500 | ||||||||||||||||||
Common Share Units [Member] | Scott W Absher [Member] | |||||||||||||||||||
Shares issued upon conversion | 12,500,000 | ||||||||||||||||||
Common shares lock up period | 2 years | ||||||||||||||||||
Warrant [Member] | |||||||||||||||||||
Exercise price (in dollars per share) | $ / shares | $ 7.91 | ||||||||||||||||||
Shares issued for services rendered | 6,275 | ||||||||||||||||||
Shares issued for services | $ | $ 33,000 | ||||||||||||||||||
Exercise price of warrants | $ / shares | $ 0.001 | ||||||||||||||||||
Warrants outstanding | 1,896,209 | ||||||||||||||||||
Price per share | $ / shares | $ 5.399 | ||||||||||||||||||
Warrants to acquire shares of common stock | 323,310 | ||||||||||||||||||
Underwritten Public Offering [Member] | |||||||||||||||||||
Shares of common stock issued | 2,222,160 | ||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 12,000,000 | ||||||||||||||||||
Underwritten Public Offering [Member] | May 2020 Common Warrant [Member] | |||||||||||||||||||
Shares of common stock issued | 2,472,500 | ||||||||||||||||||
Offering costs | $ | 1,700,000 | ||||||||||||||||||
Warrants to acquire shares of common stock | 1,277,580 | ||||||||||||||||||
Underwritten Public Offering [Member] | Common Share Units [Member] | |||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 12,000,000 | ||||||||||||||||||
Underwritten Public Offering [Member] | Common Share Units [Member] | May 2020 Common Warrant [Member] | |||||||||||||||||||
Shares of common stock issued | 1,898,850 | ||||||||||||||||||
Price per share | $ / shares | $ 5.40 | ||||||||||||||||||
Exercise price of warrants | $ / shares | $ 5.40 | $ 5.40 | $ 5.40 | ||||||||||||||||
Underwritten Public Offering [Member] | Warrant [Member] | May 2020 Common Warrant [Member] | |||||||||||||||||||
Shares of common stock issued | 323,310 | ||||||||||||||||||
Price per share | $ / shares | $ 5.399 | ||||||||||||||||||
Overallotment | |||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 1,350,000 | ||||||||||||||||||
Overallotment | May 2020 Common Warrant [Member] | |||||||||||||||||||
Shares of common stock issued | 166,500 | ||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 450,000 | ||||||||||||||||||
Proceeds from issuance of units | $ | $ 900,000 | ||||||||||||||||||
Units issued | 83,840 | ||||||||||||||||||
Price per share | $ / shares | $ 5.40 | ||||||||||||||||||
Overallotment | Common Share Units [Member] | May 2020 Common Warrant [Member] | |||||||||||||||||||
Price per share | $ / shares | $ 5.40 |
Stock Based Compensation - Opti
Stock Based Compensation - Option activity (Details) - $ / shares | Jul. 01, 2020 | Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 |
Number of Options | ||||
Options outstanding, beginning balance | 33,719 | |||
Granted | 1,235,159 | 1,506,096 | 36,073 | |
Exercised | ||||
Forfeited | (158,105) | (19,043) | ||
Options outstanding, ending balance | 1,398,740 | 50,749 | ||
Weighted Average Remaining Contractual Life (In years) | ||||
Weighted Average Remaining Contractual Life In Years, beginning balance | 9 years 9 months 7 days | |||
Weighted Average Remaining Contractual Life In Years, Granted | 10 years | 10 years | ||
Weighted Average Remaining Contractual Life In Years, Forfeited | 9 years 7 months 6 days | 8 years 22 days | ||
Weighted Average Remaining Contractual Life In Years, Ending balance | 9 years 6 months 4 days | 9 years | ||
Weighted Average Exercise Price | ||||
Weighted Average Exercise Price Beginning | $ 138 | |||
Granted | $ 5.30 | 43.60 | ||
Exercised | ||||
Forfeited | 56.08 | 111.20 | ||
Weighted Average Exercise Price Ending | $ 8.18 | $ 95.20 |
Stock Based Compensation - Op_2
Stock Based Compensation - Option vesting activity (Details) - $ / shares | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | |
Number of Option | |||
Options Vested, Beginning balance | 4,513 | ||
Vested | 19,414 | 7,410 | |
Exercised | |||
Forfeited | (1,295) | (1,632) | |
Options Vested, Ending balance | 28,410 | 10.291 | |
Weighted Average Remaining Contractual Life (In years) | |||
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years 7 months 6 days | ||
Weighted Average Remaining Contractual Life In Years, Vested | 8 years 1 month 6 days | 8 years 7 months 6 days | |
Weighted Average Remaining Contractual Life In Years, Forfeited | 6 years 4 months 24 days | 8 years 1 month 6 days | |
Weighted Average Remaining Contractual Life In Years, Ending balance | 7 years 2 months 12 days | 8 years | |
Weighted Average Exercise Price | |||
Weighted Average Exercise Price Beginning | $ 182.40 | ||
Vested | $ 89.06 | 137.20 | |
Exercised | |||
Forfeited | 140.09 | 164.40 | |
Weighted Average Exercise Price Ending | $ 115.10 | $ 152.80 |
Stock Based Compensation - Stoc
Stock Based Compensation - Stock options outstanding and vested (Details) | 12 Months Ended |
Aug. 31, 2020$ / sharesshares | |
Exercise Prices One [Member] | Minimum | |
Exercise Prices | $ 3.44 |
Exercise Prices One [Member] | Maximum | |
Exercise Prices | 10 |
Exercise Prices Two [Member] | Minimum | |
Exercise Prices | 10.01 |
Exercise Prices Two [Member] | Maximum | |
Exercise Prices | 40 |
Exercise Prices Three [Member] | Minimum | |
Exercise Prices | 40.01 |
Exercise Prices Three [Member] | Maximum | |
Exercise Prices | 80 |
Exercise Prices Four [Member] | Minimum | |
Exercise Prices | 80.01 |
Exercise Prices Four [Member] | Maximum | |
Exercise Prices | 120 |
Exercise Prices Five [Member] | Minimum | |
Exercise Prices | 120.01 |
Exercise Prices Five [Member] | Maximum | |
Exercise Prices | 160 |
Exercise Prices Six [Member] | Minimum | |
Exercise Prices | 160.01 |
Exercise Prices Six [Member] | Maximum | |
Exercise Prices | $ 391.60 |
Options Vested Two [Member] | |
Number of options vested | shares | 1,636 |
Weighted Average Remaining Contractual Life In Years | 8 years 9 months 18 days |
Weighted Average Exercise Price | $ 24.84 |
Options Vested Three [Member] | |
Number of options vested | shares | 7,798 |
Weighted Average Exercise Price | $ 51.22 |
Weighted Average Remaining Contractual Life In Years | 8 years 7 months 6 days |
Options Vested Four [Member] | |
Number of options vested | shares | 7,295 |
Weighted Average Exercise Price | $ 102.63 |
Weighted Average Remaining Contractual Life In Years | 7 years 8 months 12 days |
Options Vested Five [Member] | |
Number of options vested | shares | 10,558 |
Weighted Average Exercise Price | $ 155.41 |
Weighted Average Remaining Contractual Life In Years | 7 years |
Options Vested Six [Member] | |
Number of options vested | shares | 1,124 |
Weighted Average Remaining Contractual Life In Years | 6 years 10 months 24 days |
Weighted Average Exercise Price | $ 391.60 |
Options Vested [Member] | |
Number of options vested | shares | 28,411 |
Weighted Average Exercise Price | $ 115.09 |
Weighted Average Remaining Contractual Life In Years | 7 years 2 months 12 days |
Options Outstanding and Exercisable One [Member] | |
Number of shares non-exercisable | shares | 1,357,137 |
Weighted Average Remaining Contractual Life In Years | 9 years 10 months 24 days |
Weighted Average Exercise Price | $ 5.31 |
Options Outstanding and Exercisable Two [Member] | |
Number of options | shares | 3,917 |
Weighted Average Remaining Contractual Life In Years | 8 years 9 months 18 days |
Weighted Average Exercise Price | $ 23 |
Options Outstanding and Exercisable Three [Member] | |
Number of options | shares | 13,509 |
Weighted Average Remaining Contractual Life In Years | 8 years 7 months 6 days |
Weighted Average Exercise Price | $ 51.21 |
Options Outstanding and Exercisable Four [Member] | |
Number of options | shares | 10,427 |
Weighted Average Remaining Contractual Life In Years | 7 years 8 months 12 days |
Weighted Average Exercise Price | $ 102.92 |
Options Outstanding and Exercisable Five [Member] | |
Number of options | shares | 12,625 |
Weighted Average Remaining Contractual Life In Years | 7 years |
Weighted Average Exercise Price | $ 155.28 |
Options Outstanding And Exercisable Six [Member] | |
Number of options | shares | 1,124 |
Weighted Average Remaining Contractual Life In Years | 6 years 10 months 24 days |
Weighted Average Exercise Price | $ 391.60 |
Options Outstanding and Exercisable [Member] | |
Number of shares non-exercisable | shares | 1,357,137 |
Number of options | shares | 41,603 |
Weighted Average Remaining Contractual Life In Years | 7 years 8 months 12 days |
Weighted Average Exercise Price | $ 8.17 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Details) - USD ($) | Jul. 01, 2020 | Mar. 25, 2020 | Aug. 31, 2020 | Aug. 31, 2020 | Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 |
Number of shares authorized | 1,235,159 | 1,506,096 | 36,073 | ||||
Exercise price (in dollars per share) | $ 5.30 | $ 43.60 | |||||
Contractual life | 10 years | 3 years 9 months 7 days | |||||
Vesting period | 4 years | ||||||
Number of shares cancelled | 148,959 | ||||||
Compensation expense | $ 62,100,000 | $ 1,526,000 | $ 632,000 | ||||
Acceleration options | 9,737 | ||||||
Stock-based compensation related to acceleration options | $ 483,000 | ||||||
Weighted average vesting period for unrecognized deferred share-based compensation (in years) | 3 years 8 months 12 days | ||||||
Unrecognized deferred share-based compensation expense expected to be recognized | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | ||||
Share Based Compensation [Member] | |||||||
Compensation expense | 1,300,000 | $ 369,000 | |||||
Share based compensation | $ 5,700,000 | ||||||
Remaining weighted average vesting periods | 1 year 9 months 18 days | ||||||
Aggregate intrinsic value | $ 22,000 | $ 575,000 | |||||
Incentive stock options | |||||||
Number of shares authorized | 995,000 | 270,937 | |||||
Exercise price (in dollars per share) | $ 5.40 | ||||||
Number of shares non-exercisable | 1,357,137 | ||||||
Non-qualifying stock options | |||||||
Number of shares authorized | 280,159 | ||||||
Minimum | Incentive stock options | |||||||
Exercise price (in dollars per share) | $ 3.44 | ||||||
Maximum | Incentive stock options | |||||||
Exercise price (in dollars per share) | $ 5.40 | ||||||
Vesting on July 1, 2021 | |||||||
Number of shares of common stock issuable | 250,000 | ||||||
Vesting percentage | 25.00% | ||||||
Vesting ratably over the following three years | |||||||
Number of shares of common stock issuable | 3,000,000 | ||||||
Vesting period | 3 years |
Related Parties - Additional In
Related Parties - Additional Information (Details) - USD ($) | Jul. 18, 2019 | Jun. 06, 2019 | Aug. 31, 2020 | Aug. 31, 2019 | Dec. 23, 2019 |
Professional fees | $ 3,366,000 | $ 3,918,000 | |||
Common stock shares issued | 16,902,146 | 909,222 | |||
Common stock, shares value | $ 1,000 | $ 0 | |||
Stock issued for services | 75,000 | 263,000 | |||
J. Steven Holmes [Member] | |||||
Professional fees | $ 750,000 | $ 7 | |||
Messrs Higgins [Member] | |||||
Common stock shares issued | 428 | ||||
Messrs Higgins And White [Member] | |||||
Common stock shares issued | 856 | ||||
Common stock, shares value | $ 75,000 | ||||
J. Stephan Holmes [Member] | |||||
Proceeds from cash against future services | $ 325,000 | ||||
Price per share | $ 0.58 | ||||
Returned shares of common stock | 558,132 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Aug. 31, 2019 | Aug. 31, 2018 |
Deferred tax liabilities: | ||
Depreciation | $ (111,000) | $ (122,000) |
Software development costs | (265,000) | (845,000) |
Note receivable | (1,132,000) | |
Total deferred tax liabilities | (1,508,000) | (967,000) |
Deferred tax assets: | ||
Net operating loss carryforward | 9,362,000 | (9,157,000) |
Business interest | 3,087,000 | (2,539,000) |
Workers' compensation accruals | 2,202,000 | 1,763,000 |
Stock-based compensation | 759,000 | 354,000 |
Deferred rent | 14,000 | 15,000 |
Total deferred tax assets | 15,424,000 | 13,828,000 |
Valuation allowance | (13,916,000) | (12,861,000) |
Total net deferred tax assets | $ 1,508,000 | $ 967,000 |
Income Taxes - Income tax expen
Income Taxes - Income tax expense (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | |
Current | |||
Federal | |||
State | |||
Total current | |||
Deferred | |||
Federal | (4,670,000) | 3,162,000 | |
State | (1,915,000) | 197,000 | |
Total deferred | (6,584,000) | 3,359,000 | |
Change in valuation allowance | 6,584,000 | (3,359,000) | |
Income Tax Expense (Benefit), Total |
Income Taxes - Effective income
Income Taxes - Effective income tax rate (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | |
Income Taxes | |||
Federal statutory rate (21%) | $ 19,000,000 | $ 2,673,000 | |
Non-deductible penalties and other permanent differences | (49,000) | (430,000) | |
State taxes (8.84%) | 1,688,000 | 1,116,000 | |
Redetermination of prior year taxes | (184,000) | ||
Loss on debt extinguishment | (747,000) | ||
Preferred Option exchange expense | (13,039,000) | ||
Loss on inducement | (453,000) | ||
Change in fair value of derivative and warrant liability | (2,569,000) | ||
Change in valuation allowance | (6,584,000) | (3,359,000) | |
Income Tax Expense (Benefit), Total |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
Income Taxes | ||
Net operating loss carryforwards | $ 34,115,000 | $ 30,686,000 |
ExpireYear | P2029Y | |
Change in valuation allowance | $ 6,584,000 | 3,359,000 |
Net operating losses | $ 19,971,000 | $ 3,843,000 |
Net operating loss carryforwards, limitations on use | These NOLs have an indefinite life but are limited to 80%. |
Commitments - Future minimum le
Commitments - Future minimum lease payments under non-cancelable operating leases (Details) - Operating Lease [Member] | Aug. 31, 2020USD ($) |
2021 | $ 1,223,000 |
2022 | 1,360,000 |
2023 | 1,044,000 |
2024 | 1,075,000 |
2025 | 1,108,000 |
Thereafter | 1,652,000 |
Total minimum payments | $ 7,462,000 |
Commitments - Additional Inform
Commitments - Additional Information (Details) - USD ($) | 12 Months Ended | |||
Aug. 31, 2020 | Aug. 31, 2019 | Jul. 09, 2019 | Apr. 15, 2016 | |
Employer contribution plan | $ 0 | $ 0 | ||
Irvine Facility [Member] | ||||
Term of operating lease | 5 years | |||
Repurchase of Common Shares | 10 |
Contingencies (Details)
Contingencies (Details) - USD ($) | Jan. 22, 2020 | Jan. 17, 2020 | Jan. 31, 2020 | Apr. 30, 2019 | Mar. 31, 2016 | May 31, 2020 | Aug. 31, 2020 | Jan. 16, 2020 | Nov. 30, 2019 | Aug. 31, 2019 | Aug. 27, 2019 | Jul. 09, 2019 | Jun. 20, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Apr. 15, 2016 |
Common stock shares issued | 16,902,146 | 909,222 | |||||||||||||||
Irvine Facility [Member] | |||||||||||||||||
Term of operating lease | 5 years | ||||||||||||||||
Repurchase of Common Shares | 10 | ||||||||||||||||
Kadima Ventures [Member] | Software Development [Member] | |||||||||||||||||
Software development cost | $ 2,200,000 | ||||||||||||||||
Software modules cost | $ 11,000,000 | ||||||||||||||||
Additional cost | $ 11,000,000 | ||||||||||||||||
Revised development costs | 7,200,000 | ||||||||||||||||
Additional software modules cost demanded | $ 12,000,000 | ||||||||||||||||
Damages in excess amount | $ 11,000,000 | ||||||||||||||||
Alpha Capital v. ShiftPixy, Inc. [Member] | |||||||||||||||||
Convertible 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] | |||||||||||||||||
Convertible 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) $ / shares in Units, $ in Millions | Oct. 14, 2020USD ($)$ / sharesshares | Oct. 08, 2020$ / sharesshares | Sep. 08, 2020employee | Oct. 31, 2020 | Aug. 31, 2020$ / shares |
Subsequent Event [Line Items] | |||||
Price per share | $ / shares | $ 3.62 | ||||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Lease term | 64 months | ||||
Subsequent Event [Member] | Diamond Litigation | |||||
Subsequent Event [Line Items] | |||||
Number of Company's officers named as defendants | employee | 1 | ||||
Subsequent Event [Member] | October 2020 Public Offering | |||||
Subsequent Event [Line Items] | |||||
Gross proceeds from issuance of public offering | $ | $ 12 | ||||
Underwriting discounts, commissions and offering expenses | $ | $ 1.4 | ||||
Subsequent Event [Member] | October 2020 Public Offering | October 2020 Common warrants | |||||
Subsequent Event [Line Items] | |||||
Warrants to acquire shares of common stock | 200,000 | 2,300,000 | |||
Number of share of common stock per warrant | 0.5 | ||||
Price per share | $ / shares | $ 3 | ||||
Exercise price of warrants | $ / shares | $ 3.30 | $ 3.30 | |||
Percentage on aggregate number of shares of common stock | 5.00% | ||||
Percentage of warrants exercisable price on offering price | 110.00% | ||||
Subsequent Event [Member] | October 2020 Public Offering | October 2020 Common warrants | Minimum | |||||
Subsequent Event [Line Items] | |||||
Warrants term (in years) | 6 months | ||||
Subsequent Event [Member] | October 2020 Public Offering | October 2020 Common warrants | Maximum | |||||
Subsequent Event [Line Items] | |||||
Warrants term (in years) | 5 years | ||||
Subsequent Event [Member] | October 2020 Public Offering | Common Stock | |||||
Subsequent Event [Line Items] | |||||
Shares of common stock issued | 4,000,000 | ||||
Subsequent Event [Member] | Overallotment | October 2020 Common warrants | |||||
Subsequent Event [Line Items] | |||||
Warrants to acquire shares of common stock | 300,000 |